CHRYSALIS VCT PLC 
By
CHRYSALIS VCT PLC
FINAL RESULTS for the year ended 31 OCTOBER 2009
FINANCIAL HIGHLIGHTS
2009 2008
Pence Pence
Net asset value per share ("NAV") 82.90 88.30
Total distributions paid since inception 24.95 18.95
Total return 107.85 107.25
CHAIRMAN'S STATEMENT
A year ago we were looking at an uncertain and potentially very difficult
business environment. I am pleased to report that, although it was certainly not
easy-going, yourCompany ended the year to 31 October 2009 in good shape. We are
therefore recommending the payment of a final dividend of 2p per share, which
makes a total dividend for the year under review of 4p, representing a tax-free
yield of approximately 6.5% (based on an estimated share buyback price at a 25%
discount to NAV) on for the year as a whole.
In addition, we were able to maintain our buy-back policy, and spent in excess
of £400,000 acquiring shares which represented more than 2% of those in issue.
The proposed dividend, together with the buy-backs and the interim 2p per share
paid on 31 July 2009, account for in excess of £1.6 million distributed to
Shareholders during the year.
The Company's performance over the past year has been reasonably stable, with
income generated from investments meeting both the running costs of the Company
and negating net capital losses which have arisen on the investment portfolio.
'D' and 'E' Share Conversion
On30 April 2009, the 'D' and 'E' Shares were converted into Ordinary Shares at
rates shown in the following table:
'D'/'E' New Conversion
Share Shares in Ordinary rate per
class issue Shares 1,000
'D'/'E'
Share
'D' 532,982 411,441 772
'E' 601,376 290,429 483
Prior to conversion, 'D' and 'E' Shareholders received total dividends of 20p
and 30p respectively, as targeted in the 2006 fundraising prospectus.
Following the conversion, the Company now has just one class of shares, which
simplifies investment management, reporting and administration activities.
Net Asset Value
At 31 October 2009, the Net Asset Value ("NAV") per Ordinary Share was82.9p, an
increase of 0.6p or 0.7% over the year (after adjusting for the dividends
totalling 6.0p per share paid during the year).
The Total Return (NAV plus cumulative dividends paid since launch) to Ordinary
Shareholders since the Company's launch (when it was known as Downing Classic
VCT 3 plc) now stands at107.85p per Ordinary Share compared to an original
investment (net of income tax relief) of 80p per Ordinary Share.
Venture capital investments
The Board continues to be satisfied that our policy of self-management, which
distinguishes Chrysalis from the vast majority of VCTs, brings positive benefits
to shareholders. Our costs of operation are very competitive and, as Chris Kay,
leader of our investment team explains in more detail elsewhere, your Company
continues to produce positive returns. I commend Chris and his team for their
activities during the year. Their focus has inevitably been on portfolio
management, rather than new investments, due to the economic climate, but we are
beginning to see more potential investments and believe that the current year
will see increased investment activity.
At the year end, the Company held a portfolio of 30 investments, valued at £15.8
million. Unrealised losses arising on the portfolio amounted to £987,000 and
realised gains amounted to £649,000.
Further commentary on the portfolio, together with a schedule of the additions,
disposals and details of thehighest value investments can be found within the
Investment Management Report and Review of Investments.
Listed fixed income securities
TheCompany continues to hold a portfolio of fixed income securities, which was
valued at £8.6 million at the year end and comprised almost entirely of
gilt-edged securities.
During the year £3.6 million was re-invested from maturing securities, with the
portfolio producing an unrealised gain of £113,000, and a realised gain of
£7,000.
The gilts were purchased during last year's banking crisis, in order to reduce
exposure to the banks. The Board recognises that there are now other products
in the market which provide a higher yield and will therefore be diversifying
our fixed interest investments over the forthcoming year.
The Company received dividends totalling £290,000 from its two most mature
investments during the year, Precision Dental Laboratories Group Limited and
Wessex Advanced Switching Products Limited.
The return on activities after taxation for the year was £47,000 (2008:
£268,000), comprising a revenue return of £538,000 and a capital loss of
£491,000.
Dividends paid in respect of the year ended 31 October 2009 were as follows:
Pence £
per share
Interim dividend
Ordinary Share - 31/07/09 2.00 629
Special dividend
'D' Share - 24/04/09 16.75 89
'E' Share - 24/04/09 26.75 161
-------
879
Subject to Shareholder approval at the forthcoming Annual General Meeting
("AGM"), your Board is proposing to pay a final dividend of 2.00p per share
(split as 0.75p revenue and 1.25p capital) on 16 April 2010 to Shareholders on
the register at 12 March 2010.
