TIDMOVCT
Octopus VCT plc
Final Results
31 May 2012
Octopus VCT plc, managed by Octopus Investments Limited, today announces the
final results for the year ended 29 February 2012.
These results were approved by the Board of Directors on 30 May 2012.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com.
Chairman's Statement
Introduction
I am pleased to present the Annual Report of Octopus VCT plc for the year ended
29 February 2012.
I am also delighted to report that Martijn Kleibergen, a portfolio director at
Octopus Investments, has agreed to join the Board, effective from 11 November
2011. Martijn has extensive experience in both corporate finance and project
finance, and has held posts in both the UK and the Netherlands. At the same
time, Chris Hulatt has decided to step down as Director to focus more on his
principal job of CFO at Octopus Investments. I should like to take this
opportunity to thank Chris for his dedication and advice to this Board since its
inception.
Performance
The Company has had a good year and is trading in line with its objective of
focussing more on capital preservation than a typical VCT. It is pleasing to
report an increase in the Net Asset Value (NAV) plus cumulative dividends paid
from 95.3 pence per share at the prior year end, rising to 96.7 pence per share
as at 29 February 2012, an increase of 1.5%.
A boost to the Company performance came from the successful sale of Autologic,
which realised a gain of GBP603,000.
Dividend
Given the level of interest income earned during the year from investments, we
are proposing a final dividend of 1.0 pence per share in respect of the year
ended 29 February 2012 (2011: 1.0 pence per share). If approved by shareholders
at the AGM, this dividend will be paid on 19 July 2012 to shareholders on the
register on 22 June 2012.
Investment Portfolio
A total of GBP30.5 million was invested in the year into companies that fall in
line the with investment policy of the Company, being that of building a
portfolio that is heavily focussed on capital preservation. GBP17.0 million of
this was invested into solar companies. These are companies that have either
constructed and now operate solar renewable energy sites benefiting from the
Government's feed-in-tariffs, or are looking to do so.
It has been well documented in the media that the Government's commitment to
feed-in-tariffs has been reduced. However the Company had already made its
investment into the solar renewable energy sector before the Government's
changes came into effect. Therefore your Board and investment manager remain
confident that the Company will achieve its investment objectives into these
companies.
A total of GBP4.0 million was invested into various ticketing companies that
generate a return from the buying and selling of tickets, at a margin, to sports
and entertainment events, and GBP0.7 million into the media sector. The majority
of these funds have since been repaid, including all interest due.
Other investments include GBP3.8 million into CSL Dualcom, a security company, GBP2
million into the loan book of Borro, an online pawn broker and GBP1 million into
Salus Services 1 Holdings, a company involved in the construction of a care
home.
The majority of investments have been structured so that the majority of returns
to the Company will be in the form of interest earned on the loan notes issued.
This allows the Company good visibility of future returns and provides security
on investments as loan based structures rank ahead of equity.
A full list of the Funds' investment portfolio as at the year end is set out on
page x. The strong investment activity has continued post year end, with a
further GBP14.0 million having been deployed since the balance sheet date.
Investment Strategy
As set out in the prospectus, the Company has adopted a strategy that is aimed
at making investments that focus more on capital preservation than are typically
available from investments in unquoted companies. The Qualifying Investments
have been made into companies where the Octopus team has been confident that
there was the opportunity to invest in a manner that should provide the Fund
with a high level of capital security. These companies typically have
contractual revenues from financially sound customers or a revenue stream that
is generated from predictable transactions with a range of customers.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice
concerning ongoing compliance with Her Majesty's Revenue & Customs (HMRC) rules
and regulations concerning VCTs. The Board has been advised that Octopus VCT plc
is in compliance with the conditions laid down by HMRC for maintaining approval
as a VCT.
A key requirement is to reach at least the 70% qualifying investment level by
the end of the third accounting period. As at 29 February 2012, 45.4% of the
portfolio, as measured by HMRC rules, was invested in VCT qualifying
investments. Further to this, it is pleasing to report that post year end, the
VCT has surpassed the target by having 73.6% of funds raised invested into
qualifying investments as at 30 April 2012.
Annual General Meeting
The Company's Annual General Meeting will take place on Thursday 5 July 2012 at
3 p.m. I look forward to welcoming you to the meeting which will be held at the
offices of Octopus Investments Limited at 20 Old Bailey, London, EC4M 7AN.
Electronic Communications
Based on feedback from shareholders, and in order to reduce the cost of printing
and the consequential impact on the environment, we now offer shareholders the
opportunity to forgo their printed report and account documents, in favour of
receiving email or letter notification with details of how to view the documents
online. If you would like to change the format in which you receive this report,
please contact Octopus using the contact details provided on page x of this
report.
