Chrysalis VCT Plc Chrysalis Vct Plc : Annual Financial Report

 
TIDMCYS 
 
   Chrysalis VCT plc 
 
   Reports & Accounts for the year ended 31 October 2016 
 
 
 
   FINANCIAL SUMMARY 
 
 
 
 
                                                        31 Oct  31 Oct 
                                                         2016    2015 
                                                         pence   Pence 
 
Net asset value per share ("NAV")                        80.80   81.30 
Cumulative dividends paid per share since launch *       67.45   60.45 
 
Total Return                                            148.25  141.75 
(Net asset value per share plus cumulative dividends) 
 
Dividends in respect of financial year 
Interim dividend per share (paid)                         1.75    1.75 
Special dividend per share (paid)                         2.00    2.25 
Final proposed dividend per share                         3.25    3.25 
                                                          7.00    7.25 
* Excludes final proposed dividend 
 
   CHAIRMAN'S STATEMENT 
 
   *Total return of 8.0% for the year 
 
   *Total return on original 80p investment now at 148.25p 
 
   *Total dividends of 7.0p for the year 
 
   I am pleased to present the Annual Report for Chrysalis VCT plc for the 
year ended 31 October 2016. The year has been an eventful one with 
significant changes to the VCT regulations starting to take effect. The 
Company has, however, continued to perform well and maintained its 
dividends at a high level, with a total of 7p per share being paid 
during the year. 
 
   Portfolio 
 
   At the year end, the Company held a portfolio of 29 venture capital 
investments, valued at GBP17.8 million. During the year, two new 
companies joined the portfolio and two follow-on investments were also 
completed at a total of cost of GBP0.8 million. 
 
   There were a number of loan stock redemptions, which generated proceeds 
of GBP1.3 million, as well as the more deferred consideration from WASP, 
from which we exited in 2014, which added a further GBP440,000 to the 
total proceeds. 
 
   As usual, the Board has reviewed the investment valuations at the year 
end and made a number of adjustments. 11 investments increased in value, 
seven investments fell in value and 11 were unchanged. The largest 
movers have been MyTime Media Holdings Limited, the publisher of niche 
hobby magazines, Internet Fusion Limited, the online retailer, Precision 
Dental Laboratories Group Limited, the dental laboratory group, and 
Driver Require Group Limited, the driver recruitment agency, which have 
increased by GBP599,000, GBP484,000, GBP440,000 and GBP429,000 
respectively. 
 
   On the negative side, we have had to make a full provision of GBP1 
million against Electrobase RP (Holdings) Limited, a precision 
engineering business, which has failed to recover after a number of 
changes at management level. 
 
   Total unrealised movements for the year on the venture capital portfolio 
resulted in a net gain of GBP1.5 million, equivalent to approximately 
5.0p per share. 
 
   The Investment Management Report gives a detailed overview of the 
portfolio activity during the year and of the main valuation movements. 
 
   Cash and fixed income securities 
 
   The Company held GBP6.3 million in cash and fixed income securities at 
the year-end; split between cash of GBP4.2 million and fixed income 
securities of GBP2.1 million. 
 
   Net asset value, results and dividends 
 
   The Company's NAV fell by a small margin from 81.3p to 80.8p over the 
year as dividends slightly exceeded net earnings for the period. After 
adding back the dividends of 7.0p paid, the total return for the year 
was equivalent to 8.0% based on the opening NAV. 
 
   The return on activities after taxation for the year was GBP1.9 million 
(2014: GBP2.0 million), comprising a revenue return of GBP154,000 and a 
capital return of GBP1.8 million. 
 
   The Company paid a final 2015 dividend of 3.25p per share on 26 February 
2016. An interim 2015 dividend of 1.75p per share was combined with a 
special dividend of 2.00p per share making a total of 3.75p per share 
paid on 29 July 2016. 
 
   Subject to Shareholder approval at the forthcoming AGM, your Board is 
proposing to pay a final 2016 dividend of 3.25p per share on 28 February 
2017 to Shareholders on the register at 3 February 2017. 
 
   Share buybacks 
 
   The Board regularly reviews the Company's share buyback policy to ensure 
that it remains appropriate and, in the opinion of the Directors, in the 
best interests of Shareholders as a whole. 
 
   In the Directors' opinion, the Company's liquid resources are generally 
best utilised in paying tax free dividends to all Shareholders and 
therefore the Company does not have a fixed policy to buy in its own 
shares, but may do so, on an ad hoc basis, from time to time, and a 
resolution will be proposed accordingly. 
 
   There were no share buybacks undertaken during the year. 
 
   We recommend that any Shareholders wishing to either acquire more shares, 
or to sell existing holdings, contact the Company's broker, Nplus1 
Singer Capital Markets, who are often aware of other parties looking to 
buy or sell. 
 
