CChhrryyssaalliiss VVCCTT PPLLCC

Report & Accountsfor the year ended 31 October 2008

SHAREHOLDER INFORMATION Dividends Dividends are paid by the Registrar on behalf of the Company. Shareholders who wish to have dividends paid directly into their bank account rather than by cheque to their registered address can complete a Mandate Form for this purpose. Queries relating to dividends and requests should be directed to the Company’s Registrar, Capita Registrars, on 0870 162 3124 (calls cost 10p per minute plus network extras), or by writing to them at Northern House, Woodsome Park, Fenay Bridge, Huddersfield, West Yorkshire, HD8 0GA. Dividend history The table below shows the dividends paid by the Company since inception to 31 October 2008: Pence per share Share class 2001 2002 2003 2004 2005 2006 2007 2008 * Total Ordinary Shares 1.20 1.75 1.00 1.50 5.00 3.00 3.50 2.00 18.95 ‘D’ Shares N/A N/A N/A N/A N/A 1.25 2.00 - 3.25 ‘E’ Shares N/A N/A N/A N/A N/A 1.25 2.00 - 3.25 * Interim dividends The following dividends have been paid during the year to 31 October 2008 and between the year end and the date of this report: Ordinary

shares ‘D’

shares ‘E’

shares Dividend Date paid Pence per

share Pence per

share Pence per

share 2007 final 20 March 2008 3.50 2.00 2.00 2008 interim 25 July 2008 2.00 Nil Nil 2008 interim 15 December 2008 4.00 Nil Nil Share price The Company’s share price can be found in various financial websites with the TIDM/EPIC codes shown below: Ordinary Shares ‘D’ Ordinary Shares ‘E’ Ordinary Shares TIDM/EPIC Code CYS CYSD CYSE Latest share price (5 February 2009): 64p per share 70p per share 57p per share A link to the share price is also available on Chrysalis’s website (www.chrysalisvct.co.uk) and on Downing’s website (www.downing.co.uk). Selling shares The Company’s Ordinary shares can be bought and sold in the same way as any other quoted company on the London Stock Exchange via a stockbroker. Shareholders who invested in the ‘D’ and ‘E’ Ordinary share issue should be aware that they need to hold their shares for a minimum period of three years to retain the income tax relief they received on investment. Selling your shares may have tax consequences so you should consult your independent financial adviser before making any decisions. The Company operates a policy of buying its own shares for cancellation as they become available. The Company is, however, unable to buy back shares direct from Shareholders, so you will need to use a stockbroker to sell your shares. Downing Management Services Limited is able to provide details of close periods (when the Company is prohibited from buying in shares) and details of the price at which the Company has bought in shares. Contact details are shown on page 1 of this document. Financial calendar 25 March 2009 Annual General Meeting June 2009 Announcement of half yearly report to 30 April 2009 Notification of change of address Communications with Shareholders are mailed to the registered address held on the share register. In the event of a change of address or other amendment this should be notified to the Registrar, under the signature of the registered holder. Other information for shareholders Up to date Company information (including financial statements, share price and dividend history) may be obtained from Downing’s website at www.downing.co.uk by clicking on “VCT Information and Accounts”. Financial information is also available on Chrysalis’s website (www.chrysalisvct.co.uk) under “Shareholder Info”. If you have any queries regarding your shareholding in Chrysalis VCT plc, please contact the Registrar on the above number or visit Capita’s website at www.capitaregistrars.com and click on “Shareholders”.

CONTENTS

Page Company information 1 Investment objectives and Directors 2 Financial highlights 3 Chairman’s statement 4 Investment management report 7 Review of investments 9 Report of the Directors 16 Directors’ remuneration report 23 Corporate governance 25 Independent Auditors’ report 27 Income statement 28 Reconciliation of movements in Shareholders’ funds 30 Balance sheet 31 Cash flow statement 32 Notes to the accounts 33 Notice of the Annual General Meeting 46 Notice of a Class Meeting for Ordinary Shareholders 48 Notice of a Class Meeting for ‘D’ Ordinary Shareholders 49 Notice of a Class Meeting for ‘E’ Ordinary Shareholders 50

COMPANY INFORMATION Company number 4095791 Directors Peter Harkness (Chairman)

Julie Baddeley Martin Knight

Secretary and registered office Grant Whitehouse Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU

Tel No: 020 7416 7780 Investment manager Chrysalis VCT Management Limited

46 Dorset Street London W1U 7NB Tel No: 020 7486 7454 www.chrysalisvct.co.uk

Administration manager Downing Management Services Limited Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU

Tel No: 020 7416 7780 www.downing.co.uk

Listed fixed income securities manager Smith & Williamson Investment Management Limited 25 Moorgate London EC2R 6AY Auditor PKF (UK) LLP

Farringdon Place 20 Farringdon Road London EC1M 3AP

VCT status adviser PricewaterhouseCoopers LLP

1 Embankment Place London WC2N 6NN

Registrar Capita Registrars Ltd

Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0GA Tel No: 0870 162 3124 (calls cost 10p per minute plus network extras) www.capitaregistrars.com

Principal banker Bank of Scotland

West End Office St James’s Gate 14-16 Cockspur Street London SW1Y 5BL

1

INVESTMENT OBJECTIVE The Company’s principal investment objectives are to: achieve long term capital growth and generate income for its Shareholders principally from private equity

and AIM investments; and maintain its VCT status.

The detailed investment policy adopted to achieve the investment objectives is set out in the Report of the Directors on pages 16 to 17. DIRECTORS

Peter Harkness (59) (Chairman) is a serial entrepreneur who has significant experience working closely with institutional investors. He is chairman of TMN Group plc, one of the UK’s leading online marketing groups which is listed on the AIM market. He is also chairman of specialist publishing group My Hobby Store and of Optima Data Intelligence Services Limited (an investee company). He has been involved in a number of successful deals within the media sector, particularly in association with 3i plc, and holds directorships of several private publishing and information companies. He has been a director of Chrysalis VCT plc since April 2005.

Julie Baddeley (57) is a non-executive director of Greggs plc and Camelot Group plc. She is also a director of the Department of Health and an associate fellow of Said Business School, Oxford. Previously she was a member of the Audit Commission and a director of Woolwich plc (now Woolwich Limited) where she was responsible for e-commerce and information technology. Earlier in her career she was partner in charge of a substantial part of Accenture’s change management practice in Europe and was managing director of Sema Group plc’s consulting group in the UK. She is also a director on the board of ART VPS Limited, representing the VCT’s interests in the company. She has been a director of Chrysalis VCT plc since October 2000.

Martin Knight (59) is the Chief Operating Officer of Imperial College and also chairman of Imperial Innovations Group plc, the AIM-quoted technology transfer company that is majority owned by Imperial College and has more than 75 investee companies in its portfolio. He began his career with Morgan Grenfell & Co Ltd., becoming a Director in 1982. He has advised and acted for a number of major public and private companies on project and corporate finance transactions and on financial and investment strategies. He was appointed as a Governor of Imperial College in 1992, becoming Chairman of the Finance and Investments Committee in 2001. He became Chief Finance Officer in 2004. He has been a director of Chrysalis VCT plc since October 2008.

2

FINANCIAL HIGHLIGHTS

2008 pence

2007 pence

Ordinary Shares Net asset value per share 88.30 91.50

Cumulative distributions paid since launch 18.95 13.45

Total return 107.25 104.95 (Net asset value per share plus cumulative dividends)

First interim dividend per Ordinary Share 2.00 - Second interim dividend per Ordinary Share 4.00 - Final proposed dividend per Ordinary Share Nil 3.50

6.00 3.50

‘D’ Ordinary Shares “‘D’ Shares” Net asset value per share 81.80 106.10

Cumulative distributions paid since launch 3.25 1.25

Total return 85.05 107.35 (Net asset value per share plus cumulative dividends)

Final proposed dividend per ‘D’ Share Nil 2.00

‘E’ Ordinary Shares “‘E’ Shares” Net asset value per share 67.50 95.30

Cumulative distributions paid since launch 3.25 1.25

Total return 70.75 96.55 (Net asset value per share plus cumulative dividends)

Final proposed dividend per ‘E’ Share Nil 2.00

3

CHAIRMAN’S STATEMENT I am pleased to present my first Annual Report since taking over as Chairman of Chrysalis VCT plc. In view of the very difficult financial circumstances in which the UK finds itself, it is a particular pleasure to be able to report on a positive and successful period for Chrysalis VCT in the year 31 October 2008. Directorate change Robert Drummond, the previous Chairman, stepped down as a Director of the Company on 30 November 2008. Julie Baddeley and I would like to thank Robert for his commitment to the Company since his appointment in 2000, and for the work undertaken during the transformation of the Company from Downing Classic VCT 3 plc to Chrysalis VCT plc. Martin Knight was appointed to the Board on 20 October 2008. Martin has a strong track record in the investment sector and brings extensive relevant experience to the Board. Net Asset Value As Shareholders are aware, Chrysalis has three classes of shares, namely the Ordinary Shares, which account for 97% of the value of the VCT, and two very much smaller share pools, the ‘D’ and ‘E’ Shares. Given the state of the economy the Ordinary Share portfolio, which has investments dating back to 1999 has had a reasonable year, largely due to some successful exits from long-standing investments. At 31 October 2008, the Net Asset Value (“NAV”) per Ordinary Share was 88.3p, an increase of 2.3p or 2.5% over the year (after adjusting for the dividends totalling 5.5p per share paid during the year). The ‘D’ and ‘E’ Share portfolios are much less mature having only been invested since June 2006 and consequently, have suffered from the severe change in the economy. At 31 October 2008, the NAV per ‘D’ Share had fallen to 81.8p, a decrease of 22.3p or 26.6% over the year (after adjusting for the dividend of 2.0p per share paid during the year). At 31 October 2008, the NAV per ‘E’ Share had fallen to 67.5p, a decrease of 25.8p or 37.1% over the year (after adjusting for the dividend of 2.0p per share paid during the year). The Total Return (NAV plus cumulative dividends paid since launch) to Ordinary Shareholders since the Company’s launch (when it was known as Downing Classic VCT 3 plc) now stands at 107.3p per Ordinary Share compared to an original investment (net of income tax relief) of 80p per Ordinary Share.

The Total Return at the year end per ‘D’ Share stood at 85.0p and per ‘E’ Share stood at 70.7p, which compares to the original cost of investment for each of the ‘D’ and ‘E’ Shares (net of income tax relief) of 60p per share. Venture capital investments The Investment Management Team, led by Chris Kay, has had another successful year, despite increasingly difficult conditions, achieving three realisations and realising profits of £3.5 million compared to the original purchase cost. I would like to take this opportunity in congratulating them on this achievement. The Company also invested £1.7 million during the year, across the three share pools; £1.2 million into three new companies and £532,000 in follow-on investments. Unfortunately, the Company suffered from a number of failures during the year. Hat Pin plc, Ultralon Holdings Limited, Spice Inns Limited and Zest Juice Limited were put into administration or liquidation, resulting in an unrealised loss of £3.0 million across the share pools. Although the larger losses were borne by the Ordinary Share pool, due to the small size of the ‘D’ and ‘E’ Share pools, the impact thereon was far greater as shown in the table below: Unrealised Realised Net NAV

impact £’000 £’000 £’000 Pence Ordinary Share

(788)

719

(69)

(0.2)

‘D’ Share (131) - (131) (24.4) ‘E’ Share (96) (70) (166) (27.6) (1,015) 649 (366) As expected in the current conditions, the AIM portfolio has been affected by weak stock prices, falling in value by £1.2 million (excluding Hat Pin discussed above) during the year from £2.2 million to £780,000. It is somewhat comforting that, at present, the majority of the Company’s remaining unquoted portfolio is performing satisfactorily and, in two cases, Precision Dental Laboratories Limited and Wessex Advance Switching Products Limited have justified uplifts in their valuations by £997,000 and £1.4 million respectively. Further commentary on the portfolio, together with a schedule of the additions, disposals and details of the top performing investments can be found within the Investment Manager’s Report and Review of Investments on pages 7 to 15.

4

CHAIRMAN’S STATEMENT (continued) Listed fixed income securities The Ordinary Share pool continues to hold a portfolio of fixed income securities and a further £6.4 million (£3.2 million of which was re-invested from maturing securities) was invested during the year. The portfolio comprises almost entirely of gilt-edged securities which have provided a higher level of comfort than many alternatives and some protection against falling returns, particularly during the banking crisis which occurred in the autumn. At 31 October 2008, this portfolio was valued at £8.2 million. During the year this portfolio produced an unrealised gain of £121,000 and a negligible realised gain. Results and dividend Due to £400,000 of received dividends principally from Precision Dental Laboratories Limited and Wessex Advanced Switching Products Limited, the Revenue account performed particularly well this year enabling the total return to be in profit for the year. The total return on ordinary activities for the year was as follows: Revenue Capital Total £’000 £’000 £’000 Ordinary Share 908 (366) 542 ‘D’ Share 16 (135) (119)‘E’ Share 15 (170) (155) 939 (671) 268 During the year the Company paid an interim capital dividend of 2.0p per Ordinary Share on 25 July 2008. A further 4.0p interim dividend, comprising a 2.5p revenue and 1.5p capital dividend, was paid to Ordinary Shareholders on 15 December 2008. No interim dividends were paid in respect of the ‘D’ or ‘E’ Shares. Following the payment of record dividends, totalling 6.0p to Ordinary Shareholders in respect of the year under review, the Board has taken the decision not to pay a final dividend for the year to 31 October 2008. No final dividends will be paid in respect of the ‘D’ or ‘E’ Shares for the year to 31 October 2008, however interim dividends for the year ended 31 October 2009 will be paid as described below. Planned conversion of ‘D’ Shares and ‘E’ Shares The ‘D’ Share and ‘E’ Share pools are very small in comparison to the Ordinary Share pool and create additional complications in the investment management activities, particularly in the allocation of new investments between the various pools. When the ‘D’ and ‘E’ Shares were launched, the Company targeted a return to ‘D’ Shareholders of 20p per share, and ‘E’ Shareholders 30p per Share

by 5 April 2010. To date ‘D’ and ‘E’ Shareholders have each received dividends totalling 3.25p per share. The Board is pleased to announce that the Company is in a position to meet these targets earlier than originally envisaged. The Company will pay dividends of 16.75p per ‘D’ Share and 26.75p per ‘E’ Share on 24 April 2009 to Shareholders on the register at 13 March 2009. Following the payment of these dividends, the Board is proposing to convert both ‘D’ Shares and ‘E’ Shares into Ordinary Shares on 30 April 2009, such that the Company will have just one share class and one pool of investments. It is proposed that the conversion will be undertaken using relative audited net asset values per share of the share classes as at 31 October 2008, adjusted for the dividend payments noted above. Under the proposals, ‘D’ and ‘E’ Shares will receive Ordinary Shares as follows: For every 1,000 ‘D’ Shares, 736 Ordinary Shares For every 1,000 ‘E’ Shares, 461 Ordinary Shares In order to implement the conversions, the Company’s Articles of Association need to be amended. A resolution will be put to Shareholders at the forthcoming AGM. In addition consent will be required from each share class, so separate Share Class meetings for each of the Ordinary Shares, ‘D’ Shares and ‘E’ Shares will also be held. Full details of the proposed amendment to the Articles of Association and the resolutions to be put to the various meetings are set out on page 21. Share buybacks During the year the Company purchased 1,540,670 Ordinary Shares for cancellation at an average price of 75.8p per share. 3,090 ‘D’ Shares were purchased for cancellation during the year at a price of 81.5p per share. No ‘E’ Shares were purchased during the year. The Board has reviewed the Company’s share buyback policy in light of current market conditions and general trends within the VCT market. The Board realises that there may be forced sellers of the Company’s shares and therefore feels it is important to continue to have a policy of buying in its own shares. However, to protect the interests of all Shareholders, the Board believes that the discount at which the Company purchases shares must be increased from the levels at which these have been undertaken. In future, the Board intends to undertake any buybacks of Ordinary Shares at a 25% discount to the latest published NAV.

