TIDMCYS
Chrysalis VCT plc
Final results for the year ended 31 October 2013
FINANCIAL SUMMARY
31 Oct 31 Oct
2013 2012
pence pence
Net asset value per share ("NAV") 83.50 84.50
Cumulative dividends paid per share since launch * 40.70 35.70
Total Return 124.20 120.20
(Net asset value per share plus cumulative dividends)
Dividends in respect of financial year
Interim dividend per share 1.75 1.75
Final proposed dividend per share 3.25 3.25
5.00 5.00
* Excludes final proposed dividend
CHAIRMAN'S STATEMENT
* Dividend level retained at 5.0p for 2013
* Return for the year tops GBP1 million for the fourth year running
* 4.7% increase in net asset value over last year
* Total return on 80p investment now at 124.2p
Your Fund has continued its solid performance record during 2013 and I
am delighted to announce that the Board is proposing a final dividend of
3.25p which takes the payment for the full year to 5p. Total dividends
paid since launch now top 44p.
Although this dividend exceeds the returns made during the financial
year, the Directors are confident that your portfolio is strong and we
are aware of events post year-end which we believe fully justifies this
level of dividend.
Portfolio
At the year end, the Fund held a portfolio of 26 investments, which
value the venture capital portion of the portfolio at GBP16.2 million. A
detailed analysis of Fund activities appears elsewhere in this report,
from which shareholders will see that the bulk of investment activity
during the year centred on follow-on investments and exits.
We are proud of our record of continuing support for portfolio
businesses and made three follow-on investments during the period under
review. In our experience the small UK companies continue to find there
is a shortage of development funding from the banking sector and
follow-on investments have therefore outnumbered new opportunities.
Much of the year's activity for our investment managers has focussed on
exits. The two exits we achieved during the year illustrate opposite
ends of the spectrum of venture capital investment. The partial sale of
Newquay Helicopters follows a considerable period of close involvement
with the business by ourselves and our co-investors. In the end this
diligent approach paid off, producing a respectable result. In contrast
our investment in KnowledgePool was briefer - but more profitable and
resulted in an excellent return.
Not every investment can be a KnowledgePool and this year has been a
good example of how persistent and skilful portfolio management can
produce the right outcome from a less-promising scenario. As ever, the
Board is grateful to the key executives of our Investment Management
company, Managing Director Chris Kay and Investment Director Robert
Wilson, for their skill and efforts during the year.
Although we did not secure any new investments during the year, there
were deals in the pipeline and after the year end we made a significant
investment in the company behind the return of children's TV favourite,
The Clangers, to the BBC schedules.
Chris Kay provides further commentary in this and other portfolio
companies in his Investment Manager report.
Cash
We held cash of GBP6.4 million, at the year-end. Since bank interest
rates remain at long-term lows we have reviewed our cash management
policy and since the year end, GBP2.3 million is being held in three
corporate bonds, each of which has been selected for decent yield and
high quality.
Our total dividend pay-out for the year, if shareholders approve our
proposal at the AGM, will be GBP1.5 million.
Share Realisation and Reinvestment Programme
Shareholders will recall that in January 2013, the Company launched a
Share Realisation and Reinvestment Programme offering Shareholders the
option to sell their shares back to the Company via a tender offer and
reinvest the proceeds in new shares. This gave Shareholders the
opportunity to gain income tax relief on their new investment, while
remaining invested in our Fund.
With many of the Company's Shareholders having originally invested many
years ago, the opportunity for further income tax relief was well
received, with approximately 26% of shares participating. 8,266,579
shares were purchased for cancellation at a price of 84.5p per share and
8,018,308 new shares were allotted in respect of the tender proceeds at
a price of approximately 87.1p per share.
Fundraising activities
The Company launched a top-up offer in conjunction with the SRRP. I am
pleased to report that GBP326,000 was raised under the offer, with
374,275 shares being issued at 87.1p per share.