   Management and Board 
 
   The Board believes that the untypical management structure of the 
Company as a self-managed VCT continues to serve Shareholders well. 
Chris Kay heads a team at the wholly-owned management subsidiary, 
Chrysalis Management VCT Limited, who continue to do a good job in what 
is, on occasion, a challenging environment. Chris and his team have 
adapted well to the new conditions and I thank them on your behalf for 
their continued contribution in managing the Company's portfolio and 
believe that this structure will continue to serve Shareholders well in 
the future. 
 
   Chrysalis VCT plc has for some years had a stable Board comprising just 
three non-executives; Julie Baddeley, Martin Knight and myself. We 
remain satisfied that this format works well for your company has 
continued to operate efficiently and, I believe, once again, has added 
value for Shareholders. I would like thank both Julie and Martin for 
another year of support and the significant part they have played in the 
ongoing success of Chrysalis VCT. 
 
   Annual General Meeting 
 
   The forthcoming AGM will be held at Ergon House, Horseferry Road, London 
SW1P 2AL at 2:30pm on 23 February 2017. 
 
   Outlook 
 
   The challenges presented by the new VCT regulations are expected to be 
an ongoing theme over the next year as both the VCT industry and HMRC 
develop a clearer understanding of their implications and how VCTs can 
operate in this new era. Perhaps it is a vain hope, but as Britain will 
inevitably begin to take more control of its economic and Governmental 
affairs than was possible before the Brexit vote, it would seem to me 
that a further review of the VCT system would be a worthwhile project. 
There is indisputable evidence that the VCT movement has been a positive 
influence within "UK plc" providing capital to sectors which were 
previously all but ignored by banks and large private equity players. 
The current regulations represent, in my personal view, a retrograde 
step and they have certainly impacted on Chrysalis to the extent that we 
have had to decline opportunities which we would otherwise have been 
keen to support. 
 
   Of course, Chrysalis VCT is already heavily invested and we are 
therefore under little pressure to make new investments. Any negative 
impact on the portfolio is therefore expected to be relatively limited. 
Generally existing portfolio companies are continuing to perform well 
and we believe the portfolio contains several candidates that may be 
able to deliver profitable exits in due course. 
 
   As always I look forward to meeting some Shareholders at the AGM on 23 
February 2017 and providing an update on developments in my statement 
with the Half Yearly Report to 30 April 2017 which is expected to be 
published in July. 
 
   Peter Harkness 
 
   Chairman 
 
   INVESTMENT MANAGEMENT REPORT 
 
   This has been a relatively quiet year for Chrysalis VCT plc, although 
with one exception, the portfolio has continued to make good progress 
and produced another profitable year for Shareholders.  A total return 
of over GBP1.9 million for the year takes total profits in the last 12 
and a half years, since the Company was reorganised and merged, to over 
GBP25.9 million. 
 
   After a number of sizeable exits in 2014, it is no surprise that there 
have been very few exits recently, especially as a lot of decisions 
appear to have been put on hold following the Brexit vote on 23 June 
2016. However, with the portfolio becoming more mature, it is likely 
that there will be some realisations in the next few years. 
 
   Even though no investments have been sold, Chrysalis VCT plc has 
benefited from an inflow of cash as investee companies redeem loan 
stock.  This year GBP1.3 million has been repaid with a couple of the 
portfolio companies, MyTime Media Holdings Limited and Precision Dental 
Laboratories Group Limited, now becoming completely debt free. 
 
   In addition, we again received nearly GBP600,000 in deferred payments 
from previous sales, principally another GBP440,000 from the sale of 
Wessex Advanced Switching Productions Limited ("WASP").  We are hopeful 
that the payment condition will continue to be met and that we will 
receive the final payment of a further GBP440,000 in the next year. 
 
   This cash inflow helped fund the GBP2.1 million paid out to Shareholders 
in dividends during the year. 
 
   The one major disappointment of the year was the collapse of Electrobase 
RP (Holdings) Limited necessitating a full provision against our GBP1 
million investment.  The major factor that caused the extremely poor 
outcome was too much managerial change.  For various reasons the company 
went through a whole series of changes at the top, none of which 
arrested its decline.  Whereas large companies have their own momentum 
and are more equipped to survive management changes, the smaller 

companies that VCTs invest in are typically highly dependent on the 
people at their head and too much change can often, as has happened in 
this case, prove disastrous. 
 
   We are pleased to report, however, that the overwhelming majority of the 
portfolio has continued to trade well and generate cash (hence the loan 
stock redemptions).  Therefore, there have been a number of upward 
valuation movements. 
 
