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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Chrysalis Vct Plc | LSE:CYS | London | Ordinary Share | GB0030348683 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 32.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Chrysalis VCT plc
Reports & Accounts for the year ended 31 October 2017
FINANCIAL SUMMARY
31 Oct 31 Oct
2017 2016
Pence Pence
Net asset value per share ("NAV") 80.00 80.80
Cumulative dividends paid per share since launch * 75.45 67.45
Total Return (Net asset value per share plus cumulative
dividends) 155.45 148.25
Dividends in respect of financial year
Interim dividend per share (paid) 1.75 1.75
Special dividend per share (paid) 3.00 2.00
Final proposed dividend per share 3.25 3.25
8.00 7.00
* Excludes final proposed dividend
CHAIRMAN'S STATEMENT
*Total return of 8.9% for the year
*Total return on original 80p investment now at 155.45p
*Total dividends of 8.0p for the year
I am pleased to present my first Annual Report as Chairman of Chrysalis
VCT plc. Throughout the year to 31 October 2017, the Company has
continued to perform well and maintained its dividends at a high level,
with a total of 8.0p per share being paid during the year.
Net asset value, results and dividends
The Company's NAV fell by a small margin from 80.8p to 80.0p over the
year as dividends slightly exceeded net earnings for the period. After
adding back the dividends of 8.0p which were paid in the year, the total
return for the year was equivalent to 8.9% based on the opening NAV.
The return on activities after taxation for the year was GBP2.2 million
(2016: GBP1.9 million), comprising a revenue return of GBP173,000 (2016:
GBP154,000) and a capital return of GBP2.0 million (2016: GBP1.8
million).
The Company paid a final 2016 dividend of 3.25p per share on 28 February
2017. An interim 2017 dividend of 1.75p per share was combined with a
special dividend of 3.0p per share, making a total of 4.75p per share
paid on 4 August 2017.
Subject to Shareholder approval at the forthcoming AGM, your Board is
proposing to pay a final 2017 dividend of 3.25p per share on 2 March
2018 to Shareholders on the register at 2 February 2018.
Venture capital portfolio
At the year end, the Company held a portfolio of 24 venture capital
investments, valued at GBP17.0 million. During the year, three follow-on
investments were made at a total of cost of GBP550,000.
There were a number of realisations from the venture capital portfolio,
which generated proceeds of GBP3.2 million. Deferred consideration
totalling GBP542,000 was also received during the year, most notably
GBP525,000 from Wessex Advanced Switching Products Limited ("WASP"),
which was exited in 2014.
As part of the preparation of the annual report, the Board has reviewed
the valuations of the investments held and made a number of adjustments.
nine investments fell in value, five increased in value and ten remained
unchanged.
Valuation increases on venture capital investments totalled GBP1.8
million, including a GBP1.2 million uplift on Zappar Limited, an
augmented reality solutions business, to bring the valuation in line
with that of third parties. Coolabi Group Limited, an international
media group, was also uplifted in value by GBP550,000, representing the
premium on the loan notes held by the VCT.
Valuation decreases in respect of the venture capital portfolio amounted
to GBP758,000, the largest of which related to MyTime Media Holdings
Limited, a magazine publisher, and Locale Enterprises Limited, a
restaurant operator, of GBP253,000 and GBP215,000 respectively,
following a decline in the trading activity of each business.
Total unrealised movements for the year on the venture capital portfolio
resulted in a net gain of GBP1.0 million, equivalent to approximately
3.6p per share.
Valuation increases on venture capital investments totalled GBP1.8
million, including a GBP1.2 million uplift on Zappar Limited, an
augmented reality solutions business, to bring the valuation in line
with that of third parties. Coolabi Group Limited, an international
media group, was also uplifted in value by GBP550,000, representing the
premium on the loan notes held by the VCT.
Other investments
The Company made one new non-qualifying investment of GBP750,000 in
Impact Healthcare REIT plc, a newly launched investment trust which
holds a portfolio of care homes. The Company participated in the launch
of the trust, which continues to acquire new assets and recently
undertook a second placing of shares. This investment showed an
unrealised gain of GBP15,000 as at 31 October 2017.
The Investment Manager's Report gives a detailed overview of the
portfolio activity during the year and of the main valuation movements.
Cash and fixed income securities
One of the portfolio of three fixed income securities matured shortly
before the year end date, generating proceeds equal to its par value of
GBP689,000. The remaining two fixed interest investments were uplifted
by a net of GBP46,000, to reflect their quoted values as at 31 October
2017.
The Company held GBP6.1 million in cash and fixed income securities at
the year end; split between cash of GBP4.6 million and fixed income
securities of GBP1.5 million.
