TIDMCYS
Chrysalis VCT plc
Final results for the year ended 31 October 2012
FINANCIAL SUMMARY
31 Oct 31 Oct
2012 2011
pence pence
Ordinary Shares
Net asset value per share ("NAV") 84.50 84.90
Cumulative dividends paid per share since launch * 35.70 31.45
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Total Return 120.20 116.35
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(Net asset value per share plus cumulative dividends)
Dividends in respect of financial year
Interim dividend per share 1.75 1.50
Final proposed dividend per share 3.25 2.50
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5.00 4.00
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* Excludes final proposed dividend
CHAIRMAN'S STATEMENT
* Significant increase in dividend to 5.0p for 2012
* Return for the year tops GBP1 million for the third year running
* 4.5% increase in net asset value over last year
* Total return on 80p investment now at 120.2p
* Tax saving opportunity from S.R.R.P. launch
There is a business axiom which says that the real test of a good business is
not how well it performs in good times, but how successful it is when times are
bad.
If they apply that test to Chrysalis, I believe our shareholders should give the
Fund high marks for the results we have achieved since the economic crisis set
in - and I am pleased to announce we have delivered another very respectable set
of numbers for the year ending October 2012.
As result I am delighted to announce that our already strong dividend record
will be further enhanced with the payment of a final payment of 3.25p which
takes the dividend for the full year to 5.0p, and taking the total dividends
paid since launch to 38.95p.
This dividend exceeds the returns made during the financial year itself, but the
Directors are confident that your portfolio is strong and set to deliver funds
from exits and therefore this level of dividend is justified.
Portfolio
Following the worsening news from the High Street, shareholders will be pleased
that our portfolio includes a new on-line retail business, Internet Fusion,
which has developed a decent track record on the internet since it was founded a
few years ago by a group of young businessmen. We have provided expansion
capital for this profitable, growing company to increase its stock-holding
capacity as it expands the retail sectors it covers. Existing portfolio company
MyTime Media Holdings (formerly MyHobbyStore Holding) has this year
significantly increased its e-commerce activities in the hobbies sector using
funds we provided the previous year. A financial advantage for both these
companies is that they can base their web operations away from high-cost retail
premises - in Lincolnshire and Cambridgeshire respectively - to gain extra
advantage over shop-based operators.
However, we remain resolutely generalist with our focus firmly on the quality
and prospects of each business as well as the calibre of its management. Thus we
are pleased to be backing emerging sushi restaurant concept K10 City Sushi, with
proven management and based initially in the City of London.
At the year end, the Company held a portfolio of 30 investments, valued at GBP19.7
million. The Fund made five investments during the period under review - three
of which were in portfolio companies and two in new ones. It is an important
tenet of our investment policy that we look on each investment as an on-going
relationship and not just a one-off transaction. With bank lending still stuck
in bottom gear, many smaller companies find it very difficult to secure debt to
expand. Chrysalis is happy to step into this gap, where the transaction makes
sense for both parties and follow-on investments have outnumbered new deals.
Much of the year's activity for our investment managers has focussed on possible
exits and we had expected some return of cash from the portfolio by the year
end. Like everything in these curious times, the exit process is less
predictable than in the past, but one exit is partly complete and will return
funds during 2013.
I would like to thank the executives of our wholly-owned Fund Management
subsidiary - Managing Director Chris Kay and Director Robert Wilson - for their
hard work on the portfolio during the year.
Further commentary on portfolio activity, together with a detailed schedule of
the investments can be found in the Investment Management report and Review of
Investments.
Cash
We continue to be well funded. In fact, with the lower than usual level of new
investment and the expected in-flow of funds from potential exits, the Board has
decided that we can raid the till a little to pay out a dividend for the year in
excess of our earnings. Shareholders continue to give us good support and we
know they are dividend focussed, particularly when so many other investment
classes are not producing such good yields. We believe we will be left with
sufficient funds to continue to develop the business and produce good returns.