   In particular, our investment in Driver Require Group Limited has seen 
its valuation nearly double to GBP949,000.  This was an MBO we backed in 
January 2015 and it appears that the buy-out price was a pretty 
favourable one.  Unfortunately, under the new VCT rules this is not a 
type of investment that we can make in the future. 
 
   Probably the most significant economic event of the year was the vote to 
leave the EU but so far the most tangible actual of "Brexit" has been 
the devaluation of the pound.  This has, however, mainly had a positive 
impact on our portfolio. 
 
   For instance, a good proportion of Coolabi Group Limited's revenue is 
priced in dollars and euros but virtually all its costs are priced in 
pounds.  So, our largest investment has seen a boost in its margins. 
 
   Equally our second largest investment, Locale Enterprises Limited, has 
benefitted from the increased number of tourists using its restaurants 
who now regard the offering as extremely good value. 
 
   The portfolio has also enjoyed some non-trading achievements. 
 
   Coolabi Group Limited was nominated for two more BAFTA's for its 
Clangers production and K10 (London) Limited won an award for "The 
world's most innovative small restaurant chain" from an American 
organisation. 
 
   Eagle-eyed shareholders may also have noticed the latest Vodafone post, 
internet and newspaper advert campaign which features "Nick & Dave" the 
co-founders of Life's Kitchen Limited. 
 
   As mentioned last year, new draconian rules regarding what investments a 
VCT can make have now come into force and, to make matters worse, there 
is some confusion as to the interpretation of those rules.  Since 
breaking a rule can lead to the removal of VCT status, the whole 
industry has been proceeding with extreme caution and the total volume 
of investments is significantly down on previous years. 
 
   Chrysalis VCT plc is no exception and we have only made one small 
investment since the new rules came into force in April 2016. That was a 
GBP150,000 investment into an early-stage software company, Inaspect 
Technology Limited, whose product is specifically aimed at the Care Home 
industry. 
 
   Prior to the rule change we did make further investments in Coolabi 
Group Limited (GBP500,000) and Cambridge Mechatronics Limited 
(GBP30,000) and one other new investment, GBP75,000 into Fusion Catering 
Solutions Limited.  Although currently small, this dessert manufacturer 
does have an impressive list of clients including Wembley Stadium and 
The British Open. 
 
   As well as making new investments more difficult, the new rules have 
dramatically reduced the pool of potential investee companies, however, 
there remains substantial cash in VCTs looking for a home.  Consequently, 
competition for deals is fiercer and investment terms are inevitably 
less attractive.  Although the new rules emulated from Brussels, it is 
unlikely that they will be substantially changed in the medium term 
despite Brexit. 
 
   Chrysalis VCT plc remains fortunate that we are fairly fully invested 
and is therefore not under pressure to make new investments.  We do, of 
course, continue to look for new opportunities and to work with the 
portfolio in order to finance their growth where it is allowed. 
 
   At the time of writing, the majority of the portfolio continues to trade 
well and we are hopeful of another profitable year for Chrysalis VCT plc 
with maybe a couple of realisations. 
 
   Chrysalis VCT Management Limited 
 
   REVIEW OF INVESTMENTS 
 
   Portfolio of investments 
 
   The following investments, all of which are incorporated in England and 
Wales, were held at 31 October 2016: 
 
 
 
 
                                                     Valuation 
                                                      Movement  % of portfolio 
                                 Cost     Valuation   in year      by value 
                               GBP'000    GBP'000     GBP'000 
Top ten venture capital 
investments 
Coolabi Group Limited            3,456        4,044         60           17.1% 
Locale Enterprises Limited       2,513        2,769        392           11.7% 
Internet Fusion Limited            800        1,802        484            7.6% 
Precision Dental Laboratories 
 Group Limited                   1,110        1,730        440            7.3% 
MyTime Media Holdings Limited       76        1,217        599            3.4% 
K10 (London) Limited               950        1,122         41            4.7% 
Driver Require Group Limited       520          949        429            4.0% 
Cambridge Mechatronics 
 Limited                           366          843        343            3.6% 
Zappar (Holding) Limited            25          775          -            3.3% 
Green Star Media Limited           650          719         66            3.0% 
                                10,466       15,970      2,854           65.7% 
Other venture capital 
investments 
IX Group Limited                   250          388         59            1.6% 
Life's Kitchen Limited             200          336       (50)            1.4% 
Triaster Limited                    71          241       (79)            1.0% 
Ensign Communication 
 (Holdings) Limited                292          165      (269)            0.7% 
Livvakt Limited                    380          160          -            0.7% 
Hoop Holdings Limited              150          150          -            0.6% 
Inaspect Technology Limited        150          150          -            0.6% 
Cashfac plc                          -          120         32            0.5% 
Fusion Catering Solutions 
 Limited                            75           75          -            0.3% 
The Mission Marketing Group 
 plc *                             150           51        (6)            0.2% 
The Kellan Group plc *             320            4        (2)               - 
Progility plc *                    100            1        (1)               - 
Electrobase RP (Holdings) 
 Limited                         1,001            -    (1,000)               - 
VEEMEE Limited                     500            -          -               - 
Art VPS Limited                    358            -          -               - 
G-Crypt Limited                    305            -          -               - 
Newquay Helicopters (2013) 
 Limited                            64            -          -               - 
Planet Sport (Holdings) 
 Limited                           322            -          -               - 
Rhino Sport & Leisure Limited      304            -          -               - 
                                 4,992        1,841    (1,316)            7.6% 
Fixed income securities 
Lloyds Banking Group 7%            724          721       (20)            3.0% 
Intermediate Capital Group 
 plc 7%                            745          725        (3)            3.1% 
Provident Financial 7%             741          711        (7)            3.0% 
                                 2,210        2,157       (30)            9.1% 
 
