TIDMCYS
CHRYSALIS VCT PLC
FINAL RESULTS FOR THE YEAR ENDED 31 OCTOBER 2011
FINANCIAL HIGHLIGHTS
Year Year
Ended Ended
31 Oct 11 31 Oct 10
Pence Pence
Net asset value per share 84.9 83.0
Cumulative dividends paid since launch 31.5 28.5
Total return 116.4 111.5
CHAIRMAN'S STATEMENT
After a year in which gloomy headlines have dominated elsewhere, I am delighted
to bring you an encouraging Report and Accounts for the year ended 31 October
2011 - and some excellent news on dividends.
Your Company has recorded a solid performance, securing attractive new
investments for the portfolio and providing extra funds to existing companies to
fuel their growth. We also achieved profitable exits from two of our more mature
investments.
The outcome was a return for the year of GBP1.3 million, up by more than 22% on
the previous year.
Against the background of the poor UK economic climate, we believe Shareholders
can be satisfied with the performance of the VCT. The Chrysalis team, both Board
members and investment managers, are proud that our self-managed structure
(almost unique among VCTs) has produced yet another year of value enhancement
for Shareholders. I am certain that this structure, where Board members are
closely involved in both the search for profitable investments and the
monitoring of your portfolio, is key to the year-on-year growth in value which
has been achieved by Chrysalis since 2005, when the current VCT emerged from the
amalgamation of its predecessor funds. I would like to thank all my colleagues
for their input and support.
Increase in dividend
Your Board had already pledged to pay a 3.0p total dividend for this year, but
we are delighted to recommend that this should in fact be increased by 33.3%,
making 4.0p in total for the year (subject to Shareholder approval). Thanks to
the VCT rules this is, of course, tax free to individual Shareholders.
In dividends alone, we will be returning more than GBP1.2 million to Shareholders
for the year. When share buy-backs are taken into account, we will have
distributed more than GBP1.5 million in the year.
Following payment of the proposed 2.5p dividend, Shareholders who invested in
the Company at the outset will have received tax-free dividends totalling 34.0p
per Ordinary Share.
The Total Return (NAV plus cumulative dividends paid since launch) to Ordinary
Shareholders now stands at 116.4p per Ordinary Share compared to an original
investment (net of income tax relief) of 80p per Ordinary Share. This places us
firmly in the top quartile of all VCT funds - an excellent result when compared
with our position when a new Board and management team took over six years ago
and the Company's performance was in the bottom quartile.
At the end of the 2005 financial year, the first year after the merger which
created the current Chrysalis VCT, Total Return was only 84.7p. Interestingly,
from total assets of GBP27.4 million six years ago, we have distributed GBP14.4
million in dividends and buy-backs and still retain net assets of GBP25.1 million.
Net asset value
It is pleasing that, despite the recent economic turmoil seen in the stock
markets, the Fund's net asset value ("NAV") per share at 31 October 2011 was
84.9p, an increase of 4.9p or 5.9% over the year (after adjusting for dividends
paid during the year).
We are pleased that our strong dividend payout has been achieved without
weakening the NAV. The Board and managers believe that the VCT's performance is
best ensured by maintaining a blend of VCT investments and cash balances which
are sufficient to sustain a viable and profitable enterprise. So long as we are
able to seek out well-priced acquisitions and achieve profitable exits for our
mature investments, the VCT can remain vigorous and produce attractive returns.
Obviously, your Board keeps all options under review, but we are satisfied that
our current policy is in the best interests of Shareholders and continues to
provide an attractive investment.
Management of the Fund
The Board remains satisfied with our policy of being a self-managed Venture
Capital Trust ("VCT"). We believe that Shareholders gain both from lower
operating costs and from the additional flexibility and greater involvement in
the investee companies, which both our dedicated investment team and Board
provide.
In these increasingly cost-conscious times, Shareholders will be comforted to
know that costs are well under control. Indeed, we have been able to bring down
the cost of administrative services by 21% over the last two years. Total
running costs for the year under review have been 16% lower than the average for
the last five years.
Venture capital investments
At the year end, the Company held a portfolio of 27 investments, valued at GBP17.9
million. Our policy is that Chrysalis VCT should be an active and supportive
investor - a true partner with shareholders and managers in our investee
businesses.