Management of the Fund
Shareholders will be aware that our Fund Management operating costs are
low compared with the VCT industry in general, at 1.6% of net assets due
essentially to the self-managed structure we created in 2005. The Board
keeps this policy under review, but we remain convinced that it not only
represents exceptional value, but also gives shareholders access to a
steady supply of good quality small company investments which have been
the hallmark of our Fund.
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. During
the year, one of my fellow directors, Martin Knight, joined the Board of
the subsidiary in a non-executive capacity only.
Fixed income securities
At the year end the Fund also held a portfolio of fixed income
securities, which were valued at GBP432,000 comprised mainly of one
gilt-edged security.
Net asset value, results and dividend
Shareholders will be pleased that the Fund's net asset value ("NAV") per
share at 31 October 2013 was 83.5p, an increase of 4.0p or 4.7% over the
year (after adjusting for dividends paid during the year).
The return on activities after taxation for the year was GBP1.1 million
(2012: GBP1.0 million), comprising a revenue return of GBP519,000 and a
capital return of GBP588,000.
The Company paid an interim dividend of 1.75p per share on 31 July 2013.
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 2014 to
Shareholders on the register at 26 March 2014.
Share buybacks
The Fund maintains a policy of making ad hoc share purchases; however,
during the year, all share buybacks occurred via the SRRP facility
previously discussed.
If shares are offered to the Fund via its broker, Nplus1 Singer Capital
Markets, a decision on whether to buy, and at what price, is taken on a
case-by-case basis.
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. During the year to 31
October 2013, 2.2 million shares changed hands through the secondary
market. 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.
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.
Annual General Meeting
The forthcoming AGM will be held at 10 Lower Grosvenor Place, London
SW1W 0EN at 11:00am on 9 April 2014.
Conclusion
Much has been said recently about economic recovery in the UK and I felt
it was a good time to take stock of our activities since 2008.
At that time I promised that our focus would be on providing support to
investee companies, where required, and making sensible new investments
where possible but particularly to conserve sufficient resources to take
advantage of opportunities that would arise when economic conditions
started to improve.
I hope shareholders would agree that these accounts show that Chrysalis
VCT plc has delivered on that promise. I am proud that your Fund,
through the skill and efforts of the Board and of our investment team,
enters 2014 in precisely the condition we had planned.
Despite the troubled economic times, we have also achieved a 67% growth
in annual dividends.
Thank you to all shareholders for your continued support.
Peter Harkness
Chairman
INVESTMENT MANAGEMENT REPORT
It is pleasing to be able to report that for the fourth consecutive year,
total overall return for Shareholders was in excess of GBP1 million.
As with any reasonably sized portfolio of unquoted investments overall
return will largely be influenced by valuation movements which is not an
exact science and can require some subjective judgements.
However during this year there have been a significant number of
disposals generating over GBP4.5 million of cash (nearly 25% of the
unquoted portfolio) which has confirmed the accuracy of the valuation
policy.
The largest disposal was the sale of KnowledgePool (KP) to Capita in May
2013 which produced proceeds of GBP1.7 million with potentially another
GBP100,000 to follow. Chrysalis had only invested in KP in February
2011 when GBP1 million was invested, so a capital return of at least 70%
was achieved in just over two years. Interestingly in more normal times
KP would almost certainly have been able to get GBP1 million of bank
finance but in 2011 found it impossible. Therefore we were able to
negotiate an equity and debt package which has produced a highly
satisfactory return.
Although the banks are now stating they are keen to support SMEs, in our
experience this is still not the case. Accordingly similar deals to KP
are still around although clearly it is important to avoid a "disguised
rescue".
The second largest disposal was the sale of Escape Studios Limited. As
we reported last year Escape sold one of its operating divisions during
2012 which enabled it to repay our loan in July 2013. The repayment
included a redemption premium which effectively reduced the holding cost
of our equity position to zero. The company was then sold to Pearson in
October 2013. Assuming all the retentions are released Chrysalis will
have made a capital gain of GBP816,000 in just over four years from a
GBP750,000 investment which also provided GBP45,000 of income annually.