Outlook
There is uncertainty in the UK about the sustainability of the economic
recovery, inflationary pressures and the fragile condition of public finances.
The Board and Investment Manager conduct the investment activities with these
factors in mind.
However, the majority of investments in your Company's portfolio have continued
to report good trading results and the continued tightness in the traditional
banking markets in lending to small companies continues to provide opportunities
to invest in attractive businesses. Accordingly the Board remains confident
that the Company will achieve its investment objectives.
James Otter
Chairman
30 May 2012
Investment Manager's Review
Personal Service
At Octopus, we focus on both managing your investments and keeping you informed
throughout the investment process. We are committed to providing our investors
with regular and open communication. Our updates are designed to keep you
informed about the progress of your investment. During this time of economic
uncertainty, we consider it particularly important to be in regular contact with
our investors and are working hard to manage your money in the current climate.
Octopus Investments Limited was established in 2000 and has a strong commitment
to both smaller companies and to VCTs. We currently manage 19 VCTs, including
this Company, and manage nearly GBP340 million in the VCT sector. Octopus has over
230 employees and has previously been voted as 'Best VCT Provider of the Year'
by the financial adviser industry.
Investment Policy
The investment approach of Octopus VCT plc is to seek investments that focus
more on capital preservation than a typical VCT. Nearly all of the companies in
which Octopus VCT invests operate in sectors where there is a high degree of
predictability. Investments are sought in companies that have contractual
revenues from financially sound customers and will provide an exit for
shareholders within three to five years.
Performance
As at 29 February 2012 the NAV plus cumulative dividends paid stood at 96.7p
pence per share compared to 95.3p at 28 February 2011, an increase of 1.5%.
This increase is partly due to the successful exit of Autologic that realised a
profit of GBP603,000. Strong returns were also due to the interest income from
investments that in total generated GBP789,000 in the year.
The majority of investments are loan based on which a steady flow of interest is
received into the Company. This is now at the level whereby interest receipts
offset the running costs of the VCT. These returns will allow for any gains on
realisations and loan note redemption premiums to be paid out directly to
shareholders, or recognised as an uplift to the value of your investment.
Portfolio Review
We have made significant advances in achieving the dual target of both ensuring
Octopus VCT is in a qualifying position by the end of its third accounting
period, and making investments that will help the NAV to make progress in
achieving the desired return for investors.
Overall, GBP30.5 million was invested in the year, with GBP17.0 million of that
being into solar projects. These are investments that will benefit from the
governments feed-in-tariff regime, providing a relatively stable and predictable
return.
An investment into CSL Dualcom of GBP3.8 million should provide the Company with a
good yield. Part of the investment structure also gave us a small equity
holding, which we hope will let us recognise uplifts in the future, especially
given the strong performance of CSL.
We have also invested GBP2 million in to the loan book of Borro, an online pawn
broker. This investment provides good returns and is well secured as all loans
are asset backed, with an average loan to value of 60%.
As mentioned in the Chairman's statement, our ability to find attractive deals
and invest into them has continued post year end, with GBP14 million having been
invested since the balance sheet date.
Outlook
Whilst the UK and Western economies are in the doldrums we see a number of areas
where we can successfully invest the Fund in line with our mandate:
1. There are numerous stable, profitable companies whose owners wish to
partially sell their business now but wait several years for the marketplace
to recover in order to realise a full exit.
2. Banks continue to frustrate SMEs and many prefer to use our more flexible
debt to grow their businesses.
3. Similarly larger venture capital/private equity firms are using our more
expensive funds in preference to bank debt as we offer a faster, more
partnership orientated, intelligent form of co-investment. These companies
find our approach less risky and our funds are well suited to this type of
transaction, providing opportunities for ongoing investment in the UK.
Whilst we are optimistic regarding our market opportunity we will continue to
invest cautiously. We will do our best to ensure that our portfolio companies
can withstand a worsening of the current harsh economic climate.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.