Our total dividend pay-out for the year will be GBP1.5 million. On top of this, we
have bought in 421,276 shares during the year at cost of GBP208,000.
Share realisation and reinvestment programme and top up offer
In common with much of the VCT industry, Chrysalis is announcing a Share
Realisation and Reinvestment Programme ("SRRP") which enables shareholders to
take new shares in exchange for their existing holding. This requires no extra
cash commitment from shareholders, but it does create a substantial tax credit
on the transaction (30%) which can be off-set against tax on earnings.
Attractively, our scheme offers two closing dates - one in this tax year and the
other at the start of the next. Shareholders can choose which year to tax the
tax credit, or can split their acceptance between the two years in any ratio
which gives them the most personal advantage.
You may wish to know that all Chrysalis directors are planning to participate in
this programme.
In conjunction with this, the Company is also launching a top-up offer for 2.5
million shares, available to all shareholders and members of the public, again
across the two tax years.
Both share issues will be at a price of approximately 103% of the most recently
published net asset value on the 28 March 2013, the closing date of both offers.
The scheme is approved by HMRC. Full details are being mailed to all
shareholders. Shares which you wish to process through the scheme need to be
registered in your own name, rather than a nominee.
Management of the Fund
Shareholders will already be aware that our Fund Management operating costs are
low compared with the VCT industry in general, at 1.6% of net assets. This is
essentially due to the self-managed structure we employ. The Directors keep this
policy under regular review, but we remain convinced that it not only represents
exceptional value, but also gives shareholders access to a steady supply of good
investments.
Our wholly-owned Fund Management subsidiary does not seek profits for itself and
has no interests other than managing your investments efficiently and cost-
effectively. It may not be the norm in the VCT sector, but it works for us - and
delivers the result we want.
Fixed income securities
The Company also holds a portfolio of fixed income securities, which were valued
at GBP1.7 million at the year end and comprised mainly of gilt-edged securities.
Additionally, GBP2.0 million is held in a fixed rate deposit bank account (shown
as a current investment), which matured in December 2012.
Net asset value, results and dividend
It is pleasing to report that the Company's net asset value ("NAV") per share at
31 October 2012 was 84.5p, an increase of 3.8p or 4.5% over the year (after
adjusting for dividends paid during the year).
The return on activities after taxation for the year was GBP1.0 million (2011:
GBP1.3 million), comprising a revenue return of GBP383,000 and a capital return of
GBP629,000.
The Company paid an interim dividend of 1.75p per share on 31 July 2012. Subject
to Shareholder approval at the forthcoming AGM, your Board is proposing to pay a
final dividend of 3.25p per share on 30 April 2013 to Shareholders on the
register at 12 April 2013.
Share buybacks
The Company has maintained its policy of making ad hoc share purchases
occasionally during the year.
If shares are offered to the Company via its brokers, Nplus1 Singer Capital
Markets, a decision on whether to buy is taken on a case-by-case basis whether
to buy and at what price.
In the past share purchases by third parties in the market were negligible, but
as the attractions of our dividend policy and the strength of the portfolio has
become more widely known, more and more shares are being taken up by secondary
investors . We welcome these new shareholders.
Due to the "close period" rules, which apply to Chrysalis as a listed investment
trust, there are limited occasions on which the Fund can enter the market and
buy shares. The Directors feel that, in general, our resources are better
applied to the dividend payments - from which all shareholders benefit directly
- than to share buy-backs. We will continue to consider ad hoc purchases when
shares are offered, but we are pleased that the market is also providing
liquidity for those who wish to sell.
During the year, the Company repurchased 421,276 Ordinary Shares for an
aggregate consideration of GBP208,000 and these shares were cancelled, thus
enhancing the value of the remaining shares. Shareholders should also be advised
that the three Board members purchased, in total, 45,000 shares in July 2012.
Directors
During the year the Fund has again had the benefit of wise and committed
Directors and I have greatly appreciated the support and counsel of my
colleagues Julie Baddeley and Martin Knight. At the forthcoming AGM I am
delighted that Julie has agreed to stand again for election. I hope Shareholders
recognise, as I certainly do, her considerable knowledge of both the Fund and of
corporate governance in general and agree with me that it would be greatly to
our advantage to retain her services.