Escape's two stage sale process is currently not untypical even for
relatively small companies. Another portfolio company, Autocue, this
year sold off a non-core operating division in order to make the
remaining part of the company more attractive to potential purchasers.
The message appears to be that purchasers are out there but they only
want to acquire "clean" situations. This, of course, means additional
work for the management of the investee companies who are usually fully
occupied with the day to day running of the business.
This is where our investment policy of providing experienced
non-executive directors to the investee companies has proven
advantageous by giving investee company boards experienced resources to
carry out these strategic policies.
The third major disposal has also been far from simple. Newquay
Helicopters (formerly British International Holdings) has effectively
been profitably liquidating itself over the past 18 months, selling off
its various assets. Chrysalis has already received just over GBP1
million which it is just GBP20,000 less than its original investment and
all being well should receive a further GBP432,000 over the next 12
months. Once again Chrysalis has also received a healthy yield
throughout the seven years of the investment.
These three exits have all demonstrated the effect of structuring the
investment correctly. All three companies at various times experienced
trading difficulties but the debt/equity mix means that Chrysalis
enjoyed the benefit of downside protection and decent ongoing yield even
when things were not going to plan but importantly meant that there was
also some equity upside.
Of course if the investments had been 100% in equity the upside would
have been greater but providing all equity finance to the type of
companies that VCT's are eligible to invest in is a very high risk
business. Our philosophy remains that our shareholders would much
prefer to enjoy a decent steady return with reduced risk as far as that
is possible in a VCT.
A final example of this was the investment in Real Time Logistics Ltd.
GBP325,000 was invested in 2006 but unfortunately the company had many
years of struggle and had to be rescued several times by its majority
shareholders. If the original investment had all been equity it would
have been completely diluted and become virtually worthless. As it was
with a structured investment we have been able to negotiate over time an
exit which finally completed this year producing a small capital profit
even though the company is a long away from its original business plan.
In addition to these exits, Life's Kitchen, Precision Dental and
Triaster have all redeemed loan-notes over the year.
Chrysalis ended the year with GBP6.4 million of cash.
One major new investment of GBP956,000 was made just after the year-end
into North Promotions Ltd. This investment will help finance the return
of "The Clangers" to the BBC which is scheduled to be in early in 2016.
Other investments during the year include a further GBP138,000
investment in Rhino to help finance its acquisition of its New Zealand
competitor and GBP250,000 to K10 to help finance its third sushi
restaurant in The City of London.
The major challenge for this year, therefore, is to make more new
investments although in the short term the cash balance may grow
substantially as two more of the portfolio are currently "under offer"
(confidentiality agreements mean we cannot say more). We have learnt
over the years that good offers for individual small companies do not
come very frequently and therefore each one has to be taken very
seriously.
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 2013:
Valuation
movement % of portfolio
Cost Valuation in year by value
GBP'000 GBP'000 GBP'000
Top ten venture capital investments
Wessex Advanced Switching Products Limited 704 4,115 1,552 17.9%
Precision Dental Laboratories Limited 1,710 2,185 542 9.5%
Locale Enterprises Limited 1,338 1,801 (276) 7.8%
MyTime Media Holdings Limited 750 1,598 116 6.9%
Triaster Ltd 417 1,134 411 4.9%
Internet Fusion Limited 700 880 180 3.8%
VEEMEE Limited 500 824 (195) 3.6%
Autocue Group Limited 500 811 79 3.5%
Ensign Communication Holdings Limited 292 438 (858) 1.9%
London Italian Restaurants Limited 1,000 437 (109) 1.9%
7,911 14,223 1,442 61.7%
Other venture capital investments
Newquay Helicopters (2013) Limited
(formerly British International Holdings Limited) 295 432 (600) 1.9%
K10 (London) Limited 350 410 60 1.8%
Livvakt Limited 550 329 (82) 1.4%
Rhino Sport & Leisure Limited 304 273 (14) 1.2%
Life's Kitchen Limited 255 255 (3) 1.1%
Cashfac plc - 107 5 0.5%
Best of the Best plc * 81 64 38 0.3%
The Mission Marketing Group plc * 150 34 (1) 0.1%
Zappar Limited - 31 (94) 0.1%
Progility plc * (formerly ILX Group plc) 100 10 (6) -
The Kellan Group plc * 320 3 (6) -
Art VPS Limited 358 - - -
G-Crypt Limited 305 - - -
IX Group Limited 250 - - -
Kids Safteynet Limited 637 - - -
Planet Sport Holdings Limited 263 - - -
4,218 1,948 (703) 8.4%
Fixed income securities
United Kingdom 2.25% Gilt 07/03/2014 415 423 (8) 1.9%
S&W Investment Funds Cash Fund 9 9 - -
424 432 (8) 1.9%
12,553 16,603 731 72.0%
Cash at bank and in hand 6,445 28.0%
Total investments 23,048 100.0%
All investments are unquoted unless otherwise stated.