Share buybacks
There were no share buybacks undertaken during the year to 31 October
2017. The Board recognises that there is limited liquidity in the
Company's shares and that such buying or selling that arises is usually
at a significant discount to the underlying net asset value per share.
The Board continues to monitor this situation and will consider buying
back shares where it considers this to be in the best interests of all
shareholders.
Any Shareholders wishing to either acquire more shares, or to sell
existing holdings, are recommended to contact the Company's broker,
Nplus1 Singer Capital Markets, who are often aware of other parties
looking to buy or sell.
Board
As noted in the Half Yearly Report, the former chairman, Peter Harkness,
decided to retire as a non-executive director of the Company with effect
from 30 September 2017.
Peter was a major influence on Chrysalis VCT since he joined the Board
in 2005 and took over as Chairman in 2008. As most Shareholders will be
aware, Peter presided over a period of excellent performance for the
Company in which your Company's self-managed structure has continued to
be very effective. On behalf of the Board, I would like to thank Peter
for his substantial contribution to the Company over the last 12 years.
The Board will miss working with him and wish him well for the future.
Following Peter's retirement, I agreed to take over the role of Chairman
and the Board commenced a search to find a new non-executive director. I
am pleased to report that we identified an excellent candidate in Robert
Jeens, who agreed to join the Board on 2 October 2017. Robert has
extensive experience in the asset management industry and significant
exposure to the technology sector, from which I am certain we will
benefit. Robert is a chartered accountant and has also taken over as
chair of the Company's Audit Committee. We welcome Robert to the Board
and look forward to working with him.
Market developments
Recent years have seen the progressive tightening of the regulations
that venture capital trusts such as your Company have to comply with.
This has restricted the range of investment opportunities open to the
Company and has also caused increasing competition for eligible
investments offering potentially good returns. As reported in the
Investment Manager's report this has made the pricing of such
transactions significantly less attractive. Additionally over the past
year the Government has carried out the Patient Capital Review ("the
Review") the outcome of which was announced in the Budget in November.
The consequence of these developments is that your Board is of the view
that it is likely that the universe of attractive and available
investments that will qualify as eligible for VCTs will continue to
diminish. To this extent the outcome of the Review is not positive for
the Company. However, given that the Company is now relatively fully
invested, the impact will not, it is thought by the Board, be
immediately or significantly negative in the near term.
The Board is also aware that April 2018 will mark the end of the minimum
five year holding period required to enable investors in the Share
Realisation and Reinvestment Programme to secure the tax benefits that
they may have claimed.
To take account of all these factors the Board plans to conduct a review
of the options that may be available to the Company and will provide a
further update to Shareholders in due course.
Annual General Meeting
The forthcoming AGM will be held at 6(th) Floor, St. Magnus House, 3
Lower Thames Street, London EC3R 6HD at 10:30am on 27 February 2018.
Notice of the meeting is at the end of this document.
Outlook
The Board continues to be satisfied with the existing investment
portfolio and believes that it continues to contain investments which
have the prospect of delivering good returns for Shareholders in the
medium term.
I look forward to meeting some Shareholders at the AGM on 27 February
2018 and providing an update on developments in my statement with the
Half Yearly Report to 30 April 2018 which is expected to be published in
July.
Martin Knight
Chairman
INVESTMENT MANAGER'S REPORT
This has been another profitable year for Chrysalis VCT with total
shareholder return being GBP2.2 million which is just slightly above the
average annual return of GBP2.1 million we have achieved over the last
thirteen and a half years.
This year nearly 60% of the return has come from realisations, both from
four new exits this year and from final deferred payments from previous
exits.
The most significant exit was the sale of our investment in Internet
Fusion Limited (IF), an e-commerce business supplying a wide range of
action sportswear and outdoor wear through a number of online stores.
We first provided GBP700,000 of development capital in 2012 and further
supported the company with another GBP400,000 in September 2015 IF grew
strongly throughout our involvement and was sold in March 2017,
realising Chrysalis a profit over original cost of GBP1.3 million and an
increase over this year's opening valuation of GBP313,000.
We are also hopeful of receiving some deferred consideration during
2017/18.
We also exited from our investment in Rhino Sport and Leisure Limited,
which is involved in worldwide rugby, supplying training equipment and
sportswear. Trading has been difficult in recent years and we had made
a full provision against our GBP304,000 investment. However, a new
investor was keen to become involved in the sector and we took the
opportunity of getting all loan stock repaid, therefore crystallising
only a small loss against cost.
This yet again shows the benefit of structuring an investment so that if
it does not work out there is still a chance of significant recovery.
