TIDMOSA
Octopus Second AIM VCT PLC
Final Results
22 May 2009
Octopus Second AIM VCT PLC (the "Company"), managed by Octopus
Investments Limited, today announces the final results for the year
ended 28 February 2009.
These results were approved by the Board of Directors on 22 May 2009.
You may view the Annual Report in full at www.octopusinvestments.com
by navigating to VCT Meetings & Reports under the 'Services' section
About Octopus Second AIM VCT PLC
Octopus Second AIM VCT PLC (the "Company" or "Fund") is a venture
capital trust ("VCT") which aims to provide shareholders with
attractive tax-free dividends and long-term capital growth.
The Investment Manager is Octopus Investments Limited ("Octopus" or
"Manager"). The Company was launched as LeggMason Investors AIM VCT
plc in June 2001 and raised GBP8.9 million through an offer for
subscription. In 2004 its name was changed to Close Second AIM VCT
PLC.
In 2006 the Company raised a further GBP20.25 million through the issue
of 'C' and 'D' shares. Whilst 'C' shares follow a conventional VCT
format and will merge with the Ordinary shares in June 2009, the 'D'
shares offer the opportunity for a Distribution in Specie or the
option to merge with the Ordinary share portfolio. Further details
are discussed on page 6 of the Chairman's Statement.
Financial Summary
Year to Year to
Ordinary shares 28 February 2009 29 February 2008
Net assets (GBP'000) 1,871 3,036
Net loss after tax (GBP'000) (898) (910)
Net asset value per share ("NAV") 25.68p 40.18p
Cumulative dividends paid since
launch 22.60p 20.60p
Total return (NAV plus dividends
paid) 48.28p 60.78p
Year to Year to
C & D shares 28 February 2009 29 February 2008
Net assets (GBP'000) 13,000 18,065
Net (loss)/profit after tax (GBP'000) (4,591) (993)
Net asset value per share ("NAV") 64.55p 89.25p
Cumulative dividends paid since
launch 4.96p 2.96p
Total return (NAV plus dividends
paid) 69.51p 92.21p
Shareholder Value per Share since launch
Ordinary shares C & D shares
Dividends paid (pence (pence
in period ended per share) per share)
28 February 2003 1.60 -
28 February 2004 - -
28 February 2005 - -
28 February 2006 1.00 -
28 February 2007 7.00 0.75
31 August 2007 10.00 1.21
29 February 2008 1.00 1.00
31 August 2008 1.00 1.00
28 February 2009* 1.00 1.00
Total dividends (capital and
revenue) 22.60 4.96
Net asset value as at 28
February 2009 25.68 64.55
Total return as at 28
February 2009 48.28 69.51
*A final dividend will be proposed to remaining shareholders
following the completion of the Distribution in Specie. This will be
completed by 23 July 2009 and a dividend announcement will follow
shortly after this date.
Chairman's Statement
Introduction
I have pleasure in presenting the Company's latest annual report,
which is the first since the Company appointed Octopus Investments as
Manager last August. The year to 28 February 2009, which this report
covers, has been a turbulent one and has seen smaller companies
deserted by many investors. Share prices have fallen under the
weight of several factors which have not been avoidable for the
Company, as it has to maintain exposure to the stock market to retain
VCT status.
Change in Name and Manager
Shareholders will be aware that there has been a change to the
corporate identity of the Company. Following the move by fund
managers Andrew Buchanan and Kate Tidbury from Close Investments
Limited to Octopus Investments Limited, the Board agreed to novate
the management agreement to Octopus. As a result, it was necessary to
change the name of the Company. This change was approved at an EGM at
the beginning of September 2008. Shareholders' existing share
certificates remain valid and have not been replaced.
Andrew and Kate have joined fund manager Richard Power's larger and
better resourced team at Octopus. This highly skilled team is
involved in smaller company and VCT investment. Along with Andrew and
Kate, the team has been involved with AIM since the market's
inception. Octopus itself is an award-winning, market leading VCT
manager and smaller companies specialist. It acts as manager of 14
other VCTs and has a total of approximately GBP750 million under
management.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Manager with advice
on the ongoing compliance with HM Revenue & Customs ("HMRC") rules
and regulations concerning VCTs. The Board has been advised that
Octopus Second AIM PLC is in compliance with the conditions laid down
by HMRC for maintaining approval as a VCT. As at 28 February 2009,
over 74% of the portfolio (as measured by HMRC rules) was invested in
VCT qualifying investments.
VAT on Management Fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008. This
follows a European Court of Justice judgement against the Government
in a case relating to VAT payable by investment trusts. It is now
virtually certain that a VAT repayment will be obtained for VAT paid
on management fees going back for the last three years. However, the
extent and timing of repayments is not yet known. We will follow
developments with the help of our advisers. For the purposes of
these accounts, and with guidance from Octopus, we have accrued a
rebate of GBP139,000.
Performance
In my interim report I commented that 'falling share prices reflect
the expectation that economic conditions will continue to
deteriorate' and that with increasing talk of recession, 'none of
this describes optimism in the short term'. That has transpired.
Since that time official statistics have confirmed that the country
is in recession. Shareholders will recognise the last year as being
a very difficult one for investors of all sorts. The Investment
Manager's review will deal with this matter more fully, but in the
year to 28 February 2009 the FTSE All Share Index fell by 36.8%, the
Smaller Companies Index ex Investment Trusts fell by 51.5% and the
AIM index by 61.2%. The fall in total return (being NAV plus
dividends) over the period for Ordinary shares was 20.6% and for 'C'
&' D' shares was 24.6%, after adding back 2p of dividends in the year
to 28 February 2009 in each case. The Board feels that in the
conditions which have prevailed in this period and given the
requirement to be invested in the stock market, this is an
understandable result. We look forward to an improvement in future
as some of the investments made over the previous three years start
to mature.
Portfolio Activity
A number of new holdings have been established in the C&D portfolio
in the year to 28 February 2009, with five new investments made in
the second half. The Manager's report deals with these more fully,
but the important point is that the Company was more than 70%
invested in qualifying holdings at the year end; a key requirement of
a VCT at this stage in its life. No new investments were made in the
Ordinary portfolio as it was already more than 80% invested at the
beginning of the year. The C shares convert into Ordinary shares on
12 June 2009 at which point the two portfolios will merge.
Dividend
The Board wish to continue with their current dividend policy and
intend to make an announcement in due course with regard to a
dividend for all remaining shareholders following the completion of
the Distribution in Specie.
Distribution in Specie
Shareholders will have already received the circular relating to the
Distribution in Specie for 'D' shareholders and this process will be
completed during the summer. In addition, 'C' Shares are being
converted into Ordinary shares on 12 June 2009 with new Ordinary
share certificates being sent out on 26 June. As a result, your
Company will have only one class of share by the time I write my
interim report to you in October. A full timetable for the
Distribution in Specie is shown on page 20.
Outlook
Whether for small or larger companies, the outlook for the months
ahead is one of economic difficulties and a continuation of the
challenges which have become the norm over the past year. However,
for smaller companies, the situation is compounded by ongoing
difficulties in the banking industry, which are likely to mean that
debt facilities remain severely constrained. If the government
succeeds in its attempts to ease these constraints, and does not have
to resort to yet more indebtedness, which may act as a depressant on
the economy for a long while, then the recent rally in share prices
which has started to extend to the smallest of companies can
continue. In addition, if smaller companies remain less favoured by
banks, there is an interesting opportunity for investors to provide
capital to good companies at attractive share price ratings. With
this in mind, the Board's strategy remains to maintain an appropriate
level of liquidity in the balance sheet to achieve four aims which
should benefit shareholders in the years to come:
* to take advantage of new investment opportunities as they arise;
and
* to support further investment in existing portfolio companies if
required; and
* to assist liquidity in the Company's shares through the buy back
facility; and
* to establish a consistent dividend flow over time.
By adhering to sound investment principles in applying these aims, I
hope and trust that in a year's time, as the stock market
discriminates between companies, it will be possible to report that
the recent recovery in the NAVs to 29.3p for the Ordinary shares and
76.6p for the C&D shares (as at 13 May 2009) has made further
progress.
