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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
LEI: 2138009FVDWULSIOX404
Reports & Accounts for the year ended 31 October 2019
FINANCIAL SUMMARY
31 Oct 31 Oct
2019 2018
Pence Pence
Net asset value per share ("NAV") 67.00 73.40
Cumulative dividends paid per share since launch * 90.70 83.45
------ ------
Total Return (Net asset value per share plus cumulative
dividends) 157.70 156.85
====== ======
Dividends in respect of financial year
Interim dividend per share (paid 26 July 2019) 1.75 1.75
Special dividend per share (paid 26 July 2019) 2.25 3.00
Final proposed dividend per share 3.25 3.25
------ ------
7.25 8.00
====== ======
* Excludes final proposed dividend
CHAIRMAN'S STATEMENT
Overview
I am pleased to present my statement for the year ended 31 October 2019.
During the year, we have continued to focus on the Company's existing
portfolio and, as expected, have had very limited new investment
activity.
There were realisations totalling GBP1.4 million during the year from
the non-qualifying fixed interest investments that matured. These
proceeds were used to help fund the dividends of GBP2.1 million paid
during the year and share buybacks which totalled GBP336,000 that were
undertaken.
The Company's net assets declined from GBP21.3 million to GBP19.1
million; and per share declined from 73.4p to 67.0p at 31 October 2019.
However, Total Return (NAV plus cumulative dividends) increased by 0.85p
per share as the portfolio showed a small gain. This now stands at
157.7p per share for those Shareholders that invested at the Company's
launch in 2000, compared to the original cost (net of tax relief) of
80.0p.
The Company's investment portfolio is now highly concentrated and
shareholder outcomes are therefore likely to be significantly influenced
by the performance or corporate activity of individual investee
companies. The Board continues to monitor such developments closely.
Dividend
Subject to Shareholder approval at the forthcoming AGM, in line with the
policy noted above, your Board is proposing to pay a final 2019 dividend
of 3.25p per Share on 21 February 2020, to Shareholders on the register
as at 31 January 2020.
Cash, fixed income and other listed investments
The Company held GBP3.3 million in cash and other listed investments at
the year end.
As mentioned above, the two remaining fixed income investments were
matured during the year generating proceeds of GBP1.4 million and a loss
over opening value of GBP14,000. However, GBP38,000 of interest was
received during the year.
Venture capital portfolio
At the year end, the Company held a portfolio of 18 venture capital
investments, valued at GBP15.8 million.
As part of the year end processes, the Board has reviewed the valuations
of the unquoted investments held and made a number of adjustments
accordingly. Four investments fell in value and seven increased in value,
while the remaining seven investment valuations remain materially
unchanged from the previous year end.
The largest movements were as follows:
-- Enthuse Holdings Limited increased by GBP869,000
-- IX Group Limited increased by GBP175,000
-- Locale Enterprises Limited decreased by GBP708,000
The Investment Manager's Report gives a detailed overview of the
portfolio activity during the year and of the main valuation movements.
Share buyback policy
The Company continues to operate a policy of buying in Shares that
become available in the market at a discount of approximately 15% to the
latest published NAV, subject to market conditions and any liquidity or
regulatory restrictions. The Board feels that this level of discount
remains appropriate in view of the characteristics of the Company's
investment portfolio and is pleased to note that the level of buybacks
undertaken has been at a manageable level. The Board regularly reviews
this policy and will make adjustments if it considers they are required.
During the year 572,000 shares were purchased and cancelled for a total
sum of GBP336,000. All Shares were purchased at prices equivalent to
discount of approximately 15% to the latest published NAV.
Any Shareholders wishing to either acquire more Shares, or to sell
existing holdings in the Company, are recommended to contact the
Company's broker, Nplus1 Singer Capital Markets.
Investment Policy
A minor amendment has been made to the Investment policy to remove fixed
income securities from the scope of the policy. The Company no longer
holds fixed income securities and they are no longer permitted under the
VCT rules.
Annual General Meeting
The forthcoming AGM will be held at 6(th) Floor, St. Magnus House, 3
Lower Thames Street, London EC3R 6HD at 11:30 a.m. on 13 February 2020.
