VCT mergers take off

Chrysalis, formerly Classic Fund Management, is to become the first group to merge its Venture Capital Trusts into one vehicle. Discussions have already commenced with Chrysalis A, Chrysalis B and Chrysalis C with a view to merging all four trusts into one.

If the merger with the three other Chrysalis VCTs occurs it will result in a number of immediate improvements: corporate costs will be shared and thereby considerably reduced; the increased size will enable the group to continue to be self managed and the fund will be able to recruit and retain top quality executives and finally the market in the shares will be wider and more liquid for share buy-backs. However, while these discussions are in progress, the business has been advised that it is prohibited from undertaking share buy-backs.

The group agreed the termination of the fund management contract held by Classic Fund Management Ltd on 14 April 2004. The company became self-managed under the leadership of Chris Kay and has subsequently changed its name to Chrysalis VCT plc. The changes have made a significant impact on the performance of the business with no recent investments failing and no substantial new write-downs.

In September 2004, the Inland Revenue clarified and changed the tax rules on the merger of VCTs making the process a realistic possibility. Under the rules, all tax breaks, including CGT reinvestment relief, can now be carried over from a holding in one VCT into an acquiring VCT.