Following payment of this dividend, Shareholders who invested in the Company at
the outset, will have received dividends totalling 26.95p per Ordinary Share.
Share buybacks
The Company continues to operate a share buyback policy in order to provide
liquidity in the market. Any Shareholders wishing to sell their holding should
consult their financial adviser toensure they understand the potential tax
implications of such a disposal. Shares cannot be sold directly to the Company
but must be sold via the Stock Market through a stockbroker. The Company has
made market purchases of shares from time to time at a 25% discount to the last
published NAV. The Board reviews the discount, together with the level of share
buybacks undertaken, and makes changes as it sees fit.
During the year the Company repurchased 654,811 Ordinary Shares of 1p each for
an aggregate consideration of £408,000 being an average price of 61.9p per
Ordinary Share of 1p each representing 2.1% of the issued Ordinary share capital
held at 1 November 2008. These shares were subsequently cancelled and at the
year end the Company had 31,175,509 Ordinary shares in issue.
VCT Continuation
In line with the Articles of Association, a resolution that the Company
continues as a Venture Capital Trust is proposed at the forthcoming AGM. The
Directors recommend that Shareholders vote for the resolution.
Annual General Meeting
1.To renew the authority to allow the Company to make market purchases of the
Company's shares.
2.To continue as a Venture Capital Trust.
Outlook
With £9.7 million of liquid funds available, the Company remains well positioned
to support those portfolio companies that are unable to obtain bank finance,
whilst retaining the ability to invest in new opportunities that may arise.
Finally I would like to place on record my appreciation of the work of my two
Board colleagues, Julie Baddeley and Martin Knight, whose counsel and support
has been invaluable in navigating your Company safely through a difficult year.
Peter Harkness
Chairman
INVESTMENT MANAGEMENT REPORT
Despite the economy being in recession for the whole of this financial year, it
is pleasing to note that the VCT did make a positive return over the year. This
means that, in the 5½ years since we took over management of the fund, net
assets per share have risen by 36.4%, in addition to the 19.5p of dividends paid
out, which overall works out at a tax-free annual IRR of 11.1%.
However, in many ways, it has been a surprisingly quiet year for the VCT. This
time last year we fully expected that, during 2009, we would be faced with a
large number of difficult re-financing/re-structuring decisions for the
portfolio. Equally we assumed that there would be opportunities for our
strongly performing companies to acquire competitors at very attractive prices.
In reality neither has happened in any significant way. We have had few
requests from the portfolio for rescue finance and have only made two small
investments in that category, being a £14,000 participation in Planet Sports
rights issue and a £151,000 investment in Optima. This investment, alongside
considerably more from our syndicate partners, unfortunately failed to
turnaround Optima's fortunes and, in December 2009, it went into administration.
Unfortunately it was joined by CPI which also went into administration in
January 2010. These two companiesare however the only significant investee
companies to fail during the last 18 months, which is less than expected given
the state of the economy and the fact that VCTs have to invest in small,
vulnerable, companies..
We also have not seen any opportunistic acquisitions. Locale Enterprises
(formerly Mentorion Limited) did buy Mentorion 2 but we were already invested in
both companies.
It seems to us that whilst the banks are not being very helpful in providing new
finance and are taking every opportunity to increase lending margins and take
fees, they seem reluctant to "pull the plug" on companies, perhaps due to
political pressure now the government has such a major stake in the sector.
Equally, HMRC seems very willing to allow companies to defer tax payments.
These actions may actually only delay the inevitable outcomes, especially if
the economy does not pick up quickly, but at present it is restricting
opportunities for successful companies to pick up the viable parts of failed
enterprises.
Therefore we have yet to significantly use our cash. Liquid funds (cash at bank
and fixed interest investments) have reduced from £12.5m at the start of the
year, to £9.7m at the end, largely as a result of the £2.5m returned to
shareholders in the form of dividends (physically paid) and share buy-backs.
New investments of £1.8m were largely funded by realisations of £1.4m. Apart
from the Mentorion 2 deal, realisation proceeds were mainly as a result of
deferred payments from exits in previous years and, as we reported last year,
the window of opportunity for small private company exits tends to come late in
the business cycle. Therefore we are not anticipating many exits this year.