Elizabeth Kennedy
Chairman
22 May 2009
Investment Manager's Review
The AIM Market
In the twelve months to 28 February 2009 the AIM Index fell by 61%,
severely impacted by the well publicised banking crisis and a rapidly
deteriorating economic outlook. As is usual during periods of
uncertainty, investors shun small companies in favour of larger and
more liquid investments. However, as you will be aware, the latter
fared little better as the banking crisis unfolded.
The severe de-rating of shares has been particularly marked in the
microcap sector where your VCT makes its investments. This has made
the process of investing harder in the short term because new
companies looking to float have been put off by the constant stream
of bad news about the economy and financial markets and the
inevitably lower values afforded to businesses by the stock market.
This is well illustrated in the chart below, which shows the funds
raised on AIM over the year. Most of the VCT qualifying
opportunities that have arisen have been further fundraisings for
existing companies, many of which have been at lower prices than a
year ago.
Performance
The total return (being NAV plus dividends paid) of the Ordinary
shares and 'C' &' D' shares fell by 20.6% and 24.6% respectively
after adding back 2p of dividends in the year to 28 February 2009 in
each case. Although disappointing, this reflected the market
conditions outlined above. The FTSE All share Index fell 36.8% and
the Smaller Companies Index ex Investment Trusts fell by 51.5%. The
AIM Index fared even worse as the previous outperformance of the
resource sector unwound and poorly financed companies suffered savage
share price falls. The performance of the C&D shares NAV was helped
by the higher cash weighting compared with the Ordinary share
portfolio, as it only reached its 70% investment level right at the
end of the period.
Whilst new investments have been made at advantageous prices, the
existing portfolios have suffered from both deteriorating economic
conditions and from reduced bank funding, especially in the second
half of the financial year. It is no surprise that many of the
Government's current economic and financing measures are aimed at
promoting funding facilities for smaller companies. The businesses
in the Company's portfolio have direct experience of the treatment
the smallest companies have been subjected to as the banking
industry's problems have unfolded. Sadly, the investment in Fishworks
was a victim of this when the bank forced it to call in an
administrator. It is not surprising therefore that the majority of
the NAV falls now being reported occurred in the second half of the
financial year. It has to be hoped that the worst, in terms of share
price falls, is now over and is reflected in share price ratings.
As the last interim and annual accounts noted, smaller company shares
have been steadily derated. This process has gathered considerable
momentum in the last six months of the financial year. It has
appeared, for much of the time, to be indiscriminate and a function
of greater risk aversion rather than any view of an individual
company's prospects. Examples of this would be Vertu Motors and Bond
International Software where the cyclical nature of their businesses
and the likelihood of downgrades to forecasts caused their share
prices to fall to levels which suggested that they were in danger of
failing. Both have since seen their share prices rebound quite
strongly.
New Investments
The priority for the year was to make enough VCT qualifying
investments to achieve the 70% limit across the two portfolios and
thus maintain VCT status. We do not believe that we had to
compromise on the quality of investments, despite the flow of issues
being more subdued than has historically been the case. Over the
year, a total of GBP5.33m was invested in eight qualifying
investments. They were all in the C&D portfolio, as the Ordinary
portfolio was already more than 80% invested in qualifying holdings.
In the second half of the financial year, the Company completed five
investments. New investments were made in Advanced Computer
Software, a company set up to consolidate providers of software to
the NHS and Praesepe, an operator of high street gaming centres
looking to consolidate a fragmented sector. The new funds will allow
this well respected management team to continue to grow and make
acquisitions. The other new holding is Managed Support Services, a
company which has been rescued by new management and is now looking
to grow. This management team has achieved success in similar
circumstances previously so we have, in effect, backed a management
team with a small profitable operation and cash to fund growth. We
made a follow on investment in Lombard Medical, a healthcare group in
the middle of a very promising open trial for thoracic aortic
stents. It now has the funds to finish the trial and breathing space
to tie up a deal with a large pharmaceutical company. The investment
was made through a convertible loan note, which has since been
converted into Ordinary shares. We also topped up the investment in
Brulines to give the company the flexibility to grow into new areas.
Disposals
There were few disposals during the year as the emphasis was on
achieving the 70% investment threshold for VCT purposes. In the
Ordinary portfolio, Imprint was bid for early in the period and
Freedom 4 had a capital reorganisation and returned a significant
portion of the investment to shareholders in cash. The holding in
IMS was written down to zero when it de-listed. The holding in
Optimisa was also sold at a loss as we feared the trading environment
would worsen.
In the C&D portfolios we also sold the Optimisa holding and the main
other disposals were all of non-qualifying investments including
floating rate notes and the entire holding in the Close Special
Situations Fund which was disposed of at the end of July 2008
realising a very small loss.
Outlook
The steady stream of bad news about the state of the banks, the
economy and Government finances continues to dominate the press, not
helped by the recent budget which underlined the extent of the debt
problems facing this country. However, for those companies without
uncomfortable levels of debt, life, whilst undoubtedly tougher, goes
on. This message seems to have got through to the stock market and
there are signs of investors looking for value amongst share prices
that have fallen too far. It is for this reason that smaller
companies have outperformed their larger peers so far this year, as
the scale of the rating discounts they were trading at has become
apparent. It remains to be seen whether the economy is past its
worst, but if it improves from here there should be scope for the
asset values to recover as investments made over the past three years
mature.
If you have any questions on any aspect of your investment, please
call one of the team on 0800 316 2347.
The AIM Team
Octopus Investments Limited
Ten Largest Holdings by Value - Ordinary shares
Brooks MacDonald Group plc
Provider of asset management and financial consulting services with
a particular emphasis on the pensions market.
Cost: GBP100,000
Valuation: GBP179,000
Valuation basis: Bid price
Equity held: 0.72%
Last audited accounts: 30 June 2008
Profit before tax: GBP2.03m
Net assets: GBP5.84m
Mears Group plc
Mears is a building maintenance contractor to local authorities, the
MOD and the private sector.
Cost: GBP130,000
Valuation: GBP138,000
Valuation basis: Bid Price
Equity held: 0.08%
Last audited accounts: 31 December 2008
Profit before tax: GBP16.58m
Net assets: GBP95.7m
Research Now plc
Research Now operates specialist online research panels in the UK,
Europe, the US and Asia.
Cost: GBP73,000
Valuation: GBP121,000
Valuation basis: Bid Price
Equity held: 0.32%
Last audited accounts: 31 October 2008
Profit before tax: GBP5.7m
Net assets: GBP24.81m
Mattioli Woods plc
Provider of pensions consultancy and administration services.
Cost: GBP61,000
Valuation: GBP109,000
Valuation basis: Bid Price
Equity held: 0.27%
Last audited accounts: 31 May 2008
Profit before tax: GBP3.51m
Net assets: GBP14.03m
Atlantic Global plc
Provider of resource management software.
Cost: GBP186,000
Valuation: GBP104,000
Valuation basis: Bid Price
Equity held: 3.25%
Last audited accounts: 31 December 2008
Profit before tax: GBP0.4m
Net assets: GBP5.2m
Melorio plc
Melorio plc was formed to consolidate the UK vocational training
market. In September 2007, it acquired CLW, the UK's largest provider
of on-site construction assessment and training. As well as the
construction industry, Melorio will focus on acquisitions within the
utility, logistics and care sectors.
Cost: GBP82,000
Valuation: GBP69,000
Valuation basis: Bid price
Equity held: 0.21%
Last audited accounts: March 2008
Profit before tax: GBP1.7 m
Net assets: GBP30.6 m
Concateno plc
Provider of drug and alcohol testing services
Cost: GBP77,000
Valuation: GBP64,000
Valuation basis: Bid Price
Equity held: 0.08%
Last audited accounts: 31st December 2008
Profit before tax: GBP0.592m
Net assets: GBP116.02m
Brulines plc
Provider of beer quality monitoring and revenue protection systems to
the pub industry
Cost: GBP68,000
Valuation: GBP60,000
Valuation basis: Bid price
Equity held: 0.20%
Last audited accounts: 31 March 2008
Profit before tax: GBP4.17m
Net assets: GBP13.26m
Medical House plc
Specialises in the design, development, licensing and supply of
innovative drug delivery devices for global pharmaceutical and
biotechnology industry clients
Cost: GBP167,000
Valuation: GBP46,000
Valuation basis: Bid price
Equity held: 0.53%
Last audited accounts: 31 December 2008
Profit before tax: GBP0.68m
Net assets: GBP1.97m
Bond International plc
Provider of business software and support solutions to the
recruitment and human resources industry.