Notice of the meeting is at the end of this document.
Outlook
In previous statements I have made clear that the Board was actively
examining the options facing the Company as a small VCT in the face of a
rising cost base and a regulatory backdrop that did not necessarily
favour the investment style of our Manager. Progress is being made in
this regard. The Board remains mindful of the interests of Shareholders
in managing their favourable tax position whilst not exposing them to
unnecessary risk or cost.
Martin Knight
Chairman
INVESTMENT MANAGER'S REPORT
This has not been a vintage year for Chrysalis, although overall it has
been a much better performance than some high-profile funds that have
been investing in unquoted companies. Total return for Chrysalis
shareholders for the year ended 31 October 2019 has been a disappointing
0.85p per share or 1.2%. However as mentioned last year, profits from
investing in small private companies are rarely consistent and although
the Company has now had 2 years of relatively low profits, the 10 year
average return is still 4.99p per share which equates to an annual 6.0%
tax-free return based on a net asset value per share of 82.9p, being the
net asset value at the start of the 10 year period.
In the absence of any major exits the main factor influencing total
return is the change in the value of our investee companies. This year
most of the portfolio has seen only small changes in valuation, however,
there have been two significant alterations.
Enthuse Holdings Limited (formerly MyTime Media) has made a
transformational acquisition which has nearly doubled its size, and
which presently seems to be a highly successful one, hence our valuation
has increased by GBP869,000.
Locale Enterprise Limited, the Italian restaurant chain, unfortunately
has not been immune to all the negative factors in the casual dining
sector which have caused several well-known brands to get into financial
difficulties. Therefore, although Locale Enterprise Limited is still
profitable and generating cash we have reduced the valuation by
GBP708,000.
On the investment front this has been a very quiet year for the Company
with only one small follow on investment and no significant exits
occurring during the year. Neither event, or lack of them, is
particularly unexpected.
As previously mentioned last year we have become very cautious about
investing under the new VCT rules. These new rules have forced the VCT
industry to invest at a much earlier stage of a company's development
and in much more high-risk situations with little ability to "protect"
the investment. This is not the type of investment the Company has
traditionally made and virtually all the Company's past successful
investments would not have been allowed under the new rules.
We feel the only way to invest successfully in these circumstances is to
adopt a portfolio approach by making a lot of new investments and having
deep pockets to be able to follow your money over the inevitable
multi-funding rounds in the belief that one or two successes will pay
for the inevitable many failures. This requires available cash
resources and a very different investment approach to that which we have
adopted and successfully employed in the past. Accordingly, as the
Chairman has mentioned, the Company is currently undertaking a strategic
review to ascertain the best way forward for the fund.
The lack of any exits is also not unexpected.
The continuing uncertainty over Brexit including the setting and then
extending two deadlines has provided the perfect excuse for
prevarication. It seems that most sellers and buyers of small businesses
consider that this is not an appropriate time to be selling or buying
preferring to wait until there is a bit more clarity as to which
direction the economy is going.
The current portfolio is however quite concentrated with the seven most
valuable investments accounting for nearly 84% of the value of the fund
(excluding cash) so just one or two exits would have a significant
impact on the balance of the portfolio.
The lack of corporate activity does not mean that our investee companies
have had a quiet year with most of them continuing to grow albeit
generally at a smaller pace than we would like.
The final part of the new VCT rules came into force for the Company on 1
November 2019 which means that 80% of Chrysalis' total investments (as
defined by HMRC) must be in qualifying investments. In the absence of
any new investments this means that the proceeds of any realisations
will have to be returned to Shareholders.