We are, however, hopeful that the rate of new investment opportunities will pick
up this year and, as we continue to return cash to shareholders, the consequence
of a lack of exits means that the VCT is likely to be cash negative again this
year. Therefore it was pleasing that we entered the recession with a significant
"cash" balance.
The only new investment made during the year was in Escape Studios, which has a
national reputation for training personnel in the expanding computer graphics
industry. We invested £750,000 in March 2009 to enable the company to expand its
online teaching facilities. So far we are pleased with progress and since
computer graphics is a worldwide industry, the recent weakness of Sterling,
which has made London a more attractive place to do business ,should help
Escape.
Apart from CPI and Optima mentioned above, there were three other significant
valuation changes. Wessex Advanced Switching Products (up £559,000) and Ensign
Communications (up £578,000) saw valuations increased as a result of
considerably improved trading. In contrast Precision Dental Laboratories
valuation fell by £1m due to a 35% decline in operating profits. Precision
Dental Laboratories does however remain both profitable and cash generative and
we remain confident about its prospects.
With regard to the prospects for the existing portfolio, we are relatively
pleased with its overall trading performance and, of the companies that make up
88% of the value of the portfolio, only one has significant borrowings (although
if a proposed land sale goes through even that company will be largely debt
free). The portfolio is almost totally UK based and so is inevitably tied up
with the fortunes of the UK economy, however we are fortunate to have the
resources to support our companies through these difficult times.
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 2009:
Valuation
Movement % of
Cost Valuation in year portfolio
£'000 £'000 £'000 by value
Ten largest venture capital investments
(by value)
Wessex Advanced Switching Products 704 3,426 559 13.4%
Limited
Precision Dental Laboratories Group 2,110 2,175 (999) 8.5%
Limited
Locale Enterprises Limited
(formerly Mentorion Limited) 1,500 2,020 212 7.9%
Centre Design Limited 1,350 1,572 90 6.2%
Ensign Communications Limited 500 1,282 578 5.0%
London Italian Restaurants Limited 1,000 1,000 - 3.9%
British International Holdings Limited 750 869 16 3.4%
Triaster Limited 758 829 (60) 3.3%
Escape Studios Limited 750 750 - 2.9%
The Capital Pub Company plc * 505 353 116 1.4%
---------------------------------------
9,927 14,276 512 55.9%
Other venture capital investments
Y88 Product Development Limited
(formerly RFTRAQ Limited) 325 270 - 1.1%
Gcrypt Limited 208 231 - 0.9%
Planet Sport (Holdings) Limited 263 225 (13) 0.8%
Rhino Sport and Leisure Limited 166 149 (25) 0.6%
BreakingViews Limited - 141 - 0.5%
Glisten plc * 149 136 (158) 0.5%
CPI Acquisition UK Limited 468 68 (400) 0.3%
Global3Digital Limited 67 67 - 0.3%
Lifes Kitchen Ltd. 165 65 (100) 0.3%
Best of the Best plc * 98 54 15 0.2%
The Mission Marketing Group plc * 150 40 (25) 0.2%
YouGov plc * 20 38 (22) 0.1%
ILX Group plc * 100 38 16 0.1%
Cashfac Limited - 22 (61) 0.1%
The Kellan Group plc * 320 20 (45) 0.1%
Art VPS Limited 358 - - -
Heath and Green Limited 30 - (30) -
IX Group plc 250 - - -
Kids SafteyNet Limited 637 - - -
Optima Data Intelligence Limited 651 - (651) -
---------------------------------------
4,425 1,564 (1,499) 6.1%
Listed fixed income securities
Treasury 2¼% Stock 07/03/2014 2,513 2,508 (5) 9.8%
Treasury 4¼% Stock 07/03/2011 1,883 1,986 47 7.8%
Treasury 5¼% Stock 2012 1,477 1,553 46 6.1%
Treasury 3¼% Stock 07/12/2011 1,293 1,289 (4) 5.1%
Treasury 8% Stock 2013 1,163 1,184 30 4.6%
Smith & Williamson Cash Trust 57 56 (1) 0.2%
---------------------------------------
8,386 8,576 113 33.6%
Total 22,738 24,416 (874) 95.6%
Cash at bank and in hand 1,137 4.4%
----------- ------------
Total investments 25,553 100.0%
All investments are unquoted unless otherwise stated.