                                17,668       19,968      1,508           82.4% 
 
Cash at bank and in hand                      4,161                      17.6% 
 
Total investments                            24,129                     100.0% 
 
   All investments are unquoted unless otherwise stated. 
 
   *Quoted on AIM 
 
   Investment movements for the year ended 31 October 2016 
 
   Additions 
 
 
 
 
                                        GBP'000 
New venture capital investments 
Inaspect Technology Limited                 150 
Fusion Catering Solutions Limited            75 
                                            225 
 
Follow-on venture capital investments 
Coolabi Group Limited                       500 
Cambridge Mechatronics Limited               30 
                                            530 
 
Total investments                           755 
 
 
   Disposals 
 
 
 
 
 
                                     Value at                 Gain      Realised 
                            Cost     01/11/15    Proceeds    vs cost      gain 
                          GBP'000   GBP'000     GBP'000     GBP'000    GBP'000 
Venture capital 
investments 
Unquoted 
MyTime Media Holdings 
 Limited                      675         675         675          -           - 
Internet Fusion Limited       200         244         244         44           - 
Precision Dental 
 Laboratories Group 
 Limited                      200         200         200          -           - 
Livvakt Limited               169         169         169          -           - 
Locale Enterprises 
 Limited                       10          10          10          -           - 
 
Dissolution/liquidation 
and retention 
Retentions 
Wessex Advanced 
 Switching Productions 
 Limited                        -           -         440        440         440 
Autocue Limited                 -           -         125        125         125 
Newquay Helicopters 
 (2013) Limited                 -           -          27         27          27 
Total                       1,254       1,298       1,890        636         592 
 
   Directors' responsibilities statement 
 
   The Directors are responsible for preparing the Report of the Directors, 
the Strategic Report and the Directors' Remuneration Report and the 
financial statements in accordance with applicable law and regulations. 
They are also responsible for ensuring that the Annual Report includes 
information required by the Listing Rules of the Financial Conduct 
Authority. 
 
   Company law requires the Directors to prepare financial statements for 

each financial year. Under that law, the Directors have elected to 
prepare the financial statements in accordance with United Kingdom 
Generally Accepted Accounting Practice (United Kingdom Accounting 
Standards and applicable law). Under company law the Directors must not 
approve the financial statements unless they are satisfied that they 
give a true and fair view of the state of affairs of the Company and of 
the profit or loss of the Company for that period. 
 
   In preparing these financial statements, the Directors are required to: 
 
   *select suitable accounting policies and then apply them consistently; 
 
   *make judgments and accounting estimates that are reasonable and 
prudent; 
 
   *state whether applicable UK Accounting Standards have been followed, 
subject to any material departures disclosed and explained in the 
financial statements; and 
 
   *prepare the financial statements on the going concern basis unless it 
is inappropriate to presume that the Company will continue in business. 
 
   The Directors are responsible for keeping adequate accounting records 
that are sufficient to show and explain the Company's transactions, to 
disclose with reasonable accuracy at any time the financial position of 
the Company and to enable them to ensure that the financial statements 
comply with the Companies Act 2006. They are also responsible for 
safeguarding the assets of the Company and hence for taking reasonable 
steps for the prevention and detection of fraud and other 
irregularities. 
 
   In addition, each of the Directors considers that the Annual Report, 
taken as a whole, is fair, balanced and understandable and provides the 
information necessary for Shareholders to assess the Company's position, 
performance, business model and strategy. 
 
   The Directors are responsible for the maintenance and integrity of the 
corporate and financial information included on the Company's website. 
Legislation in the United Kingdom governing the preparation and 
dissemination of the financial statements and other information included 
in annual reports may differ from legislation in other jurisdictions. 
 