5

CHAIRMAN’S STATEMENT (continued) Share buybacks (continued) In light of the ‘D’ Share and ‘E’ Share dividends that the Company will pay in April and the proposed conversion of the ‘D’ Shares and ‘E’ Shares into Ordinary Shares, the Board does not expect to undertake any buybacks on ‘D’ Shares or ‘E’ Shares. The Board will regularly review the Company’s share buyback policy and make changes should circumstances change. Resolution 6 will be put to Shareholders at the forthcoming AGM to give the Company authority to repurchase its own shares in the market. Articles of Association At the forthcoming AGM, the Board will seek Shareholder approval to update the Company’s Articles of Association. Resolution 7, which is a special resolution, proposes the adoption of new Articles of Association which incorporate a number of changes which are required as a result of the implementation of the Companies Act 2006 as well as the conversion of the ‘D’ and ‘E’ Shares described on page 5. An explanation of the proposed changes is provided on pages 21 and 22. Articles of Association re Directors remuneration Under the Company’s current Articles of Association, the aggregate fees payable to the Directors for their normal services shall not exceed a sum of £75,000 per annum. This sum has been fixed at this level for some time and is currently fully utilised by the current Board costs. The Board believes an increase in the spending cap is overdue. At current levels we cannot provide for natural cost inflation, nor are we able to consider any expansion of the Board to provide additional non-executive skills which might be necessary to enhance its decision making processes. The current cap is clearly inappropriate and the Board is proposing to amend the Articles of Association such that aggregate directors’ remuneration will not exceed £150,000 per annum. Shareholders should note that there are no plans at the current time to fully utilise the proposed revised level. This proposed amendment to the Articles of Association is proposed for adoption by Resolution 8 at the forthcoming AGM.

Annual General Meeting/ Separate Class Meetings The next AGM of the Company will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU at 3:00pm on 25 March 2009. Three items of Special Business are being proposed at the meeting to renew the authority to allow the Company to make market purchases of the Company’s shares, to update the Articles of Association, and to uplift the upper limit on the total aggregate ordinary remuneration for the Directors to £150,000 per annum from £75,000. As mentioned above, separate class meetings are also required where consent from each share class will be sought for the proposed alterations to the Articles of Association. These meetings will be held immediately following the AGM as follows:

Ordinary Shares 3:15pm ‘D’ Shares 3:20pm ‘E’ Shares 3:25pm

Outlook The current business climate is unprecedented in recent times, both in the severity of the swing into economic difficulties caused by the credit crisis and in the lack of clarity as to what is likely to happen in the coming year or two. All we can say with any certainty is the forthcoming year will be challenging for our portfolio companies. The Company’s more mature investments, which comprise a fair proportion of the portfolio, should provide some stability but experience shows that immature companies will have less resilience. All investee companies will be closely monitored and supported as appropriate. In addition to a well managed portfolio, the key advantage this Company possesses is £11.3 million of liquid funds available (following the payment of the dividend in December 2008), which means we are well placed to provide support to investee companies if required, whilst still conserving sufficient resources in order to take advantage of opportunities that will hopefully arise when economic conditions start to improve.

Peter Harkness Chairman

5 February 2009

6

INVESTMENT MANAGEMENT REPORT There is no doubt that the economy is going through challenging times and the VCT is not immune with unfortunately four of our investee companies, Zest Juice Limited, Ultralon Holdings Limited, Hat Pin plc and Spice Inns Limited going into administration during the year. However that has been more than balanced by three significant exits (ILG Digital Limited (“ILG”), Babel Media Limited (“Babel”) and Advance Media Information Limited (“AMI”)) all at prices above their previous valuations and generating £7.5 million of proceeds. These realisations, coupled with a deliberate slowing down in the rate of new investment as the warning signs of recession became ever more apparent during the year, mean that following the payment of the dividend in December 2008, the VCT has £11.3 million of cash at its disposal. This is despite returning £4.2 million of cash to Shareholders in the form of dividends and share buybacks in the last 10 months of 2008. We believe that this cash is a major strength for the VCT for two distinct reasons. Firstly we have calculated that the VCT could currently refinance ALL the bank borrowings of all the companies that make up 90% of the value of our invested portfolio. That is not to say that we would wish to do so but it does give the VCT considerable options and means that our portfolio is not under threat from the whims of the banks. Secondly, assuming the economy does not move into a prolonged recession, at some stage there will be great value investments to be made by those who have ready cash to invest. Our research based on the last two recessions has indicated that in the past the best time to invest in the type of companies that VCTs are allowed to invest in, was towards the end of the recession i.e. once there were distinct signs of recovery in place. Therefore we will not be rushing into many new investments but will be monitoring events closely and hopefully getting our timing right. Incidentally it is worth pointing out that as a long established VCT, Chrysalis is allowed to invest in a wider range of companies than those permitted for VCTs that have raised their money in the last two years and therefore for certain investments there should be less competition.

With regard to the health of our existing portfolio, clearly as predominantly UK based businesses any severe downturn will affect their trading performance and hence valuations. However our top nine investee companies which account for over 80% of the invested portfolio by value (another example of the famous 80:20 rule) are starting from reasonable positions, in that they all reported profits in their last set of accounts and all, except British International Holdings Limited, are not significantly geared. The one area of the portfolio where valuations have suffered badly is our (fortunately small) AIM portfolio. Our seven current AIM investments were worth £2.17 million at the start of the financial year but had declined to £780,000 (down 64%) by the end of the year despite virtually all reporting good sets of results. We believe that these companies are currently undervalued and so would not wish to sell even if there was suitable liquidity. However, on the other hand, the VCT rules work to discourage buying cheap shares on the market, firstly because any such purchases are not qualifying investments and secondly because at current prices any purchase would have an impact on the Inland Revenue qualification % which cannot be allowed to fall below 70%. In summary although the immediate outlook for the UK economy is grim, the actions we have taken over the last three years particularly in realising over £19 million of cash (equivalent to 70% of the current value of the Ordinary Share Pool) and not getting involved in highly leveraged investments should enable the VCT to benefit from the opportunities that the inevitable recovery will produce. A complete summary of realisations made by the Company during the year is presented on page 11. We would just like to provide some further details on the three major exits, namely AMI, ILG and Babel. As we have mentioned previously a common feature of most of our successful exits is that the investee company has received a number of investments from Chrysalis and these three are no exception with the VCT investing four times in both Babel and AMI, and twice in ILG. Clearly the decision as to whether to reinvest or not (since it is very easy to lose money by continually supporting companies that eventually fail) can only be properly made by maintaining close relationships with the investee companies. Consequently a large proportion of the Investment Manager’s time is spent on the existing portfolio.

7

INVESTMENT MANAGEMENT REPORT (continued) All three exits were to trade buyers and at prices that look even better now than they did at the time. It does seem that in any business cycle there is only a short window when small private companies are “in fashion” and therefore takeover targets, consequently it is important to grab the opportunities to exit when they occur. Unfortunately this window often seems to occur late in any business cycle (and often marks the peak) therefore we are not anticipating any significant exits this year. Chrysalis VCT Management Limited

5 February 2009

8

REVIEW OF INVESTMENTS Portfolio of investments The following investments, all of which are incorporated in England and Wales, were held at 31 October 2008:

Cost £’000

Valuation £’000

Valuation movement

in year £’000

% of

portfolio by value

ORDINARY SHARE POOL Ten largest venture capital investments (by value) Precision Dental Laboratories Group Limited 2,110 3,174 997 11.5% Wessex Advanced Switching Products Limited 704 2,867 1,436 10.4% Centre Design Limited 1,350 1,482 277 5.4% London Italian Restaurants Limited 1,000 1,000 - 3.6% Mentorion Limited 700 987 167 3.6% Triaster Limited 758 889 (32) 3.2% British International Holdings Limited 700 797 97 2.9% Ensign Communications Limited 500 704 19 2.6% Mentorion 2 Limited 700 700 - 2.6% Optima Data Intelligence Limited 450 450 - 1.6% 8,972 13,050 2,961 47.4% Other venture capital investments CPI Acquisition UK Limited 300 300 - 1.1% Glisten plc * 149 294 (446) 1.1% RFTRAQ Limited 325 270 (410) 1.0% The Capital Pub Company plc * 505 237 (434) 0.9% Planet Sport (Holdings) Limited 250 225 - 0.8% Gcrypt Limited 170 193 23 0.7% Lifes Kitchen Ltd. 165 165 - 0.6% BreakingViews Limited - 141 - 0.5% Rhino Sport and Leisure Limited 116 122 6 0.5% Cashfac Limited - 83 83 0.3% Global3Digital Limited 67 67 - 0.2% The Mission Marketing Group plc * 150 65 (110) 0.2% The Kellan Group plc * 320 65 (81) 0.2% YouGov plc * 20 59 (66) 0.2% Best of the Best plc * 98 39 (50) 0.1% Heath and Green Limited 30 30 - 0.1% ILX Group plc * 100 21 (56) 0.1% Art VPS Limited 358 - - - Forward Media Limited 440 - (158) - Hat Pin plc 245 - (283) - IX Group plc 250 - - - Kids SafteyNet Limited 637 - - - Patterning Technology Limited 286 - - - Shopcreator Limited 255 - - - Spice Inns Limited 850 - (789) - Ultralon Holdings Limited 978 - (978) - 7,064 2,376 (3,749) 8.6% Listed fixed income securities Treasury 4 ¼% 2011 Stock 1,883 1,938 56 7.0% UK THM Treasury 2009 1,546 1,561 15 5.7% Treasury 5 ½% 2012 Stock 1,477 1,507 30 5.5% Treasury 4% 2009 Stock 1,215 1,232 23 4.5% Treasury 8% 2013 Stock 1,163 1,154 (9) 4.2% Nucleus cash trust 763 768 6 2.8% 8,047 8,160 121 29.7% Total 24,083 23,586 (667) 85.7% Cash at bank and in hand 3,941 14.3% Total investments 27,527 100.0%

9

REVIEW OF INVESTMENTS (continued)

Cost £’000

Valuation £’000

Valuation movement

in year £’000

% of

portfolio by value

‘D’ SHARE POOL Mentorion Limited 50 71 12 16.4% British International Holdings Limited 50 57 7 13.2% Rhino Sport and Leisure Limited 50 52 2 12.1% CPI Acquisition UK Limited 50 50 - 11.6% Mentorion 2 Limited 50 50 - 11.6% Hat Pin plc 80 - (106) - Spice Inns Limited 50 - (46) - 380 280 (131) 64.9% Cash at bank and in hand 151 35.1% Total Investments 431 100.0% ‘E’ SHARE POOL CPI Acquisition UK Limited 50 50 - 12.3% Optima Data Intelligence Limited 50 50 - 12.3% Spice Inns Limited 50 - (46) - Ultralon Holdings Limited 50 - (50) - 200 100 (96) 24.6% Cash at bank and in hand 306 75.4% Total Investments 406 100.0% All investments are unquoted unless otherwise stated. * Quoted on AIM Delisted from AIM In Administration

10

REVIEW OF INVESTMENTS (continued) Investment movements for the year ended 31 October 2008 ADDITIONS Ordinary

Shares ‘D’

Shares ‘E’

Shares Total £'000 £'000 £'000 £'000 New investments Heath and Green Limited 30 - - 30 Lifes Kitchen Limited 165 - - 165 London Italian Restaurants Limited 1,000 - - 1,000 1,195 - - 1,195 Follow on investments Babel Media Limited 100 - - 100 GCrypt Limited 64 - - 64 Hat Pin plc 125 - - 125 Precision Dental Laboratories Limited 10 - - 10 Ultralon Holdings Limited 28 - - 28 Wessex Advanced Switching Products Limited 5 - - 5 Zest Juice Limited 180 - 20 200 512 - 20 532 Listed fixed income securities Nucleus cash trust 365 - - 365 Treasury 4 ¼% 2011 Stock 1,883 - - 1,883 Treasury 5 ½% 2012 Stock 1,476 - - 1,476 Treasury 8% 2013 Stock 1,163 - - 1,163 UK THM Treasury 2009 1,546 - - 1,546 6,433 - - 6,433 8,140 - 20 8,160

DISPOSALS Cost MV at

31/10/07* Proceeds Profit/

(loss) vs cost

Realised gain/ (loss)

£’000 £’000 £’000 £’000 £’000 Ordinary Share pool Full disposals Advance Media Information Limited 615 934 1,175 560 241 Babel Media Limited 1,705 2,936 3,190 1,485 254 ILG Digital Limited 806 2,101 2,666 1,860 565 Tellings Golden Miller plc 75 30 48 (27) 18 Partial disposals BreakingViews Limited - 45 56 56 11 You Gov plc 24 150 106 82 (44) Liquidation Zest Juice Limited 630 630 - (630) (630) Retention monies from prior disposals - - 304 304 304 Listed fixed income securities Nucleus Cash Trust 2 2 2 - - Treasury 4¼% 2007 Stock 2,084 1,927 1,925 (159) (2) Treasury 5% 2008 Stock 1,218 1,200 1,203 (15) 3 7,159 9,955 10,675 3,516 720 ‘E’ Share pool Zest Juice Limited 70 70 - (70) (70)* Adjusted for purchases in the year

11

REVIEW OF INVESTMENTS (continued) Further details of the ten largest investments (by value) follow: Precision Dental Laboratories Group Limited

www.precisiondentalstudio.co.uk

Cost: £2,110,000 Latest accounts: 30/09/2007 Investment comprises: Turnover: £6.1 million Equity Shares: £1,110,000 Loss before tax: (£163,000) 5% Loan Stock: £1,000,000 Net assets: £756,000 Valuation method: Earnings multiple Valuation at 31/10/08: £3,174,000 Market capitalisation: N/A Valuation at 31/10/07: £2,167,000 Proportion of equity held: 36.5% Precision Dental is one of the UK’s leading dental laboratory groups, manufacturing a full range of dental products such as crowns, bridges and replacement teeth. During the year ended 30 September 2007, the company disposed of two loss making laboratories. The audited accounts include a loss on disposal of £537,000. The remaining laboratories made an operating profit of £374,000 and have produced a higher level of profit in the year ended 30 September 2008.