* Quoted on AIM
Investment movements for the year ended 31 October 2013
Additions
GBP'000
Follow-on investments
K10 (London) Limited 250
Newquay Helicopters (2013) Limited 126
Rhino Sport & Leisure Limited 138
Total investments 514
Disposals
Value at Profit Realised gain/
Cost 01/11/12* Proceeds vs cost (loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
disposals
Full and partial
disposals
Escape Studios
Limited 750 1,605 1,566 816 (39)
KnowledgePool Group
Limited 1,000 1,614 1,799 799 185
Real Time Logistic
Solutions Limited 55 - 68 13 68
Newquay Helicopters
(2013) Limited 739 1,013 1,013 274 -
Loan note redemptions
and conversions
Precision Dental
Laboratories
Limited 200 200 200 - -
Life's Kitchen
Limited 45 45 45 - -
Triaster Ltd 286 286 286 - -
Liquidation
Aerialcell Limited 350 25 - (350) (25)
3,425 4,788 4,977 1,552 189
Fixed income
securities
S&W Investment Funds
Cash Fund 1 1 1 - -
United Kingdom 1%
Gilt 07/09/2017 1,235 1,240 1,242 7 2
1,236 1,241 1,243 7 2
Total 4,661 6,029 6,220 1,559 191
* Adjusted for purchases in the year where applicable
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Directors Report, the
Strategic Report and the Directors' Remuneration Report and the
financial statements in accordance with applicable law and regulations.
They are also responsible for ensuring that the annual report includes
information required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law, the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the Directors must not
approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
-- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company's transactions, to
disclose with reasonable accuracy at any time the financial position of
the Company and to enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
In addition, each of the Directors considers that the Annual Report,
taken as a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements and other information included
in annual reports may differ from legislation in other jurisdictions.
INCOME STATEMENT
for the year ended 31 October 2013
2013 2012
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 966 - 966 765 - 765
Gains on investments - 922 922 - 914 914
966 922 1,888 765 914 1,679
Investment management
fees (103) (308) (411) (104) (310) (414)
Performance incentive
fees - (98) (98) - (1) (1)
Other expenses (252) (20) (272) (219) (33) (252)
Return on ordinary
activities before tax 611 496 1,107 442 570 1,012
Tax on ordinary
activities (92) 92 - (59) 59 -
Return attributable to
equity shareholders 519 588 1,107 383 629 1,012
Basic and diluted return 1.7p 2.0p 3.7p 1.3p 2.1p 3.4p
per share
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year. The total column within the Income Statement represents
the 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 2013
2013 2012
GBP'000 GBP'000
Opening Shareholders' funds 25,168 25,640
Issue of shares 326 -
Issue of shares under Share Realisation and Reinvestment
Programme 6,985 -
Share issue costs (90) -
Purchase of own shares - (208)
Purchase of own shares under Share Realisation and
Reinvestment Programme (7,020) -
Total recognised gains for the year 1,107 1,012
Dividends paid (1,497) (1,276)
Closing Shareholders' funds 24,979 25,168
BALANCE SHEET
at 31 October 2013
2013 2012
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 16,603 21,387
Current assets
Debtors 2,031 190
Current investments - 2,000
Cash at bank and in hand 6,445 1,690
8,476 3,880
Creditors: amounts falling due within one
year (100) (99)
Net current assets 8,376 3,781
Net assets 24,979 25,168
Capital and reserves
Called up share capital 299 298
Capital redemption reserve 89 89
Share premium 1,478 1,064
Merger reserve 1,981 2,104
Special reserve 2,320 3,653
Capital reserve - realised 11,051 10,138
Capital reserve - unrealised 7,122 7,104
Revenue reserve 639 718
Total equity shareholders' funds 24,979 25,168
Net asset value per share 83.5p 84.5p
CASH FLOW STATEMENT
for the year ended 31 October 2013
2013 2012
GBP'000 GBP'000
Net cash inflow from operating activities 260 55
Taxation - -
Capital expenditure
Payments to acquire investments (1,970) (2,535)