   By order of the Board 
 
   Grant Whitehouse 
 
   Secretary of Chrysalis VCT plc 
 
   INCOME STATEMENT 
 
   for the year ended 31 October 2016 
 
 
 
 
                               2016                                  2015 
 
                     Revenue  Capital   Total   Revenue  Capital   Total 
                     GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
 
Income                   603        -      603      733        -      733 
 
Gains on 
 investments               -    2,100    2,100        -    1,971    1,971 
 
                         603    2,100    2,703      733    1,971    2,704 
 
Investment 
 management 
 fees                  (102)    (305)    (407)    (103)    (309)    (412) 
Performance 
 incentive 
 fees                      -     (41)     (41)        -     (35)     (35) 
Other expenses         (310)        -    (310)    (261)      (2)    (263) 
 
Return on 
 ordinary 
 activities 
 before tax              191    1,754    1,945      369    1,625    1,994 
 
Tax on 
 ordinary 
 activities             (37)       37        -     (73)       73        - 
 
Return 
 attributable 
 to equity 
 Shareholders            154    1,791    1,945      296    1,698    1,994 
 
Basic and               0.5p     6.0p     6.5p     1.0p     5.7p     6.7p 
 diluted 
 return per 
 share 
 
 
   All Revenue and Capital items in the above statement derive from 
continuing operations. No operations were acquired or discontinued 
during the year. The total column within the Income Statement represents 
the Statement of Total Comprehensive Income of the Company prepared in 
accordance with Financial Reporting Standards ("FRS102"). There are no 
other items of comprehensive income. The supplementary revenue and 
capital return columns are prepared in accordance with the Statement of 
Recommended Practice issued in November 2014 by the Association of 
Investment Companies ("AIC SORP"). 
 
   Other than revaluation movements arising on investments held at fair 
value through the profit or loss account, there were no differences 
between the return as stated above and historical cost. 
 
   BALANCE SHEET 
 
   at 31 October 2016 
 
 
 
 
                                                    2016                2015 
                                          GBP'000  GBP'000  GBP'000  GBP'000 
 
Fixed assets 
Investments                                         19,968            19,003 
 
Current assets 
Debtors                                        88               153 
Cash at bank and in hand                    4,161             5,223 
                                            4,249             5,376 
 
Creditors: amounts falling due within 
 one year                                    (54)              (67) 
 
Net current assets                                   4,195             5,309 
 
Net assets                                          24,163            24,312 
 
Capital and reserves 
Called up share capital                                299               299 
Capital redemption reserve                              89                89 
Share premium                                        1,478             1,478 
Merger reserve                                       1,357             1,357 
Special reserve                                        802             1,926 
Capital reserve - realised                          13,896            15,022 
Capital reserve - unrealised                         5,760             3,439 
Revenue reserve                                        482               702 
 
Total equity Shareholders' funds                    24,163            24,312 
 
Net asset value per share                            80.8p             81.3p 
 
   STATEMENT OF CASH FLOW 
 
   for the year ended 31 October 2016 
 
 
 
 
                                                 2016     2015 
                                                GBP'000  GBP'000 
Cash flow from operating activities 
Profit on ordinary activities before taxation     1,945    1,994 
Gains on investments                            (2,100)  (1,971) 
Decrease in debtors                                  65       33 
Decrease in creditors                              (13)    (202) 
 
Net cash outflow from operating activities        (103)    (146) 
 
Cash flow from investing activities 
Purchase of investments                           (755)    (2,483) 
Proceeds from disposal of investments             1,890      5,083 
 
Net cash inflow from investing activities         1,135      2,600 
 
Cash flow for financing activities 
Equity dividends paid                           (2,094)    (2,169) 
 
Net cash outflow from financing activities      (2,094)    (2,169) 
 
(Decrease)/increase in cash                     (1,062)        285 
 
 
Net movement in cash 
 
Beginning of the year                             5,223      4,938 
Net cash (outflow)/inflow                       (1,062)        285 
 
End of year                                       4,161      5,223 
 
   NOTES TO THE ACCOUNTS 
 
   for the year ended 31 October 2016 
 
   1. Accounting policies 
 
   Basis of accounting 
 
   The Company has prepared its financial statements in accordance with the 
Companies Act 2006, Financial Reporting Standard 102 ("FRS102") and in 
accordance with the Statement of Recommended Practice "Financial 
Statements of Investment Trust Companies" revised November 2014 
("SORP"). 
 
   This is the first period in which the financial statements have been 
prepared under FRS102, however, it has not been necessary to restate 
comparatives as the treatment previously applied is consistent with the 
requirements of FRS102. As a result, there are no reconciling 
differences between the previous financial reporting framework and the 
current financial reporting framework and the comparative figures 
represent the position under both current and previous financial 
reporting frameworks. 
 