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 2019:
Valuation % of
movement portfolio
Cost Valuation in year by value
GBP'000 GBP'000 GBP'000
Top ten venture capital
investments
Coolabi Group Limited 3,456 5,144 - 26.9%
Enthuse Holdings Limited
(formerly MyTime Media Holdings) 56 1,914 869 10.0%
Locale Enterprises Limited 2,513 1,711 (708) 9.0%
Zappar Limited 300 1,626 4 8.5%
Driver Require Group Limited 520 1,205 (90) 6.3%
Cambridge Mechatronics Limited 366 1,172 (3) 6.1%
K10 (London) Limited 950 1,144 33 6.0%
Green Star Media Limited 650 730 79 3.8%
IX Group Limited 250 525 175 2.8%
Life's Kitchen Limited 500 400 (100) 2.1%
9,561 15,571 259 81.5%
------- ----------- --------- ------------
Other venture capital investments
Triaster Limited 71 156 39 0.8%
The Mission Marketing Group plc* 150 96 31 0.5%
The Kellan Group plc 320 1 - 0.0%
Progility plc 100 - - 0.0%
Art VPS Limited 358 - - 0.0%
G-Crypt Limited 305 - - 0.0%
Livvakt Limited 220 - - 0.0%
Fusion Catering Solutions Limited 75 - - 0.0%
------- ----------- --------- ------------
1,599 253 70 1.3%
Total venture capital investments 11,160 15,824 329 82.8%
------- ----------- --------- ------------
Other listed investments
Impact Healthcare REIT plc** 750 803 46 4.2%
------- ----------- --------- ------------
750 803 46 4.2%
------- ----------- --------- ------------
Total investments 11,910 16,627 375 87.0%
======= =========
Cash at bank and in hand 2,477 13.0%
Total investments and cash 19,104 100.0%
=========== ============
All investments are unquoted unless otherwise stated.
* Quoted on AIM
** Listed and traded on the Main Market of the London Stock
Exchange
Investment movements for the year ended 31 October 2019
Additions
GBP'000
Venture capital investments
Life's Kitchen Limited 100
=========
Disposals
Total
gain/
Value at (loss) Realised
Cost 01/11/18* Proceeds vs cost gain/(loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed interest
investments
Intermediate Capital
Group plc 7% 745 689 688 (57) (1)
Lloyds Banking Group
perpetual 724 739 726 2 (13)
1,469 1,428 1,414 (55) (14)
--------- ------------ ---------- ---------- ------------
Dissolution/liquidation
Autocue Group Limited - - 1 1 1
--------- ------------ ---------- ---------- ------------
Total 1,469 1,428 1,415 (54) (13)
========= ============ ========== ========== ============
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.
INCOME STATEMENT
for the year ended 31 October 2019
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 446 - 446 486 - 486
Gains on
investments - 362 362 - 534 534
446 362 808 486 534 1,020
Investment
management
fees (86) (259) (345) (97) (292) (389)
Performance
incentive
fees - - - - (54) (54)
Other expenses (274) (6) (280) (264) (3) (267)
------- ------- ------- ------- ------- -------
Return on
ordinary
activities
before tax 86 97 183 125 185 310
Tax on
ordinary
activities (1) 1 - (4) 13 9
------- ------- ------- ------- ------- -------
Return
attributable
to equity
Shareholders 85 98 183 121 198 319
======= ======= ======= ======= ======= =======
Basic and 0.3p 0.3p 0.6p 0.4p 0.7p 1.1p
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 (updated in February 2018)
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 2019
Called
up Capital Share Capital Capital
share redemption premium Merger Special reserve- reserve- Revenue
capital reserve reserve reserve reserve realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 November
2017 299 89 1,478 1,357 602 13,715 5,902 505 23,947
Total
comprehensive
income - - - - - (435) 633 121 319
Transfer
between
reserves* - - - (828) 354 1,227 (753) - -
Transactions
with owners
Purchase of
own Shares (9) 9 - - (550) - - - (550)
Dividends paid - - - - - (2,285) - (104) (2,389)
-------- ----------- -------- --------- --------- --------- ----------- --------- -------
At 31 October
2018 290 98 1,478 529 406 12,222 5,782 522 21,327
Total
comprehensive
income - - - - - (277) 375 85 183
Transfer
between
reserves* - - - - (70) 203 (133) - -
Transactions
with owners
Purchase of
own Shares (6) 6 - - (336) - - - (336)
Dividends paid - - - - - (2,035) - (58) (2,093)
-------- ----------- -------- --------- --------- --------- ----------- --------- -------
At 31 October
2019 284 104 1,478 529 - 10,113 6,024 549 19,081
======== =========== ======== ========= ========= ========= =========== ========= =======
* A transfer of GBP42,000 (2018: GBP722,000) representing previously
recognised unrealised gains, transferred on disposal of investments
during the year, has been made between the Capital Reserve -- unrealised
and the Capital Reserve -- realised. A transfer of GBP175,000 (2018:
GBP1,475,000) representing a permanent diminution in value, has been
made between the Capital Reserve -- unrealised and the Capital Reserve
-- realised. A transfer of GBP70,000 (2018: GBP354,000) representing
realised losses on disposal of investments, plus capital expenses and
capital dividends in the year was made between the Capital Reserve --
realised and the Special reserve. A transfer of GBPnil (2018:
GBP828,000) representing a disposal of an investment during the year has
been made between the Special reserve and the Merger reserve.