* Quoted on AIM
Investment movements for the year ended 31 October 2009
ADDITIONS
Total
£'000
New investments
Escape Studios Limited 750
Follow on investments
CPI Acquisition UK Limited 102
Gcrypt Limited 39
Locale Enterprises Limited 750
Optima Data Intelligence Limited 151
Planet Sport (Holdings) Limited 14
---------
Total venture capital investment additions 1,806
Listed fixed income securities
Treasury 3¼% Stock 07/12/2011 1,293
Treasury 2¼% Stock 07/03/2014 2,513
---------
3,806
Total investments 5,612
DISPOSALS
Cost MV at Proceeds Profit/ Realised
31/10/08* (loss) vs gain/
cost (loss)
£'000 £'000 £'000 £'000 £'000
Venture Capital disposals
Mentorion 2 Limited *** 750 750 778 28 28
CPI Acquisition UK Limited 34 34 37 3 3
Liquidations/ dissolutions
Forward Media Limited 440 - 7 (433) 7
Goldstart Limited - - 217 217 217
Hat Pin plc 325 - - (325) -
Patterning Technologies Limited 286 - - (286) -
Shopcreator Limited 255 - - (255) -
Spice Inns Limited 950 - - (950) -
Ultralon Holdings Limited 1,028 - - (1,028) -
Retention monies from prior
disposals
Babel Media Limited - - 394 394 394
Listed fixed income securities
Smith & Williamson Cash Trust 707 711 703 (4) (8)
Treasury 4% Stock 07/03/2009 1,215 1,232 1,228 13 (4)
UK THM Treasury 2009 ** 1,546 1,561 1,580 34 19
---------------------------------------------
Total 7,536 4,288 4,944 (2,592) 656
*Adjusted for purchases in the year
**Gain recognised as revenue income
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report of the Directors, 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 Services 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 theDirectors 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 those financial statements, the Directors are required to:
?select suitable accounting policies and then apply them consistently;
?make judgements and 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 accounting records that are sufficient
to show and explain the Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Company and to enable them to
ensure that the financial statements, and the Directors Remuneration Report,
comply with the requirements of 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.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information relating to the Company included on the Managers
websites. 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.
Directors' statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names are listed on the Report of the Directors,
confirms that, to the best of each person's knowledge:
?the financial statements, prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, give a true and fair view of the assets,
liabilities, financial position and result of the Company; and
?the Directors' Report contained in the Annual Report includes a fair review of
the development and performance of the business and the position of the company
together with a description of the principal risks and uncertainties that it
faces.
Electronic publication
The financial statements are published on www.chrysalisvct.co.uk (maintained by
the Investment Manager) and on www.downing.co.uk, (maintained by the
Administration Manager).
Statement as to disclosure of information to auditors
The Directors in office at the date of the report have confirmed, as far as they
are aware, that there is no relevant audit information of which the auditors are
unaware. Each of the Directors have confirmed that they have taken all the steps
that they ought to have taken as directors in order to make themselves aware of
any relevant audit information and to establish that it has been communicated to
the auditor.
Grant Whitehouse
Secretary of Chrysalis VCT plc
Company number: 4095791
Registered Office:
Kings Scholars House
230 Vauxhall Bridge Road
London SW1V 1AU
INCOME STATEMENT
for the year ended 31 October 2009
Year ended 31 October Year ended 31 October
2009 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 1,187 - 1,187 1,602 - 1,602
Losses on investments - (237) (237) - (258) (258)
------------------------ -------------------------
1,187 (237) 950 1,602 (258) 1,344
Investment management fees (112) (337) (449) (126) (377) (503)
Performance incentive fees - (14) (14) - (175) (175)
Other expenses (429) (1) (430) (300) (20) (320)
------------------------ -------------------------
Return on ordinary activities
before tax 646 (589) 57 1,176 (830) 346
Tax on ordinary activities (108) 98 (10) (237) 159 (78)
------------------------ -------------------------
Returnattributable to equity
Shareholders 538 (491) 47 939 (671) 268
Ordinary Share 1.7p (1.6p) 0.1p 2.8p (1.1p) 1.7p
'D' Share N/A N/A N/A 2.8p (25.3p) (22.5p)
'E' Share N/A N/A N/A 2.6p (28.4p) (25.8p)
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 profit and loss account
of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement as shown above.