Annual General Meeting
The forthcoming AGM will be held at 10 Lower Grosvenor Place, London SW1W 0EN at
10:00 am on 14 March 2013. Notice of the meeting is at the end of this document.
Immediately afterwards on the same day at the same venue there will be an
additional General Meeting to approve the Share Realisation Reinvestment Scheme
I mentioned previously.
Conclusion
Good progress has been made in the year and total return on an original 80p
investment (after tax relief) is now 120.2p.
For the coming year I can promise the same degree of enthusiasm and dedication
from the Directors, Executives, support staff and advisers that the Fund has
enjoyed previously. It would be very welcome if we experience a kinder business
environment in the immediate future, but whatever the economy throws our way, I
believe we are well placed to cope with it.
Peter Harkness
Chairman
INVESTMENT MANAGEMENT REPORT
It is pleasing to report that despite operating in a very low growth economy our
portfolio has performed sufficiently well such that total overall return for
shareholders is over GBP1 million for the third consecutive year. All that profit
and more ( GBP1.4 million) has been returned to Shareholders during the year by way
of dividends and share buybacks.
Five investments were made during the year totaling GBP1.15 million. One of which
was a small ( GBP50,000) attempted rescue into AerialCell which unfortunately did
not survive and one was a participation in the demerger of Zappar Ltd from
VEEMEE Ltd. So now we have a direct investment in a potentially very exciting
technology company. We also provided GBP300,000 to Livvakt Ltd, the property
developer, to enable it to continue to grow its business.
There were two new companies added to the portfolio. The first is K10 City Sushi
which operates a successful Sushi restaurant in The City of London and has
ambitious expansion plans. We have invested alongside Ian Neill who has had a
glittering career in the sector and was described by The Times as the "godfather
of casual dining." K10's second restaurant opens in February.
The second new company is Internet Fusion Ltd where we invested GBP700,000 to fund
the expansion of this fast growing e-commerce distributor of leisure and
sportswear products. Sales at the company grew by 50% over the year and are
forecast to do the same during 2013.
Due to the continuing retrenchment by the clearing banks transactions seem few
and far between and consequently we have not seen any exits this year with the
only return of cash coming from some loan repayments. A number of portfolio
companies have had serious sale discussions but lack of finance for the proposed
purchaser has meant that an acceptable price has not been achieved. Two of our
companies namely British International Holdings ("BIH") and Escape Studios have
however successfully sold operating divisions towards the end of the financial
year and we expect to be receiving some substantial cash sums when both their
reorganizations are completed.
Turning to the operating performance of the portfolio it has generally been a
good year. Our top 12 investments account for 90% of the value of the venture
capital portfolio and of these 11 are trading profitably and 9 of those are
showing year on year improvements. The only loss maker is BIH which as mentioned
above is effectively winding itself up by selling off its various divisions. We
reported last year that profits had declined at Wessex Advanced Switching
Products our biggest investment. I am pleased to be able to report that the
company has reversed that trend and is confident about prospects for 2013.
The lack of exits and the return of cash to our Shareholders has meant that
despite relatively low levels of investment our overall effective cash balance
(including fixed interest investments) has fallen from GBP7.7 million to GBP5.4
million at the year end. The proposed final dividend will cost nearly another
GBP1.0 million and as previously reported whilst it remains difficult for small
and medium sized companies to obtain bank funding we consider it prudent to keep
aside 20% ( GBP3.9 million) of the value of our venture capital portfolio in order
that we have sufficient resources to support our companies if required.
We do however anticipate some realisations this year although now more than ever
no deal is certain until it is actually done and looking forward to this year we
are cautiously optimistic that 2013 will be a better year for the economy than
2012. Hence hopefully the majority of our investee companies will continue to
prosper. However the recent collapse of several high profile retail chains does
show that trading is still tough.