Wessex Advanced Switching Products Limited

www.waspswitches.co.uk

Cost: £704,000 Latest accounts: 31/12/2007 Investment comprises: Turnover: £8.8 million Equity Shares: £704,000 Profit before tax: £1.4 million Net assets: £2.8 million Valuation method: Earnings multiple Valuation at 31/10/08: £2,867,000 Market capitalisation: N/A Valuation at 31/10/07: £1,426,000 Proportion of equity held: 28.1% Wessex Advanced Switching Products manufactures rotary switches for military communications systems, membrane switches and touch screens for electronic control panels. The company has continued its record of growth in turnover and profitability. With no debt and cash generation, the company has adopted a dividend policy. During the year Chrysalis received dividends of £226,000.

Centre Design Limited

www.centredesign.co.uk

Cost: £1,350,000 Latest accounts: 31/01/2007 Investment comprises: Turnover: £4.7 million Equity Shares: £145,000 Profit before tax: £80,000 10% Loan Stock: £1,205,000 Net assets: £618,000 Valuation method: Earnings multiple Valuation at 31/10/08: £1,482,000 Market capitalisation: N/A Valuation at 31/10/07: £1,205,000 Proportion of equity held: 45.8% Centre Design is a market leader in the provision of Christmas displays to shopping centres in the UK. Clients include Bluewater, The Mall Corporation and the recently opened Cabot Circus in Bristol.

London Italian Restaurants Limited

Cost: £1,000,000 Latest accounts: None yet published Investment comprises: Turnover: N/A Equity Shares: £125,000 Profit before tax: N/A 4.5% Loan Stock: £875,000 Net assets: N/A Valuation method: Recent investment Valuation at 31/10/08: £1,000,000 Market capitalisation: N/A Valuation at 31/10/07: Not held Proportion of equity held: 25% The investment in London Italian Restaurants Limited only completed in October 2008. Chrysalis VCT and Framlington AIM 2 VCT have provided £2 million to fund acquisitions of Italian restaurants in London. In December 2008 two restaurants were acquired in Bromley and Balham and the management team are looking for additional targets.

12

REVIEW OF INVESTMENTS (continued) Mentorion Limited

www.localerestaurants.com

Cost: £750,000 Latest accounts: 31/05/2008 Investment comprises: Turnover: £3.0 million Equity Shares: £100,000 Loss before tax: (£70,000) 6.5% Loan Stock: £650,000 Net assets: £280,000 Valuation method: Earnings multiple Valuation at 31/10/08: £987,000 Market capitalisation: N/A Valuation at 31/10/07: £879,000 Proportion of equity held: 28.6% Mentorion operates three Italian restaurants, branded Locale, at County Hall, Fulham and Blackheath. Sales in the year to 31 May 2008 grew by 20% and have continued to grow this financial year.

Triaster Limited

www.triaster.co.uk

Cost: £758,000 Latest accounts: 31/03/2008 Investment comprises: Turnover: £1.8 million Equity Shares: £71,000 Profit before tax: £177,000 10% Loan Stock: £687,000 Net liabilities: (£491,000) Valuation method: Earnings multiple Valuation at 31/10/08: £889,000 Market capitalisation: N/A Valuation at 31/10/07: £921,000 Proportion of equity held: 31.7% Triaster is a developer of easy to use process-mapping software, and has developed an add-on product to Microsoft Visio - called Process Navigator. A joint marketing agreement has been signed with Microsoft, and the product is being promoted by the BSI. After several years of losses, Triaster has now recorded three profitable years in a row.

British International Holdings Limited

www.islesofscillyhelicopter.com

Cost: £750,000 Latest accounts: 31/12/2007 Investment comprises: Turnover: £23 million Equity Shares: £170,000 Profit before tax: £1.4 million 9% Loan Stock: £580,000 Net assets: £3.2 million Valuation method: Earnings multiple Valuation at 31/10/08: £854,000 Market capitalisation: N/A Valuation at 31/10/07: £750,000 Proportion of equity held: 7.5% British International provides helicopter services to a range of commercial and military clients. It also operates the UK’s only scheduled public helicopter service between Penzance and the Isles of Scilly. The company has a long standing relationship with the Ministry of Defence providing helicopter support to the Falkland Island Garrison and to the Royal Navy in Plymouth and Scotland.

Ensign Communications Limited

www.ensign-net.co.uk

Cost: £500,000 Latest accounts: 31/12/2007 Investment comprises: Turnover: £4.0 million Equity Shares: £83,000 Profit before tax: £91,000 10% Loan Stock: £417,000 Net assets: £708,000 Valuation method: Earnings multiple Valuation at 31/10/08: £704,000 Market capitalisation: N/A Valuation at 31/10/07: £685,000 Proportion of equity held: 25% Ensign is a provider and integrator of wireless and conventional network solutions to a wide range of markets including retail, warehousing, manufacturing, government and education. It also provides support services to a number of clients.

13

REVIEW OF INVESTMENTS (continued) Mentorion 2 Limited

www.localerestaurants.com

Cost: £750,000 Latest accounts: 31/05/2008 Investment comprises: Turnover: £76,000 Equity Shares: £75,000 Loss before tax: (£59,000) 6.5% Loan Stock: £675,000 Net assets: £7,000 Valuation method: Earnings multiple Valuation at 31/10/08: £750,000 Market capitalisation: N/A Valuation at 31/10/07: £750,000 Proportion of equity held: 25% Mentorion 2 operates a Locale Italian restaurant in East Dulwich. It only commenced trading in May 2008 but has quickly become established and sales are on budget for this year.

Optima Data Intelligence Limited

www.optimabiz.co.uk

Cost: £500,000 Latest accounts: 30/06/2007 Investment comprises: Turnover: £638,000 Equity Shares: £180,000 Loss before tax: (£16,000) 10% Loan Stock: £320,000 Net assets: £945,000 Valuation method: Earnings multiple Valuation at 31/10/08: £500,000 Market capitalisation: N/A Valuation at 31/10/07: £500,000 Proportion of equity held: 11% Optima provides data management services for the publishing industry. Chrysalis VCT invested in a ProVen VCT led syndicate in May 2005. Audited accounts for June 2008 are not yet available but management accounts indicate sales have grown to £4.1 million with a small operating profit.

Note: The proportion of equity held by each investment also represents the level of voting rights held by the Company in respect of the investment.

14

Equity shares

Loan stock

Fixed income securities

Cash at bank and in hand

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Level of investment (£)

Software Media agencies Industrialmachinery

Restaurants andBars

Businesssupportservices

Health Careproviders

Travel &Leisure

Other

Sector

Spread of Investments by Sector

Sector Cost Sector Valuation

REVIEW OF INVESTMENTS (continued) Analysis of investments by commercial sector The split of the venture capital investment portfolio by commercial sector (by cost and by value at 31 October 2008) is as follows: Analysis of investments by nature of instrument The following chart summarises the Company’s investment portfolio by the nature of instrument held (by value at 31 October 2008) as follows:

Percentage of Funds in VCT Qualifying investments

Target

Actual at 31/10/08

Actual at 31/10/08

Accounts

basis

HMRC valuation rules

basis Ordinary pool 70.0% 55.6% 75.0% ‘D’ Share pool 70.0% 64.9% 72.5% ‘E’ Share pool 70.0% 24.6% 46.7% Company 70.0% 55.6% 74.6%

15

REPORT OF THE DIRECTORS The Directors present the Annual Report and Accounts of the Company for the year ended 31 October 2008. Principal activity and status The Directors initially obtained approval for the Company to act as a venture capital trust from HM Revenue & Customs and have continued to meet the standards set out by HM Revenue & Customs. The Company revoked its status as an investment company on 3 September 2004 upon the payment of a capital distribution, however, the Directors consider that the Company has conducted its affairs in a manner to enable it to continue to comply with Part 6 of the Income Tax Act 2007. Business review The combination of falling stock markets and the failure of four investments during the year have had a negative impact on the portfolio totalling £4.2 million. This fall in value has been offset by three successful exits, realising £1.1 million, the improved performance of a number of investee companies and a “Revenue” profit during the year of £939,000. The Company’s business and developments during the year are reviewed further in the Chairman’s Statement, Investment Management Report and the Review of Investments. Share capital In accordance with the Company’s policy as discussed in the Chairman’s Statement, during the year the Company purchased 1,540,670 Ordinary Shares for cancellation for an aggregate consideration of £1.2 million being an average price of 75.8p per Ordinary Share of 1p each (approximately equal to a 15% discount to the most recently published NAV at the time of purchase) and representing 4.7% of the issued Ordinary Share capital. Additionally, 3,090 ‘D’ Shares were purchased for cancellation for an aggregate consideration of £3,000 at a price of 81.5p per ‘D’ Share of 1p each (approximately equal to a 10% discount to the most recently published NAV at the time of purchase) and representing 0.6% of the issued ‘D’ Share capital. All these shares were subsequently cancelled. As these shares were acquired at a discount to the Company’s NAV per share, these transactions enhanced the NAV per share of remaining Shareholders. No ‘E’ Shares were purchased during the year. At the year end the Company had in issue 31,128,450 Ordinary Shares of 1p each, 532,982 ‘D’ Shares of 1p each and 601,376 ‘E’ Shares of 1p each. The Ordinary Shares, the ‘D’ Shares and the

‘E’ Shares rank pari passu in all respects as to rights to attend and vote at any general meeting of the Company. There are no other share classes in issue. Results and distributions Return on ordinary activities after tax for the year ended 31 October 2008 split as:

£’000

Per

share Ordinary Shares 542 1.7p ‘D’ Shares (119) (22.5p) ‘E’ Shares (155) (25.8p) 268 During the year the Company paid an interim capital dividend of 2.0p per Ordinary Share on 25 July 2008. A further 4.0p interim dividend, comprising a 2.5p revenue and 1.5p capital dividend, was paid on 15 December 2008 to Ordinary Shareholders. No final dividends will be paid to Ordinary, ‘D’ or ‘E’ Shareholders for the year under review. Performance incentive fees Ordinary share pool The Board has an incentive scheme under which additional fees are paid to Chrysalis VCT Management Limited based on achieving exits from investments. The exit fees are calculated as 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 or 2½% of the gain in respect of investments made prior to 30 April 2004. ‘D’ and ‘E’ share pools Should the resolutions to convert the ‘D’ and ‘E’ Shares into Ordinary Shares be turned down by Shareholders at the forthcoming AGM, arrangements will be put in place for performance fees to be payable from each of the ‘D’ and ‘E’ Share pools. These will be payable when dividend payments and/or distributions not equal to less than compound rates of 7% and 5% per annum on the ‘D’ and ‘E’ Shares respectively have been paid and the net assets per share are £1.00 or more (adjusted for capital distributions). These fees will be 15% of the grossed up amount of any dividend and will be first calculated in respect of the year ended 31 October 2009. Investment policy The Company’s investment policy covers several areas as follows:

1. Venture capital investments 2. Fixed income securities 3. Venture capital trust regulations

16

REPORT OF THE DIRECTORS (continued) Investment policy (continued) Venture Capital Investments The Company holds a portfolio of Venture Capital Investments, predominantly comprising unquoted companies, but also including a proportion of investments in companies trading on AIM. The Company intends overall, to hold approximately 70% of its fund in Venture Capital Investments and therefore has a maximum exposure to such investments of 100%. In addition the individual share pools have specific policies as follows: Ordinary Shares The Ordinary Share pool will hold over 70% of the Company’s investments in a portfolio of Qualifying Companies each of which, in the opinion of the Directors, have, or are expected to have: a strong management team and board; good opportunities for growth in value; and realistic prospects of achieving a stock market

flotation or being sold within three to five years.

‘D’ Shares The ‘D’ Share pool invests in a general portfolio of qualifying businesses to fund expansion, acquisitions, management buy-outs or turnaround opportunities. The businesses invested in will need to have the potential for attractive growth and a clear exit strategy. The investment emphasis will be on unquoted, established and profitable businesses with proven management teams, although a small proportion of investments in established companies quoted on AIM will also be considered. ‘E’ Shares The ‘E’ Share pool invests alongside the Ordinary and ‘D’ Share pools, with emphasis being given to low risk investment opportunities and, should suitable opportunities arise, investments in the art and antiques sector. Fixed Income Securities The Company holds a portfolio consisting of ‘A’ rated bonds issued by the UK Government, major companies and institutions with a minimum credit rating of A minus (Standard & Poors rated) or A3 (Moodys rated) at the time of investment. Maximum exposure to such investments is 100%. Venture Capital Trust Regulations In continuing to maintain its VCT status, the Company complies with a number of regulations as set out in Part 6 of the Income Tax Act 2007. How the main regulations apply to the Company is

summarised as follows: 1. The Company holds at least 70% of its

investments in qualifying companies (as defined by Part 6 of the Income Tax Act 2007);

2. At least 30% of the Company’s qualifying

investments (by value) are held in “eligible shares” (“eligible shares” generally being ordinary share capital);

3. At least 10% of each investment in a qualifying

company is held in “eligible shares” (by cost at time of investment);

4. No investment constitutes more than 15% of

the Company’s portfolio (by value at time of investment);

5. The Company’s income for each financial year

is derived wholly or mainly from shares and securities;

6. The Company distributes sufficient Revenue

dividends to ensure that not more than 15% of the income from shares and securities in any one year is retained; and

7. A maximum unit size of £1 million in each VCT

qualifying investment (per tax year). Borrowings It is not the Company’s intention to have any borrowings. The Company does however have the ability to borrow not more than 15% of the aggregate of: The nominal capital of the Company being

issued and paid up; and The amounts standing to credit of the reserves

of the Company; as shown within the latest audited balance sheet of the Company but after: Making such adjustments as appropriate to take

account of share buybacks or other variation of issued share capital.