During the year under review, our management team, under Chris Kay, has
continued to be positive and diligent, resulting in both new investments and
profitable exits. In times like these, a performance like ours is not easy to
achieve.
Further commentary on the portfolio, together with a schedule of the additions,
disposals and details of the highest value investments can be found within the
Investment Management Report and Review of Investments.
Fixed income securities
The Company also holds a portfolio of fixed income securities, which were valued
at GBP3.9 million at the year end and comprised entirely of gilt-edged securities.
Additionally, GBP2.0 million is held in a fixed rate deposit bank account (shown
as a current investment), which matures in 2012.
Results and dividends
The return on activities after taxation for the year was GBP1.3 million (2010:
GBP1.0 million), comprising a revenue return of GBP346,000 and a capital return of
GBP921,000.
The Company paid an interim dividend of 1.5p per share on 29 July 2011. Subject
to Shareholder approval at the forthcoming AGM, your Board is proposing to pay a
final dividend of 2.5p per share on 30 March 2012 to Shareholders on the
register at 24 February 2012.
Share buybacks
The Company does not operate a fixed-price policy when purchasing its own
shares. If shares are offered to the Company via its brokers, Singer Capital
Markets, a decision is made on a case-by-case basis whether to buy and at what
price. The key criterion will be that the purchase represents good value to
remaining Shareholders.
The Board is proud to have been able to increase the liquidity in Chrysalis VCT
shares since the appointment of Singer Capital Markets. It is also pleasing to
report that as a direct result of their appointment, Singer Capital Markets have
significantly reduced the spread on the Company's shares, and we expect this to
be maintained. During the year, some new Shareholders have joined the register,
presumably because of the attractive dividend policy and strength of our
performance. Shareholders may also have noticed that the Directors and managers
have acquired shares on the open market from time to time, indicating our
collective faith in the VCT. Contact details for our brokers appear elsewhere in
this document and any Shareholders wishing to sell part or all of their holding,
or purchase further shares, should speak to Singer Capital Markets direct.
During the year, the Company repurchased 691,212 Ordinary Shares for an
aggregate consideration of GBP346,000 and these shares were cancelled, thus
enhancing the value of the remaining shares.
Directors' remuneration
Now I come to a section of my report in which I declare a personal interest, on
my own behalf and on behalf of my fellow directors.
About the only aspect of your Fund which has not shown growth in the last five
years is the level of fees paid to Directors. The total for the whole Board has
remained at GBP75,000 per year during that time, while the Fund has moved
significantly forward in performance and in the returns it has paid to
Shareholders.
The results speak for themselves and I feel that it is reasonable to propose a
modest increase in Board fees.
Usually, little is said in these reports about the detailed role of the
Directors, but Shareholders should know that the Chrysalis Board is not just a
rubber stamp on the Fund's activities. Board members are very active in the
Fund, outside Board meetings, developing first-hand knowledge of investee
companies and providing guidance and expertise to the investment team. Chrysalis
VCT also benefits from potential investment proposals channelled via the
Directors. No fees or performance bonuses are paid to Directors in this respect
- thus saving the VCT external introduction fees which are sometimes due on
investments.
I believe your Directors represent excellent value for money and in my
experience receive substantially less than would be paid for similar input and
responsibility in a comparable stock-exchange listed business.
At the AGM, the Board is proposing to amend the Articles of Association so that
the cap on total Directors' remuneration will be increased to GBP90,000 per year.
Should the resolution be passed, the Directors will increase their remuneration
up to the level on the proposed cap from 1 April 2012 (not to be backdated), the
split of which is shown within the Directors Remuneration Report.
This is a modest proposal and I hope Shareholders will take the opportunity to
acknowledge the work of the Board by voting in favour.
Annual General Meeting
The forthcoming Annual General Meeting ("AGM") will be held at 10 Lower
Grosvenor Place, London SW1W 0EN at 11:30am on 15 March 2012.
Conclusion
Your Fund is in good health and the portfolio is holding up very well. We expect
to be able to add attractive new investments in the current financial year.