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 2012:
Valuation % of
movement portfolio
Cost Valuation in year by value
GBP'000 GBP'000 GBP'000
Top ten venture capital investments
Wessex Advanced Switching Products Limited 704 2,563 346 10.2%
Locale Enterprises Limited 1,338 2,077 (13) 8.3%
British International Holdings Limited 908 1,919 (71) 7.6%
Precision Dental Laboratories Limited 1,910 1,843 206 7.4%
Knowledge Pool Group Limited 1,000 1,614 614 6.4%
Escape Studios Limited 750 1,605 2 6.4%
MyTime Media Holdings Limited
(formerly MyHobbyStore Holding Limited) 750 1,482 246 5.9%
Ensign Communication Holdings Limited 292 1,296 (349) 5.2%
VEEMEE Limited 500 1,019 202 4.1%
Triaster Ltd 703 1,009 170 4.0%
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8,855 16,427 1,353 65.5%
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Other venture capital investments
Autocue Group Limited 500 731 231 2.9%
Internet Fusion Limited 700 700 - 2.8%
London Italian Restaurants Limited 1,000 547 (328) 2.2%
Livvakt Limited 550 412 (138) 1.7%
Life's Kitchen Limited 300 303 3 1.2%
Rhino Sport & Leisure Limited 166 149 74 0.6%
Zappar Limited - 125 125 0.5%
Cashfac plc - 101 51 0.4%
K10 City Sushi Limited 100 100 - 0.4%
The Mission Marketing Group plc * 150 35 16 0.1%
Best of the Best plc * 81 26 5 0.1%
Aerialcell Limited 350 25 (325) 0.1%
ILX Group plc * 100 16 (16) 0.1%
The Kellan Group plc * 320 9 (1) -
Art VPS Limited 358 - - -
G-Crypt Limited 305 - (152) -
IX Group Limited 250 - - -
Kids Safteynet Limited 637 - - -
Planet Sport Holdings Limited 263 - - -
Real Time Logistic Solutions Limited 55 - - -
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6,185 3,279 (455) 13.1%
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Fixed income securities
United Kingdom 1% Gilt 07/09/2017 1,235 1,240 5 5.0%
United Kingdom 2.25% Gilt 07/03/2014 415 431 (5) 1.7%
S&W Investment Funds Cash Fund 10 10 - -
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1,660 1,681 - 6.7%
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16,700 21,387 898 85.3%
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Cash at bank and in hand 1,690 6.7%
Royal Bank of Scotland plc 3.41% 2012 2,000 8.0%
deposit
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Total investments 25,077 100.0%
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All investments are unquoted unless otherwise stated.
* Quoted on AIM
Investment movements for the year ended 31 October 2012
Additions
GBP'000
New investments
Internet Fusion Limited 700
K10 City Sushi Limited 100
Follow-on investments
Aerialcell Limited 50
Livvakt Limited 300
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1,150
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Fixed income securities
S&W Investment Funds Cash Fund 150
United Kingdom 1% Gilt 07/09/2017 1,235
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1,385
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Total investments 2,535
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Disposals
Realised
MV at Profit gain/
Cost 01/11/11* Proceeds vs cost (loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital disposals
Tender offer
Best of the Best plc 16 4 16 - 12
Loan note redemptions
Precision Dental Laboratories Limited 200 200 200 - -
Triaster Limited 55 55 55 - -
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271 259 271 - 12
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Fixed income securities
S&W Investment Funds Cash Fund 140 140 140 - -
United Kingdom 2.25% Gilt 07/03/2014 1,412 1,486 1,474 62 (12)
United Kingdom 2.75% Gilt 22/01/2015 1,032 1,043 1,043 11 -
United Kingdom 2% Gilt 22/01/2016 929 994 1,010 81 16
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3,513 3,663 3,667 154 4
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Total 3,784 3,922 3,938 154 16
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* 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 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.
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.