Other than revaluation movements arising on investments held at fair value
through the Income Statement, there were no differences between the
return/deficit as stated above and historical cost.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 October 2009
2009 2008
£'000 £'000
Opening shareholders' funds 28,342 31,040
Purchase of own shares (408) (1,177)
Total recognised gains for the year 47 268
Dividends paid (2,123) (1,789)
---------------------
Closing shareholders' funds 25,858 28,342
BALANCE SHEET
at 31 October 2009
2009 2008
£'000 £'000 £'000 £'000
Fixed assets
Investments 24,416 23,966
Current assets
Debtors 523 268
Cash at bank and in hand 1,137 4,398
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1,660 4,666
Creditors: amounts falling due within one year (218) (290)
------- -------
Net current assets 1,442 4,376
-------- --------
Net assets 25,858 28,342
Capital and reserves
Called up share capital 312 323
Capital redemption reserve 75 64
Share premium 1,064 1,064
Merger reserve 8,694 8,694
Special reserve 1,795 5,554
Capital reserve - realised 11,493 12,196
Investment holding gains/(losses) 1,678 (696)
Revenue reserve 747 1,143
-------- --------
Total equity shareholders' funds 25,858 28,342
Basic and diluted net asset value per share
Ordinary share 82.9p 88.3p
'D' Share N/A 81.8p
'E' Share N/A 67.5p
CASH FLOW STATEMENT
for year ended 31 October 2009
2009 2008
£'000 £'000
Net cash inflow from operating activities 327 609
---------------------
Taxation (78) (64)
---------------------
Capital expenditure
Purchase of investments (5,612) (8,160)
Sale of investments 4,645 10,675
---------------------
Net cash (outflow)/ inflow from capital expenditure (967) 2,515
---------------------
Equity dividends paid (2,121) (1,792)
---------------------
Net cash (outflow)/inflow before financing (2,839) 1,268
Financing
Purchase of own shares (422) (1,128)
---------------------
Net cash outflow from financing (422) (1,128)
---------------------
(Decrease)/increase in cash (3,261) 140
NOTES ON THE ACCOUNTS
for the year ended 31 October 2009
1.Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice and in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
January 2009 ("SORP").
The financial statements are prepared under the historical cost convention
except for certain financial instruments measured at fair value and on the basis
that it is not appropriate to prepare consolidated accounts.
The Company implements new Financial Reporting Standards ("FRS") issued by the
Accounting Standards Board when required. No new standards were issued for
implementation for the year under review. The Association of Investment
Companies issued a new SORP in January 2009 which has been adopted for these
financial statements. No comparative restatements have been required as a
result of the implementation of the new SORP.
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. The 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.
Investments
Investments are designated as "fair value through profit or loss" assets 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. The fair value of an investment upon
acquisition is deemed to be cost. Thereafter investments are measured at fair
value in accordance with the International Private Equity and Venture Capital
Valuation Guidelines ("IPEV") together with FRS26.
Listed fixed income investments and investments quoted on AIM are measured using
bid prices in accordance with the IPEV.
For unquoted instruments, 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 or liquidation the loss on
the investment, although not physically disposed of, is treated as being
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.
It is not the Company's policy to exercise either significant or 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 that does 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 has 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
managers 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 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, equivalent to the fair value of the expected
balance receivable/payable by the Company.
2.Basic and diluted return per share
Weighted
average
number of Revenue
shares in return per Capital loss
issue share per share
£'000 £'000
Return per share is calculated on the
following:
Year ended31 October 2009
Ordinary Shares 31,183,605 538 (491)
Year ended31 October 2008
Ordinary Shares 32,053,843 908 (366)
'D' Shares 533,987 16 (135)
'E' Shares 601,376 15 (170)
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 share
2009 2008
Shares in issue Net Asset Value Net Asset Value
2009 2008 Pence per £'000 Pence per £'000
share share
Ordinary
Shares 31,175,509 31,128,450 82.9p 25,858 88.3p 27,500
'D' Shares N/A 532,982 N/A - 81.8p 436
'E' Shares N/A 601,376 N/A - 67.5p 406
-------- --------
25,858 28,342
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on net asset per share. The net asset value per share
disclosed therefore represents both basic and diluted return per share.
4.Principal financial risks
As a VCT, the majority of the Company's assets are represented by financial
instruments which are held as part of the investment portfolio. In order to
ensure continued compliance with relevant VCT regulations and to be in a
position to deliver the long term capital growth, which is part of the Company's
investment objective, the Board is very much aware of the need to manage and
mitigate the risks associated with these financial instruments.