Cost: GBP43,000
Valuation: GBP44,000
Valuation basis: Bid price
Equity held: 0.33%
Last audited accounts: 31 December 2008
Profit before tax: GBP2.8m
Net assets: GBP31.51m
Ten Largest Holdings by Value - 'C' & 'D' shares
Brulines plc
Provider of beer quality monitoring and revenue protection equipment
to the pub industry.
Cost: GBP903,000
Valuation: GBP790,000
Valuation basis: Bid price
Equity held: 2.60%
Last audited accounts: 31 March 2008
Profit before tax: GBP4.17m
Net assets: GBP13.26m
Advanced Computer Software plc
The group was formed to acquire and manage software businesses in
sectors where the directors believe there are opportunities for
consolidation. It has made one healthcare related acquisition to
date.
Cost: GBP650,000
Valuation: GBP765,000
Valuation basis: Bid price
Equity held: 2.00%
Last audited accounts: 28 February 2009
Profit before tax: GBP1.1m
Net assets: GBP25.44m
Managed Support Services plc
MSS installs and maintains air conditioning systems. It is also
seeking to acquire other businesses with money raised earlier this
year.
Cost: GBP750,000
Valuation: GBP762,000
Valuation basis: Bid price
Equity held: 5.67%
Last audited accounts: 31 March 2008
Profit before tax: GBP8.91m loss
Net assets: GBP5.86m
Praesepe plc
Praesepe operates low stake high street gaming outlets under the
Cashino brand. The Group was established to consolidate this
marketplace.
Cost: GBP700,000
Valuation: GBP700,000
Valuation basis: Bid price
Equity held: 4.14%
Last audited accounts: 31 December 2008
Profit before tax: GBP3.87m loss
Net assets: GBP8.7m
IS Pharma plc
IS Pharma plc is an international pharmaceutical company involved in
the development and commercialisation of niche healthcare products.
Cost: GBP902,000
Valuation: GBP679,000
Valuation basis: Bid price
Equity held: 3.81%
Last audited accounts: 31 March 2008
Profit before tax: GBP1.2 m
Net assets: GBP8.7 m
Animalcare plc
Manufacturer and distributor of veterinary medicines, identification
chips and other products for pets and livestock.
Cost: GBP485,000
Valuation: GBP617,000
Valuation basis: Bid price
Equity held: 4.47%
Last audited accounts: June 2008
Profit before tax: GBP1.1 m
Net assets: GBP14.6 m
Clerkenwell Ventures plc
Shell which has failed to find a qualifying investment and is now
returning cash to shareholders.
Cost: GBP550,000
Valuation: GBP447,000
Valuation basis: Bid price
Equity held: 1.76%
Last audited accounts: September 2008
Profit before interest & tax: GBP0.7 m
Net assets: GBP29.8 m
Pressure Technologies plc
Pressure Technologies plc is the holding company for Chesterfield
Special Cylinders ("CSC"). CSC designs, manufactures and offers
testing and refurbishment services for a range of speciality high
pressure, seamless steel gas cylinders for global energy and defence
markets.
Cost: GBP302,000
Valuation: GBP432,000
Valuation basis: Bid price
Equity held: 1.78%
Last audited accounts: September 2008
Profit before tax: GBP5.0 m
Net assets: GBP11.2 m
Melorio plc
Melorio plc was formed to consolidate the UK vocational training
market. In September 2007, it acquired CLW, the UK's largest provider
of on-site construction assessment and training. As well as the
construction industry, Melorio will focus on acquisitions within the
utility, logistics and care sectors.
Cost: GBP490,000
Valuation: GBP412,000
Valuation basis: Bid price
Equity held: 1.25%
Last audited accounts: March 2008
Profit before tax: GBP1.7 m
Net assets: GBP30.6 m
Mount Engineering plc
Manufacturer and supplier of high precision thread conversion
adaptors which are sold mainly to the oil industry.
Cost: GBP431,000
Valuation: GBP333,000
Valuation basis: Bid price
Equity held: 2.52%
Last audited accounts: 31 December 2008
Profit before tax: GBP3.1 million
Net assets: GBP18.4 million
Directors' Responsibility Statement
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;
* prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping 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.
The Directors confirm that to the best of their knowledge the
financial statements for the year ended 28 February 2009 comply with
the requirements set out above and that suitable accounting policies,
consistently applied and supported by reasonable and prudent
judgement, have been used in their preparation. 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.
Under applicable law and regulations, the Directors are responsible
for preparing a Directors' Report (including Business Review),
Directors' Remuneration Report and Corporate Governance Statement
which comply with that law and those regulations.
In so far as the Directors are aware:
* there is no relevant audit information of which the Company's
auditor is unaware; and
* the Directors have taken all steps that they ought to have taken
to make themselves aware of any relevant audit information and to
establish that the auditor is aware of that information.
The Manager is responsible for the maintenance and integrity of the
corporate and financial information included on the Investment
Manager's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements and other
information included in annual reports may differ from legislation in
other jurisdictions. The work carried out by PKF (UK) LLP as
independent auditor of the Company does not involve consideration of
the maintenance and integrity of the website and accordingly they
accept no responsibility for any changes that have occurred to the
financial statements since they were initially presented on the
website.
The Directors confirm to the best of their knowledge that:
* the financial statements, prepared in accordance with UK
Generally Accepted Accounting Practice (UK GAAP) and the 2003
Statement of Recommended practice, "Financial Statements of
Investment Trust Companies" (SORP),revised December 2005, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Company.
* the annual report includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
Brief biographical notes on the Directors are given on page 22
On Behalf of the Board
Elizabeth Kennedy
Chairman
22 May 2009
Income Statement
Ordinary Shares
Year to 28 February 2009 Year to 29 February 2008
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/gain on
disposal of
fixed asset
investments 10 - (40) (40) - 258 258
Loss on
disposal of
current asset
investments 11 - - - - - -
Loss on
valuation of
fixed asset
investments 10 - (849) (849) - (1,147) (1,147)
Loss on
valuation of
current asset
investments 11 * - - - - -
Investment
income 2 39 - 39 55 - 55
Investment
management fees 3 (12) (35) (47) (22) (67) (89)
Management fee
VAT rebate 3 5 14 19 - - -
Other expenses 4 (33) - (33) (30) - (30)
Profit/(loss)
on ordinary
activities
before tax (1) (910) (911) 3 (956) (953)
Taxation on
profit/(loss)
on ordinary
activities 6 5 8 13 3 40 43
Profit/(loss)
on ordinary
activities
after tax 4 (902) (898) 6 (916) (910)
Earnings/(loss)
per share -
basic and
diluted 8 0.05p (12.31)p (12.26)p 0.08p (11.95)p (11.87)p
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial
statements
* the Company has only one class of business and derives its income
from investments made in shares and securities and from bank and
money market funds
The Company has no recognised gains or losses other than the results
for the year as set out above. Accordingly a statement of total
recognised gains or losses is not required.
Other than revaluation movements arising on investments held at fair
value through profit and loss account, there were no differences
between the profit/(loss) as stated above and at historical cost.
Income Statement
C & D Shares
Year to 29 February
Year to 28 February 2009 2008
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/gain on
disposal of
fixed asset
investments 10 - (609) (609) - 206 206
Loss on
disposal of
current asset
investments 11 - (94) (94) - (18) (18)
Loss on
valuation of
fixed asset
investments 10 - (3,780) (3,780) - (1,162) (1,162)
Loss on
valuation of
current asset
investments 11 - (217) (217) - (180) (180)
Investment
income 2 460 - 460 774 - 774
Investment
management fees 3 (76) (229) (305) (113) (340) (453)
Management fee
VAT rebate 3 23 69 92 - - -
Other expenses 4 (125) - (125) (117) - (117)
Profit/(loss)
on ordinary
activities
before tax 282 (4,860) (4,578) 544 (1,494) (950)
Taxation on
profit/(loss)
on ordinary
activities 6 (46) 33 (13) (130) 87 (43)
Profit/(loss)
on ordinary
activities
after tax 236 (4,827) (4,591) 414 (1,407) (993)
Earnings/(loss)
per share -
basic and
diluted 8 1.17p (23.97)p (22.80)p 2.05p (6.95)p (4.9)p
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial
statements
* the Company has only one class of business and derives its income
from investments made in shares and securities and from bank and
money market funds
The Company has no recognised gains or losses other than the results
for the year as set out above. Accordingly a statement of total
recognised gains or losses is not required.