Excluding amounts set aside for future taxation.

Deducting therefrom (1) amounts equal to any distribution by the Company out of profits earned prior to the date of the latest audited balance sheet, (2) goodwill and other intangible assets and (3) any debit balances on profit and loss account.

At 31 October 2008, the maximum amount of borrowings allowed, without the previous sanction at a General Meeting, stood at £4,064,482. There are no plans to utilise this ability at the current time.

17

REPORT OF THE DIRECTORS (continued) Environmental and social policy As a VCT with all of its executive and administrative activities delegated to third parties, the Company does not have a policy on either environmental or social and community issues. Investment Management fees Chrysalis VCT Management Limited, the Company’s wholly owned subsidiary, provides investment management services to the Company for a fee of 1.65% of net assets per annum. As the Group is self-managed there is no formal contract or notice period in place. The Board is satisfied with the performance of the Company under the current management arrangement and believes that it is in the Shareholders’ best interest to continue as a self-managed VCT. Administration Management fees Downing Management Services Limited (“Downing”) provides administration services to the Company for a fee of 0.5% of gross proceeds raised, subject to a maximum of £60,000 per annum, increasing each year in line with RPI (plus VAT). Under a side agreement, dated 25 January 2006, Downing’s appointment continues until 5 April 2009 and either the Board or Downing are entitled to serve upon the other 12 months notice of termination, such notice to expire no earlier than 5 April 2009. Trail commission The Company has an agreement to pay trail commission annually to Downing Corporate Finance Limited in connection with the Company’s original fund raising of Ordinary Shares. This is calculated at 0.25% of the Net Asset Value per share of the Company at each year end multiplied by 21,388,768, being the number of shares in issue on 28 January 2005, the day that the merger with the Chrysalis VCTs was announced. The Company also has an agreement to pay commission annually to authorised financial intermediaries at the rate of 0.25% per annum on the value of ‘D’ Shares and ‘E’ Shares at the offer price subscribed by investors whose applications were submitted through them and who continue to hold ‘D’ Shares and ‘E’ Shares. Fixed interest investment management Smith & Williamson Investment Management Limited provided investment management services to the Company in respect of fixed income securities for a fee of 0.15% per annum (plus VAT) of the amount invested in fixed income securities

subject to a maximum of £10,000 per annum (plus VAT). Directors The Directors of the Company during the year and their beneficial interests in the issued Ordinary Shares, ‘D’ Shares and ‘E’ Shares all of 1p each, in the Company at each year end and the date of this report were as follows: At 31 October 2008 Ordinary

Shares ‘D’

Shares ‘E’

Shares Peter Harkness Nil 5,150 5,150 Julie Baddeley 16,543 Nil 10,300 Robert Drummond Nil Nil 20,600 Martin Knight Nil Nil Nil At 31 October 2007 Ordinary

Shares ‘D’

Shares ‘E’

Shares Peter Harkness Nil 5,150 5,150 Julie Baddeley 16,543 Nil 10,300 Robert Drummond 80,700 Nil 20,600 Martin Knight Nil Nil Nil Martin Knight was appointed as a Director on 20 October 2008 and Robert Drummond resigned as a Director on 30 November 2008. Peter Harkness retires at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election. In addition Martin Knight will retire at the AGM and, being eligible, will also offer himself for re-election. The Board recommends that Shareholders take into consideration their experience, as shown in their biographies on page 2 in order to support the decision to re-elect the retiring Directors at the AGM. Each of the Directors, with the exception of Martin Knight, entered into a consultancy agreement dated 30 January 2006, which is terminable on 12 months notice by either side. Martin Knight has entered into a consultancy agreement dated 20 October 2008 which is terminable on 12 months notice by either side. Each Director is required to devote such time to the affairs of the Company as the Board reasonably requires and their powers are bound by the Company’s Articles of Association. Appointments of new Directors to the Board are considered by all existing Directors as, and when, required. The Company provides Directors’ and Officers’ liability insurance, giving appropriate cover for legal action brought against its Directors, and has also agreed to indemnify Directors in circumstances where they are not considered to be culpable. The indemnity, which is a qualifying third party indemnity provision for the purpose of the Companies Act 1985, is for the benefit of all of the Company’s current Directors.

18

REPORT OF THE DIRECTORS (continued) VCT monitoring The Company has retained PricewaterhouseCoopers LLP (“PwC”) to advise it on compliance with VCT requirements, including evaluation of investment opportunities, as appropriate and regular review of the portfolio. Compliance as at

31 Oct 2008/ Year ended 31 Oct 2008

1. The Company holds at least 70% of its investments in qualifying companies

74.6%

2. At least 30% of the Company’s qualifying investments (by value) are held in “eligible shares”

53.3%

3. At least 10% of each investment in a qualifying company is held in “eligible shares”

Complied

4. No investment constitutes more than 15% of the Company’s portfolio;

Complied

5. The Company’s income for each financial year is derived wholly or mainly from shares and securities;

80.6%

6. The Company distributes sufficient Revenue dividends to ensure that not more than 15% of the income from shares and securities in any one year is retained;

12.4%

7. A maximum unit size of £1 million in each VCT qualifying investment (per tax year).

Complied

Creditor payment policy The Company’s payment policy is to pay creditors within 30 days of receipt of an invoice except where other terms have been agreed. The Company did not have any trade creditors at the year-end. Key performance indicators The main key performance indicators for the Company are the Venture Capital Trust Regulations as shown in the table above. The Investment and Administration Managers together with PricewaterhouseCoopers LLP review compliance with the regulations monthly, and the Board reviews the position at the quarterly board meetings. At each board meeting, the Directors consider a number of performance measures to assess the Company’s success in meeting its investment strategy (as shown on page 16). The Board believes the Company’s key performance indicators, for comparison purposes against similar VCTs, are Net Asset Value Total Return (NAV plus cumulative dividends paid to date) and dividends per share (see page 3).

In addition, the Board considers the Company’s performance in relation to other VCTs. Although the Company has not joined the Association of Investment Companies (AIC), it is hoped that the AIC’s monthly performance statistics will provide a further measure of comparative performance. Principal risks and uncertainties The principal financial risks faced by the Company, which include interest rate, market price, credit and liquidity risk, are summarised within note 18 to the financial statements. In addition to these risks, the Company, as a fully listed Company on the London Stock Exchange and as a Venture Capital Trust, operates in a complex regulatory environment and therefore faces a number of 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 UK Listing Authority Listing rules and the Companies Act could lead to suspension from the Stock Exchange and damage to the Company’s reputation. The Board reviews and agrees policies for managing each of these risks. They receive quarterly reports from the Investment and Administration Managers (“the Managers”) which monitor the compliance of these risks, and place reliance on the Managers to give updates in the intervening periods. These policies have remained unchanged since the beginning of the financial period. Auditors A resolution to re-appoint PKF (UK) LLP as the Company’s Auditor will be proposed at the forthcoming Annual General Meeting. New Articles of Association At the Annual General Meeting (“AGM”), a Special Resolution (Resolution 7) will be proposed to amend the Articles of Association of the Company, (i) to make them compliant with the recent

changes caused by the implementation of the Companies Act 2006, and

(ii) to incorporate provisions to convert the ‘D’ Share and ‘E’ Shares into Ordinary Shares.

Further details are given on pages 21 and 22. A further Special Resolution (Resolution 8) will also be proposed to amend the article 88 to increase the limit on the aggregate directors’ remuneration to £150,000.

19

REPORT OF THE DIRECTORS (continued) Annual General Meeting The AGM will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:00pm on 25 March 2009. The Notice of the AGM and Form of Proxy are at the end of this document. Substantial interests As at 31 October 2008 and the date of this report, the Company was not aware of any beneficial interest exceeding 3 per cent of the issued Ordinary Share capital. Statement of Directors’ responsibilities The Directors are responsible for preparing the annual 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 Services 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). The financial statements are required to 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 estimates that are

reasonable and prudent; state whether applicable 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 confirm that they have complied with the above requirements in preparing the financial statements. They also confirm that the annual report includes a fair review of the development and performance of the business together with a description of the principal risks and uncertainties faced by the Company. The Directors of the Company as at 31 October 2008 are shown on page 18 of the Annual Report and Accounts. The Directors are responsible for ensuring that the Company keeps proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. 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. Corporate Governance The Company’s compliance with, and departures from, the Financial Reporting Council’s Combined Code on Corporate Governance June 2006 (www.frc.org.uk) is shown on pages 25 and 26. Statement as to disclosure of information to Auditors The Directors in office at the date of the report have confirmed, as far as they are aware, that there is no relevant audit information of which the Auditors are unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the Auditor. By order of the Board

Grant Whitehouse Secretary Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU

5 February 2009

20

CONVERSION OF ‘D’ SHARES AND ‘E’ SHARES At the AGM taking place on 25 March 2009, Resolution 7 will be put to Shareholders to adopt new Articles of Association which include changes such that the ‘D’ Shares and ‘E’ Shares will convert into Ordinary Shares on 30 April 2009 (the “Conversion”). The proposals in respect of the conversions are summarised below. 1. Expected timetable of the cnversions Date from which it is advised that dealings in ‘D’ Shares and ‘E’ Shares should only be for cash settlement and immediate delivery of documents of title

20 April 2009

Record Date for Shareholders’ entitlements under the Conversion

28 April 2009

Conversion Date (Conversion of ‘D’ Shares and ‘E’ Shares into Ordinary Shares)

30 April 2009

Admission to Official List and to trading on the London Stock Exchange of the new Ordinary Shares

7 May 2009

New Ordinary Share certificates dispatched

14 May 2009

2. Conversion process (a) The Directors will implement the merger of

the share classes as set out below. (b) Firstly, the Directors shall convert such

number of ‘D’ Shares and ‘E’ Shares held by each ‘D’ Shareholder and ‘E’ Shareholder into Ordinary Shares.

(c) Forthwith upon the conversion of the ‘D’ Shares and ‘E’ Shares into new Ordinary Shares, the Company will apply to the UKLA for the new Ordinary Shares to be admitted to listing on the Official List and to trading on the London Stock Exchange’s market for listed securities.

(d) The Company will issue new Ordinary Share certificates to relevant Shareholders following Conversion.

3. Conversion calculations (a) The number of new Ordinary Shares into

which each of the ‘D’ Shares and ‘E’ Shares held by each ‘D’ Shareholder and ‘E’ Shareholder respectively will be converted will be based on the adjusted relative audited net asset values at 31 October 2008 (“the Conversion ratio”) and will be as follows:

‘D’ Shares 0.736 ‘E’ Shares 0.461

(b) The aggregate number of new Ordinary

Shares to which each holding of ‘D’ Shares and ‘E’ Shares will convert shall be rounded down to the nearest whole number and the Directors may deal in such manner as they think fit with fractional entitlements to Ordinary Shares arising from the Conversion, including selling any such shares representing such fractional entitlements and retaining the proceeds for the Company.

(c) The Directors may in their absolute discretion

amend the terms of the Conversion subject to these being non-material modifications or additions as may be required to convert the ‘D’ Shares and ‘E’ Shares into new Ordinary Shares on a fair and reasonable basis.

The Conversion will have no impact on the overall net asset value of a holding of either ‘D’ Shareholders, ‘E’ Shareholders or Ordinary Shareholders.

21

ARTICLES OF ASSOCIATION UPDATE FOR COMPANIES ACT 2006 At the AGM, Resolution 7 proposes to amend the Articles of Association of the Company in order to make them compliant with the recent changes caused by the implementation of the Companies Act 2006. The main changes are summarised as follows: AGM The AGM will be held within six months beginning on the day following the Company’s accounting reference date. Currently, the AGM must be held within 15 months of the previous AGM. Electronic communications General authority will be given to the Company to provide Shareholders notices, documents and information in electronic form (such as by email or fax) and by means of publication on a website. The Company may contact Shareholders at a later date to request their consent to receive communications via electronic form or by means of a website, but has no immediate plans to use this facility. General Meetings Extraordinary General Meetings will just be referred to as General Meetings and the notice period for General Meetings will be reduced from 21 to 14 days.

Removal of extraordinary resolutions Any references to extraordinary resolutions have been replaced with special resolutions. Appointment of proxy A proxy will be allowed to be appointed by electronic form. The 48 hour deadline for proxies to be deposited before a General Meeting will no longer include weekends or bank holidays. Shareholders will be allowed to appoint multiple proxies and a proxy will have the right to speak at a General Meeting and vote on a show of hands as well as on a poll. Directors’ conflicts of interest Under provisions being introduced by the Companies Act 2006, a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests. The new Articles of Association, as allowed by the Companies Act 2006, give the Directors authority to approve such situations and to include other provisions to allow conflicts of interest to be dealt with such that a breach of duty is avoided.

22

DIRECTORS’ REMUNERATION REPORT The Board have prepared this report, in accordance with the requirements of Schedule 7A to the Companies Act 1985. A resolution to approve this report will be put to the members at the Annual General Meeting to be held on 25 March 2009. Under the requirements of Schedule 7A, the Company’s Auditors are required to audit certain disclosures contained within the report. These disclosures have been highlighted and the audit opinion thereon is contained within the Auditors’ Report on page 27. Directors’ remuneration policy Directors’ remuneration is calculated in accordance with the Company’s Articles of Association as follows:

(i) The remuneration of the Directors (other than

an executive director appointed under the Articles) shall be such amount as the Directors shall from time to time determine (provided that, unless otherwise approved by the Company in general meeting, the aggregate of the remuneration of such Directors shall not exceed £75,000 per year, to be divided among them in such proportion and manner as the Directors may determine). The Directors shall also be paid by the Company all travelling, hotel and other expenses they may incur in attending meetings of the Directors or general meetings or otherwise in connection with the discharge of their duties.

(ii) Any Director who, by request of the Directors, performs special services or goes or resides abroad for any purposes of the Company may be paid such extra remuneration as the Directors may determine.

(iii) The emoluments and benefits of any executive director for his services as such shall be determined by the Directors and may be of any description, including membership of any pension or life assurance scheme for employees or their dependants or, apart from membership of any such scheme, the payment of a pension or other benefits to him or his dependants on or after retirement or death.

At the forthcoming AGM, Resolution 8 is being proposed to increase the limit on the aggregate directors’ remuneration, discussed under point (i) above to £150,000.

