Half-yearly report

Chrysalis VCT plc Interim Statement for the six months ended 30 April 2007 Recent Performance Summary 30 April 31 Oct 30 April 2007 2006 2006 pence pence pence Ordinary shares Net asset value per share 88.70 84.70 77.80 Cumulative dividends paid per ordinary 13.45 10.45 10.45 share Total return 102.15 95.15 88.25 'D' share Net asset value per share 104.30 96.50 94.50 Cumulative dividends paid per ordinary 1.25 - - share Total return 105.55 96.50 94.50 'E' share Net asset value per share 95.00 95.40 94.50 Cumulative dividends paid per ordinary 1.25 - - share Total return 96.25 95.40 94.50 CHAIRMAN'S STATEMENT Introduction Once again, it is very pleasing to report that Chrysalis VCT has continued to perform well throughout the period under review. During the six months to 30 April 2007, a number of further profitable exits were achieved, while other portfolio companies made good progress and a significant number of new investments were made. Net Asset Value Ordinary Shares At 30 April 2007, the Net Asset Value per Ordinary Share ("NAV") had risen to 88.7p, an increase of 7.0p (8.6%) since the previous year end of 31 October 2006 (after adjusting for the 3p per Ordinary Share dividend paid in the period). Total Return to original Ordinary Shareholders (NAV plus cumulative dividends paid since launch) now stands at 102.15p per share, compared to an original net of income tax cost of 80p per share. 'D' shares The NAV of the 'D' Shares has risen to 104.3p over the period, being an increase of 9.05p or 9.4% since 31 October 2006 (after adding back the 'D' share dividend of 1.25p paid in the period). 'E' shares The NAV of the 'E' Shares stood at 95.0p at 30 April 2007, an increase of 0.85p or 0.9% since 31 October 2006 (after adding back the 'E' share dividend of 1.25p paid in the period). Venture Capital Investments During the period, the Company made six new investments and five follow on investments at a total cost of £3.7 million. These investments were allocated as follows between the individual share pools: Number of Investments £'000 Ordinary Share pool 9 3,377 'D' Share pool 5 248 'E' Share pool 2 100 3,725 At the period end, the 'D' Share pool held eight investments valued at £448,000 and the 'E' Share pool held two investments valued at £100,000. As mentioned in earlier reports, although the 'E' share pool is no longer limiting the scope of its investments to the art and antiques sector, it is seeking to select potentially less risky investments than would be accepted by the 'D' share and Ordinary share pools. As a result of this approach, the rate of investment for the 'E' share pool has been slower than the other pools. During the period, the Company achieved a series of successful disposals within the Ordinary share pool, generating £6.7 million of proceeds and realising gains against the previous carrying values of £1.2 million and profit over cost of £4.4 million. The most notable disposals were Ma Potters and ProTx Group, which produced profits against cost of £1.3 million and £1.8 million respectively. At the period end, the Board has reviewed the valuations of the unquoted investments and made some adjustments to the carrying values. Although there were a small number of reductions, a greater number of investments justified increases. The most notable has been to the investment in ILG Digital Limited (formerly i-Level), a digital advertising agency held by the Ordinary share pool, where trading has been particularly strong, supporting an increase of £660,000 to £2.1 million. Overall (including the AIM-quoted stocks) the Ordinary share portfolio gave rise to £1.2 million (3.6p per share) of unrealised gains and the 'D' Share portfolio, unrealised gains of £45,000 (8.4p per share). Both of the 'E' Share portfolio's investments continue to be held at cost. Results and dividend The return after taxation for the Company for the period amounted to a gain of £2,305,000 comprising a revenue return of £213,000 and a capital surplus of £2,092,000. Share buybacks The Company continues to operate a share buyback policy in order to provide liquidity in the market for its shares. Any Shareholders wishing to sell their holding should consult their financial adviser to ensure they understand the potential tax implications of such a disposal. Shares cannot be sold directly to the Company but must be sold via the Stock Market through a stockbroker. During the period, the Company repurchased 834,725 Ordinary shares, at an average price of 73.8p per share for cancellation. Outlook It is now three years since the current investment management team and Board took over the running of the Company. Although the performance in the initial years under the original management was poor, the current management team have been able to emphatically turn around the Company's fortunes and have now delivered strong increases in NAV over each of the