Other than revaluation movements arising on investments held at fair
value through profit and loss account, there were no differences
between the profit/(loss) as stated above and at historical cost.
Income Statement
Total
Year to 29 February
Year to 28 February 2009 2008
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/gain on
disposal of
fixed asset
investments 10 - (649) (649) - 464 464
Loss on
disposal of
current asset
investments 11 - (94) (94) - (18) (18)
Loss on
valuation of
fixed asset
investments 10 - (4,629) (4,629) - (2,309) (2,309)
Loss on
valuation of
current asset
investments 11 - (217) (217) - (180) (180)
Investment
income 2 499 - 499 829 - 829
Investment
management
fees 3 (88) (264) (352) (135) (407) (542)
Management fee
VAT rebate 3 28 83 111 - - -
Other expenses 4 (158) - (158) (147) - (147)
Profit/(loss)
on ordinary
activities
before tax 281 (5,770) (5,489) 547 (2,450) (1,903)
Taxation on
profit/(loss)
on ordinary
activities 6 (41) 41 - (127) 127 -
Profit/(loss)
on ordinary
activities
after tax 240 (5,729) (5,489) 420 (2,323) (1,903)
* the 'Total' column of this statement represents the statutory
Profit and Loss account of the Company; the supplementary revenue
return and capital return columns have been prepared in
accordance with the AITC Statement of Recommended Practice
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial
statements
* the Company has only one class of business and derives its income
from investments made in shares and securities and from bank and
money market funds
The Company has no recognised gains or losses other than the results
for the year as set out above. Accordingly a statement of total
recognised gains or losses is not required.
Other than revaluation movements arising on investments held at fair
value through profit and loss account, there were no differences
between the profit/(loss) as stated above and at historical cost.
Balance Sheet
Ordinary Shares
As at 28 February As at 29
Notes 2009 February 2008
GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset investments 10 1,362 2,426
Current assets:
Investments 11 - -
Debtors 12 38 48
Cash at bank 489 577
527 625
Creditors: amounts falling due
within one year 13 (18) (15)
Net current assets 509 610
Net assets 1,871 3,036
Called up equity share capital 14 383 383
Special distributable reserve 15 7,334 7,333
Capital redemption reserve 15 61 61
Capital reserve - realised 15 (4,464) (4,124)
- 15
unrealised (870) (162)
Own shares held in treasury 15 (166) (44)
Revenue reserve 15 (407) (411)
Total equity shareholders'
funds 1,871 3,036
Net asset value per share -
basic and diluted 9 25.68p 40.18p
The accompanying notes are an integral part of the financial
statements.
The statements were approved by the directors and authorised for
issue on 22 May 2009 and are signed on their behalf by:
Elizabeth Kennedy
Chairman
22 May 2009
Balance Sheet
C & D Shares
As at 28 February As at 29
Notes 2009 February 2008
GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset investments 10 8,194 7,356
Current assets:
Investments 11 3,723 8,475
Debtors 12 207 85
Cash at bank 921 2,263
4,851 10,823
Creditors: amounts falling due
within one year 13 (45) (114)
Net current assets 4,806 10,709
Net assets 13,000 18,065
Called up equity share capital 14 1,012 1,012
Special distributable reserve 15 18,077 18,077
Capital redemption reserve 15 - -
Capital reserve - realised 15 (1,554) (302)
- 15
unrealised (4,714) (937)
Own shares held in treasury 15 (70) -
Revenue reserve 15 249 215
Total equity shareholders'
funds 13,000 18,065
Net asset value per share
basic and diluted 9 64.55p 89.25p
The accompanying notes are an integral part of the financial
statements.
The statements were approved by the directors and authorised for
issue on 22 May 2009 and are signed on their behalf by:
Elizabeth Kennedy
Chairman
22 May 2009
Balance Sheet
Total
As at 28 As at 29
Notes February 2009 February 2008
GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset investments 10 9,556 9,782
Current assets:
Investments 11 3,723 8,475
Debtors 12 245 133
Cash at bank 1,410 2,840
5,378 11,448
Creditors: amounts falling due
within one year 13 (63) (129)
Net current assets 5,315 11,319
Net assets 14,871 21,101
Called up equity share capital 14 1,395 1,395
Special distributable reserve 15 25,411 25,410
Capital redemption reserve 15 61 61
Capital reserve - realised 15 (6,018) (4,426)
- 15
unrealised (5,584) (1,099)
Own shares held in treasury 15 (236) (44)
Revenue reserve 15 (158) (196)
Total equity shareholders' funds 14,871 21,101
The accompanying notes are an integral part of the financial
statements.
The statements were approved by the directors and authorised for
issue on 22 May 2009 and are signed on their behalf by:
Elizabeth Kennedy
Chairman
22 May 2009
Reconciliation of Movements in Shareholders' Funds
Ordinary shares
Year to 28 February Year to 29 February
2009 2008
GBP'000
Shareholders' funds at start
of year 3,036 4,889
Loss for the period (898) (910)
Shares purchased for
cancellation - (55)
Shares purchased and held in
treasury (121) (44)
Dividends paid (146) (844)
Shareholders' funds at end of
year 1,871 3,036
Reconciliation of Movements in Shareholders' Funds
C & D shares
Year to 28 February Year to 29 February
2009 2008
GBP'000 GBP'000
Shareholders' funds at start
of year 18,065 19,505
Loss for the period (4,591) (993)
Shares purchased and held in
treasury (70) -
Dividends paid (404) (447)
Shareholders' funds at end of
year 13,000 18,065
Reconciliation of Movements in Shareholders' Funds
Total
Year to 28 February Year to 29 February
2009 2008
GBP'000 GBP'000
Shareholders' funds at start
of year 21,101 24,394
Loss for the period (5,489) (1,903)
Shares purchased for
cancellation - (55)
Shares purchased and held in
treasury (191) (44)
Dividends paid (550) (1,291)
Shareholders' funds at end of
year 14,871 21,101
Cash Flow Statement
Ordinary shares
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
Net cash inflow/(outflow) from
operating activities (9) (9)
Return on investments and servicing of
finance
Interest paid - -
Taxation: UK Corporation tax paid 13 -
Capital expenditure and financial
investment
Purchase of investments - (221)
Disposal of investments 175 868
Net cash inflow from investing
activities 175 647
Management of liquid resources :
Net sale of liquid resources - 301
Equity dividends paid
Capital dividends paid (146) (844)
Net cash inflow before financing 33 95
Financing :
Own shares held in treasury (121) (44)
Cancellation of shares - (55)
Net cash outflow from financing (121) (99)
Decrease in cash resources (88) (4)
Reconciliation of Net Cash Flow to Movement in Liquid Resources
Ordinary shares
Year to 28 February Year to 29 February
2009 2008
GBP'000 GBP'000
Decrease in cash at bank (88) (4)
Decrease in cash
equivalents - (300)
Opening net liquid
resources 577 881
Net liquid resources 489 577
Reconciliation of Loss before Taxation to Cash Flow from Operating
Activities
Ordinary shares
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
Loss on ordinary activities before
tax (911) (953)
Decrease in debtors 10 50
Increase in creditors 3 5
Loss/(gain) on realisation of
investments 40 (258)
Loss on valuation of investments 849 1,147
Inflow/(outflow) from operating
activities (9) (9)
Liquid Resources as at:
Ordinary shares
28 February 2009 29 February 2008
GBP'000 GBP'000
Cash at bank 489 577
Floating Rate Notes - -
OEICs - -
Net liquid resources 489 577
Cash Flow Statement
C & D shares
Year to 28 Year to 29
Note February 2009 February 2008
GBP'000 GBP'000
Net cash (outflow)/inflow from
operating activities (69) 231
Return on investments and servicing
of finance
Interest paid - -
Taxation: UK Corporation tax paid (13) -
Capital expenditure and financial
investment
Purchase of investments (5,333) (5,675)
Disposal of investments 106 377
Net cash outflow from investing
activities (5,227) (6,283)
Management of liquid resources :
Net sale of liquid resources 4,441 7,487
Equity dividends paid
Revenue dividends paid (202) (447)
Capital dividends paid (202) -
Net cash (outflow) / inflow before
financing (1,272) 1,973
Financing
Issue of share capital - 4
Own shares held in treasury (70) -
Net cash (outflow)/inflow from
financing (70) 4
(Decrease)/increase in cash
resources (1,342) 1,977
Reconciliation of Net Cash Flow to Movement in Liquid Resources
C & D shares
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
(Decrease)/increase in cash at
bank (1,342) 1,977
Decrease in cash equivalents (4,752) (7,685)
Opening net liquid resources 10,738 16,446