Receipts from sale of investments 5,809 3,938
Net cash inflow from capital expenditure 3,839 1,403
Equity dividends paid (1,497) (1,276)
Net cash inflow before management of liquid resources
and financing 2,602 182
Management of liquid resources
Redemption of current investment 2,000 -
Net cash inflow from liquid resources 2,000 -
Financing
Proceeds from shares issued 326 -
Proceeds from shares issue under Share Realisation
and Reinvestment Programme 6,985 -
Share issue costs (90) -
Purchase of own shares (48) (172)
Purchase of own shares under Share Realisation and
Reinvestment Programme (7,020) -
Net cash outflow from financing 153 (172)
Increase in cash 4,755 10
NOTES TO THE ACCOUNTS
for the year ended 31 October 2013
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. 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.
Fixed asset investments (continued)
It is not the Company's policy to exercise controlling influence over
investee companies. Therefore, the results of these companies are not
incorporated into the Income Statement except to the extent of any
income accrued. This is in accordance with the SORP 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.
Share issue costs
Issue costs in relation to shares issued are deducted from the share
premium account.
2. Basic and diluted return per share
2013 2012
Return per share based on:
Net revenue return for the financial year (GBP'000) 519 383
Capital return per share based on:
Net capital gain for the financial year (GBP'000) 588 629
Weighted average number of shares in issue 29,864,316 30,023,505
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
2013 2012
Shares in issue Net asset value Net asset value
Pence Pence per
2013 2012 per share GBP'000 share GBP'000
Ordinary
Shares 29,917,025 29,791,021 83.5p 24,979 84.5p 25,168
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 predominantly at fixed rates. A summary of
the interest rate profile of the Company's investments is shown below.
Interest rate risk profile of financial assets and financial liabilities
There are three levels of interest which are attributable to the
financial instruments as follows:
* "Fixed rate" assets represent investments with predetermined yield
targets and comprise fixed interest and loan note investments.
* "Floating rate" assets predominantly bear interest at rates linked to
Bank of England base rate and comprise cash at bank.
* "No interest rate" assets do not attract interest and comprise equity
investments, loans and receivables (excluding cash at bank) and other
financial liabilities.
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 at Royal Bank of Scotland plc with a balance also
maintained at Bank of Scotland plc, both of which are 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 (2013: GBP100,000, 2012: GBP99,000) and has no
borrowings. The Company always holds sufficient levels of funds as cash
and readily realisable investments in order to meet expenses and other
cash outflows as they arise. For these reasons, the Board believes that
the Company's exposure to liquidity risk is minimal.
The Company's liquidity risk is managed by Chrysalis VCT Management
Limited in line with guidance agreed with the Board and is reviewed by
the Board at regular intervals.
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, GBP411,000 (2012: GBP414,000) 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
GBP98,000 (2012: GBP1,000) were due to Chrysalis VCT Management Limited.
At the year end, GBP46,000 was outstanding (2012: GBPNil).
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 or investment decisions regarding 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 2013,
but has been extracted from the statutory financial statements for the
year ended 31 October 2013, which were approved by the Board of
Directors on 14 February 2014 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 2012 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 2013 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 NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Chrysalis VCT PLC via Globenewswire
HUG#1762197
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