Stuart Nicol
Investment Director
Octopus Investments
30 May 2012
Investment Portfolio
Movement
Cost of in fair Fair Movement % %
investment value to value as in year equity equity
Qualifying as at 29 29 at 29 to 29 held by managed
fixed asset February February February February Octopus by
investments Sector 2012 2012 2012 2012 VCT Octopus
=---------------------------------------------------------------------------------
Salus
Services 1
Holdings Ltd Care homes 1,000 - 1,000 - 10.0% 100.0%
Salus
Services 2
Ltd Care homes 1,000 - 1,000 - 32.9% 67.8%
Personnel
Advisory
Services Ltd Advisory 1,000 - 1,000 - 30.2% 90.6%
GreenCo
Services 2
Ltd Environmental 1,000 - 1,000 - 40.9% 92.0%
Saas Business Business
Services Ltd services 1,000 - 1,000 - 30.2% 90.6%
Resilient
Corporate Business
Services Ltd services 1,000 - 1,000 - 18.2% 88.5%
Healthcare
Education
Business
Services Ltd Healthcare 1,000 - 1,000 - 30.2% 90.6%
MediaCo Media
Business
Services Ltd 1,000 - 1,000 - 30.2% 90.6%
Atlantic
Screen
International
Ltd Media 1,000 - 1,000 - 50.0% 100.0%
Acquire Your
Business Ltd Healthcare 882 - 882 - 49.0% 100.0%
Howbery Solar
Ltd Solar 600 - 600 - 50.0% 100.0%
EKF
Diagnostics
Plc Healthcare 375 203 578 (32) 1.0% 6.3%
Helaku Power
Ltd Solar 500 - 500 - 25.0% 50.0%
Aashman Power
Ltd Solar 500 - 500 - 17.0% 100.0%
Grian Power
Ltd Solar 500 - 500 - 12.5% 100.0%
Intina Power
Ltd Solar 500 - 500 - 12.5% 100.0%
Kala Power
Ltd Solar 500 - 500 - 18.5% 100.0%
Nima Power
Ltd Solar 500 - 500 - 12.5% 100.0%
Tonatiuh
Trading 1 Ltd Solar 500 - 500 - 20.7% 100.0%
Tuwale Power
Ltd Solar 500 - 500 - 12.5% 100.0%
Cyrah Power
Ltd Solar 500 - 500 - 16.7% 100.0%
Donoma Power
Ltd Solar 500 - 500 - 44.9% 100.0%
Evaki Power
Ltd Solar 500 - 500 - 16.7% 100.0%
Gnowee Power
Ltd Solar 500 - 500 - 17.9% 100.0%
Sula Power
Ltd Solar 500 - 500 - 32.3% 100.0%
Teruko Power
Ltd Solar 500 - 500 - 17.9% 100.0%
Tonatiuh
Power 2 Ltd Solar 500 - 500 - 17.8% 100.0%
Yata Power
Ltd Solar 500 - 500 - 16.7% 100.0%
Palk Power
Ltd Solar 500 - 500 - 19.3% 100.0%
CSL Dualcom Security
Holdings Ltd devices 429 - 429 - 1.4% 3.4%
PTB Films Ltd Media 249 - 249 - 12.5% 100.0%
Quickfire 2
Films Ltd Media 247 - 247 - 6.5% 99.9%
Quickfire
Films Ltd Media 246 - 246 - 6.5% 99.7%
=---------------------------------------------------------------------------------
Total
qualifying
fixed asset
investments 20,528 203 20,731 (32)
=---------------------------------------------------------------------------------
Non
qualifying
fixed asset
investments
CSL Dualcom Security
Holdings Ltd devices 3,411 - 3,411 - 1.4% 3.4%
Helaku Power
Ltd Solar 3,025 - 3,025 - 25.0% 50.0%
Borro Loan 2
Ltd* Pawn brokers 2,000 - 2,000 - 0.0% 0.0%
Shakti Power
Ltd* Solar 1,458 - 1,458 - 0.0% 100.0%
Michabo Power
Ltd* Solar 1,088 - 1,088 - 0.0% 100.0%
Donoma Power
Ltd Solar 720 - 720 - 44.9% 100.0%
Season Ticket
Credit Ltd* Ticketing 267 - 267 - 0.0% 100.0%
EKF
Diagnostics
Plc Healthcare 3 2 5 - 1.0% 6.3%
=---------------------------------------------------------------------------------
Total non-
qualifying
fixed asset
investments 11,972 2 11,974 -
=---------------------------------------------------------------------------------
Total fixed
asset
investments 32,500 205 32,705 (32)
Current asset
investments 10,580 - 10,580 -
=---------------------------------------------------------------------------------
Total
investments 43,080 205 43,285 (32)
=---------------------------------------------------------------------------------
Cash at bank 6,236
Debtors less
creditors 398
=---------------------------------------------------------------------------------
Net assets 49,919
*100% loan based investment
Valuation Methodology
The unquoted investments held by Octopus VCT have no trading platform from which
prices can be easily obtained. As a result, the methodology used in fair valuing
the investments is the transaction price of the recent investment round.
Subsequent adjustment to the fair value of unquoted investments has been made
using sector multiples based on information as at 29 February 2012 where
applicable, and adjustment to the fair value has also been made according to any
significant under or over performance of the business.
Quoted investments are valued at market bid price. No discounts are applied.
If you would like to find out more regarding the International Private Equity
and Venture Capital ('IPEVC') Valuation Guidelines, please visit the following
website: www.privateequityvaluation.com.