Net liquid resources 4,644 10,738
Reconciliation of Loss before Taxation to Cash Flow from Operating
Activities
C & D shares
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
Loss on ordinary activities before
tax (4,578) (950)
(Increase)/decrease in debtors (122) 44
Decrease in creditors (69) (17)
Loss/(gain) on realisation of
investments 703 (188)
Loss on valuation of investments 3,997 1,342
(Outflow)/inflow from operating
activities (69) 231
Liquid Resources as at:
C & D shares
28 February 2009 29 February 2008
GBP'000 GBP'000
Cash at bank 921 2,263
Floating Rate Notes 3,723 7,418
OEICs - 1,057
Net liquid resources 4,644 10,738
Cash Flow Statement
Total
Year to 28 Year to 29
Note February 2009 February 2008
GBP'000 GBP'000
Net cash (outflow) / inflow from
operating activities (78) 222
Capital expenditure and financial
investment
Purchase of investments (5,333) (5,896)
Disposal of investments 281 1,246
Net cash (outflow) / inflow from
investing activities (5,052) (5,635)
Management of cash equivalent
resources :
Net sale of cash equivalents 4,441 7,787
Equity dividends paid
Revenue dividends paid (202) (447)
Capital dividends paid (348) (844)
Net cash (outflow) / inflow before
financing (1,239) 2,068
Financing
Issue of share capital - 4
Own shares held in treasury (191) (44)
Cancellation of shares - (55)
Net cash (outflow)/inflow from
financing (191) (95)
(Decrease)/Increase in cash
resources (1,430) 1,973
Reconciliation of Net Cash Flow to Movement in Liquid Resources
Total
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
(Decrease)/increase in cash at
bank (1,430) 1,973
Decrease in cash equivalents (4,752) (7,985)
Opening net liquid resources 11,315 17,327
Net liquid resources 5,133 11,315
Reconciliation of Loss before Taxation to Cash Flow from Operating
Activities
Total
Year to 28 Year to 29
February 2009 February 2008
GBP'000 GBP'000
Loss on ordinary activities before
tax (5,489) (1,903)
Decrease/ (increase) in debtors (112) 94
Decrease in creditors (66) (12)
Loss/(gain) on realisation of
investments 743 (446)
Loss on valuation of investments 4,846 2,489
(Outflow)/Inflow from operating
activities (78) 222
Liquid Resources as at:
Total
28 February 2009 29 February 2008
GBP'000 GBP'000
Cash at bank 1,410 2,840
Floating Rate Notes 3,723 7,417
OEICs - 1,057
Net liquid resources 5,133 11,315
Notes to the Financial Statements
1. Principal Accounting policies
The financial statements have been prepared under the historical cost
convention, except for the revaluation of certain financial
instruments, and in accordance with UK Generally Accepted Accounting
Practice (UK GAAP). Where presentational guidance set out in the
Statement of Recommended Practice (SORP) "Financial Statements of
Investment Trust Companies", revised December 2005, is consistent
with the requirements of UK GAAP, the directors have sought to
prepare the financial statements on a consistent basis compliant with
the recommendations of the SORP.
The principal accounting policies have remained unchanged from those
set out in the Company's 2008 annual report and financial
statements. A summary of the principal accounting policies is set
out below.
The accounts have been drawn up to include a statutory Profit and
Loss account in accordance with Schedule 4 of the Companies Act 1985.
Investment company status was revoked on 25 November 2005.
Investments
Purchases and sales of investments are recognised in the financial
statements at the date of the transaction (trade date).
These investments will be managed and their performance evaluated on
a fair value basis in accordance with a documented investment
strategy and information about them has to be provided internally on
that basis to the Board. Accordingly as permitted by FRS 26, the
investments will be designated as fair value through profit and loss
("FVTPL") on the basis that they qualify as a group of assets
managed, and whose performance is evaluated, on a fair value basis in
accordance with a documented investment strategy. The Company's
investments are measured at subsequent reporting dates at fair
value.
In the case of investments quoted on a recognised stock exchange,
fair value is established by reference to the closing bid price on
the relevant date or the last traded price, depending upon convention
of the exchange on which the investment is quoted. This is
consistent with the International Private Equity and Venture Capital
(IPEVC) guidelines. For the avoidance of doubt, the Company does not
hold any unquoted investments.
Gains and losses arising from changes in fair value of investments
are recognised as part of the capital return within the Income
Statement and allocated to the capital reserve unrealised.
In preparation of the valuations of assets the directors are required
to make judgements and estimates that are reasonable and incorporate
their knowledge of the performance of the investee companies.
Current asset investments
Current asset investments comprise Floating Rate Notes ("FRN") and
Open Ended Investment Companies ("OEICs") and are designated as
FVTPL. Gains and losses arising from changes in fair value of
investments are recognised as part of the capital return within the
Income Statement and allocated to the capital reserve unrealised
reserve as appropriate. FRNs and OEICs are classified as current
asset investments as they are investments held for the short term and
comparative classification in the Balance Sheet has been restated
accordingly.
The current asset investments are all invested with the Company's
cash manager and are readily convertible into cash at the choice of
the Company. The current asset investments are held for trading, are
actively managed and the performance is evaluated on a fair value
basis in accordance with a documented investment strategy.
Information about them has to be provided internally on that basis to
the Board.
Income
Investment income includes interest earned on bank balances and money
market securities and includes income tax withheld at source.
Dividend income is shown net of any related tax credit.
Dividends receivable are brought into account when the Company's
right to receive payment is established and there is no reasonable
doubt that payment will be received. Fixed returns on debt and money
market securities are recognised on a time apportionment basis so as
to reflect the effective yield, provided there is no reasonable doubt
that payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged wholly to revenue with the exception of the investment
management fee, which has been charged 25% to the revenue account and
75% to the realised capital reserve to reflect, in the Directors'
opinion, the expected long term split of returns in the form of
income and capital gains respectively from the investment portfolio.
Revenue and capital
The revenue column of the Income Statement includes all income and
revenue expenses of the Company. The capital column includes
realised and unrealised gains and losses on investments. Gains and
losses arising from changes in fair value are considered to be
realised only to the extent that they are readily convertible to cash
in full at the balance sheet date.
Taxation
Corporation tax payable is applied to profits chargeable to
corporation tax, if any, at the current rate. The tax effect of
different items of income/gain and expenditure/loss is allocated
between capital and revenue return on the "marginal" basis as
recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the
balance sheet date where transactions or events have occurred at that
date that will result in an obligation to pay more, or a right to pay
less tax, with the exception that deferred tax assets are recognised
only to the extent that the Directors consider that it is more likely
than not that there will be suitable taxable profits from which the
future reversal of the underlying timing difference can be deducted.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in
hand and deposits repayable on demand, less overdrafts payable on
demand. Liquid resources are current asset investments which are
disposable without curtailing or disrupting the business and are
either readily convertible into known amounts of cash at or close to
their carrying values or traded in an active market. Liquid
resources comprise term deposits of less than one year (other than
cash), government securities, investment grade bonds and investments
in money market managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair
value and subsequently measured at amortised cost.