   The Company implements new Financial Reporting Standards issued by the 
Accounting Standards Board when required. 
 
   Presentation of Income Statement 
 
   In order to better reflect the activities of a Venture Capital Trust and 
in accordance with the SORP, supplementary information which analyses 
the Income Statement between items of a revenue and capital nature has 
been presented alongside the Income Statement. Net revenue is the 
measure the Directors believe appropriate in assessing the Company's 
compliance with certain requirements set out in Part 6 of the Income Tax 
Act 2007. 
 
   Fixed asset investments 
 
   Investments are designated as "fair value through profit or loss" assets, 
upon acquisition, due to investments being managed and performance 
evaluated on a fair value basis. A financial asset is designated within 
this category if it is both acquired and managed, with a view to selling 
after a period of time, in accordance with the Company's documented 
investment policy. 
 
   Judgements in applying accounting policies and key sources of estimation 
uncertainty 
 
   Of the Company's assets measured at fair value, it is possible to 
determine their fair value within a reasonable range of estimates. The 
fair value of an investment upon acquisition is deemed to be cost. 
Thereafter, investments are measured at fair value in accordance with 
FRS 102 sections 11 and 12 together with the International Private 
Equity and Venture Capital Valuation Guidelines ("IPEV"). 
 
   Fixed income investments and investments quoted on AIM are measured 
using bid prices in accordance with the IPEV. 
 
   For unquoted investments, fair value is established using the IPEV. The 
valuation methodologies for unquoted entities used by the IPEV to 
ascertain the fair value of an investment are as follows: 
 
   *Price of recent investment; 
 
   *Multiples; 
 
   *Net assets; 
 
   *Discounted cash flows or earnings (of underlying business); 
 
   *Discounted cash flows (from the investment); and 
 

   *Industry valuation benchmarks. 
 
   The methodology applied takes account of the nature, facts and 
circumstances of the individual investment and uses reasonable data, 
market inputs, assumptions and estimates in order to ascertain fair 
value. 
 
   Where an investee company has gone into receivership, liquidation, or 
administration (where there is little likelihood of recovery), the loss 
on the investment, although not physically disposed of, is treated as 
being realised. Permanent impairments in the value of investments are 
deemed to be realised losses and held within the Capital Reserve - 
Realised. 
 
   Gains and losses arising from changes in fair value are included in the 
Income Statement for the year as a capital item and transaction costs on 
acquisition or disposal of the investment expensed. 
 
   Judgements in applying accounting policies and key sources of estimation 
uncertainty (continued) 
 
   It is not the Company's policy to exercise controlling influence over 
investee companies. Therefore, the results of these companies are not 
incorporated into the Income Statement except to the extent of any 
income accrued. This is in accordance with the SORP and FRS102 sections 
14 and 15 that do not require portfolio investments to be accounted for 
using the equity method of accounting. 
 
   Income 
 
   Dividend income from investments is recognised when the Shareholders' 
rights to receive payment have been established, normally the 
ex-dividend date. 
 
   Interest income is accrued on a timely basis, by reference to the 
principal outstanding and at the effective interest rate applicable and 
only where there is reasonable certainty of collection. 
 
   Expenses 
 
   All expenses are accounted for on an accruals basis. In respect of the 
analysis between revenue and capital items presented within the Income 
Statement, all expenses have been presented as revenue items except as 
follows: 
 
   *Expenses which are incidental to the acquisition of an investment are 
deducted as a capital item. 
 
   *Expenses which are incidental to the disposal of an investment are 
deducted from the disposal proceeds of the investment. 
 
   *Expenses are split and presented partly as capital items where a 
connection with the maintenance or enhancement of the value of the 
investments held can be demonstrated. The Company has adopted the policy 
of allocating investment management fees, 75% to capital and 25% to 
revenue as permitted by the SORP. The allocation is in line with the 
Board's expectation of long term returns from the Company's investments 
in the form of capital gains and income respectively. 
 
   *Performance incentive fees arising from the disposal of investments are 
deducted as a capital item. 
 
   Taxation 
 
   The tax effects on different items in the Income Statement are allocated 
between capital and revenue on the same basis as the particular item to 
which they relate using the Company's effective rate of tax for the 
accounting period. 
 
   Due to the Company's status as a Venture Capital Trust and the continued 
intention to meet the conditions required to comply with Part 6 of the 
Income Tax Act 2007, no provision for taxation is required in respect of 
any realised or unrealised appreciation of the Company's investments 
which arises. 
 