BALANCE SHEET
at 31 October 2019
2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 16,627 17,580
Current assets
Debtors 46 102
Cash at bank and in hand 2,477 3,763
------- -------
2,523 3,865
Creditors: amounts falling due within
one year (69) (118)
------- -------
Net current assets 2,454 3,747
------- -------
Net assets 19,081 21,327
======= =======
Capital and reserves
Called up share capital 284 290
Capital redemption reserve 104 98
Share premium 1,478 1,478
Merger reserve 529 529
Special reserve - 406
Capital reserve -- realised 10,113 12,222
Capital reserve -- unrealised 6,024 5,782
Revenue reserve 549 522
------- -------
Total equity Shareholders' funds 19,081 21,327
======= =======
Net asset value per share 67.0p 73.4p
STATEMENT OF CASH FLOW
for the year ended 31 October 2019
2019 2018
GBP'000 GBP'000
Cash flow from operating activities
Profit on ordinary activities before taxation 183 319
Gains on investments (362) (534)
Decrease in debtors 55 78
Increase/(decrease) in creditors 9 (1)
Net cash outflow from operating activities (115) (138)
------- -------
Cash flow from investing activities
Purchase of investments (100) -
Proceeds from disposal of investments 1,415 2,223
Net cash inflow from investing activities 1,315 2,223
------- -------
Cash flow for financing activities
Equity dividends paid (2,092) (2,389)
Purchase of own Shares (394) (492)
Net cash outflow from financing activities (2,486) (2,881)
------- -------
Decrease in cash (1,286) (796)
======= =======
Net movement in cash
Beginning of the year 3,763 4,559
Net cash outflow (1,286) (796)
------- -------
End of year 2,477 3,763
======= =======
NOTES TO THE ACCOUNTS for the year ended 31 October 2019
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' and in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital
Trusts" issued by the Association of Investment Companies ("AIC") in
November 2014 and revised in February 2018 ("SORP") as well as the
Companies Act 2006.
The financial statements have been prepared on a going concern basis and
under historical cost convention, with the exception of investments
which are designated as "fair value through profit or loss".
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.
Judgements in applying accounting policies and key sources of estimation
uncertainty
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. Investments held by the Company are treated as having
been disposed of when the risks and rewards of ownership no longer
accrue to the Company.
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:
-- Multiples;
-- Industry valuation benchmarks;
-- Discounted cash flows or earnings (of underlying business);
-- Discounted cash flows (from the investment);
-- Net assets; and
-- Price of recent investment;
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.
Contingent or deferred consideration on the disposal of an investment is
only recognised to extent that receipt is virtually certain.
Judgements in applying accounting policies and key sources of estimation
uncertainty
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.
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
previously accrued income is doubtful, corresponding provisions are
considered and made.
2. Basic and diluted return per share
2019 2018
Return per share based on: GBP'000 GBP'000
Net revenue return for the financial year 85 121
Net capital gain for the financial year 98 198
Total return for the financial year 183 319
========== ==========
Weighted average number of Shares in issue 28,824,085 29,697,929
========== ==========
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 the basic and diluted return
per share.