Financial instruments
The Company's principal financial assets are its investments and the
policies in relation to those assets are set out above. Financial
liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the
assets of the entity after deducting all of its financial
liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this
is classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
Dividends
Dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been
established. This liability is established when the dividends
proposed by the Board are approved by the shareholders.
2. Income
28 February 2009 29 February 2008
'C' &
Ordinary 'C' & 'D' Ordinary 'D'
Shares shares Total Shares shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Dividend income 21 63 84 17 23 40
Floating rate note
interest - 328 328 15 653 668
Bank deposit interest 18 63 81 23 82 105
Management fee rebates - 6 6 - 16 16
39 460 499 55 774 829
3. Investment management fees
28 February 2009
Ordinary Shares 'C' & 'D' shares Total
GBP'000 GBP'000 GBP'000
Investment management fee:
Revenue 12 76 88
Capital 35 229 264
Total 47 305 352
VAT rebate:
Revenue (5) (23) (28)
Capital (14) (69) (83)
Total (19) (92) (111)
28 213 241
29 February 2008
Ordinary Shares Ordinary Shares Ordinary Shares
GBP'000 GBP'000 GBP'000
Investment management
fee:
Revenue 22 113 135
Capital 67 340 407
Total 89 453 542
For the purposes of the revenue and capital columns in the Income
Statement, the management fee (including VAT) has been allocated 25%
to revenue and 75% to capital, in line with the Board's expected long
term return in the form of income and capital gains respectively from
the Company's investment portfolio.
Octopus provides investment management and accounting and
administration services to the Company under a management agreement
dated 31 October 2003 which was revised in December 2005 for an
initial fixed term to April 2009 and may be terminated at any time
thereafter by not less than six months' notice given by either
party. No compensation is payable in the event of terminating the
agreement by either party, if the required notice period is given.
The fee payable, should insufficient notice be given, will be equal
to the fee that would have been paid should continuous service be
provided, or the required notice period was given. The basis upon
which the management fee is calculated is disclosed within note 19 to
the financial statements.
The Chancellor of the Exchequer announced in his budget statement on
12 March 2008 that the Finance Act 2008 would contain draft
legislation exempting VCTs from VAT on management fees with effect
from 1 October 2008. This legislation was passed in July 2008 and as
such all VCTs are now exempt from paying VAT on management fees from
this date. Therefore VAT has not been included on management fees
since 1 October 2008 and has been rebated for previous years.
4. Other expenses
28 February 2009 29 February 2008
'C' & 'C' &
Ordinary 'D' Total 'D' Ordinary Total
Shares shares Shares shares Shares Shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' remuneration 8 34 42 10 38 48
Fees payable to the
Company's auditor for
the audit of the
financial statements* 3 11 14 3 12 15
Bank charges and safe
custody fees 1 3 4 1 3 4
Legal and professional
expenses 3 14 17 4 15 19
Other administration
expenses 18 63 81 12 49 61
33 125 158 30 117 147
*Please note all 2008 audit fees were payable to Deloitte & Touche
LLP. All fees relating to the Company's auditor in 2009 were paid
wholly to PKF LLP.
The total expense ratio for the Company for the year to 28 February
2009 was 2.8 per cent (2008: 3.3%). Total running costs are capped at
3.5%.
5. Directors' remuneration
28 February 2009 29 February 2008
GBP'000 GBP'000
Directors' emoluments
Elizabeth Anita Kennedy 16 16
Sir Aubrey Thomas Brocklebank 13 13
Alastair James Ritchie 13 13
42 42
None of the Directors received any other remuneration or benefit from
the Company during the year. The Company has no employees other than
non-executive directors. The average number of non-executive
Directors in the year was three (2008: three).
6. Tax on ordinary activities
The corporation tax charge for the year was GBPnil (2008: GBPnil).
Factors affecting the tax charge for the current year:
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 20.9% (2008: 30.0%). The differences
are explained below.
28 February 2009
Ordinary Shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax (1) (910) (911)
Current tax at 20.9% (2008: 30%) - (190) (190)
Income not liable to tax (5) - (5)
Expenses not deductible for tax purposes - 186 186
Utilisation of excess management expenses - (4) (4)
Marginal relief adjustment - - -
Total current tax charge (5) (8) (13)
28 February 2009
'C' & 'D' shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax 282 (4,860) (4,578)
Current tax at 20.9% (2008: 30%) 59 (1,015) (956)
Income not liable to tax (13) - (13)
Expenses not deductible for tax purposes - 982 982
Utilisation of excess management expenses - - -
Marginal relief adjustment - - -
Total current tax charge 46 (33) 13
28 February 2009
Total Shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax 281 (5,770) (5,489)
Current tax at 20.9% (2008: 30%) 59 (1,205) (1,146)
Income not liable to tax (18) - (18)
Expenses not deductible for tax purposes - 1,168 1,168
Utilisation of excess management expenses - (4) (4)
Marginal relief adjustment - - -
Total current tax charge 41 (41) -
28 February 2008
Ordinary shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax 3 (956) (953)
Current tax at 30% 1 (287) (286)
Income not liable to tax (5) - (5)
Expenses not deductible for tax purposes - 267 267
Utilisation of excess management expenses - (17) (17)
Marginal relief adjustment 1 (3) (2)
Total current tax charge (3) (40) (43)
28 February 2008
'C' & 'D' shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax 544 (1,494) (950)
Current tax at 30% 163 (448) (285)
Income not liable to tax (12) - (12)
Expenses not deductible for tax purposes - 346 346
Utilisation of excess management expenses - - -
Marginal relief adjustment (21) 15 (6)
Total current tax charge 130 (87) 43
28 February 2008
Total
'C' & 'D'
Ordinary Shares shares Total Shares
GBP'000 GBP'000 GBP'000
Loss on ordinary activities 547 (2,450) (1,903)
before tax
Current tax at 30% 164 (735) (571)
Income not liable to tax (17) - (17)
Expenses not deductible for
tax purposes - 613 613
Utilisation of excess
management expenses - (17) (17)
Marginal relief adjustment (20) 12 (8)
Total current tax charge 127 (127) -
Approved venture capital trusts are exempt from tax on capital gains
within the Company. Since the Directors intend that the Company will
continue to conduct its affairs so as to maintain its approval as a
venture capital trust, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or
disposal of investments.
7. Dividends
The Board wish to continue with their current dividend policy and
will propose a final dividend to remaining shareholders following the
completion of the Distribution in Specie. This will be completed by
23 July 2009 and a dividend announcement will follow shortly after
this date.
Ordinary Shares
The interim dividend declared of 1.0 pence per Ordinary share for the
six months ending 31 August 2008 was paid on 9 January 2009 to
shareholders on the register on 12 December 2008.
C & D Shares
The interim dividend declared of 1.0 pence per C & D share for the
six months ending 31 August 2008 was paid on 9 January 2009 to
shareholders on the register on 12 December 2008.
8. Earnings per share
Ordinary shares
The earnings per Ordinary share is based on loss after tax of
GBP898,000 (2008: GBP910,000) and on 7,330,190 (2008: 7,668,121) Ordinary
shares, being the weighted average number of shares in issue during
the year.
There are no potentially dilutive capital instruments in issue and,
as such, the basic and diluted earnings per share are identical.
'C' & 'D' shares
The earnings per 'C' & 'D' share is based on loss after tax of
GBP4,591,000 (2008: GBP993,000) and on 20,135,793 (2008: 20,240,793) 'C'
& 'D' shares, being the weighted average number of shares in issue
during the year.
There are no potentially dilutive capital instruments in issue and,
as such, the basic and diluted earnings per share are identical.
9. Net asset value per share
Ordinary shares
The calculation of net asset value per Ordinary share as at 28
February 2009 is based on net assets of GBP1,871,000 (2007: GBP3,036,000)
divided by 7,284,864 (2007: 7,555,693) Ordinary shares in issue at
that date (excluding treasury shares).