We feel comfortable about those factors we can influence and are as concerned as
all sensible folk about those we cannot. You can be sure we will be working hard
to deliver another creditable performance and - unforeseen difficulties apart -
we expect to at least match the 2011 dividend next year.
Peter Harkness
Chairman
INVESTMENT MANAGEMENT REPORT
It is pleasing to report that, despite continuing difficult times for the UK
economy, the overall return for Shareholders again exceeded GBP1 million. This
year the overall return was 22.5% higher than last year at GBP1.3 million,
virtually all of which was paid out to Shareholders by way of dividends or share
buybacks.
Six new investments were made during the year totalling GBP2.7 million, two of
which were further funding to our existing portfolio (VEEMEE and Autocue). Both
these investments have enabled those companies to continue to grow and develop
at a time when traditional bank funding is largely unavailable.
As mentioned last year, in November we invested GBP750,000 in a secondary buy-out
of MyHobbyStore (MHS), a publisher of niche hobby magazines. MHS has performed
strongly since then and has made a number of acquisitions which are already
looking successful.
In February we provided GBP1 million to fund the growth of KnowledgePool Group,
which specialises in Managed Learning and has recently won multi-million pound
contracts with Lloyds Bank and Ford.
March saw a small investment in property developer Livvakt Limited and in June
we provided GBP300,000 to AerialCell, a company which installs and maintains
telecommunication masts. A few years ago both these transactions would probably
have been debt financed but we have taken the opportunity of the current banking
situation to get an equity position.
The total of these investments of GBP2.7 million was almost exactly matched by
total realisation proceeds of GBP2.7 million, most of which came from the
profitable sale of two companies; Centre Design Limited and The Capital Pub
Company. In the current economic circumstances we are only looking to sell
investments if we receive a "knockout" bid, as we believe that, generally,
prices are depressed and we are not budgeting for any realisations this year.
Turning to the portfolio, overall it is has been a good year which is why
valuations have risen. We are particularly pleased by the performance of Escape
Studios which has just started trading from its new training school in Los
Angeles which caters for the US West Coast computer graphics industry. Trading
has also been good at the original Shepherds Bush studio and therefore our
valuation has increased by over GBP600k.
VEEMEE too has had a good year with profits well up on last year. Our additional
investment has helped it fund the development of Zappar, a joint venture
operating in the augmented reality market. Since our year end, Zappar has been
demerged from VEEMEE so Chrysalis VCT now holds a direct equity stake and its
product is commanding a lot of attention with an interactive t-shirt being
featured on Blue Peter, in December 2011. Our valuation had been increased by
GBP317,000 over the year.
In September 2010 we financed the secondary buyout of Ensign Communications.
Since then trading has been good and the company has been able to repay all the
debt associated with the buyout and now has net cash. Consequently, we have
increased the value of our equity stake by GBP219,000.
Inevitably, it is not all good news and trading at WASP has suffered due to the
downturn in defence spending which has meant a reduction in our valuation of
GBP906,000. However, despite that, our stake is still valued at GBP1.5 million above
cost. WASP's aviation division continues to do well and overall it remains a
cash rich, profitable company.
It is worth outlining our strategy regarding our liquid resources, which stands
at GBP7.7 million. As mentioned above, during the year, cash invested was almost
exactly matched by proceeds from realisations. This was somewhat a coincidence
and currently we have no realisations in the pipeline. However, the VCT had a
reduction of liquid resources during the year by GBP1.3 million (after accounting
for GBP1.5 million of Treasury Gilt sales undertaken at the end of October 2010
which settled in November 2010) due to the payment of dividends and share
buybacks.
The proposed dividend of 2.5p will require cash of GBP750,000 this effectively
means that our current cash balance is GBP7.0 million.
As has been widely reported, it is currently very difficult for small and
medium-sized companies to obtain bank funding and therefore we believe that it
is prudent to put aside 20% ( GBP3.6 million) of the value of our portfolio in
order that we have sufficient resources to support our companies if they require
it.
We clearly wish to continue paying dividends and continue with our limited share
buyback programme. We also believe that, during the year, there will be new
opportunities to take advantage of the continuing credit crunch to make new
investments on advantageous terms. Therefore, we feel that our cash position is
just about sufficient for the current economic circumstances.