The third significant exit was Ensign Communications (Holdings) Limited
which is a specialist supplier and installer of WIFI products.
Chrysalis originally backed an MBI of this company back in November
2005. There was then a secondary buy-out in 2010 when we received all
our original investment back but reinvested GBP275,000. This was fully
repaid in 2011 leaving Chrysalis with an effectively free equity stake.
Ensign was then sold to a trade buyer in May 2017 giving Chrysalis
proceeds of GBP334,000 and increase over valuation of GBP169,000.
The final exit of the year was of an even older investment, namely
Cashfac plc. This was a 1999 investment made at the height of the
dotcom boom. Initially the company struggled, and a full provision was
made. Over recent years Cashfac has however made considerable progress
and has been consistently profitable which gave us an opportunity to
finally exit at a profit over our valuation.
As shareholders will recall our most successful exit over recent times
was the sale of Wessex Advanced Switching Productions Limited ("WASP")
and again this year we received a deferred payment of GBP525,000 arising
from that sale. Unfortunately, this was the last such payment.
During the year Chrysalis also received GBP310,000 in loan repayments,
GBP160,000 from Livvakt Limited and GBP150,000 from Zappar (Holding)
Limited. The latter loan has been acquired for just GBP25,000 so
represented a profit over cost of GBP125,000.
This overall total cash inflow of GBP3.7 million was used to fund
dividend payments of GBP2.4 million and new investments of GBP1.3
million.
As was reported last year the new VCT investment qualifying rules have
considerably reduced the number of possible investment opportunities.
There is also a large volume of VCT money looking for qualifying
investments which inevitably means that pricing of such deals has
dramatically increased.
We have not been prepared to pay these higher prices believing that the
risk reward equation has been detrimentally altered by the new rules.
Accordingly, we have only invested in order to support our existing
portfolio. Therefore, during this year, we have only subscribed a
further GBP300,000 in equity on Zappar Holdings Limited, and provided
loans of GBP200,000 and GBP50,000 to Life's Kitchen Ltd and Inaspect
Technology Limited.
We also made a GBP750,000 allowable non-qualifying investment for
liquidity purposes in Impact Healthcare REIT plc where Mahesh Patel, who
is Chairman of our investee company, PDL Limited, is a major figure.
Generally, our portfolio has had a satisfactory year but there are
increasing signs in some sectors we are invested in, of more difficult
trading times ahead.
In particular, the casual dining sector in which Locale, K10 and Life's
Kitchen operate in, is seeing increased food and drink costs, largely
caused by the effects of the sterling's devaluation finally coming
through, as well as increased staff costs due to the increases in the
national living wage. This clearly has put margins under pressure. In
addition, a shortage of drivers, partly due to EU drivers returning home,
is also pushing up wage rates in the delivery sector which is not
helping Driver Require's margins. There have however been several
portfolio successes.
Zappar Limited which is involved in the development and application of
augmented reality solutions had a very successful fund-raising round,
raising over GBP2.0 million at three times the price of the previous
round. This should give the company sufficient cash to fund its
development to the next level and enabled us to increase our valuation
by GBP1.2 million.
Cambridge Mechatronics Limited has also made considerable progress
during the year, signing deals with Samsung and various other mobile
phone manufacturers. It is currently discussing a fund-raising round at
a valuation well in excess of our current valuation.
Our biggest investment Coolabi Group Limited has also made progress with
television programmes "The Clangers" and "Scream Street" both enjoying
high ratings on CBEEBIES and CBBC. Also, Driver Require has won two
Hertfordshire Business Awards, the Business Growth Award and Medium
Business of the Year.
As Shareholders may have seen in the November 2017 Budget, the
Government has reviewed the VCT scheme as part of its broader "Patient
Capital Review". The result has been a number of changes to the VCT
regulations in an attempt to focus investment on potentially higher risk
areas that require capital. It is not clear at this stage whether the
rule changes will successfully achieve the Government's objectives. The
new regulations will present some additional challenges to managing the
portfolio and particularly in securing new investments while the
transition to the new rules takes place.
With regard to the outlook for this year, for a whole host of macro and
micro economic reasons, there appears to be more uncertainty now than
there has been for some time. We will continue to work closely with all
portfolio companies to ensure that any issues are dealt with at an early
stage and risks are mitigated as much as possible.