   Deferred taxation is not discounted and is provided in full on timing 
differences that result in an obligation at the balance sheet date to 
pay more tax, or a right to pay less tax, at a future date, at rates 
expected to apply when they crystallise based on current tax rates and 
law. Timing differences arise from the inclusion of items of income and 
expenditure in taxation computations in periods different from those in 
which they are included in the accounts. 
 
   Other debtors and other creditors 
 
   Other debtors (including accrued income) and other creditors are 
included within the accounts at amortised cost. 
 
   2. Basic and diluted return per share 
 
 
 
 
                                                  2016        2015 
Return per share based on:                      GBP'000     GBP'000 
Net revenue return for the financial year             154         296 
Net capital gain for the financial year             1,379       1,698 
Total return for the financial year                 1,533       1,994 
 
Weighted average number of shares in issue     29,917,025  29,917,025 
 
 
   As the Company has not issued any convertible securities or share 
options, there is no dilutive effect on return per share. The return per 
share disclosed therefore represents both basic and diluted return per 
share. 
 
   3. Basic and diluted net asset value per Ordinary Share 
 
 
 
 
                                           2016                         2015 
               Shares in issue        Net asset value        Net asset value 
                                                          Pence 
                                     Pence                 per 
               2016        2015     per share    GBP'000  share     GBP'000 
 
Ordinary 
 Shares    29,917,025  29,917,025        80.8     24,163    81.3      24,312 
 
 
   As the Company has not issued any convertible securities or share 
options, there is no dilutive effect on net asset value per share. The 
net asset value per share disclosed therefore represents both basic and 
diluted return per share. 
 
   Principal risks 
 
   The Company's investment activities expose the Company to a number of 
risks associated with financial instruments and the sectors in which the 
Company invests. The principal financial risks arising from the 
Company's operations are: 
 
   *Market risks; 
 
   *Credit risk; and 
 
   *Liquidity risk. 
 
   The Board regularly reviews these risks and the policies in place for 
managing them. There have been no significant changes to the nature of 
the risks that the Company is exposed to over the year and there have 
also been no significant changes to the policies for managing those 
risks during the year. 
 
   The risk management policies used by the Company in respect of the 
principal financial risks and a review of the financial instruments held 
at the year-end are provided below. 
 
   Markets risks 
 
   As a VCT, the Company is exposed to investment risks in the form of 
potential losses and gains that may arise on the investments it holds in 
accordance with its investment policy. The management of these 
investment risks is a fundamental part of investment activities 
undertaken by Chrysalis VCT Management Limited and overseen by the 
Board. The Investment Manager monitors investments through regular 
contact with management of investee companies, regular review of 
management accounts and other financial information and attendance at 
investee company board meetings. This enables the Investment Manager to 
manage the investment risk in respect of individual investments. 
Investment risk is also mitigated by holding a diversified portfolio 
spread across various business sectors and asset classes. 
 
   The key investment risks to which the Company is exposed are: 
 
   *Investment price risk; and 
 
   *Interest rate risk. 
 
   The Company has undertaken sensitivity analysis on its financial 
instruments, split into the relevant component parts, taking into 
consideration the economic climate at the time of review in order to 
ascertain the appropriate risk allocation. 
 
   Investment price risk 
 
   Market price risk arises from uncertainty about the future prices and 
valuations of financial instruments held in accordance with the 
Company's investment objectives. It represents the potential loss that 
the Company might suffer through market price movements in respect of 
quoted investments and also changes in the fair value of unquoted 
investments that it holds. 
 
   Interest rate risk 
 
   The Company accepts exposure to interest rate risk on floating-rate 
financial assets through the effect of changes in prevailing interest 
rates. The Company receives interest on its cash deposits at a rate 
agreed with its bankers and on liquidity funds at rates based on the 
underlying investments. Investments in loan stock and fixed interest 
investments attract interest predominantly at fixed rates. A summary of 
the interest rate profile of the Company's investments is shown below. 
 
   Interest rate risk profile of financial assets and financial liabilities 
 
   There are three levels of interest which are attributable to the 
financial instruments as follows: 
 
   *"Fixed rate" assets represent investments with predetermined yield 
targets and comprise fixed interest and loan note investments. 
 
   *"Floating rate" assets predominantly bear interest at rates linked to 
Bank of England base rate and comprise cash at bank. 
 
   *"No interest rate" assets do not attract interest and comprise equity 
investments, loans and receivables (excluding cash at bank) and other 
financial liabilities. 
 
   Credit risk 
 
   Credit risk is the risk that a counterparty to a financial instrument is 
unable to discharge a commitment to the Company made under that 
instrument. The Company is exposed to credit risk through its holdings 
of loan stock in investee companies, investments in liquidity funds, 
cash deposits and debtors. 
 