Looking forward to this year, trading within the portfolio is generally in line
with expectations and all of our top 11 investee companies (which account for
93% of our portfolio value) are currently profitable. The performance of the UK
economy over the last few years has taught us not to be complacent, but at the
moment we are cautiously optimistic about the portfolio for the year ahead,
particularly for our restaurant and catering businesses that operate in London
which should benefit from the increased tourism brought about by The Queen's
Diamond Jubilee and of course, The Olympics.
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 2011:
Valuation movement
in year % of portfolio by
Cost Valuation GBP'000 value
GBP'000 GBP'000
Ten largest venture
capital investments (by
value)
Wessex Advanced 704 2,217 (906) 8.7%
Switching Products
Limited
Locale Enterprises 1,338 2,090 97 8.2%
Limited
British International 908 1,991 271 7.8%
Holdings Limited
Precision Dental 2,110 1,837 (324) 7.2%
Laboratories Limited
Ensign Communication 292 1,644 219 6.4%
Holdings Limited
Escape Studios Limited 750 1,603 614 6.3%
MyHobbyStore Holdings 750 1,236 486 4.8%
Limited
Knowledge Pool Group 1,000 1,000 - 3.9%
Limited
Triaster Ltd 758 894 207 3.5%
London Italian 1,000 875 - 3.4%
Restaurants Limited
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9,610 15,387 664 60.2%
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Other venture capital
investments
VEEMEE Limited 500 817 317 3.2%
Autocue Group Limited 500 500 - 1.9%
Life's Kitchen Limited 300 300 - 1.2%
Aerialcell Limited 300 300 - 1.2%
Livvakt Limited 250 250 - 1.0%
G-Crypt Limited 305 152 (153) 0.6%
Rhino Sport & Leisure 166 74 - 0.3%
Limited
Cashfac Initiatives - 50 24 0.2%
Limited
ILX Group plc * 100 33 1 0.1%
Best of the Best plc * 97 25 (4) 0.1%
The Mission Marketing 150 19 7 0.1%
Group plc *
The Kellan Group plc * 320 10 (2) -
Art VPS Limited 358 - - -
IX Group Limited 250 - - -
Kids Safteynet Limited 637 - - -
Planet Sport Holdings 263 - - -
Limited
Real Time Logistic 55 - - -
Solutions Limited
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4,551 2,530 190 9.9%
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Listed fixed income
securities
United Kingdom 2.25% 1,827 1,922 11 7.5%
Gilt 07/03/2014
United Kingdom 2.75% 1,032 1,043 14 4.1%
Gilt 22/01/2015
United Kingdom 2% Gilt 929 994 65 3.9%
22/01/2016
---------------------------------------------------------
3,788 3,959 90 15.5%
---------------------------------------------------------
17,949 21,876 944 85.6%
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Cash at bank and in 1,680 6.6%
hand
Royal Bank of Scotland 2,000 7.8%
plc 3.41% 2012 deposit
----------- --------------------
Total investments 25,556 100.0%
----------- --------------------
All investments are unquoted unless otherwise stated.
* Quoted on AIM
Investment movements for the year ended 31 October 2011
Additions
GBP'000
New investments
Aerialcell Limited 300
Knowledge Pool Group Limited 1,000
Livvakt Limited 250
MyHobbyStore Holding Limited 750
Follow-on investments
Autocue Group Limited 200
VEEMEE Limited 150
--------
2,650
--------
Listed fixed income securities
United Kingdom 2% Gilt 22/01/2016 929
--------
Total investments 3,579
--------
Disposals
Cost MV at Proceeds Profit/ Realised (loss)/
31/10/10(*) (loss) vs cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
disposals
BreakingViews Limited - 18 18 18 -
Centre Design Limited 1,350 1,386 1,384 34 (2)
CPI Acquisitions (UK)
Limited 400 - - (400) -
Ensign Communication
Holdings Ltd 230 230 230 - -
Global3 Digital
Limited 66 66 55 (11) (11)
Locale Enterprises
Limited 163 163 163 - -
The Capital Pub
Company plc 505 540 832 327 292
YouGov plc 20 30 33 13 3
-----------------------------------------------------------
2,734 2,433 2,715 (19) 282
-----------------------------------------------------------
Listed fixed income
securities
United Kingdom 4.5%
Bond 07/03/2013 878 876 857 (21) (19)
-----------------------------------------------------------
Total 3,612 3,309 3,572 (40) 263
-----------------------------------------------------------
(* )Adjusted for purchases in the year where applicable
Directors' responsibilities statement
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 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 and 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 and 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.