INCOME STATEMENT for the year ended 31 October 2012
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 765 - 765 781 - 781
Gains on investments - 914 914 - 1,207 1,207
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765 914 1,679 781 1,207 1,988
Investment management fees
(104) (310) (414) (106) (317) (423)
Performance incentive fees
- (1) (1) - (27) (27)
Other expenses (219) (33) (252) (270) (1) (271)
----------------------- ----------------------
Return on ordinary activities 442 570 1,012 405 862 1,267
before tax
Tax on ordinary activities (59) 59 - (59) 59 -
----------------------- ----------------------
Return attributable to equity 383 629 1,012 346 921 1,267
shareholders
----------------------- ----------------------
Basic and diluted return per share
1.3p 2.1p 3.4p 1.1p 3.0p 4.1p
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 profit or 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 2012
2012 2011
GBP'000 GBP'000
Opening Shareholders' funds 25,640 25,638
Purchase of own shares (208) (346)
Total recognised gains for the year 1,012 1,267
Dividends paid (1,276) (919)
-------------------
Closing Shareholders' funds 25,168 25,640
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BALANCE SHEET at 31 October 2012
2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 21,387 21,876
Current assets
Debtors 190 222
Current investments 2,000 2,000
Cash at bank and in hand 1,690 1,680
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3,880 3,902
Creditors: amounts falling due within one year (99) (138)
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Net current assets 3,781 3,764
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Net assets 25,168 25,640
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Capital and reserves
Called up share capital 298 302
Capital redemption reserve 89 85
Share premium 1,064 1,064
Merger reserve 2,104 2,128
Special reserve 3,653 6,377
Capital reserve - realised 10,138 10,897
Capital reserve - unrealised 7,104 3,927
Revenue reserve 718 860
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Total equity shareholders' funds 25,168 25,640
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Net asset value per share 84.5p 84.9p
CASH FLOW STATEMENT for the year ended 31 October 2012
2012 2011
GBP'000 GBP'000
Net cash inflow/(outflow) from operating activities 55 (14)
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Taxation - -
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Capital expenditure
Payments to acquire investments (2,535) (3,579)
Receipts from sale of investments 3,938 5,063
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Net cash inflow from capital expenditure 1,403 1,484
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Equity dividends paid (1,276) (919)
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Net cash inflow before financing 182 551
Financing
Purchase of own shares (172) (334)
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Net cash outflow from financing (172) (334)
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Increase in cash 10 217
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NOTES TO THE ACCOUNTS for the year ended 31 October 2012
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 as explained in note
9. 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.
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.
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.
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 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 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
2012 2011
Return per share based on:
Net revenue return for the financial year ( GBP'000) 383 346
------------ -----------
Capital return per share based on:
Net capital gain for the financial year ( GBP'000) 629 921
------------ -----------
Weighted average number of shares in issue 30,023,505 30,655,950
------------ -----------
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
2012 2011
Shares in issue Net asset value Net asset value
Pence Pence per
per share share
2012 2011 GBP'000 GBP'000
Ordinary 29,791,021 30,212,297 84.5p 25,168 84.9p 25,640
Shares
----------------------- ----------- -------- ------------- -------
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 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:
* Investment 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:
Investment 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 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. 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 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.
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.
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 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 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 usually has a relatively low level of creditors (2012: GBP99,000,
2011: GBP138,000) 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 Chrysalis VCT Management Limited
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, provides investment
management services to the Company for a fee of 1.65% of net assets per annum.
During the period, GBP414,000 (2011: GBP423,000) 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 GBP1,000 (2011: GBP27,000) were due to Chrysalis VCT Management Limited. At
the year end, GBPNil was outstanding (2011: GBP1,000).
Peter Harkness holds a position of significant influence within MyTime Media
Holdings Limited (formerly MyHobbyStore Holding Limited, an investment held by
the Company, and therefore abstains from discussions surrounding the valuation
of the company. Details of the investment, including cost, valuation and income
received during the year 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 2012, but has been extracted
from the statutory financial statements for the year ended 31 October 2012,
which were approved by the Board of Directors on 31 January 2013 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 2011 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 2012 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.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#1674755]
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