Directors’ remuneration, as shown in the following table, is set at a level designed to reflect the time commitment and the high level of responsibility borne by the non-executive directors and should be broadly comparable with those paid by similar companies. Consultancy agreements Each of the Directors, with the exception of Martin Knight, has entered into a consultancy agreement, dated 30 January 2006, which is terminable on 12 months notice by either side. Martin Knight has entered into a consultancy agreement dated 20 October 2008 which is terminable on 12 months notice by either side. Each Director is required to devote such time to the affairs of the Company as the Board reasonably requires. Directors’ remuneration (audited) Directors’ remuneration for the Company and its subsidiary for the year under review was as follows:

2008 Annual fee

2007 Annual fee

£ £ Peter Harkness 18,750 18,750 Robert Drummond 37,500 37,500 Julie Baddeley 18,750 18,750 Martin Knight - - 75,000 75,000 No other emoluments, pension contributions or life assurance contributions were paid by the Company to, or on behalf of, any Director. The Company does not have any share options in place. 2008/2009 Remuneration The remuneration levels for the forthcoming year are expected to be as shown in the following table.

Per annum Aggregated £ £

Peter Harkness 37,500 35,937 Robert Drummond * 37,500 3,125 Julie Baddeley 18,750 18,750 Martin Knight 18,750 17,187 * Robert Drummond resigned on 30 November 2008 and in addition to his salary received an ex-gratia payment of £37,500.

23

DIRECTORS’ REMUNERATION REPORT (continued) Performance graph The following chart represents the Company’s performance over the reporting periods since incorporation, and compares the NAV Total Return of the Company (dividends reinvested) and Share Price Total Return of the Company to the FTSE AIM All-Share Total Return Index. The FTSE AIM All-Share Index has been chosen as a comparison as it best represents the spread of investments held by the Company and has been rebased to 100 at November 2000 in the case of Ordinary Shares and 30 April 2006 in the case of

‘D’ and ‘E’ Shares the effective respective launch dates of each share class. By order of the Board

Grant Whitehouse Secretary Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU 5 February 2009

Chrysalis VCT - Ordinary Share Performance

-

20

40

60

80

100

120

140

160

Apr-01

Oct-01

Apr-02

Oct-02

Apr-03

Oct-03

Apr-04

Oct-04

Apr-05

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

FTSE AIM All ShareIndex Total Return

Chrysalis VCTOrdinary Share NAVTotal Return

Chrysalis VCTOrdinary Share SharePrice Total Return

Chrysalis VCT - D & E Share Performance

-

20

40

60

80

100

120

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

FTSE AIM All ShareIndex Total Return

Chrysalis VCT D ShareNAV Total Return

Chrysalis VCT D ShareShare Price Total Return

Chrysalis VCT E ShareNAV Total Return

Chrysalis VCT E ShareShare Price Total Return

24

CORPORATE GOVERNANCE The Directors support the relevant principles of the Combined Code being the principles of good governance and the code of best practice. The Board The Company has a Board comprising three non-executive Directors. The Chairman and senior director is Peter Harkness. Biographical details of all Board members (including significant commitments of the chairman) are shown on page 2. Directors are subject to re-election at the first AGM after their appointment and by rotation thereafter. In accordance with the Combined Code, one Director was re-elected during the year. A further Director is offering himself for re-election by rotation at the next AGM. Full Board meetings take place quarterly and additional meetings are held as required to address specific issues including considering recommendations from the Investment Manager, making all decisions concerning the acquisition or disposal of investments, and reviews, periodically, the terms of engagement of all third party advisers (including investment managers and administrators). All the members of the Board attended each full board meeting held during the year, as well as the appropriate committee meetings. The Board has a formal schedule of matters specifically reserved for its decision. The Board has also established procedures whereby Directors wishing to do so in the furtherance of their duties may take independent professional advice at the Company’s expense. All Directors have access to the advice and services of the Company Secretary. The Company Secretary provides the Board with full information on the Company’s assets and liabilities and other relevant information requested by the Chairman, in advance of each Board meeting. As the Company has a small Board of non-executive Directors, all the Directors sit on all committees. The Chairman of the Audit Committee is Peter Harkness, and the chairman of the Nomination and Remuneration Committees is Julie Baddeley. All committees have defined terms of reference and duties. Audit Committee The Audit Committee is responsible for reviewing the half yearly and annual accounts before they are presented to the Board, the terms of appointment of the Auditors, together with their remuneration, as well as a full review of the effectiveness of the Company’s internal control and risk management systems.

Any non-audit services provided by the Auditors are reviewed and approved by the Committee prior to being undertaken, to ensure that Auditor objectivity and independence is safeguarded. The Committee is satisfied with the performance of the auditors and recommends to Shareholders that they be re-appointed as auditors for the forthcoming year. The Committee met twice during the year. They reviewed the internal financial controls and recommended that, although still appropriate to the Company, they be updated. They also considered the need for an internal audit function and concluded that this function would not be an appropriate control for a venture capital trust. As the Company has no staff, other than directors, there are no procedures in place in respect of C3.4 of the Combined Code, relating to whistle blowing. The Audit Committee understands that the Investment Manager and Administration Manager have whistle blowing procedures in place. Nomination Committee The Nomination Committee’s primary function is to make recommendations to the Board on all new appointments and also to advise generally on issues relating to Board composition and balance. The Committee met once during the year to consider the appointment of a new non-executive Director to the Board. Remuneration Committee The Remuneration Committee meets as required, to discuss the existing levels of remuneration for the non-executive Directors, and whether they reflect the time commitment and responsibilities of the positions and are comparable with industry standards. Where deemed necessary, they will recommend adjustments to the remuneration levels. The Committee met once to review the levels of remuneration following the change in composition of the Board. Relations with Shareholders Shareholders have the opportunity to meet the Board at the AGM. The Board is also happy to respond to any written queries made by Shareholders during the course of the year, or to meet with Shareholders if so requested. In addition to the formal business of the AGM, representatives of the management team and the Board are available to answer any questions a Shareholder may have.

25

CORPORATE GOVERNANCE (continued) Relations with shareholders (continued) Separate resolutions are proposed at the AGM on each substantially separate issue. Downing Management Services Limited collates proxy votes and the results (together with the proxy forms) are forwarded to the Company Secretary immediately prior to the AGM. In order to comply with the Combined Code, proxy votes are announced at the AGM, following each vote on a show of hands, except in the event of a poll being called, and are published immediately following the AGM. The notice of the next AGM and proxy form can be found at the end of these financial statements. The terms of reference of the committees and terms and conditions of appointment of non-executive directors are available to Shareholders upon request. Financial reporting The Directors’ statement of responsibilities for preparing the accounts is set out in the Directors’ Report on page 20, and a statement by the Auditors about their reporting responsibilities is set out in the Auditors’ Report on page 27. Internal control The Board has adopted an Internal Control Manual (“Manual”), for which they are responsible, which has been compiled in order to comply with the Combined Code. The Manual is designed to provide reasonable, but not absolute, assurance against material misstatement or loss, which it achieves by detailing the perceived risks and controls to mitigate them. The Board reviews the perceived risks in line with relevant guidance on an annual basis and implements additional controls as appropriate. The Board is responsible for ensuring that the procedures to be followed by the advisers and themselves are in place, and they review the effectiveness of the Manual, based on the report from the Audit Committee, on an annual basis to ensure that the controls remain relevant and were in operation throughout the year.

Although the Board are ultimately responsible for safeguarding the assets of the Company, the Board has delegated, through written agreements, the day-to-day operation of the Company (including the Financial Reporting Process) to the following advisers: Investment Management Chrysalis VCT Management Ltd Administration Downing Management Services Ltd Listed Fixed Income Securities Management

Smith & Williamson Investment Management Limited

Going concern The Directors are of the opinion that at the time of approving the financial statements, they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason they believe that the Company continues to be a going concern and that it is appropriate to continue to apply the going concern basis in preparing the financial statements. Compliance statement The Listing Rules require the Board to report on compliance with the 48 Combined Code provisions throughout the accounting period. With the exception of the limited items outlined below, the Company has complied throughout the accounting year ended 31 October 2008 with the provisions set out in Section 1 of the Combined Code. a) New Directors do not receive a full, formal and

tailored induction on joining the Board. Such matters are addressed on an individual basis as they arise. Also the Company has no major Shareholders so Shareholders are not given the opportunity to meet any new non-executive Directors at a specific meeting other than the Annual General Meeting. (A5-1, D1-1, D1-2)

b) The non-executive Directors do not have service contracts, whereas the recommendation is for fixed term renewable contracts. (B1-6) The Directors do have consultancy agreements in place.

c) Due to the size of the Board, a formal performance evaluation of the Board, its committees, the individual Directors and the Chairman has not been undertaken. Specific performance issues are dealt with as they arise. (A6, A7-2)

26

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CHRYSALIS VCT PLC We have audited the financial statements of Chrysalis VCT plc for the year ended 31 October 2008 which comprise the Income Statement, the Reconciliation of Movements in Shareholders’ Funds, the Balance Sheet, the Cash Flow Statement and the related notes. The financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors’ Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors The Directors’ responsibilities for preparing the annual report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and United Kingdom accounting standards (‘United Kingdom Generally Accepted Accounting Practice’) are set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. The information in the Directors’ Report includes that specific information presented in the Chairman’s Statement, Investment Management Report and Review of Investments that is cross referenced from the business review section of the Directors’ Report. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if the information specified by law regarding Directors’ Remuneration and other transactions is not disclosed. We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.

We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the Chairman’s Statement, the Investment Management Report, the Review of Investments the Directors’ Report, the Conversion of the ‘D’ and ‘E’ Share pools, the Articles of Association Update, the unaudited part of the Directors’ Remuneration Report, and the Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ Remuneration Report to be audited. Opinion In our opinion: the financial statements give a true and fair view, in

accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 October 2008 and of its return for the year then ended;

the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985; and

the information given in the Directors’ Report is consistent with the financial statements.

PKF (UK) LLP Registered Auditors London UK 5 February 2009

27

INCOME STATEMENT for the year ended 31 October 2008 Company position Year ended 31 October 2008 Year ended 31 October 2007

Note Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Income 2 1,602 - 1,602 1,294 - 1,294

(Losses)/gains on investments 9 - (258) (258) - 2,992 2,992

1,602 (258) 1,344 1,294 2,992 4,286 Investment management fees 3 (126) (377) (503) (125) (377) (502)Performance incentive fees 3 - (175) (175) - (228) (228)Other expenses 4 (300) (20) (320) (308) - (308) Return on ordinary activities before tax

1,176

(830) 346

861

2,387 3,248

Tax on ordinary activities 6 (237) 159 (78) (255) 190 (65) Return attributable to equity

shareholders

939

(671) 268

606

2,577 3,183 Basic and diluted return per share:

Ordinary Share 8 2.8p (1.1p) 1.7p 1.7p 7.6p 9.3p ‘D’ Share 8 2.8p (25.3p) (22.5p) 2.1p 8.8p 10.9p ‘E’ Share 8 2.6p (28.4p) (25.8p) 2.5p (1.4p) 1.1p Split as: Ordinary Shares Year ended 31 October 2008 Year ended 31 October 2007

Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Income 1,553 - 1,553 1,239 - 1,239

Gains on investments - 39 39 - 2,943 2,943

1,553 39 1,592 1,239 2,943 4,182 Investment management fees (122) (365) (487) (121) (363) (484)Performance incentive fees - (175) (175) - (228) (228)Other expenses (298) (20) (318) (296) - (296) Return on ordinary activities before tax 1,133 (521) 612

822 2,352 3,174

Tax on ordinary activities (225) 155 (70) (242) 186 (56) Return attributable to equity

shareholders 908 (366) 542

580 2,538 3,118

28

INCOME STATEMENT (continued) for the year ended 31 October 2008 ‘D’ Shares Year ended 31 October 2008 Year ended 31 October 2007

Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Income 25 - 25 24 - 24

(Losses)/gains on investments - (131) (131) - 53 53

25 (131) (106) 24 53 77 Investment management fees (2) (6) (8) (2) (7) (9) Other expenses (1) - (1) (6) - (6) Return on ordinary activities before tax 22 (137) (115)

16 46 62

Tax on ordinary activities (6) 2 (4) (5) 2 (3) Return attributable to equity

shareholders 16 (135) (119)

11 48 59 ‘E’ Shares Year ended 31 October 2008 Year ended 31 October 2007

Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Income 24 - 24 31 - 31

Losses on investments - (166) (166) - (4) (4)

24 (166) (142) 31 (4) 27 Investment management fees (2) (6) (8) (2) (7) (9) Other expenses (1) - (1) (6) - (6) Return on ordinary activities before tax 21 (172) (151)

23 (11) 12

Tax on ordinary activities (6) 2 (4) (8) 2 (6) Return attributable to equity

shareholders 15 (170) (155)

15 (9) 6 The revenue and capital movements in the year for the Ordinary Shares, ‘D’ Shares and ‘E’ Shares relate to continuing operations. The total column within the Income Statement represents the profit and loss account of the Company. A Statement of Total Recognised Gains and Losses relating to each class of share has not been prepared as all gains and losses are recognised in the relevant Income Statements as shown on page 28 and above. The accompanying notes are an integral part of these financial statements.

29

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS for the year ended 31 October 2008

Note

Year ended 31 October 2008

Year ended 31 October 2007

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Opening

shareholders’ funds 29,898 569 573 31,040 29,033 517 574 30,124

Purchase of own shares 12 (1,174) (3) - (1,177) (1,232) - - (1,232)

Total recognised gains for the year 542 (119) (155) 268 3,118 59 6 3,183

Distributions 7 (1,766) (11) (12) (1,789) (1,021) (7) (7) (1,035) Closing

shareholders’ funds

27,500

436

406

28,342 29,898 569 573 31,040

The accompanying notes are an integral part of these financial statements.