'C' & 'D' shares
The calculation of net asset value per 'C' & 'D' share as at 28
February 2009 is based on net assets of GBP13,000,000 (2007:
GBP18,065,000) divided by 20,140,793 (2007: 20,240,793) 'C' & 'D'
Ordinary shares in issue at that date
10. Fixed asset investments
29 February 2008 28 February 2007
'C' & 'C' &
Ordinary 'D' Total Ordinary 'D' Total
Shares shares Shares Shares shares Shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Book cost 2,589 8,265 10,854 2,978 2,760 5,738
Revaluation (163) (909) (1,072) (985) 253 (732)
Valuation 2,426 7,356 9,782 3,963 3,013 6,976
28 February 2009 29 February 2008
GBP'000 GBP'000
Opening valuation 2,426 7,356 9,782 3,963 3,013 6,976
Purchases at cost - 5,333 5,333 221 5,675 5,896
Disposal proceeds (175) (106) (281) (869) (377) (1,246)
(Loss)/profit on
realisation of
investments
- current year (40) (609) (649) 258 206 464
Revaluation in year (849) (3,780) (4,629) (1,147) (1,162) (2,309)
Closing valuation 1,362 8,194 9,556 2,426 7,356 9,782
Book cost
- Ordinary shares 2,232 12,628 14,860 2,589 8,265 10,854
Revaluation
- Ordinary shares (870) (4,434) (5,304) (163) (909) (1,072)
Closing Valuation 1,362 8,194 9,556 2,426 7,356 9,782
Transaction costs on purchases and disposals for the year were GBPNil.
Further details of the fixed asset investments held by the Company
are shown within the Investment Manager's Review on pages 7 to 18.
All investments are designated as fair value through profit or loss
from the time of acquisition, and all capital gains or losses on
investments so designated. Given the nature of the Company's venture
capital investments, the changes in fair value of such investments
recognised in these financial statements are not considered to be
readily convertible to cash in full at the balance sheet date and
accordingly these gains are treated as unrealised.
At 28 February 2009 and 29 February 2008 there were no commitments in
respect of investments approved by the Investment Manager but not yet
completed.
11. Current asset investments
Current asset investments at 28 February 2009 and at 28 February 2009
comprised Open Ended Investment Company ("OEICs") and Floating Rate
Notes ("FRNs")*.
'C' & 'D' Shares
29 February 2008 28 February 2007
GBP'000 GBP'000
Opening Book cost
FRNs 7,504 15,009
OEICs 1,000 1,000
8,504 16,009
Revaluation
FRNs (86) (5)
OEICs 58 157
(28) 152
Closing valuation 8,475 16,161
28 February 2009 28 February 2008
GBP'000 GBP'000
Opening valuation 8,475 16,161
Disposal proceeds:
FRNs (3,467) (7,488)
OEICs (974) -
(4,441) (7,488)
Profit/(loss) in year on
realisation of investments:
FRNs (11) (18)
OEICs (83) -
(94) (18)
Revaluation in year:
FRNs (217) (80)
OEICs - (100)
(217) (180)
Closing valuation 3,723 8,475
Book cost
FRNs 4,003 7,504
OEICs - 1,000
4,003 8,504
Revaluation
FRNs (280) (86)
OEICs - 58
(280) (28)
Closing valuation 3,723 8,475
* FRNs represent money held pending investment and can be accessed
with 5 workings days notice. FRNs were classified as fixed asset
investments in the prior year but are classified as current asset
investments in the current year.
Transaction costs on purchases and disposals for the year were GBPNil.
12. Debtors
28 February 2009 29 February 2008
'C' & 'C' &
Ordinary 'D' Total Ordinary 'D' Total
shares shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Prepayments and accrued 2 30 32 5 85 90
income
Other debtors 36 171 207 - - -
Inter class debtor - 6 6 43 - 43
38 207 245 48 85 133
13. Creditors: amounts falling due within one year
28 February 2009 29 February 2008
'C' &
Ordinary 'C' & 'D' Total Ordinary 'D' Total
shares shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accruals 12 45 57 15 71 86
Inter class creditor 6 - 6 - 43 43
18 45 63 15 114 129
14. Share capital
28 February 2009 29 February 2008
GBP'000 GBP'000
Authorised:
36,000,000 (2008: 36,000,000)
Ordinary shares of 5p each 1,800 1,800
25,000,000 (2008: 25,000,000) 'C'
shares of 5p each 1,250 1,250
20,000,000 (2008: 20,000,000) 'D'
shares of 5p each 1,000 1,000
4,050 4,050
Allotted and fully paid up
(including treasury shares) GBP'000 GBP'000
7,669,349 (2008: 7,669,349)
Ordinary shares of 5p each 383 383
8,214,295 (2008: 8,214,295) 'C'
shares of 5p each 411 411
12,026,498 (2008: 12,026,498) 'D'
shares of 5p each 601 601
1,395 1,395
The capital of the Company is managed in accordance with its
investment policy with a view to the achievement of its investment
objective as set on page 27. The Company is not subject to any
externally imposed capital requirements.
The Company did not issue any shares in the year.
The Company repurchased the following shares; these are currently
held in Treasury:
* 28 Mar 2008: 5,000 Ordinary shares at a price of 35p per share
* 25 April 2008: 31,395 Ordinary shares at a price of 34.5p per
share
* 09 May 2008: 20,000 Ordinary shares at a price of 35.5p per share
* 23 June 2008: 65,168 Ordinary shares at a price of 34.5p per
share
* 27 June 2008: 110,000 Ordinary shares at a price of 35.5p per
share
* 4 July 2008: 75,000 'C' shares at a price of 74p per share
* 29 August 2008: 56,293 Ordinary shares at a price of 31p per
share
* 26 September 2008: 30,000 Ordinary shares at a price of 30p per
share
* 27 October 2008: 42,229 Ordinary shares at a price of 24p per
share
* 28 November 2008: 25,000 'D' shares at a price of 61.5p per share
* 9 January 2009: 24,400 Ordinary shares at a price of 23p per
share
The total nominal value of the Ordinary shares repurchased was
GBP19,224 representing 5.01% of the issued share capital.
The total nominal value of the 'C' and 'D' shares repurchased was
GBP5,000 representing 0.49% of the issued share capital.
15. Reserves
Ordinary Shares
Own
Capital Special Capital Capital shares
redemption distributable reserve reserve held in Revenue
reserve reserve realised unrealised treasury reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 28
February 2008 61 7,333 (4,124) (162) (44) (411)
Repurchase of
own shares - - - - (122) -
Profit on
ordinary
activities
after tax - - - - - 4
losses on
revaluation - - (41) (849) - -
Capitalisation
of management
fees - - (12) - - -
Prior period
gains/losses
on disposal - - (141) 141 - -
Dividends paid - - (146) - - -
Reverse b/fwd
stamp duty -
paid by Close 1 - - - -
Balance as at
28 February
2009 61 7,334 (4,464) (870) (166) (407)
'C' & 'D' Shares
Own
Capital Special Capital Capital shares
redemption distributable reserve reserve held in Revenue
reserve reserve realised unrealised treasury reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 28
February 2008 - 18,077 (302) (937) - 215
Repurchase of
own shares - - - - (70) -
Profit on
ordinary
activities
after tax - - - - - 236
losses on
revaluation - - (703) (3,997) - -
Capitalisation
of management
fees - - (127) - - -
Prior period
gains/losses
on disposal - - (220) 220 - --
Dividends paid - - (202) - - (202)
Reverse b/fwd
stamp duty -
paid by Close - - - - -
Balance as at
28 February
2009 - 18,077 (1,554) (4,714) (70) 249
When the Company revalues its investments during the period, any
gains or losses arising are credited/charged to the Income
Statement. Unrealised gains/losses are then transferred to the
capital reserve - unrealised. When an investment is sold any balance
held on the capital reserve unrealised is transferred to the capital
reserve - realised as a movement in reserves. The purpose of the
special distributable reserve was to create a reserve which will be
capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a
view to narrowing the discount at which the Company's shares trade to
net asset value.
16. Financial instruments and risk management
The Company's financial instruments comprise equity investments,
FRNs, cash balances and liquid resources. The Company holds financial
assets in accordance with its investment policy of investing mainly
in a portfolio of VCT qualifying AIM-quoted securities whilst holding
a proportion of its assets in cash or near-cash investments in order
to provide a reserve of liquidity.
Fixed and current asset investments (see note 10 and 11) are valued
at fair value. For quoted investments this is bid price. The fair
value of all other financial assets and liabilities is represented by
their carrying value in the balance sheet. The Directors believe
that the fair value of the assets held at the year end is equal to
their book value.