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 2017:
Valuation
Movement % of
in Portfolio
Cost Valuation year by value
GBP'000 GBP'000 GBP'000
Top ten venture capital
investments
Coolabi Group Limited 3,456 4,594 550 19.4%
Locale Enterprises Limited 2,513 2,554 (215) 10.7%
Zappar Limited 300 2,161 1,236 9.0%
Precision Dental Laboratories
Group Limited 1,110 1,731 1 7.3%
K10 (London) Limited 950 1,117 (5) 4.7%
MyTime Media Holdings Limited 76 965 (253) 4.0%
Driver Require Group Limited 520 961 12 4.0%
Cambridge Mechatronics Limited 366 843 - 3.5%
Green Star Media Limited 650 719 - 3.0%
Life's Kitchen Ltd 400 400 (135) 1.7%
10,341 16,045 1,191 67.3%
Other venture capital
investments
IX Group Limited 250 339 (49) 1.4%
Triaster Limited 71 231 (10) 1.0%
Inaspect Technology Limited 200 200 - 0.8%
Hoop Holdings Limited 150 135 (15) 0.6%
The Mission Marketing Group plc* 150 58 7 0.2%
The Kellan Group plc* 320 2 (1) 0.0%
Progility plc* 100 1 - 0.0%
Electrobase RP (Holdings)
Limited 1,001 - - 0.0%
VEEMEE Limited 500 - - 0.0%
Art VPS Limited 358 - - 0.0%
G-Crypt Limited 305 - - 0.0%
Livvakt Limited 220 - - 0.0%
Fusion Catering Solutions
Limited 75 - (75) 0.0%
Newquay Helicopters (2013)
Limited 64 - - 0.0%
3,764 966 (143) 4.0%
Fixed income securities
Lloyds Banking Group 7% 746 719 (7) 3.0%
Intermediate Capital Group plc
7% 724 774 53 3.2%
1,470 1,493 46 6.2%
Other quoted
Impact Healthcare REIT plc* 750 765 15 3.2%
750 765 15 3.2%
16,325 19,269 1,109 80.7%
Cash at bank and in hand 4,559 19.3%
Total investments 23,828 100.0%
All investments are unquoted unless otherwise stated.
*Quoted on AIM
Investment movements for the year ended 31 October 2017
Additions
GBP'000
Venture capital investments
Zappar Limited 300
Life's Kitchen Ltd 200
Inaspect Technology Limited 50
550
Other quoted
Impact Healthcare REIT plc 750
750
Total investments 1,300
Disposals
Value Gain/ Realised
at (loss) Gain/
Cost 01/11/16* Proceeds vs cost (loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
investments
Internet Fusion Limited 800 1,802 2,115 1,315 313
Ensign Communication
(Holdings) Limited 292 165 335 43 170
Cashfac plc - 120 164 164 44
Livvakt Limited 160 160 160 - -
Zappar (Holding) Limited 25 150 150 125 -
Planet Sport Holdings 322 - - (322) -
Rhino Sport & Leisure
Limited 304 - 254 (50) 254
1,903 2,397 3,178 1,275 781
Dissolution/liquidation
and retention
Wessex Advanced
Switching Products
Limited - - 525 525 525
Newquay Helicopter
Limited - - 14 14 14
Autocue Group Limited - - 3 3 3
- - 542 542 542
Fixed income securities
Provident Financial 7% 741 711 689 (52) (22)
741 711 689 (52) (22)
Total 2,644 3,108 4,409 1,765 1,301
*Adjusted for purchases in the year where applicable
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
INCOME STATEMENT
for the year ended 31 October 2017
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 576 - 576 603 - 603
Gains on
investments - 2,411 2,411 - 2,100 2,100
576 2,411 2,987 603 2,100 2,703
Investment
management
fees (102) (306) (408) (102) (305) (407)
Performance
incentive
fees - (127) (127) - (41) (41)
Other expenses (268) (6) (274) (310) - (310)
Return on
ordinary
activities
before tax 206 1,972 2,178 191 1,754 1,945
Tax on
ordinary
activities (33) 33 - (37) 37 -
Return
attributable
to equity
Shareholders 173 2,005 2,178 154 1,791 1,945
Basic and 0.6p 6.7p 7.3p 0.5p 6.0p 6.5p
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 ("FRS 102"). 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.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 October 2017
Called
up Capital Capital Capital
share redemption Merger reserve- reserve-
capital reserve Share premium reserve Special reserve realised unrealised Revenue reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 November
2015 299 89 1,478 1,357 1,926 15,022 3,439 702 24,312
Total
comprehensive
income - - - - - 283 1,508 154 1,945
Transfer
between
reserves - - - - (1,124) 311 813 - -
Transactions
with owners
Dividends paid - - - - - (1,720) - (374) (2,094)
At 31 October
2016 299 89 1,478 1,357 802 13,896 5,760 482 24,163
Total
comprehensive
income - - - - - 896 1,109 173 2,178
Transfer
between
reserves - - - - (200) 1,167 (967) - -
Transactions
with owners
Dividends paid - - - - - (2,244) - (150) (2,394)
At 31 October
2017 299 89 1,478 1,357 602 13,715 5,902 505 23,947
*A transfer of GBP465,000 (2016: GBP44,000) representing previously
recognised unrealised gains, transferred on disposal of investments
during the year, has been made from the Capital Reserve - unrealised to
the Capital Reserve - realised. A transfer of GBP502,000 (2016:
GBP857,000) representing a permanent diminution in value, has been made
between the Capital Reserve - unrealised and the Capital Reserve -
realised. A transfer of GBP200,000 (2016: GBP1,124,000) representing
realised losses on disposal of investments, plus capital expenses and
capital dividends in the year was made from Capital Reserve - realised
to Special reserve.