30

BALANCE SHEET at 31 October 2008

Note

Year ended 31 October 2008

Year ended 31 October 2007

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Fixed assets Investments 9 23,586 280 100 23,966 26,068 410 246 26,724 Current assets Debtors 10 253 10 5 268 278 5 5 288 Cash at bank and

in hand

3,941

151

306

4,398

3,772

158

328

4,258 4,194 161 311 4,666 4,050 163 333 4,546 Creditors:

amounts falling due within one year

11 (280)

(5) (5) (290) (220)

(4) (6) (230) Net current

assets

3,914

156

306

4,376

3,830

159

327

4,316 Net assets 27,500 436 406 28,342 29,898 569 573 31,040 Capital and

reserves

Called up share capital

12

312

5

6

323

327

5

6

338

Capital redemption reserve

13

64

-

-

64

49

-

-

49 Share premium 13 - 502 562 1,064 - 502 562 1,064 Merger reserve 13 8,694 - - 8,694 8,694 - - 8,694 Special reserve 13 5,554 - - 5,554 7,318 - - 7,318 Capital reserve –

realised

13

12,262

15

(81)

12,196

9,858

19

(7)

9,870 Capital reserve –

unrealised

13

(496)

(100)

(100)

(696)

2,966

31

(4)

2,993 Revenue reserve 13 1,110 14 19 1,143 686 12 16 714 Equity

shareholders’ funds

27,500

436

406

28,342

29,898

569

573

31,040 Net asset value

per share

14

88.3p

81.8p

67.5p

91.5p

106.1p

95.3p The financial statements on pages 28 to 45 were approved and authorised for issue by the Board of Directors on 5 February 2009 and were signed on its behalf by:

Peter Harkness Chairman The accompanying notes are an integral part of these financial statements.

31

CASH FLOW STATEMENT for year ended 31 October 2008

Note

Year ended 31 October 2008

Year ended 31 October 2007

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

Ordinary Shares

‘D’ Shares

‘E’ Shares

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Net cash inflow

from operating activities 15 584 10 15 609 145 9 10 164

Taxation (56) (3) (5) (64) (71) (1) (1) (73) Capital

expenditure

Purchase of investments (8,140) - (20) (8,160) (7,323) (278) (250) (7,851)

Sale of investments

10,675

- -

10,675

8,821

74

-

8,895

Net cash inflow/ (outflow) from capital expenditure 2,535 - (20) 2,515 1,498 (204) (250) 1,044

Equity

distributions paid (1,769) (11) (12) (1,792) (1,021) (7) (7) (1,035)

Net cash inflow/

(outflow) before financing 1,294 (4) (22) 1,268 551 (203) (248) 100

Financing Share issue costs - - - - (6) - - (6)Shares

repurchased (1,125) (3) - (1,128) (1,254) - - (1,254) (1,125) (3) - (1,128) (1,260) - - (1,260) Increase/

(decrease) in cash 16 169 (7) (22) 140 (709) (203) (248) (1,160)

The accompanying notes are an integral part of the financial statements.

32

NOTES ON THE ACCOUNTS for the year ended 31 October 2008 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”). The financial statements are prepared under the historical cost convention as except for certain financial instruments measured at fair value and on the basis that it is not appropriate to prepare consolidated accounts as explained in note 9. The Company implements new Financial Reporting Standards (“FRS”) issued by the Accounting Standards Board when required. FRS29 “Financial Instruments: Disclosures” (which replaces parts of FRS25 “Financial Instruments: Disclosure and Presentation”), was mandatory for accounting periods commencing on or after 1 January 2007, and has therefore been adopted for the year under review. No comparative restatements have been required as a result of the implementation of this standard. Presentation of Income Statement In order to better reflect the activities of venture capital trust and in accordance with guidance issued by the Association of Investment Companies (“AIC”), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The 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. Investments Venture capital investments are designated as “fair value through profit or loss” assets and are measured at fair value. 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. The fair value of an investment upon acquisition is deemed to be cost. Thereafter investments are measured at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines “IPEV” together with FRS26. Listed fixed income investments and investments quoted on AIM are measured using bid prices with marketability discounts applied where deemed appropriate, in accordance with the IPEV. In respect of unquoted instruments, fair value is established by 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; Earnings multiple; 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 or liquidation the loss on 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.

33

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 1. Accounting policies (continued)

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 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’ fee, 75% to the Capital Account 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.

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 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.

2. Income

2008 2007 £’000 £’000

Income from investments Loan stock interest 661 702 Dividend income 400 75 Listed fixed income security interest 231 247 1,292 1,024 Other income 5 5 Deposit interest 305 265

1,602 1,294

34

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 3. Investment management fees 2008 2007

£’000 £’000

Basic fees 503 502 Performance incentive fees 175 228 678 730

Performance incentive fees, as shown above, are payable quarterly to Chrysalis VCT Management Limited based on cash 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 or 2½% of the gain on investments made prior to 30 April 2004.

4. Other expenses 2008 2007

£’000 £’000

Directors’ fees 75 75 Social security costs 6 6 Administration services 84 81 Auditors’ remuneration for - audit 18 13 - taxation services 2 2 Trail commission 48 51 Other running costs 87 80

320 308 5. Directors’ fees

Details of remuneration (excluding VAT and employers’ NIC) are given in the Directors’ Remuneration Report on page 23. The Company had no employees (other than the Directors) during the year. No other emoluments or pension contributions were paid by the Company to, or on behalf of, any Director.

6. Taxation on ordinary activities 2008 2007

£’000 £’000 (a) Tax charge for year

Current year: UK Corporation tax (charged to the Revenue Account) 237 255 Tax credited to Capital Account (159) (190)Charge for year 78 65

(b) Factors affecting tax charge for year Return on ordinary activities before tax 346 3,248 Tax at effective rate of 28.6% (2007: 26.5%) 99 860 Effects of: Losses/ (gains) on investments 74 (792) Expenses disallowed for tax purposes 19 17 UK dividend income (114) (20) 78 65

35

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 7. Distributions

Attributable to Ordinary Shareholders Year ended 31 October 2008

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2007 final 20/03/2008 1.50 2.00 3.50 485 646 1,131 2008 interim 25/07/2008 - 2.00 2.00 - 635 635 1.50 4.00 5.50 485 1,281 1,766 Proposed 2008 interim 15/12/2008 2.50 1.50 4.00 778 466 1,245 2.50 1.50 4.00 778 466 1,245 Year ended 31 October 2007

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2006 interim 02/03/2007 - 3.00 3.00 - 1,021 1,021 Proposed 2007 final - 1.50 2.00 3.50 490 653 1,143 Attributable to ‘D’ Shareholders Year ended 31 October 2008

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2007 final 20/03/2008 2.00 - 2.00 11 - 11 Proposed 2008 final N/A - - - - - - Year ended 31 October 2007

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2006 final 27/03/2007 1.25 - 1.25 7 - 7 Proposed 2007 final - 2.00 - 2.00 11 - 11 Attributable to ‘E’ Shareholders Year ended 31 October 2008

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2007 final 20/03/2008 2.00 - 2.00 12 - 12 Proposed 2008 final N/A - - - - - - Year ended 31 October 2007

Pence per share £’000 Paid/Due Revenue Capital Total Revenue Capital Total

Paid in year 2006 final 27/03/2007 1.25 - 1.25 7 - 7 Proposed 2007 final - 2.00 - 2.00 12 - 12

36

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008

8. Return per share Ordinary

Shares ‘D’ Shares ‘E’ Shares

Return per share based on: Net revenue after taxation for the financial year (£’000) 908 16 15 Weighted average number of shares in issue 32,053,843 533,987 601,376 Capital return per share based on: Net capital loss for the financial year (£’000) (366) (130) (170) Weighted average number of shares in issue 32,053,843 533,987 601,376 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.

9. Investments

Unquoted

Quoted on AIM

Listed fixed

income securities

Total £’000 £’000 £’000 £’000 Opening cost at 1 November 2007 17,172 1,641 4,918 23,731 Gains/(losses) at 1 November 2007 2,352 824 (183) 2,993 Opening fair value at 1 November 2007 19,524 2,465 4,735 26,724 Movement in year Purchased at cost 1,602 125 6,433 8,160 Sales - proceeds (7,392) (154) (3,129) (10,675) - realised gains on sales 675 (25) - 650 Unrealised gain recognised as income - - 15 15 Unrealised gains/ (losses) in the income

statement 617 (1,631) 106 (908) Closing fair value at 31 October 2008 15,026 780 8,160 23,966 Closing cost at 31 October 2008 14,948 1,667 8,047 24,662 Gains/ (losses) at 31 October 2008 78 (887) 113 (696) 15,026 780 8,160 23,966

The Company also holds 100% of the issued share capital of Chrysalis VCT Management Limited at a cost of £1. Results of the subsidiary undertaking for the year ended 31 October 2008 is as follows:

Country of registration

Nature of business

Turnover Retained profit

Net liabilities

£’000 £’000 £’000 Chrysalis VCT Management Ltd England and Wales

Investment Manager 677 - -

Consolidated Group Financial Statements have not been prepared as the subsidiary undertaking is not considered to be material. The Financial Statements therefore present only the results of Chrysalis VCT plc, which the Directors also consider is the most useful presentation for Shareholders.

37

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 10. Debtors 2008 2007

£’000 £’000

Trade debtors - 3 Other debtors 5 2 Prepayments and accrued income 263 283

268 288 11. Creditors: amounts falling due within one year 2008 2007

£’000 £’000

Corporation tax 78 64 Other taxes and social security 8 8 Other creditors 59 11 Accruals and deferred income 145 147

290 230 12. Called up share capital 2008 2007

£’000 £’000 Authorised: 50,000,000 (2007: 50,000,000) Ordinary Shares of 1p each 500 500 25,000,000 (2007: 25,000,000) ‘D’ Shares of 1p each 250 250 25,000,000 (2007: 25,000,000) ‘E’ Shares of 1p each 250 250 1,000 1,000 Allotted, called up and fully paid: 31,128,450 (2007: 32,669,120) Ordinary Shares of 1p each 312 327 532,982 (2007: 536,072) ‘D’ Shares of 1p each 5 5 601,376 (2007: 601,376) ‘E’ Shares of 1p each 6 6

323 338 During the year the Company repurchased 1,540,670 Ordinary Shares of 1p each, with a nominal value of £15,000, for an aggregate consideration of £1.2 million being an average price of 75.8p per Ordinary Share of 1p each and representing 4.7% of the issued Ordinary share capital. These shares were subsequently cancelled. The Company also repurchased 3,090 ‘D’ Shares of 1p each, with a nominal value of £31, for an aggregate consideration of £3,000 at a price of 81.5p per ‘D’ Share of 1p each and representing 0.6% of the issued ‘D’ Share capital. These shares were subsequently cancelled.

38

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008

13. Reserves

Capital redemption

reserve Share

premium Merger reserve

Special reserve

Capital reserve - realised

Capital reserve -

unrealised

Revenue

reserve £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 November 2007 49 1,064 8,694 7,318 9,870 2,993 714 Shares repurchased 15 - - (1,174) - - (3)Expenses capitalised - - - - (572) - - Tax on capital expenses - - - - 159 - - Gains/(losses) on

investments

- - - - 650 (908) - Realisation of revaluation

from previous years - - - - 2,781 (2,781) - Transfer between reserves - - - (590) 590 - - Distributions paid - - - - (1,282) - (507)Retained net revenue for

the year

- - - - - - 939 At 31 October 2008 64 1,064 8,694 5,554 12,196 (696) 1,143 The Special Reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends. During the year the Special Reserve was utilised to eliminate realised losses on the Capital Reserve – Realised. The Special Reserve and Revenue Reserve are distributable reserves. In addition, the Capital Reserve – Realised held by the Ordinary Shares is a distributable reserve. Reserves are split as:

Ordinary Shares Capital

redemption reserve

Share premium

Mergerreserve

Special reserve

Capital reserve - realised

Capital reserve -

unrealised

Revenue

reserve £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 November 2007 49 - 8,694 7,318 9,858 2,966 686 Shares repurchased 15 - - (1,174) - - - Expenses capitalised - - - - (560) - - Tax on capital expenses - - - - 155 - - Gains/(losses) on

investments

- - - - 720 (681) - Realisation of revaluation

from previous years - - - - 2,781 (2,781) - Transfer between reserves - - - (590) 590 - - Distributions paid - - - - (1,282) - (484)Retained net revenue for

the year

- - - - - - 908 At 31 October 2008 64 - 8,694 5,554 12,262 (496) 1,110

39

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 13. Reserves (continued) ‘D’ Shares

Capital redemption

reserve Share

premiumMergerreserve

Special reserve

Capital reserve - realised

Capital reserve -

unrealised

Revenue

reserve £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 November 2007 - 502 - - 19 31 12 Shares repurchased - - - - - - (3)Expenses capitalised - - - - (6) - - Tax on capital expenses - - - - 2 - - Losses on investments - - - - - (131) - Dividend paid - - - - - - (11)Retained net revenue for

the year

- - - - - - 16 At 31 October 2008 - 502 - - 15 (100) 14

‘E’ Shares Capital

redemption reserve

Share premium

Mergerreserve

Special reserve

Capital reserve - realised

Capital reserve -

unrealised

Revenue

reserve £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 November 2007 - 562 - - (7) (4) 16 Expenses capitalised - - - - (6) - - Tax on capital expenses - - - - 2 - - Losses on investments - - - - (70) (96) - Dividends paid - - - - - - (12)Retained net revenue for the year

- - - - - - 15

At 31 October 2008 - 562 - - (81) (100) 19

14. Net asset value per ordinary share

Shares in issue2008

Net Asset Value 2007

Net Asset Value

2008 2007 Pence per share

£’000 Pence per share

£’000

Ordinary Shares 31,128,450 32,669,120 88.3p 27,500 91.5p 29,898 ‘D’ Shares 532,982 536,072 81.8p 436 106.1p 569 ‘E’ Shares 601,376 601,376 67.5p 406 95.3p 573 28,342 31,040

As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset per share. The net asset value per share disclosed therefore represents both basic and diluted return per share.

40

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 15. Reconciliation of return on ordinary activities before taxation to net cash flow from operating

activities 2008 2007

£’000 £’000

Return on ordinary activities before taxation 346 3,248 Losses/(gains) on investments 258 (2,992)Decrease/(increase) in debtors 8 (106)(Decrease)/increase in creditors (3) 14 Net cash inflow from operating activities 609 164

16. Analysis of changes in cash during the year 2008 2007

£’000 £’000

Beginning of year 4,258 5,418 Net cash inflow/(outflow) 140 (1,160) End of year 4,398 4,258

17. Financial instruments and derivatives

The Company’s financial instruments comprise investments in quoted companies, unquoted companies, listed fixed interest investments and are all designated as “fair value through profit or loss” assets. The main purpose of these financial instruments is to generate revenue and capital appreciation for the Company’s operations. The fair value of investments is determined using the detailed accounting policy as shown in note 1. Loans and receivables (including cash at bank and debtors) and other financial liabilities are stated at amortised cost which the Directors consider is equivalent to fair value. The Company has not entered into any derivative transactions. Interest rate risk profile of financial assets and financial liabilities The Company’s financial assets (excluding cash at bank) and liabilities, other than the Company’s investments, have no attributable interest rate and cash at bank attracts interest at a floating rate. Investments in listed fixed interest investments are fixed rate. Venture Capital Investments comprise equity and loan stock, with the equity holdings having no interest rate attached to them and the majority of loan stock having an attributable fixed rate of interest. Average Average period 2008 2007 interest rate until maturity £’000 £’000

Fixed rate 7.3% 1,151 days 13,416 15,130 Floating rate 5.2% 5,166 4,656 No interest rate 9,760 11,254

28,342 31,040 “Fixed rate assets” represent investments with predetermined yield targets. “Floating rate assets” predominantly bear interest at rates linked to Bank of England base rate. “No interest rate assets” include net assets (investments, debtors and creditors) having no attributable

rate of interest. Financial liabilities The Company has no financial liabilities or guarantees other than as stated in the Balance Sheet.