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.
Statement as to disclosure of information to the Auditor
The Directors in office at the date of this report have confirmed, as far as
they are aware, that there is no relevant audit information of which the Auditor
is unaware. Each of the Directors has 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.
By order of the Board
Grant Whitehouse
Secretary of Chrysalis VCT plc
INCOME STATEMENT
for the year ended 31 October 2011
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 781 - 781 713 - 713
Gains on investments - 1,207 1,207 - 1,077 1,077
--------------------------------------------
781 1,207 1,988 713 1,077 1,790
Investment management fees (106) (317) (423) (106) (319) (425)
Performance incentive fees - (27) (27) - (8) (8)
Other expenses (270) (1) (271) (320) (3) (323)
--------------------------------------------
Return on ordinary activities before
tax 405 862 1,267 287 747 1,034
Tax on ordinary activities (59) 59 - (57) 57 -
--------------------------------------------
Return attributable to equity
shareholders 346 921 1,267 230 804 1,034
--------------------------------------------
Basic and diluted return per share
1.1p 3.0p 4.1p 0.7p 2.6p 3.3p
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 profit and loss account, there were no differences between the
return as stated above and historical cost.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 October 2011
2011 2010
GBP'000 GBP'000
Opening Shareholders' funds 25,638 25,858
Purchase of own shares (346) (167)
Total recognised gains for the year 1,267 1,034
Dividends paid (919) (1,087)
-------------------
Closing Shareholders' funds 25,640 25,638
-------------------
BALANCE SHEET
at 31 October 2011
2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 21,876 20,662
Current assets
Debtors 222 1,672
Current investments 2,000 2,000
Cash at bank and in hand 1,680 1,463
------- -------
3,902 5,135
Creditors: amounts falling due within one year (138) (159)
------- -------
Net current assets 3,764 4,976
-------- -------
Net assets 25,640 25,638
-------- -------
Capital and reserves
Called up share capital 302 309
Capital redemption reserve 85 78
Share premium 1,064 1,064
Merger reserve 2,128 2,832
Special reserve 6,377 6,599
Capital reserve - realised 10,897 11,333
Revaluation reserve 3,927 2,679
Revenue reserve 860 744
-------- -------
Total equity shareholders' funds 25,640 25,638
-------- -------
Basic and diluted net asset value per share 84.9p 83.0p
CASH FLOW STATEMENT
for the year ended 31 October 2011
2011 2010
GBP'000 GBP'000
Net cash outflow from operating activities (14) (8)
--------------------------
Taxation - (10)
--------------------------
Capital expenditure
Purchase of investments (3,579) (5,391)
Sale of investments 5,063 9,030
--------------------------
Net cash inflow from capital expenditure 1,484 3,639
--------------------------
Management of liquid resources
Purchase of current investment - (2,000)
--------------------------
Net cash outflow from liquid resources - (2,000)
--------------------------
Equity dividends paid (919) (1,083)
--------------------------
Net cash inflow before financing 551 538
Financing
Purchase of own shares (334) (212)
--------------------------
Net cash outflow from financing (334) (212)
--------------------------
Increase in cash 217 326
--------------------------
NOTES ON THE ACCOUNTS
for the year ended 31 October 2011
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 required to prepare consolidated accounts. The Company's accounts
therefore present information about it as an individual undertaking rather than
as a group undertaking.
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. 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.
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. 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, 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.
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.
Current asset investments
Current asset investments comprise amounts held on a fixed term deposit at a
banking institution and are valued at par.
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 manager's 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
2011 2010
Return per Share based on:
Net revenue return for the financial year ( GBP'000) 346 230
--------------------------
Capital return per Share based on:
Net capital gain for the financial year ( GBP'000) 921 804
--------------------------
Weighted average number of Shares in issue 30,655,950 31,060,084
--------------------------
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on return per share. The return per share disclosed
therefore represents both basic and diluted return per share.