BALANCE SHEET
at 31 October 2017
2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 19,269 19,968
Current assets
Debtors 180 88
Cash at bank and in hand 4,559 4,161
4,739 4,249
Creditors: amounts falling due within
one year (61) (54)
Net current assets 4,678 4,195
Net assets 23,947 24,163
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 602 802
Capital reserve - realised 13,715 13,896
Capital reserve - unrealised 5,902 5,760
Revenue reserve 505 482
Total equity Shareholders' funds 23,947 24,163
Net asset value per share 80.0p 80.8p
STATEMENT OF CASH FLOW
for the year ended 31 October 2017
2017 2016
GBP'000 GBP'000
Cash flow from operating activities
Profit on ordinary activities before taxation 2,178 1,945
Gains on investments (2,411) (2,100)
(Increase)/decrease in debtors (92) 65
Increase/(decrease) in creditors 8 (13)
Net cash outflow from operating activities (317) (103)
Cash flow from investing activities
Purchase of investments (1,300) (755)
Proceeds from disposal of investments 4,409 1,890
Net cash inflow from investing activities 3,109 1,135
Cash flow for financing activities
Equity dividends paid (2,394) (2,094)
Net cash outflow from financing activities (2,394) (2,094)
Increase/(Decrease) in cash 398 (1,062)
Net movement in cash
Beginning of the year 4,161 5,223
Net cash inflow/(outflow) 398 (1,062)
End of year 4,559 4,161
Accounting policies
Basis of accounting
The Company has prepared its financial statements in accordance with the
Companies Act 2006, Financial Reporting Standard 102 ("FRS 102") and in
accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" updated in January 2017
("SORP"). The financial statements have been prepared on a going concern
basis, under historical cost convention.
The financial statements are presented in pounds sterling and rounded to
thousands. The company's functional and presentational currency is
pounds sterling.
Presentation of Income Statement
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.
Redemption premiums are reflected in the valuations of fixed asset
investments.
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 FRS 102 sections
14 and 15 that do not require portfolio investments to be accounted for
using the equity method of accounting.
The carrying values of the Company's investments are disclosed in Note 9
and Note 15 of the full financial statements.
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. Where the recovery of
accrued income is doubtful, provisions are made accordingly.
Basic and diluted return per share
2017 2016
Return per share based on: GBP'000 GBP'000
Net revenue return for the financial year 173 154
Net capital gain for the financial year 2,005 1,791
Total return for the financial year 2,178 1,945
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.
Basic and diluted net asset value per Ordinary Share
2017 2016
Shares in issue Net asset value Net asset value
Pence Pence
2017 2016 per share GBP'000 per share GBP'000
Ordinary
Shares 29,917,025 29,917,025 80.0 23,947 80.8 24,163
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 overleaf.
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 (2017: GBP61,000, 2016: GBP54,000) 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, GBP408,000 (2016: GBP407,000) was
payable to Chrysalis VCT Management Limited in respect of these fees. At
the balance sheet date GBP104,000 (2016: GBPnil) of prepaid fees were
included in debtors.
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 GBP127,000 (2016: GBP41,000) were due to
Chrysalis VCT Management Limited. At the year-end, GBPnil (2016:
GBP1,000) was outstanding and payable.
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 included in the portfolio summary.
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 2017,
but has been extracted from the statutory financial statements for the
year ended 31 October 2017, which were approved by the Board of
Directors on 19 December 2017 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 2016 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 2017 will be printed and posted to shareholders
shortly. Copies will also be available to the public at the registered
office of the Company at 6(th) Floor, St. Magnus House, 3 Lower Thames
Street, London EC3R 6HD, 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 19, 2017 12:30 ET (17:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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