Currency exposure As at 31 October 2008, the Company had one American investment which was valued at £Nil (2007: £Nil).

Borrowing facilities

The Company had no committed borrowing facilities as at 31 October 2008.

41

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 18. Principal financial risks

As a VCT, the majority of the Company’s assets are represented by financial instruments which are held as part of the investment portfolio. In order to ensure continued compliance with relevant VCT regulation and to be in a position to deliver the long term capital growth which is part of the Company’s investment objective, the Board is very much aware of the need to manage and mitigate the risks associated with the financial instruments held within the investment portfolio. The management of these risks starts with the application of a clear investment strategy which has been developed by the Board who are experienced investment professionals. Furthermore, the Board has appointed an experienced Investment Manager to whom they have communicated the Company’s investment objectives and whose remuneration is linked to the achievement of those objectives. The Investment Manager reports regularly to the Board on performance, and to facilitate the direct Board involvement with key decisions, on whether or not to invest, disinvest and the nature, terms and the security of investments being made. Further information about the VCT’s investment policy is set out in the Report of the Directors on page 16. In addition to its investment portfolio, the VCT maintains a cash position. The Directors consider that the risk profile associated with cash deposits is low and thus the carrying value in the financial statements is a close approximation of its fair value. A review of the specific financial risks faced by the Company follows. Market risks The key market risks to which the Company is exposed are interest rate risk and market price 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. Interest rate risk The Company receives interest on cash deposits at a rate agreed with its banker, while investments in loan stock and fixed interest investments predominately attract interest at fixed rates. The Company’s future cash flows can be influenced by changes in interest rates resulting in an increase or decrease in income from investments linked to the base rate. A summary of the interest rate profile of the Company’s investments is shown in Note 17. As the Company must comply with the VCT regulations, increases in interest rates could lead to a potential breach of these regulations as the proportion of the Company’s income from sources other than shares and securities could exceed the required level. The Company therefore monitors the level of income received from fixed, floating and non interest bearing assets to ensure that the regulations are not breached. The Company has reviewed the financial impact that a 1.0% change in base rate would have on the Company with income and the total return for the year changing by £39,000, equivalent to a 4.2% impact on overall income receivable by the Company. Such a change would have an immaterial impact on Net Asset Value. Market price risk Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company’s investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face of market movements. At 31 October 2008, the net unrealised loss on the quoted portfolios (AIM-quoted and fixed income investments) was £774,000 (2007: net gain £641,000). The investments the Company holds are, in the main, thinly traded (due to the underlying nature of the investments) and, as such, the prices are more volatile than those of more widely traded, full list, securities. In addition, the ability of the Company to realise the investments at their carrying value may at times not be possible if there are no willing purchasers. The ability of the Company to purchase or sell investments is also constrained by the requirements set down for VCTs. The Board considers each investment purchase to ensure that an acquisition will enable the Company to continue to have an appropriate spread of market risk and that an appropriate risk reward profile is maintained.

42

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 18. Principal financial risks (continued)

It is not the Company’s policy to use derivative instruments to mitigate market risk, as the Board believes that the effectiveness of such instruments does not justify the cost or risk involved. The Company’s sensitivity to fluctuations in the share prices of its quoted investments (AIM-quoted but excluding listed fixed interest investments) is summarised below. A 50% fall in the share price in each of the quoted investments held by the Company would have an effect as follows:

Risk

exposure (current

val’n)

Impact on Net Assets

Impact on

NAV per share

£’000 £’000 Pence 50% fall in quoted stocks Ordinary Share pool 780 (399) (1.2p) ‘D’ Share pool - - - ‘E’ Share pool - - -

A fall in shares prices generally would have a lesser impact on the valuation of the unquoted portfolio due to the underlying nature of the investment and securities held within each individual company. A 25% fall in the valuations of all of the unquoted investments held by the Company would have an effect as follows: Risk

exposure (current

val’n)

Impact on Net Assets

Impact on

NAV per share

£’000 £’000 Pence 25% fall in unquoted investment valuations Ordinary Share pool 14,646 (3,662) (11.8p) ‘D’ Share pool 280 (70) (13.1p) ‘E’ Share pool 100 (25) (4.2p)

The Company also has exposure to variations in the price of its non-qualifying investments. As the investment is a government gilt, such securities are subject to lower price fluctuations. A 2.5% fall in the valuation of these assets held by the Company would have the following impact:

Risk exposure (current

val’n)

Impact on Net Assets

Impact on NAV per

share £’000 £’000 Pence

2.5% fall in value of non-qualifying investments (government gilt)

Ordinary Share pool 8,160 (204) (0.7p) ‘D’ Share pool - - - ‘E’ Share pool - - -

In each case, the impact of such changes on the return for the year would be that same as that on Net Assets and NAV per share.

43

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 18. Principal financial risks (continued)

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’s financial assets that are exposed to credit risk are summarised as follows:

2008 2007 £’000 £’000

Fair value through profit or loss assets Investments in listed fixed income securities 8,160 4,735 Investments in loan stocks 7,584 10,793 Loans and receivables Cash and cash equivalents 4,398 4,258 Interest and other receivables 206 271 20,348 20,057

Investments in loan stocks comprise a fundamental part of the Company’s venture capital investments and are managed within the main investment management procedures. Cash is mainly held by Bank of Scotland plc, which is an AA- rated financial institution and, consequently the Directors consider that the risk profile associated with cash deposits is low. Interest, dividends and other receivables are predominantly covered within the investment management procedures. Liquidity risk Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. As the Company only ever has a very low level of creditors and has no borrowings, the Board believes that the Company’s exposure to liquidity risk is minimal.

19. Management of capital

The Company’s objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to continue to provide returns for Shareholders. The requirements of the Venture Capital Trust Regulations and the fact that the Company has a policy of not having any borrowings mean that there is limited scope to manage the Company’s capital structure. However, to the extent it is possible, the Company can maintain or adjust its capital structure by adjusting the amount of dividends paid to Shareholders, purchasing its own shares or issuing new shares. As the Company has a low level of liabilities, the Board considers the Company’s net assets to be its capital. The Company does not have any externally imposed capital requirements.

20. Contingencies, guarantees and financial commitments

The Company had no contingencies or guarantees at the year end.

44

NOTES ON THE ACCOUNTS (continued) for the year ended 31 October 2008 21. Related party transactions

Chrysalis VCT Management Limited, a wholly owned subsidiary, is the Company’s Investment Manager and they receive a fee of 1.65% of net assets per annum. During the period £503,000 (2007: £502,000) was paid to Chrysalis VCT Management Limited in respect of these fees. No amounts were outstanding at the year end. An exit fee is payable quarterly to Chrysalis VCT Management Limited (with effect from 1 May 2006) based on cash realisations from all investments excluding quoted loan notes, redemptions of loan notes in the normal course of business and other treasury functions. The exit 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 2½% of investments made prior to 30 April 2004. During the year exit fees of £175,000 (2007: £228,000) were due to Chrysalis VCT Management Limited. At the year end £1,000 was outstanding (2007: £9,000).

22. Controlling party In the opinion of the Directors there is no immediate or ultimate controlling party.

45

NOTICE OF THE ANNUAL GENERAL MEETING OF CHRYSALIS VCT PLC NOTICE IS HEREBY GIVEN that the Annual General Meeting of Chrysalis VCT plc will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:00pm on 25 March 2009 for the transaction of the following business: As Ordinary Business, to consider and, if thought fit, pass the following resolutions which will be proposed as Ordinary Resolutions: 1. To receive and adopt the Report of the Directors and Accounts of the Company for the year ended

31 October 2008, together with the report of the Auditors thereon; 2. To approve the Directors’ Remuneration Report; 3. To reappoint PKF (UK) LLP as Auditors of the Company to hold office until the conclusion of the next

Annual General Meeting at which accounts of the Company are presented and to authorise the Directors to determine their remuneration;

4. To re-elect as Director, Peter Harkness, who retires by rotation and, being eligible, offers himself for re-

election; 5. To re-elect as Director, Martin Knight, who retires and, being eligible, offers himself for re-election; As Special Business, to consider and, if thought fit, pass the following Special Resolutions: 6. That, the Company be and is generally and unconditionally authorised to make one or more market

purchases (within the meaning of Section 163(3) of the Companies Act 1985) of Ordinary Shares of 1p each, ‘D’ Ordinary Shares of 1p each and ‘E’ Ordinary Shares of 1p in the capital of the Company provided that:

(i) the maximum number of Ordinary Shares hereby authorised to be purchased is 4,638,139,

representing approximately 14.9% of the present issued Ordinary share capital of the Company, the maximum number of ‘D’ Ordinary Shares hereby authorised to be purchased is 79,414, representing approximately 14.9% of the present issued ‘D’ Ordinary share capital of the Company and the maximum number of ‘E’ Ordinary Shares hereby authorised to be purchased is 89,605, representing approximately 14.9% of the present issued ‘E’ Ordinary share capital of the Company;

(ii) the minimum price which may be paid for an Ordinary Share, ‘D’ Ordinary Share or ‘E’ Ordinary

Share is 1p, exclusive of all expenses;

(iii) the maximum price which may be paid for an Ordinary share, ‘D’ Ordinary Share or ‘E’ Ordinary share is an amount, exclusive of all expenses, equal to 105% of the average of the middle market quotations for the Ordinary Shares, ‘D’ Ordinary Shares or ‘E’ Ordinary Shares as derived from the Daily Official List of the London Stock Exchange, for each of the five business days immediately preceding the day on which the ordinary share is contracted to be purchased;

(iv) the Company may make a contract to purchase Ordinary Shares, ‘D’ Ordinary Shares or ‘E’ Ordinary

Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority, and may validly make a purchase of ordinary shares in pursuance of any such contract.

and this power, unless previously varied, revoked or renewed, shall come to an end at the conclusion of the Annual General Meeting next following the passing of this Resolution or if earlier, on the expiry of 15 months from the passing of this Resolution.

7. That the Articles of Association produced to the meeting and initialled by the Chairman for the purpose of

identification be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association.

46

NOTICE OF THE ANNUAL GENERAL MEETING (continued) 8. To amend Article 88 (of the Articles of Association) in respect of the upper limit on the total aggregate

remuneration for the Directors to £150,000 per annum. By order of the Board

Grant Whitehouse Secretary 5 February 2009 Registered Office: Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU Notes (a) Any member of the Company entitled to attend and vote at the Meeting may appoint a proxy to attend and, on a poll,

vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company.

(b) To be valid the instrument appointing a proxy and authority under which it is executed must be deposited at Downing Management Services Limited, Kings Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time of the Meeting.

(c) Completion and return of a form of proxy will not preclude a member of the Company from attending and voting in person.

(d) Copies of the Directors’ consultancy agreements and the Register of Directors’ interests in the Ordinary Shares of the Company, a copy of the New Articles of Association and a copy of the current Articles of Association (marked up to show the proposed changes) will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday and Public Holidays excluded) from the date of this notice, until the end of the Annual General Meeting for at least 15 minutes prior to and during the Meeting.

(e) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those holders of the Company’s shares registered on the Register of Members of the Company as at 3.00 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members 48 hours before the time of any adjourned meeting, shall be entitled to attend and vote at the said general meeting in respect of such shares registered in their name at the relevant time. Changes to entries on the Register of Members after 3.00 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members less than 48 hours before the time of any adjourned meeting, shall be disregarded in determining the right of any person to attend and vote at the Meeting.

47

NOTICE CONVENING A SEPARATE CLASS MEETING OF ORDINARY SHAREHOLDERS OF CHRYSALIS VCT PLC NOTICE IS HEREBY GIVEN that a meeting of the holders of Ordinary Shares of 1p each in the capital of Chrysalis VCT plc will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:15pm on 25 March 2009 for the purpose of considering and, if thought fit, passing the following resolution as a special resolution: That the holders of Ordinary Shares of 1p each in the capital of the Company (“Ordinary Shares”) hereby sanction, approve and consent to: Special Resolution (a) the passing and carrying into effect, as a special resolution of the Company, of Resolution 7 set out in

the Notice of the Annual General Meeting of the Company convened for 3.00pm. on 25 March 2009 (a copy of which is produced for the meeting signed by the Chairman for the purposes of identification) or any adjournment thereof; and

(b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the right and

privileges attached to the Ordinary Shares which will, or may, result from the passing and carrying into effect of the resolution referred to in paragraph (a) above and notwithstanding that the passing and carrying into effect of such resolution may affect the rights and privileges attached to such Ordinary Shares.

By order of the Board

Grant Whitehouse Company Secretary Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU 5 February 2009 Notes (a) Any member of the Company entitled to attend and vote at the Meeting is also entitled to appoint one or more proxies to attend, speak

and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

(b) To be valid, a Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in the Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

(c) Completion and return of a form of proxy will not preclude a member of the Company from attending and voting in person. (d) Copies of the Directors’ Letters of Appointment, the Register of Directors’ interests in the Shares of the Company kept, a copy of the

New Articles of Association and a copy of the current Articles of Association (marked up to show the proposed changes) will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday and Public Holidays excluded) from the date of this notice, until the end of the Annual General Meeting for at least 15 minutes prior to and during the Class Meeting.

(e) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those holders of the Company’s shares registered on the Register of Members of the Company as at 3.15 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members 48 hours before the time of any adjourned meeting, shall be entitled to attend and vote at the said general meeting in respect of such shares registered in their name at the relevant time. Changes to entries on the Register of Members after 3.15 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members less than 48 hours before the time of any adjourned meeting, shall be disregarded in determining the right of any person to attend and vote at the Meeting.