3. Basic and diluted net asset value per Ordinary Share
2019 2018
Shares in issue Net asset value Net asset value
Pence Pence
2019 2018 per share GBP'000 per share GBP'000
Ordinary
Shares 28,472,025 29,044,025 67.0 19,081 73.4 21,327
========== ========== ========== ========= ========== =========
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 the basic
and diluted value per share.
4. Principal Risks
The Board has carried out a robust assessment of the principal risks
facing the Company, including those that would threaten its business
model, future performance, solvency and liquidity. The Board has ensured
that there are policies in place for managing each of these risks. The
principal financial risks faced by the Company, which include interest
rate, investment price, credit and liquidity risks, are summarised
within Note 15 of the financial statements.
Other principal risks faced by the Company have been assessed by the
Board and grouped into the key categories outlined below:
-- Underperformance;
-- Regulatory;
-- Operational; and
-- Economic, political and other external factors.
Underperformance
The Company holds investments in unquoted and quoted UK businesses. Poor
investment decisions or a lack of effective monitoring and management of
investments could result in a reduction in the NAV of the Company.
The Investment Manager has significant experience in investing in
unquoted UK companies and engage reputable and experienced advisers at
each stage of the investment process. Furthermore, the Board regularly
reviews the performance of the portfolio.
Regulatory
The Company, as a fully listed Company on the London Stock Exchange with
a premium listing and as a Venture Capital Trust, operates in a complex
regulatory environment and therefore faces related risks. A breach of
the VCT Regulations could result in the loss of VCT status and
consequent loss of tax reliefs currently available to Shareholders and
the Company being subject to capital gains tax. Serious breaches of
other regulations, such as the Listing Rules of the Financial Conduct
Authority and the Companies Act, could lead to suspension from the Stock
Exchange and damage to the Company's reputation.
The Board receives quarterly reports from the Investment and
Administration Managers, which monitor the compliance of these risks,
and places reliance on them to give updates in the intervening periods.
These policies have remained unchanged since the beginning of the
financial year. Philip Hare & Associates LLP provides regular
independent reviews of the Company's VCT status, as well as advice on
VCT compliance issues as and when they arise.
In order to further mitigate this risk, the Board monitors regulatory
and legislative developments. The Company also has a strong compliance
culture and systems in place to ensure that the Company complies with
all of its regulatory requirements.
Operational
The Company relies on the Investment Manager, Administration Manager and
other third parties to fulfil many of its operational requirements and
duties. A provision of inferior services by one or more of these parties
could lead to inadequate systems and controls or inefficient management
of the Company, its assets and its reporting requirements.
The Company, the Investment Manager and the Administration Manager
engage experienced and reputable service providers, the performance of
which is reviewed on an annual basis by the Board. In addition, the
Audit Committee reviews the Internal Control and Corporate Governance
Manual on an annual basis.
Economic, political and other external factors
Fluctuations in the stock market due to Brexit uncertainty, economic
recession or monetary policy could affect the valuations of quoted
investee companies, even if such companies are performing to plan. The
impact of this on the NAV of the Company is mitigated by the portfolio
largely consisting of investments in unquoted companies.
Wider political and economic events also have the potential to impact
the performance and therefore valuations of the unquoted companies in
the portfolio as a result of a deterioration in business and consumer
confidence. This is mitigated by holding a diversified portfolio of
investments across a wide range of sector and subsectors.
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 year GBP345,000 (2018: GBP389,000) was
payable to Chrysalis VCT Management Limited in respect of these fees. At
the balance sheet date GBPnil (2018: 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 GBP43 (2018: GBP54,000) were due to Chrysalis VCT Management Limited. At the year-end, GBPnil (2018: GBPnil) 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. 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 2019, but has been extracted from the statutory financial statements for the year ended 31 October 2019, which were approved by the Board of Directors on 13 December 2019 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006. The statutory accounts for the year ended 31 October 2018 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 2019 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at St. Magnus House, 3 Lower Thames Street, London EC3R 6HD and will be available for download from www.downing.co.uk
(END) Dow Jones Newswires
December 13, 2019 11:17 ET (16:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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