last six half-yearly reporting periods. Over that time, the NAV per Ordinary share has risen from 60.7p to 88.7p with a further 8p of dividends being paid. This is equivalent to a return on capital of 59.3% and is an excellent performance for which the Board congratulates the investment management team. The investment exits achieved over the last year or so have not only returned significant levels of cash to your Company, but have also changed the profile of the Company's investment portfolio. With a more immature portfolio than has been the case for some time, it is in unrealistic in the short term to expect the rate of increase in the Company's NAV and Total Return to continue at the levels seen in recent periods. However, the Board remains confident that attractive returns will be made over the medium term. Over the remainder of the year, the management team's focus will remain split between making new investments for the 'D' share, 'E' share and Ordinary pools, while also working with the more mature portfolio companies within the Ordinary share pool with a view to achieving further profitable exits. The Board is confident that the management team will continue to be effective in these roles. Robert Drummond Chairman UNAUDITED SUMMARISED BALANCE SHEET as at 30 April 2007 As at 30 Apr 2007 As at As at 30 Apr 31 Oct 2006 2006 Ordinary 'D' 'E' shares Shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 £'000 Investments 23,789 448 100 24,337 23,900 24,776 Net current assets 5,856 111 471 6,438 4,280 5,348 Net assets 29,645 559 571 30,775 28,180 30,124 Capital and reserves Called up share capital 335 5 6 346 360 354 Capital redemption 41 - - 41 27 33 reserve Share premium - 502 562 1,064 1,064 1,064 Merger reserve 8,694 - - 8,694 8,694 8,694 Special reserve 8,007 - - 8,007 10,404 9,436 Capital reserve - 9,529 (5) (6) 9,518 3,657 5,782 realised Capital reserve - 2,734 50 - 2,784 4,166 4,639 unrealised Revenue reserve 305 7 9 321 (192) 122 Total equity 29,645 559 571 30,775 28,180 30,124 Net asset value per: Ordinary share 88.7p 77.8p 84.7p 'D' share 104.3p 94.5p 96.5p 'E' share 95.0p 94.5p 95.4p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the period ended 30 April 2007 30 Apr 2007 30 Apr 31 Oct 2006 2006 Ordinary 'D' 'E' shares Shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000 £'000 Opening 29,033 517 574 30,124 27,401 27,401 shareholders' fund Issue of shares - - - - 1,075 1,137 Purchase of own (619) - - (619) (1,153) (733) shares Total recognised gains in the period 2,252 49 4 2,305 1,148 3,512 Distributions (1,021) (7) (7) (1,035) (711) (711) 29,645 559 571 30,775 28,180 30,124 UNAUDITED INCOME STATEMENT for the six months ended 30 April 2007 Six months ended Company Total 30 April 2007 Revenue Capital Total £'000 £'000 £'000 Income 522 - 522 Gains on investments: Realised - 1,207 1,207 Unrealised - 1,195 1,195 522 2,402 2,924 Investment management fees (62) (188) (250) Performance incentive fees - (219) (219) Other expenses (150) - (150) Return on ordinary activities 310 1,995 2,305 Share issue costs - - - Return on ordinary activities before 310 1,995 2,305 taxation Taxation (97) 97 - Return attributable to equity shareholders 213 2,092 2,305 Return per Ordinary share 0.6p 6.0p 6.6p Return per 'D' share 1.1p 8.0p 9.1p Return per 'E' share 1.3p (0.5p) 0.8p Six months ended Year ended Company Total 30 April 2006 31 October 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 446 - 446 1,149 Gains on investments: Realised - 87 87 1,119 Unrealised - 1,523 1,523 2,636 446 1,610 2,056 4,904 Investment management fees (58) (175) (233) (465) Performance incentive fees Other expenses (165) - (165) (333) Return on ordinary 223 1,435 1,658 4,106 activities Share issue costs (507) - (507) (520) Return on ordinary (284) 1,435 1,151 3,586 activities before taxation Taxation (36) 33 (3) (74) Return attributable to (320) 1,468 1,148 3,512 equity shareholders Return per Ordinary share (0.9p) 4.1p 3.2p 9.9p Return per 'D' share - - - 1.9p Return per 'E' share - - - 0.9p Six months ended Ordinary shares 30 April 2007 Revenue Capital Total £'000 £'000 £'000 Income 496 - 496 Gains on investments: Realised - 1,207 1,207 Unrealised - 1,150 1,150 496 2,357 2,853 Investment management fees (60) (180) (240) Performance incentive fees - (219) (219) Other expenses (144) - (144) Return on ordinary activities 292 1,958 2,250 Share issue costs - - - Return on ordinary activities before 292 1,958 2,250 taxation Taxation (93) 95 2 Return attributable to equity shareholders 199 2,053 2,252 Six months ended Year ended Ordinary shares 30 April 2006 31 October 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 446 - 446 1,122 Gains on investments Realised - 87 87 1,119 Unrealised - 1,523 1,523 2,631 446 1,610 2,056 4,782 Investment management fees (58) (175) (233) (456) Performance incentive fees Other expenses (165) - (165) (328) Return on ordinary 