   The Company's financial assets that are exposed to credit risk are 
summarised as follows: 
 
   The Manager manages credit risk in respect of loan stock with a similar 
approach as described under Investment risks above. In addition the 
credit risk is partially mitigated by registering floating charges over 
the assets of certain investee companies. The strength of this security 
in each case is dependent on the nature of the investee company's 
business and its identifiable assets. The level of security is a key 
means of managing credit risk. Similarly, the management of credit risk 
associated with interest, dividends and other receivables is covered 
within the investment management procedures. 
 
   Cash is mainly held at Royal Bank of Scotland plc with a balance also 

maintained at Bank of Scotland plc, both of which are A minus rated 
financial institutions and ultimately part-owned by the UK Government. 
Consequently, the Directors consider that the risk profile associated 
with cash deposits is low. 
 
   There have been no changes in fair value during the year that can be 
directly attributable to changes in credit risk. 
 
   Liquidity risk 
 
   Liquidity risk is the risk that the Company encounters difficulties in 
meeting obligations associated with its financial liabilities. Liquidity 
risk may also arise from either the inability to sell financial 
instruments when required at their fair values or from the inability to 
generate cash inflows as required. The Company usually has a relatively 
low level of creditors (2016: GBP54,000, 2015: GBP67,000) and has no 
borrowings. The Company always holds sufficient levels of funds as cash 
and readily realisable investments in order to meet expenses and other 
cash outflows as they arise. For these reasons, the Board believes that 
the Company's exposure to liquidity risk is minimal. 
 
   The Company's liquidity risk is managed by Chrysalis VCT Management 
Limited in line with guidance agreed with the Board and is reviewed by 
the Board at regular intervals. 
 
   Related party transactions 
 
   Chrysalis VCT Management Limited, a wholly owned subsidiary, provides 
investment management services to the Company for a fee of 1.65% of net 
assets per annum. During the year, GBP407,000 (2015: GBP412,000) was 
paid to Chrysalis VCT Management Limited in respect of these fees. No 
amounts were outstanding at the year-end (2015: none). 
 
   A performance incentive fee is payable to Chrysalis VCT Management 
Limited based on realisations from all investments excluding quoted loan 
notes, redemptions of loan notes in the normal course of business and 
other treasury functions. The performance incentive fee is the greater 
of 1% of the cash proceeds of any exit or 5% of the gain to the Company 
after all exit costs for investments made after 30 April 2004 reduced to 
2.5% of investments made prior to 30 April 2004. During the year 
performance incentive fees of GBP41,000 (2015: GBP35,000) were due to 
Chrysalis VCT Management Limited. At the year-end, GBP1,000 was 
outstanding and payable (2015: GBP9,000). 
 
   Peter Harkness holds positions of significant influence in MyTime Media 
Holdings Limited and Hoop Holdings Limited, both investments held by the 
Company, and therefore abstains from discussions surrounding the 
valuation or investment decisions regarding the investments. Details of 
the investments, including cost and valuation are shown within the 
Aannual Report 
 
   Martin Knight holds a position of significant influence within Cambridge 
Mechatronics Limited, an investment held by the Company, and therefore 
abstains from discussions surrounding the valuation or investment 
decisions regarding the company. Details of the investment, including 
cost and valuation are shown within the Annual Report. 
 
   ANNOUNCEMENT BASED ON AUDITED ACCOUNTS 
 
   The financial information set out in this announcement does not 
constitute the Company's statutory financial statements in accordance 
with section 434 Companies Act 2006 for the year ended 31 October 2016, 
but has been extracted from the statutory financial statements for the 
year ended 31 October 2016, which were approved by the Board of 
Directors on 22 December 2016 and will be delivered to the Registrar of 
Companies following the Company's Annual General Meeting. The 
Independent Auditor's Report on those financial statements was 
unqualified and did not contain any emphasis of matter nor statements 
under s498(2) and (3) of the Companies Act 2006. 
 
   The statutory accounts for the year ended 31 October 2015 have been 
delivered to the Registrar of Companies and received an Independent 
Auditors report which was unqualified and did not contain any emphasis 
of matter nor statements under s498(2) and (3) of the Companies Act 
2006. 
 
   A copy of the full annual report and financial statements for the year 
ended 31 October 2016 will be printed and posted to shareholders 
shortly. Copies will also be available to the public at the registered 
office of the Company at Ergon House, Horseferry Road, London, SW1P 2AL 
and will be available for download from www.downing.co.uk/cys and 
www.chrysalisvct.co.uk. 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Chrysalis VCT PLC via Globenewswire 
 
 
 
 

(END) Dow Jones Newswires

December 22, 2016 11:15 ET (16:15 GMT)

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