48

NOTICE CONVENING A SEPARATE CLASS MEETING OF ‘D’ ORDINARY SHAREHOLDERS OF CHRYSALIS VCT PLC NOTICE IS HEREBY GIVEN that a meeting of the holders of ‘D’ Ordinary Shares of 1p each in the capital of Chrysalis VCT plc will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:20pm on 25 March 2009 for the purpose of considering and, if thought fit, passing the following resolution as a special resolution: That the holders of ‘D’ Ordinary Shares of 1p each in the capital of the Company (“‘D’ Shares”) hereby sanction, approve and consent to: Special Resolution (a) the passing and carrying into effect, as a special resolution of the Company, of Resolution 7 set out in

the Notice of the Annual General Meeting of the Company convened for 3:00pm. on 25 March 2009 (a copy of which is produced for the meeting signed by the Chairman for the purposes of identification) or any adjournment thereof; and

(b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the right and

privileges attached to the ‘D’ Shares which will, or may, result from the passing and carrying into effect of the resolution referred to in paragraph (a) above and notwithstanding that the passing and carrying into effect of such resolution may affect the rights and privileges attached to such D Shares.

By order of the Board

Grant Whitehouse Company Secretary Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU 5 February 2009 Notes (a) Any member of the Company entitled to attend and vote at the Meeting is also entitled to appoint one or more proxies to attend, speak

and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

(b) To be valid, a Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in the Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

(c) Completion and return of a form of proxy will not preclude a member of the Company from attending and voting in person. (d) Copies of the Directors’ Letters of Appointment, the Register of Directors’ interests in the Shares of the Company kept, a copy of the

New Articles of Association and a copy of the current Articles of Association (marked up to show the proposed changes) will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday and Public Holidays excluded) from the date of this notice, until the end of the Annual General Meeting for at least 15 minutes prior to and during the Class Meeting.

(e) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those holders of the Company’s shares registered on the Register of Members of the Company as at 3.20 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members 48 hours before the time of any adjourned meeting, shall be entitled to attend and vote at the said general meeting in respect of such shares registered in their name at the relevant time. Changes to entries on the Register of Members after 3.20 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members less than 48 hours before the time of any adjourned meeting, shall be disregarded in determining the right of any person to attend and vote at the Meeting.

49

NOTICE CONVENING A SEPARATE CLASS MEETING OF ‘E’ ORDINARY SHAREHOLDERS OF CHRYSALIS VCT PLC NOTICE IS HEREBY GIVEN that a meeting of the holders of ‘E’ Ordinary Shares of 1p each in the capital of Chrysalis VCT plc will be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:25pm on 25 March 2009 for the purpose of considering and, if thought fit, passing the following resolution as a special resolution: That the holders of ‘E’ Ordinary Shares of 1p each in the capital of the Company (“‘E’ Shares”) hereby sanction, approve and consent to: Special Resolution (a) the passing and carrying into effect, as a special resolution of the Company, of Resolution 7 set out in

the Notice of the Annual General Meeting of the Company convened for 3.00pm. on 25 March 2009 (a copy of which is produced for the meeting signed by the Chairman for the purposes of identification) or any adjournment thereof; and

(b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the right and

privileges attached to the ‘E’ Shares which will, or may, result from the passing and carrying into effect of the resolution referred to in paragraph (a) above and notwithstanding that the passing and carrying into effect of such resolution may affect the rights and privileges attached to such E Shares.

By order of the Board

Grant Whitehouse Company Secretary Kings Scholars House 230 Vauxhall Bridge Road London SW1V 1AU 5 February 2009 Notes (a) Any member of the Company entitled to attend and vote at the Meeting is also entitled to appoint one or more proxies to attend, speak

and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

(b) To be valid, a Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in the Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

(c) Completion and return of a form of proxy will not preclude a member of the Company from attending and voting in person. (d) Copies of the Directors’ Letters of Appointment, the Register of Directors’ interests in the Shares of the Company kept, a copy of the

New Articles of Association and a copy of the current Articles of Association (marked up to show the proposed changes) will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturday and Public Holidays excluded) from the date of this notice, until the end of the Annual General Meeting for at least 15 minutes prior to and during the Class Meeting.

(e) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those holders of the Company’s shares registered on the Register of Members of the Company as at 3.25 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members 48 hours before the time of any adjourned meeting, shall be entitled to attend and vote at the said general meeting in respect of such shares registered in their name at the relevant time. Changes to entries on the Register of Members after 3.25 p.m. on 23 March 2009 or, in the event that the Meeting is adjourned, on the Register of Members less than 48 hours before the time of any adjourned meeting, shall be disregarded in determining the right of any person to attend and vote at the Meeting.

50

CHRYSALIS VCT PLC ANNUAL GENERAL MEETING FORM OF PROXY For use at the Annual General Meeting of the above-named Company to be held on 25 March 2009, at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:00pm. I/We* …………………………………………………………………………………………………………...

(in BLOCK CAPITALS please) of ………………………………………………………………………………………………………………. being the holder(s) of Ordinary Shares/‘D’ Ordinary Shares/‘E’ Ordinary Shares* of 1p each in the capital of the above-named Company, hereby appoint the Chairman of the meeting (see note 1) or ………………………………………………………………………………………………………………. of ………………………………………………………………………………………………………………. as my/our* proxy to attend for me/us* on my/our* behalf at the Annual General Meeting of the Company to be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU on 25 March 2009 or at any adjournment thereof. I/We* desire to vote on the Resolutions as indicated in the appropriate column below. Please indicate with an “X” how you wish your vote to be cast. Details of the Resolutions are set out in the Notice of the Annual General Meeting. ORDINARY BUSINESS

FOR AGAINST WITHHELD

1. To receive and adopt the Report of the Directors and Accounts 2. To approve the Directors’ Remuneration Report. 3. To re-appoint the Auditors and authorise the Directors to determine their remuneration. 4. To re-elect Peter Harkness as a Director. 5. To re-elect Martin Knight as a Director. SPECIAL BUSINESS 6. To authorise the Directors to make market purchases of its

shares.

7. To adopt the new Articles of Association of the Company. 8. To amend Article 88 to uplift the upper limit on the aggregate

directors remuneration to £150,000 per annum.

Dated this ………………… day of …………………………………………………………………… 2009 Signature(s) …………………………………………..……………………………………………………….. Notes: 1. If you wish to appoint a proxy of your own choice delete the words “the Chairman of the meeting” and insert the name and address of the person whom you wish

to appoint in the space provided. A proxy need not be a member of the Company. 2. In the case of a corporation this form must be executed under its common seal or signed on its behalf by its attorney or a duly authorised officer of the

corporation. 3. In the case of joint shareholders any one of them may sign. The vote of the person whose name stands first in the register of members will be accepted to the

exclusion of the votes of the other joint holders. 4. If you do not indicate the way you desire your proxy to vote, you will be deemed to have authorised your proxy to vote or abstain from voting at his/her

discretion. 5. A “vote withheld” is not a vote in law and is not counted in the calculation of the proportion of the votes for and against a resolution. 6. To be valid this form of proxy must be completed and deposited (together with any power of attorney, or other authority under which it is signed) with Downing

Management Services Limited, Kings Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time fixed for holding the meeting or adjourned meeting.

7. Completion of this form will not preclude you from attending and voting at the meeting if you so wish. 8. Any alteration made to the form of proxy must be initialled. * Delete as appropriate

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CHRYSALIS VCT PLC CLASS MEETING OF ORDINARY SHAREHOLDERS FORM OF PROXY For use at the Class Meeting of Ordinary Shareholders of the above-named Company to be held on 25 March 2009, at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:15pm. I/We* …………………………………………………………………………………………………………...

(in BLOCK CAPITALS please) of ………………………………………………………………………………………………………………. being the holder(s) of Ordinary Shares of 1p each in the capital of the above-named Company, hereby appoint the Chairman of the meeting (see note 3) or ………………………………………………………………………………………………………………. of ………………………………………………………………………………………………………………. as my/our* proxy to attend for me/us* on my/our* behalf at the Class Meeting of the Ordinary Shareholders of the Company to be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU on 25 March 2009 or at any adjournment thereof. I/We* desire to vote on the Resolution as indicated in the appropriate column below. Please indicate with an “X” how you wish your vote to be cast. Details of the Resolution is set out in the Notice of the Class Meeting of Ordinary Shareholders. FOR AGAINST WITHHELD To approve the passing of Special Resolution 7 at the General Meeting and any variation to class rights resulting therefrom

Dated this ………………… day of …………………………………………………………………… 2009 Signature(s) …………………………………………..……………………………………………………….. Notes: NOTES AND INSTRUCTIONS 1. The Notice of the Class Meeting is set out on page 48 of the Annual Report. 2. Any member of the Company entitled to attend and vote at the Class Meeting is also entitled to appoint one or more proxies to attend,

speak and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Class Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

3. Delete “the Chairman of the meeting” if it is desired to appoint any other person and insert his or her name and address. If no name is inserted, the proxy will be deemed to have been given in favour of the Chairman of the meeting. If this Form of Proxy is returned without stating how the proxy shall vote on any particular matter the proxy will exercise his discretion as to whether, and if so how, he votes.

4. Any alterations to the Form of Proxy should be initialled. 5. To be valid, this Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or

notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in this Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

6. In the case of a corporation, this form must be under its common seal or under the hand of some officer or attorney duly authorised in that behalf.

7. In the case of joint holders, the vote of the senior holder tendering a vote will be accepted to the exclusion of the votes of the other joint holders. Seniority depends on the order in which the names stand in the register of members.

8. The completion and return of this Form of Proxy will not preclude you from attending and voting at the meeting should you subsequently decide to do so.

* Delete as appropriate

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CHRYSALIS VCT PLC CLASS MEETING OF ‘D’ ORDINARY SHAREHOLDERS FORM OF PROXY For use at the Class Meeting of ‘D’ Ordinary Shareholders of the above-named Company to be held on 25 March 2009, at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:20pm. I/We* …………………………………………………………………………………………………………...

(in BLOCK CAPITALS please) of ………………………………………………………………………………………………………………. being the holder(s) of ‘D’ Ordinary Shares of 1p each in the capital of the above-named Company, hereby appoint the Chairman of the meeting (see note 3) or ………………………………………………………………………………………………………………. of ………………………………………………………………………………………………………………. as my/our* proxy to attend for me/us* on my/our* behalf at the Class Meeting of the ‘D’ Ordinary Shareholders of the Company to be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU on 25 March 2009 or at any adjournment thereof. I/We* desire to vote on the Resolution as indicated in the appropriate column below. Please indicate with an “X” how you wish your vote to be cast. Details of the Resolution is set out in the Notice of the Class Meeting of ‘D’ Ordinary Shareholders. FOR AGAINST WITHHELD To approve the passing of Special Resolution 7 at the General Meeting and any variation to class rights resulting therefrom

Dated this ………………… day of …………………………………………………………………… 2009 Signature(s) …………………………………………..……………………………………………………….. Notes: NOTES AND INSTRUCTIONS 1. The Notice of the Class Meeting is set out on page 49 of the Annual Report. 2. Any member of the Company entitled to attend and vote at the Class Meeting is also entitled to appoint one or more proxies to attend,

speak and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Class Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

3. Delete “the Chairman of the meeting” if it is desired to appoint any other person and insert his or her name and address. If no name is inserted, the proxy will be deemed to have been given in favour of the Chairman of the meeting. If this Form of Proxy is returned without stating how the proxy shall vote on any particular matter the proxy will exercise his discretion as to whether, and if so how, he votes.

4. Any alterations to the Form of Proxy should be initialled. 5. To be valid, this Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or

notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in this Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

6. In the case of a corporation, this form must be under its common seal or under the hand of some officer or attorney duly authorised in that behalf.

7. In the case of joint holders, the vote of the senior holder tendering a vote will be accepted to the exclusion of the votes of the other joint holders. Seniority depends on the order in which the names stand in the register of members.

8. The completion and return of this Form of Proxy will not preclude you from attending and voting at the meeting should you subsequently decide to do so.

* Delete as appropriate

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CHRYSALIS VCT PLC CLASS MEETING OF ‘E’ ORDINARY SHAREHOLDERS FORM OF PROXY For use at the Class Meeting of ‘E’ Ordinary Shareholders of the above-named Company to be held on 25 March 2009, at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU at 3:25pm. I/We* …………………………………………………………………………………………………………...

(in BLOCK CAPITALS please) of ………………………………………………………………………………………………………………. being the holder(s) of ‘E’ Ordinary Shares of 1p each in the capital of the above-named Company, hereby appoint the Chairman of the meeting (see note 1) or ………………………………………………………………………………………………………………. of ………………………………………………………………………………………………………………. as my/our* proxy to attend for me/us* on my/our* behalf at the Class Meeting of the ‘E’ Ordinary Shareholders of the Company to be held at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU on 25 March 2009 or at any adjournment thereof. I/We* desire to vote on the Resolution as indicated in the appropriate column below. Please indicate with an “X” how you wish your vote to be cast. Details of the Resolution is set out in the Notice of the Class Meeting of ‘E’ Ordinary Shareholders. FOR AGAINST WITHHELD To approve the passing of Special Resolution 7 at the General Meeting and any variation to class rights resulting therefrom

Dated this ………………… day of …………………………………………………………………… 2009 Signature(s) …………………………………………..……………………………………………………….. Notes: NOTES AND INSTRUCTIONS 1. The Notice of the Class Meeting is set out on page 50 of the Annual Report. 2. Any member of the Company entitled to attend and vote at the Class Meeting is also entitled to appoint one or more proxies to attend,

speak and vote instead of that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Class Meeting in order to represent his appointor. A member entitled to attend and vote at the meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person.

3. Delete “the Chairman of the meeting” if it is desired to appoint any other person and insert his or her name and address. If no name is inserted, the proxy will be deemed to have been given in favour of the Chairman of the meeting. If this Form of Proxy is returned without stating how the proxy shall vote on any particular matter the proxy will exercise his discretion as to whether, and if so how, he votes.

4. Any alterations to the Form of Proxy should be initialled. 5. To be valid, this Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or

notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority, must be delivered to Downing Management Services Limited, Kings Scholar House, 230 Vauxhall Bridge Road, London SW1V 1AU not less than 48 hours before the time appointed for holding the Meeting or adjourned meeting at which the person named in this Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours after it is demanded, the document(s) must be delivered as aforesaid not less than 48 hours before the time appointed for taking the poll, or where the poll is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the demand is made.

6. In the case of a corporation, this form must be under its common seal or under the hand of some officer or attorney duly authorised in that behalf.

7. In the case of joint holders, the vote of the senior holder tendering a vote will be accepted to the exclusion of the votes of the other joint holders. Seniority depends on the order in which the names stand in the register of members.

8. The completion and return of this Form of Proxy will not preclude you from attending and voting at the meeting should you subsequently decide to do so.

* Delete as appropriate

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