The management of these risks starts with the application of a clear investment
policy which has been developed by the Board who are experienced investment
professionals. Furthermore, the Board has appointed an experienced Investment
Manager to whom they have communicated the Company's investment objectives and
whose remuneration is linked to the achievement of those objectives. The
Investment Manager reports regularly to the Board on performance, and to
facilitate the direct Board involvement with key decisions, on whether or not to
invest, disinvest and the nature, terms and the security of investments being
made.
Further information about the VCT's investment policy is set out in the Report
of the Directors.
In assessing the risk profile of its investment portfolio, the Board has
identified three principal classes of financial instrument. Investments are
"fair value through the profit and loss account" and are recognised as such on
initial recognition.
In addition to its investment portfolio, the VCT holds cash balances with one of
the main UK banks and the Listed Fixed Income Securities Manager. The Directors
consider that the risk profile associated with cash deposits is low and thus the
carrying value in the Financial Statements is a close approximation of its fair
value.
The Board has reviewed the Company's financial risk profile and concluded that
the current sensitivity level remains appropriate.
A review of the specific financial risks faced by the Company follows.
Market risks
The key market risks to which the Company is exposed are interest rate risk and
market price 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.
Interest rate risk
Board decisions in relation to amounts to be retained as cash deposits and held
in fixed interest investments (including yields) are influenced by actual and
potential changes in the Bank of England base rate.
Market price risk
Market price risk arises from uncertainty about the future prices of financial
instruments held in accordance with the Company's investment objectives. It
represents the potential loss that the Company might suffer through holding
market positions in the face of market movements. At 31 October 2009, the net
unrealised loss on the quoted portfolios (AIM-quoted and fixed income
investments) was £799,000 (2008: £774,000).
The investments the Company holds are (with the exception of listed fixed income
securities), in the main, thinly traded (due to the underlying nature of the
investments) and, as such, the prices are more volatile than those of more
widely traded, full list, securities. In addition, the ability of the Company
to realise the investments at their carrying value may at times not be possible
if there are no willing purchasers. The ability of the Company to purchase or
sell investments is also constrained by the requirements set down for VCTs.
The Board considers each investment purchase to ensure that an acquisition will
enable the Company to continue to have an appropriate spread of market risk and
that an appropriate risk reward profile is maintained.
It is not the Company's policy to use derivative instruments to mitigate market
risk, as the Board believes that the effectiveness of such instruments does not
justify the cost or risk involved.
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's financial assets that are exposed to credit risk are summarised as
follows:
2009 2008
£'000 £'000
Fair value through profit or loss assets
Investments in listed fixed income securities 8,576 8,160
Investments in loan stocks 7,557 7,584
Loans and receivables
Cash and cash equivalents 1,137 4,398
Interest and other receivables 207 206
---------- ----------
17,477 20,348
Investments in loan stocks comprise a fundamental part of the Company's venture
capital investments and are managed within the main investment management
procedures.
Cash is mainly held by Bank of Scotland plc, which is an Aa3 rated financial
institution (Moody's)and, consequently the Directors consider that the risk
profile associated with cash deposits is low.
Interest, dividends and other receivables are predominantly covered within the
investment management procedures.
Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting
obligations associated with its financial liabilities. As the Company only ever
has a very low level of creditors and has no borrowings, the Board believes that
the Company's exposure to liquidity risk is minimal.
5.Related party transactions
Chrysalis VCT Management Limited, a wholly owned subsidiary, is the Company's
Investment Manager which receives a fee of 1.65% of net assets per annum.
During the period £449,000 (2008: £503,000) was paid to Chrysalis VCT
Management Limited in respect of these fees. No amounts were outstanding at the
year end.
An exit fee is payable quarterly to Chrysalis VCT Management Limited (with
effect from 1 May 2006) based on cash realisations from all investments
excluding quoted loan notes, redemptions of loan notes in the normal course of
business and other treasury functions. The exit 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 2½% of investments made
prior to 30 April 2004. During the year exit fees of £14,000 (2008: £175,000)
were due to Chrysalis VCT Management Ltd. At the year end £10,000 was
outstanding (2008: £1,000).
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 2009, but has been extracted
from the statutory financial statements for the year ended 31 October 2009,
which were approved by the Board of Directors on29 January 2010 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 s
498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 October 2008 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
S237(2) or (3) of the Companies Act 1985.
A copy of the full annual report and financial statements for the year ended 31
October 2009 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at Kings
Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU and will be available
for download from www.downing.co.uk and www.chrysalisvct.co.uk.
[HUG#1378799]
CHRYSALIS VCT : Final Results
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