The Lemon Fool

Chrysalis VCT Plc Half-year Report
LEI: 2138009FVDWULSIOX404
21 August 2020

Half-Yearly Report for the six months ended 30 April 2020

https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/half-year-report/20200821070000H3299/

Chrysalis VCT Plc Half-year Report wrote:Future Strategy
For some time, two things have been clear: the Company’s investment manager has been and remains unenthusiastic about the investment opportunities available to it under the current VCT rules; and, as previous realisation proceeds have been paid out to Shareholders in special dividends on top of the regular 5p annual dividends, the size of the company has reduced to a level that is becoming increasingly difficult to justify as an independent publicly quoted entity.

A number of options were explored by the Board. In the end, the Board has concluded that it is in the best interests of Shareholders generally to undertake an orderly wind up of the Company using the VCT winding up regulations.

(I have a holding in Chrysalis VCT)

Websites:
http://www.chrysalisvct.co.uk/
https://www.downing.co.uk/existing-investor/chrysalis-vct

Whilst I agree with them that they can't keep going as they reduce in size, I am a bit disappointed by their plan to wind up.

Such a process could take several years during which we have to keep paying fees to liquidators. I would have preferred them to have been taken over and would have thought Pembroke a good fit as they both have media and hospitality.

Looking at the recent share transactions which are in the 40p to 45p band, it appears that there is now a lot more liquidity - so probably Chrysalis is carrying out the promised Buy-Back policy. And this should allow a reasonable exit to those not willing to wait for a possibly protracted wind-up. 40p is certainly a big improvement on 20p

Interim report (pdf) is now available on the website (think it appeared yesterday 7 Sept, and the pdf has a timestamp of being updated 7 Sept)
https://www.downing.co.uk/existing-investor/chrysalis-vct
Half-yearly Report to 30 April 2020

although info was in the RNS on 21 Aug

https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/half-year-report/20200821070000H3299/

yorkshirelad1 wrote:Interim report (pdf) is now available on the website (think it appeared yesterday 7 Sept, and the pdf has a timestamp of being updated 7 Sept)
https://www.downing.co.uk/existing-investor/chrysalis-vct
Half-yearly Report to 30 April 2020

although info was in the RNS on 21 Aug

https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/half-year-report/20200821070000H3299/

I'm a bit confused. Has there been an additional interim report since the half-yearly report to 30th April (issued as an RNS on 21st August)?

scotia wrote:

yorkshirelad1 wrote:Interim report (pdf) is now available on the website (think it appeared yesterday 7 Sept, and the pdf has a timestamp of being updated 7 Sept)
https://www.downing.co.uk/existing-investor/chrysalis-vct
Half-yearly Report to 30 April 2020

although info was in the RNS on 21 Aug

https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/half-year-report/20200821070000H3299/

I'm a bit confused. Has there been an additional interim report since the half-yearly report to 30th April (issued as an RNS on 21st August)?

Sorry for the confusion. Not additional information.
The RNS was on 21 Aug.
The company's interim report glossy version pdf (same info as the RNS) appeared yesterday.

I'm waiting for the notification to shareholder of the interim report from the company: it would be nice if the company tells its shareholders about the 6 month results/report, rather than expecting shareholders to keep an eye on the RNS. Especially as it contains the unusual information that the directors have "concluded that it is in the best interests of Shareholders generally to undertake an orderly wind up of the Company".

yorkshirelad1 wrote:

scotia wrote:

yorkshirelad1 wrote:Interim report (pdf) is now available on the website (think it appeared yesterday 7 Sept, and the pdf has a timestamp of being updated 7 Sept)
https://www.downing.co.uk/existing-investor/chrysalis-vct
Half-yearly Report to 30 April 2020

although info was in the RNS on 21 Aug

https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/half-year-report/20200821070000H3299/

I'm a bit confused. Has there been an additional interim report since the half-yearly report to 30th April (issued as an RNS on 21st August)?

Sorry for the confusion. Not additional information.
The RNS was on 21 Aug.
The company's interim report glossy version pdf (same info as the RNS) appeared yesterday.

I'm waiting for the notification to shareholder of the interim report from the company: it would be nice if the company tells its shareholders about the 6 month results/report, rather than expecting shareholders to keep an eye on the RNS. Especially as it contains the unusual information that the directors have "concluded that it is in the best interests of Shareholders generally to undertake an orderly wind up of the Company".

Finally got the e-mail today from the managers to shareholders about the availability of the CYS interim report.

As I flagged from the Artemis circular below, the same situation may apply to some original Chrysalis shareholders in a liquidation.

Beware of old CGT deferral being triggered in liquidation.

The Board is aware that some Shareholders acquired their original shares before 6 April 2004 and claimed capital gains tax (“CGT“) deferral relief on their investment. The receipt of distributions made during the course of the liquidation will cause those deferred gains to become chargeable to tax at the prevailing rate of CGT. Such Shareholders should take their own advice as to their own circumstances.