223 1,435 1,658 4,088 activities Share issue costs (507) - (507) (520) Return on ordinary (284) 1,435 1,151 3,568 activities before taxation Taxation (36) 33 (3) (72) Return attributable to (320) 1,468 1,148 3,496 equity shareholders Six months ended 'D' Shares 30 April 2007 Revenue Capital Total £'000 £'000 £'000 Income 11 - 11 Gains on investments: Realised - - - Unrealised - 45 45 11 45 56 Investment management fees (1) (3) (4) Other expenses (2) - (2) Return on ordinary activities before 8 42 50 taxation Taxation (2) 1 (1) Return attributable to equity shareholders 6 43 49 Six months ended Year ended 'D' Shares 30 April 2006 31 October 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income - - - 13 Gains on investments Realised - - - - Unrealised - - - 5 - - - 18 Investment management fees - - - (5) Other expenses - - - (2) Return on ordinary - - - 11 activities before taxation Taxation - - - (1) Return attributable to - - - 10 equity shareholders Six months ended 'E' Shares 30 April 2007 Revenue Capital Total £'000 £'000 £'000 Income 15 - 15 Gains on investments Realised - - - - - - Unrealised 15 - 15 Investment management fees (1) (5) (6) Other expenses (4) - (4) Return on ordinary activities before 10 (5) 5 taxation Taxation (2) 1 (1) Return attributable to equity shareholders 8 (4) 4 Six months ended Year ended 'E' Shares 30 April 2006 31 October 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income - - - 14 Gains on investments: Realised - - - - Unrealised - - - - - - - 14 Investment management fees - - - (4) Other expenses - - - (3) Return on ordinary - - - 7 activities before taxation Taxation - - - (1) Return attributable to - - - 6 equity shareholders UNAUDITED CASH FLOW STATEMENT for the six months ended 30 April 2007 Six months Six months Year ended ended ended 30 April 30 April 31 October 2007 2006 2006 Note £'000 £'000 £'000 Cash (outflow)/inflow from operating activities and 1 returns on investments (1,639) 72 349 Capital expenditure Purchase of investments (5,585) (885) (3,671) Proceeds on disposal of 8,426 34 4,337 investments Net cash (outflow)/inflow 2,841 (851) 666 from capital expenditure Acquisitions Purchase of subsidiary - 3 (18) undertakings - 3 (18) Equity dividends paid (1,035) (711) (711) Net cash (outflow)/inflow 167 (1,487) 286 before financing Financing Issue of shares - 1,137 1,137 Share issue costs (6) (431) (527) Purchase of own shares (588) (681) (1,120) Net cash inflow/(outflow) (594) 25 (510) from financing (Decrease)/increase in cash 2 (427) (1,462) (224) Notes to the cash flow statement: 1 Cash inflow from operating activities and returns on investments Net revenue return on 310 223 700 ordinary activities Expenses charged to capital (407) (175) (349) Provision against bad debts - - 8 Costs relating to prior - - 21 year merger (Increase)/decrease in (1,608) 3 (39) other debtors Increase/(decrease) in 66 21 8 other creditors Net cash (outflow)/inflow (1,639) 72 349 from operating activities 2 Analysis of net funds Beginning of period 5,418 5,642 5,642 Net cash (outflow)/inflow (427) (1,462) (224) End of period 4,991 4,180 5,418 SUMMARY OF INVESTMENT PORTFOLIO as at 30 April 2007 Ordinary Share pool Movement % of in the portfolio Cost Valuation period by value £'000 £'000 £'000 Top twenty venture capital investments Babel Media Limited 1,555 2,786 - 9.9% Precision Dental Laboratories 2,100 2,167 - 7.7% Group plc ILG Digital Limited 806 2,100 660 7.4% Wessex Advanced Switching 699 1,292 116 4.6% Products Limited Centre Design Limited 1,350 1,205 - 4.3% Glisten plc * 188 940 33 3.3% Spice Inns Limited 850 850 - 3.0% Triaster Limited 758 829 (92) 2.9% British International 700 700 - 2.5% Holdings Limited Mentorion Limited 700 700 - 2.5% Mentorion II Limited 700 700 - 2.5% Advanced Media Information 615 695 - 2.5% Limited RFTRAQ Limited (formerly Core 325 680 68 2.4% Control) Ensign Communications Limited 500 624 124 2.2% The Capital Pub Company 505 580 - 2.1% Limited YouGov plc * 44 318 79 1.1% CPI Acquisition UK Limited 300 300 - 1.1% Planet Sport (Holdings) 250 225 - 0.8% Limited Berkeley Scott Group plc * 320 218 158 0.8% Forward Media Limited 440 204 (48) 0.7% 13,705 18,113 1,098 64.3% Other venture capital 2,507 1,016 86 3.6% investments Listed fixed income 16.5% securities 4,843 4,660 (34) Subtotal 21,055 23,789 1,150 84.4% Cash at bank and in hand 4,403 15.6% Ordinary Share Pool - Total 28,192 100.0% Movement % of in the portfolio Cost Valuation period by value £'000 £'000 £'000 'D' Share pool Brainjuicer plc * 48 80 32 14.4% Hat Pin plc * 50 68 13 12.2% British International 50 50 - 8.9% Holdings Limited CPI Acquisition UK 50 50 - 8.9% Limited Mentorion Limited 50 50 - 8.9% Mentorion II Limited 50 50 - 8.9% Rhino Sports and Leisure 50 50 - 8.9% Limited Spice Inns Limited 50 50 - 8.9% 398 448 45 80.0% Cash at bank and in hand 112 20.0% 'D' Share pool - Total 560 100.0% 'E' Share pool