3. Basic and diluted net asset value per ordinary share
Shares in issue 2011 2010
Net Asset Value Net Asset Value
2011 2010 Pence per GBP'000 Pence per GBP'000
share share
Ordinary Shares 30,212,297 30,903,509 84.9p 25,640 83.0p 25,638
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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. Financial instruments
The Company's financial instruments comprise investments held at fair value
through profit and loss, being equity and loan stock investments in quoted
companies and unquoted companies; loans and receivables, being cash deposits and
short term debtors; and financial liabilities, being creditors arising from its
operations. The main purpose of these financial instruments is to generate
cashflow, revenue and capital appreciation for the Company's operations. The
Company has no gearing or other financial liabilities apart from short-term
creditors and does not use any derivatives.
The fair value of investments is determined using the detailed accounting policy
as shown in note 1. The fair value of cash deposits and short-term debtors and
creditors equates to their carrying value in the balance sheet.
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:
Market risks
As a VCT, the Company is exposed to market 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 market risks is a fundamental part of
investment activities undertaken by the Investment Manager and overseen by the
Board. The 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
Manager to manage the investment risk in respect of individual investments.
Market risk is also mitigated by holding a diversified portfolio spread across
various business sectors and asset classes.
The key market risks to which the Company is exposed are:
* Market 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.
Market 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 predominately 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.
Weighted average Weighted 2011 2010
average period
interest rate until maturity GBP'000 GBP'000
Fixed rate 4.5% 1,121 days 14,573 13,532
Floating rate 0.5% 1,680 1,463
No interest rate 9,387 10,643
-------- -------
25,640 25,638
-------- -------
The Company monitors the level of income received from fixed, floating and non
interest rate assets and, if appropriate, may make adjustments to the allocation
between the categories, in particular, should this be required to ensure
compliance with the VCT regulations.
It is estimated that an increase of 1.25% in interest rates would increase net
assets and total return before taxation for the year by GBP4,000. As the Bank of
England base rate stood at 0.5% per annum throughout the year, it is not
believed that a reduction from this level is likely.
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:
2011 2010
GBP'000 GBP'000
Fair value through profit or loss assets
Investments in listed fixed income securities 3,959 3,816
Investments in loan stocks 8,614 7,716
Loans and receivables
Cash and cash equivalents 1,680 1,463
Current investments 2,000 2,000
Interest and other receivables 146 108
---------- -------------
16,399 15,103
---------- -------------
The Manager manages credit risk in respect of loan stock with a similar approach
as described under Market risks above. Similarly the management of credit risk
associated interest, dividends and other receivables is covered within the
investment management procedures.
Cash is mainly held by Bank of Scotland plc, which is an A-rated financial
institution 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 only normally has a relatively low level of creditors (2011:
GBP138,000, 2010: GBP159,000) 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 the Investment Manager in line with
guidance agreed with the Board and is reviewed by the Board at regular
intervals.
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, GBP423,000 (2010: GBP425,000) was paid to Chrysalis VCT
Management Limited in respect of these fees. No amounts were outstanding at the
year end.
A performance incentive fee is payable quarterly to Chrysalis VCT Management
Limited (with effect from 1 May 2006) 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 GBP27,000 (2010: GBP8,000) were due to Chrysalis VCT Management Limited. At
the year end, GBP1,000 was outstanding (2010: GBP4,000).
During the year the Company invested GBP750,000 in My HobbyStore Holding Limited,
a company of which Peter Harkness is Chairman and a shareholder.
6. Controlling party
In the opinion of the Directors there is no immediate or ultimate controlling
party.
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 2011, but has been extracted
from the statutory financial statements for the year ended 31 October 2011,
which were approved by the Board of Directors on 2 February 2012 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 2010 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 s
498(2) and (3) of the Companies Act 2006.
A copy of the full annual report and financial statements for the year ended 31
October 2011 will be printed and posted to Shareholders shortly. Copies will
also be available to the public at the registered office of the Company at 10
Lower Grosvenor Place, London, SW1W 0EN and will be available for download from
www.chrysalisvct.co.uk and www.downing.co.uk.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Chrysalis VCT PLC via Thomson Reuters ONE
[HUG#1582247]
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