127tolmers wrote:https://www.investegate.co.uk/chrysalis-vct-plc--cys-/gnw/update-on-preparation-of-proposals-for-company-to-commence-a-vct-winding-up-period--correction-/20201023082849H4005/
On 21 August 2020, the Company announced that the Board was preparing formal proposals to be put to Shareholders for approval for the Company to commence a formal VCT winding up period and to put the Company into Members’ Voluntary Liquidation.
(snip)

On the basis of comments by 127tolmers (on this thread) re deferred CGT being triggered, I sent a quick e-mail off to CYS (Downing) and had a very prompt helpful reply from the Company Secretary

Company Secretary Chrysalis VCT plc wrote:I can confirm that the shareholder circular that is being prepared by Chrysalis VCT will include a note about the potential tax implications for shareholders who deferred capital gains on their investment. You are correct that the liquidation of the Company will result in the withdrawal of the capital gains deferral for such shareholders and it is indeed one of the factors that the VCT Board has given lengthy consideration.

It remains to be seen what exactly is in the circular, but it is good to know they've got the matter factored in, and a nudge for CYS shareholders who need to be aware of it.

So, investors who have a potential CGT liability owing to rollover relief, need to start planning now.

First you need to ascertain the price you paid for them - not easy as actually some shares held now come from shares in other companies which merged into Chrysalis. Almost certainly you will have paid 100 pence for the shares but may have received a smaller number of shares in Chrysalis when the merger took place.

If that purchase was for less then the current CGT limit - you don't have to do anything.

If they cost more than that then you will have to pay CGT but you can avoid that by one or two perfectly legal steps
1. If you are lucky enough to be married, you can transfer some to your wife to utilize both allowances
2. If that leaves either or both of you over the limit, then you can 'bed' and ISA' them to use more than one tax year's allowances. Just don't exceed the CGT exemption limit in any one year unless it keeps you in a lower band.

Once they are in the ISA - they are no longer yours and can be sold if you can find a better investment to deploy the cash into.

Other experts will tell you whether this can still be done after the VCT goes into administration/wind up mode

as they though, DYOR before acting.

I tried to sell about £3K worth of Chrysalis VCT shares today. My broker could not get the price and volume which I expected to be available if Chrysalis is buying back. He contacted N+1 Singer who are the corporate broker who will get back to us when/if they know the timescale.
I couldn't get through to Downing (company secretary) by phone, so I have sent them an email.
Has anyone else had more luck?
Richard

Postscript: the Company Secretary's office says contact N+1 Singer - Sam Greatrex - 0203 205 7528 so I assume they have authorised the buyback.

An announcement was duly made after hours today but we will have to wait for the dcouments to see what is really planned.

There will be a vote on a related party transaction as per the following:-

The related party transaction involves a variation to the service agreement of Chris Kay, a director of Chrysalis VCT Management Limited ("CVM"), a subsidiary of the Company. Subject to Shareholders’ approval, the agreement with CVM will be varied to provide for a salary of £18,000 p.a. and such amount as reduces the net assets of CVM to below £10,000, subject to its working capital requirements for the following period of 12 months.

The circular can be found on the National Storage Mechanism, see below

A copy of the circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

It shows that the 36 month wind up process will cost £978k or 3.4p/share of which investment manager and (increased!)performance fees are £667k. This sounds excessive in a solvent liquidation.

The 2019 running costs pa were £345k for investment fees and a very high £280k on other expenses. A better solution would have been for the board to have reduced both the investment fees and other expenses or negotiated a deal with another VCT (which they tried but say they could not agree).

The unaudited portfolio is now valued at 52.8p (£14.9m) after the payment of a 1.75p divi in September. The April NAV was 57.0p (£16.2m). Their valuation of Coolabi , the largest holding, has reduced by £880k (17%) from £5.14m to £4.26m and represents the major portfolio change.

Several references are made to pre 2004 VCT investors who deferred CGT and who will now have a CGT liability at the time of first distribution. These shareholders would have been better served by a merger with an evergreen VCT.

It will be interesting to see if the Board can get a 75% vote to get this approved.

127tolmers wrote:It shows that the 36 month wind up process will cost £978k or 3.4p/share of which investment manager and (increased!)performance fees are £667k. This sounds excessive in a solvent liquidation.

I admire your restraint!

I will vote against

does anyone understand the movement of the sp here!

I was against the principle of liquidation for CYS but these figures only confirm my intention to vote 'against'.

I am puzzled they can predict a time of 36 months because I have had private equity investment trusts go into solvent liquidation and that can take more like ten years. I fail to see why Coolabi should go down so much in value if it is mostly loan stock. Why should the liquidator be saddled with an advisor when they are qualified to do the liquidation themself?

Perhaps it is time for a 'scavenger' VCT to take over companies such as CYS and just run them down at a reasonable cost. Many VCTs don't want a 'second-hand' portfolio that they aren't familiar enough with which is one good reason why possible merger partners would have been thin on the ground.

Kidman wrote:Many VCTs don't want a 'second-hand' portfolio that they aren't familiar enough with which is one good reason why possible merger partners would have been thin on the ground.

Yet many have a track record of taking them on: Albion, Foresight, Maven spring instantly to mind.

Not sure whether coolabi (or anything else) would put this firmly in bargepole territory.