CPI Acquisition UK 50 50 - 8.7% Limited Spice Inns Limited 50 50 - 8.7% 100 100 - 17.4% Cash at bank and in hand 476 82.6% 'E' Share pool - Total 576 100.0% NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP"). Except as stated in note 2, consistent accounting polices have been applied to both this year and the prior years' accounts. The financial statements are prepared under the historical cost convention as modified by the revaluation of certain financial instruments Presentation of Income Statement InvestmentsAll investments are designated as "fair value through profit or loss" assets and are initially measured at cost, equivalent to their fair value. Thereafter the investments are measured at subsequent reporting dates at fair value. Listed fixed income investments and investments quoted on AIM are measured using bid prices with illiquidity discounts applied where deemed appropriate. In respect of unquoted instruments, fair value is established by using International Private Equity and Venture Capital Valuation Guidelines. Where no reliable fair value can be estimated for such unquoted equity investments they are carried at cost, subject to any provision for impairment. Where an investee company has gone into receivership or liquidation the investment, although not physically disposed of, is treated as being realised. Gains and losses arising from changes in fair value are included in the income statement for the year as a capital item and transaction costs on acquisition or disposal of the investment expensed. It is not the Company's policy to exercise either significant or controlling influence over investee companies. Therefore the results of these companies are not incorporated into the revenue account except to the extent of any income accrued. Income Dividend income from investments is recognised when the shareholders' rights to receive payment has 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, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount, 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 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 managers fees, 75% to the capital reserve and 25% to the revenue account 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 from the capital account. Issue costs Issue costs have been deducted from the share premium account. Deferred taxation Deferred taxation 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 financial statements. 2. All revenue and capital items in the Income Statement derive from continuing operations. 3. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. 4. The comparative figures were in respect of the period ended 30 April 2006 and the year ended 31 October 2006 respectively. 5. Net Asset Value per share calculations are based on the following: Ordinary Shares 'D' Shares 'E' Shares Net Assets (£'000) 29,645 559 571 Number of shares in issue 33,431,034 536,072 601,376 at period end 6. Return per share calculations are based on the following: Ordinary Shares 'D' Shares 'E' Shares Revenue return per share based on: Net revenue return after 199 6 8 taxation (£'000) Weighted average number of 34,006,157 536,072 601,376 shares in issue Capital return per share based on: Net capital gain/(loss) 2,053 43 (43) after taxation (£'000) Weighted average number of 34,006,157 536,072 601,376 shares in issue 7. Dividends 30 April 2007 31 Oct 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Paid in year Ordinary shares 2006 interim - 1,021 1,021 - (paid 02/03/2007) 'D' shares 2006 final (paid 7 - - - 27/03/2007) 'E' shares 2006 final (paid 7 - - - 27/03/2007) Ordinary shares 2005 final - - - 711 (paid 04/04/2006) 14 1,021 1,035 711 Proposed 'D' shares 2006 final - - - 7 'E' shares 2006 final - - - 7 - - - 14 8. Reserves Share Capital Merger Special Capital Capital Revenue premium redemption reserve reserve reserve reserve reserve reserve unrealised realised £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 November 1,064 33 8,694 9,436 4,639 5,782 122 2006 Shares - 8 - (619) - - - repurchased Expenses - - - - - (407) - capitalised Tax on - - - - - 97 - capital expenses Realised - - - - - 1,207 - gains Unrealised - - - - 1,195 - - gains Transfer between - - - (810) (3,050) 3,860 - reserves Retained net revenue for - - - - - - 213 the year Distributions paid - - - - - (1,021) (14) in year At 30 April 1,064 41 8,694 8,007 2,784 9,518 321 2007 The above figures relate to the Company as a whole. The Special Reserve, Capital Reserve - Realised and Revenue Reserve are all distributable reserves. 9. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 October 2006 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the auditors' report on those financial statements was unqualified. 10. Copies of the unaudited interim results will be sent to shareholders shortly. Further copies can be obtained from the Company's Registered Office. ---END OF MESSAGE---