In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are price risk, interest rate risk, credit
risk and liquidity risk. The Company's approach to managing these
risks is set out below together with a description of the nature and
amount of the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined
with regard to the Company's investment objective, as outlined on
page 27. The management of market risk is part of the investment
management process and is a central feature of venture capital
investment. The Company's portfolio is managed in accordance with the
policies and procedures described in the Corporate Governance
statement on pages 37 to 40, having regard to the possible effects of
adverse price movements, with the objective of maximising overall
returns to shareholders. Investments in smaller companies, by their
nature, usually involve a higher degree of risk than investments in
larger companies quoted on a recognised stock exchange, though the
risk can be mitigated to a certain extent by diversifying the
portfolio across business sectors and asset classes. The overall
disposition of the Company's assets is regularly monitored by the
Board.
Details of the Company's investment portfolio at the balance sheet
date are set out on pages 10 to 12.
89.3% (29 February 2008: 86.5%) by value of the Company's net assets
comprises equity securities listed on the London Stock Exchange or
quoted on AIM. A 30% increase in the bid price of these securities as
at 28 February 2009 would have increased net assets and the total
return for the year by GBP3,983,700 (29 February 2008: GBP5,477,100); a
corresponding fall would have reduced net assets and the total return
for the year by the same amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a
result, the Company is exposed to fair value interest rate risk due
to fluctuations in the prevailing levels of market interest rates.
Floating rate
The Company's floating rate investments comprise cash held on
interest-bearing deposit accounts and, where appropriate, within
interest bearing money market securities. The benchmark rate which
determines the rate of interest receivable on such investments is the
bank base rate, which was 1.0% at 28 February 2009 (29 February 2008:
5.25%). The amounts held in floating rate investments at the balance
sheet date were as follows:
28 February 2009 29 February 2008
'C' & 'C' &
Ordinary 'D' Total Ordinary 'D' Total
shares shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Floating rate notes - 3,723 3,723 - 7,419 7,419
Open Ended Investment -
Companies - - - 1,057 1,057
Cash on deposit 489 921 1,410 577 2,263 2,840
489 4,644 5,133 577 10,739 11,316
A 1% increase in the base rate would increase income receivable from
these investments, net assets and the total return for the year by
GBP51,330 (29 February 2008: GBP113,160)
Credit risk
Credit risk is the risk that a counter party to a financial
instrument will fail to discharge an obligation or commitment that it
has entered into with the Company. The Investment Manager and the
Board carry out a regular review of counterparty risk. The carrying
values of financial assets represent the maximum credit risk exposure
at the balance sheet date.
At 28 February 2009 the Company's financial assets exposed to credit
risk comprised the following:
28 February 2009 29 February 2008
'C' & 'C' &
Ordinary 'D' Total Ordinary 'D' Total
shares shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments in floating
rate instruments - 3,723 3,723 - 7,419 7,419
Cash on deposit 489 921 1,410 577 2,263 2,840
Open Ended Investment
Companies - - - - 1,057 1,057
Accrued dividends and
interest receivable 1 27 28 4 73 77
490 4,671 5,161 581 10,812 11,393
Credit risk relating to listed money market securities is mitigated
by investing in money market instruments issued by major companies
and institutions with a minimum Moody's long term debt rating of 'A'.
Those assets of the Company which are traded on recognised stock
exchanges are held on the Company's behalf by third party custodians
(HSBC in the case of listed money market securities and quoted equity
securities). Bankruptcy or insolvency of a custodian could cause the
Company's rights with respect to securities held by the custodian to
be delayed or limited.
Credit risk arising on the sale of investments is considered to be
small due to the short settlement and the contracted agreements in
place with the settlement lawyers.
The Company's interest-bearing deposit and current accounts are
maintained with HSBC.
Other than cash or liquid money market funds, there were no
significant concentrations of credit risk to counterparties at 28
February 2009 or 29 February 2008.
Liquidity risk
The Company's financial assets include investments in AIM-quoted
companies, which by their nature involve a higher degree of risk than
investments on the main market. As a result, the Company may not be
able to realise some of its investments in these instruments quickly
at an amount close to their fair value in order to meet its liquidity
requirements, or to respond to specific events such as deterioration
in the creditworthiness of any particular issuer.
The Company's listed money market securities are considered to be
readily realisable as they are of high credit quality as outlined
above.
The Company's liquidity risk is managed on a continuing basis by the
Investment Manager in accordance with policies and procedures laid
down by the Board. The Company's overall liquidity risks are
monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
At 28 February 2009 these investments were valued at GBP489,000 for
Ordinary shares and GBP4,644,000 for 'C' & 'D' shares (29 February 2008
GBP577,000 for Ordinary shares and GBP10,739,000 for 'C' & 'D' shares).
17. Post balance sheet events
The following events occurred between the balance sheet date and the
signing of these financial statements:
Ordinary Shares
* The Company has purchased 152,900 Ordinary shares at a weighted
average price of 24.1p per share. These shares are held in
Treasury.
'C' Shares
* The Company purchased 97,683 'C' shares at a weighted average
price of 59p per share. These shares are held in Treasury.
'D' Shares
* The Company purchased 212,100 'D' shares for cancellation at a
weighted average price of 58.9p per share.
The following investments have been completed between the balance
sheet date and the signing of these financial statements:
Ordinary shares
* On 12 March 2009, the Company sold 31,440 shares in Optimisa plc
for GBP7,821.
'C' & 'D' shares
* On 12 March 2009, the Company sold 204,875 shares in Optimisa plc
for GBP50,835
* On 7 May 2009, the Company sold 324,250 shares Advanced Computer
Software plc for GBP119,841
* 8 May 2009, the Company purchased 30,000,000 of convertible loan
notes for GBP300,000 in Lombard Medical plc
* 20 May 2009, the Company sold 118,000 shares in B Global plc for
GBP18,518
18. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as
at 28 February 2009 (2008: GBPnil).
19. Related party transactions
Octopus acts as the Investment Manager of the Company. Under the
management agreement, Octopus receives a fee of 2.0% per annum of the
net assets of the Company for the investment management services.
During the period 1 August to 28 February 2009, the Company incurred
management fees of GBP190,000 (2007: GBPnil) payable to Octopus. At the
period end there was GBPNil (2008: GBPnil) outstanding to Octopus.
Prior to 1 August 2008, Close acted as the Investment Manager of the
Company. During the period 1 March 2008 to 31 July 2008, the Company
incurred management fees of GBP162,000 (including VAT at the applicable
rate at that time) payable to Close. At the period end there was
GBPnil outstanding to Close.
Elizabeth Kennedy is a divisional director of Brewin Dolphin Limited,
the Company's brokers. Subject to this exception, no Director was
party to, or had an interest in, any contract or arrangement with the
Company at any time during the period under review or as at the date
of this report. During the year directors' fees were paid to Brewin
Dolphin Limited. At the financial year end, the amount due to Brewin
Dolphin Limited disclosed as creditors was nil.
During the year, the VCT held an investment in the Close Special
Situations Fund. As at 28 February 2009, Octopus Second AIM VCT PLC
held nil units in the Close Special Situations Fund (2008: 1,012,043
units). The following transactions occurred between Close Special
Situation Fund and Octopus Second AIM VCT PLC:
* 2 May 2008 the Company sold 101,204 units
* 18 June 2008 the Company sold 95,000 units
* 29 July 2008 the Company sold 145,462 units
* 5 August 2008 the Company sold 662,400 units
* 7 August 2008 the company sold 7,977 units
Buybacks of shares for cancellation during the year were transacted
through Winterflood Securities Limited, a subsidiary of Close
Brothers Group plc, the ultimate parent company of the Investment
Manager, Close Investments Limited for the period to 1 August 2008.
From this date buybacks were transacted though Brewin Dolphin Limited
and Winterflood Securities Limited. A total of 384,485 Ordinary
shares (2008: 94,848), 75,000 'C' and 'D' 25,000 shares (2008: nil)
were purchased at a weighted average price of 32 pence per Ordinary
share (2007: 58p) 74 pence per 'C' share and 61.5 pence per 'D'
share.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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