Largest Holdings
Listed below are the 10 largest investments by value as at 29 February 2012:
CSL DualCom Limited ('DualCom')
DualCom is the UK's leading supplier of dual path signalling devices, which link
burglar alarms to the police or a private security firm. The devices communicate
using a telephone line or broadband connection and a wireless link from
Vodafone, which has been a partner since 2000. DualCom has developed a number of
new products for the sector, which have enabled the business to steadily grow
its market share of new connections and its profitability since the initial
investment. Further information can be found at the Company's website
www.csldual.com.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP300,000 GBP300,000 |
| |
| Loan stock GBP3,540,000 GBP3,540,000 |
| -------------- -------------+
| Total GBP3,840,000 GBP3,840,000 |
+-----------------------------------------------------+
Investment date: March 2011
Equity held: 1.4%
Equity held by all funds managed by Octopus: 3.4%
Last audited accounts: 31 March
2011
Revenues: GBP9.6 million
Profit before interest & tax: GBP2.0
million
Net assets: GBP2.9
million
Income receivable recognised in year: GBP88,000
Valuation basis: Held at cost
Helaku Power Limited
Helaku Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Trevemper, Cornwall.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP500,000 GBP500,000 |
| |
| Loan stock GBP3,025,000 GBP3,025,000 |
| -------------- -------------+
| Total GBP3,525,000 GBP3,525,000 |
+-----------------------------------------------------+
Investment date: March 2011
Equity held: 25.0%
Equity held by all funds managed by Octopus: 50.0%
Last unaudited accounts: 31 March 2012
Revenues:
GBPnil
Loss before interest & tax:
GBP0.05 million
Net assets:
GBP1.6 million
Income receivable recognised in year: GBP87,000
Valuation basis: Held at cost
Borro Loan 2 Limited ('Borro')
Borro is a 100% subsidiary of 'Borro Limited' - an online pawn broker, providing
short term loans secured against high value assets.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares - - |
| |
| Loan stock GBP2,000,000 GBP2,000,000 |
| -------------- -------------+
| Total GBP2,000,000 GBP2,000,000 |
+-----------------------------------------------------+
Investment date: December 2011
Equity held: 0.0%
Equity held by all funds managed by Octopus: 0.0%
Last audited accounts: 31 December 2010
Revenues: GBP0.0 million*
Loss before interest & tax: GBP0.0 million*
Net assets:
GBP0.0million*
Income receivable recognised in year: GBP47,000
Valuation basis: Held at cost
*Borro is a loan book Company, 'Borro Limited' is the trading Company.
Therefore, Borro has nil revenues and nominal net assets.
Shakti Power Limited
Shakti Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Dunsfold, Surrey.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares - - |
| |
| Loan stock GBP1,458,000 GBP1,458,000 |
| -------------- -------------+
| Total GBP1,458,000 GBP1,458,000 |
+-----------------------------------------------------+
Initial investment date: July
2011
Equity held: 0.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 March 2012
Turnover GBP71,000
Profit before tax: GBP23,000
Income receivable recognised in year: GBPnil
Net assets:
GBP5.7 million
Michabo Power Limited
Michabo Power Limited constructed and operates a solar renewable energy site at
a carefully selected location in Somerset.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares - - |
| |
| Loan stock GBP1,088,000 GBP1,088,000 |
| -------------- -------------+
| Total GBP1,088,000 GBP1,088,000 |
+-----------------------------------------------------+
Initial investment date:
September 2011
Equity held:
0.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 March 2012
Turnover GBP71,000
Profit before tax: GBP23,000
Income receivable recognised in year: GBP33,000
Net assets:
GBP5.7 million
Salus Services 1 Holdings Limited ('Salus')
Salus is funding the construction of a care home based in Colchester.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP1,000,000 GBP1,000,000 |
| |
| Loan stock - - |
| -------------- -------------+
| Total GBP1,000,000 GBP1,000,000 |
+-----------------------------------------------------+
Investment date: March 2011
Equity held: 10.0%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: 31 March 2011
Revenues: GBP0.0 million
Profit before interest & tax: GBP0.0
million
Net assets: GBP9.6
million
Income receivable recognised in year: GBP40,000
Valuation basis: Held at cost
Salus Services 2 Limited
Salus Services 2 is a company that has been set up to seek and invest into a
qualifying trade in the advisory sector.
+---------------------------------------------------+
| Asset class Cost Valuation |
| |
| Ordinary shares GBP300,000 GBP300,000 |
| |
| Loan stock GBP700,000 GBP700,000 |
| -------------- -------------+
| Total GBP1,000,000 GBP1,000,000 |
+---------------------------------------------------+
Investment date: November 2010
Equity held: 32.9%
Equity held by all funds managed by Octopus:
67.8%
Last unaudited accounts: 30 November 2011
Revenues: GBP11,000
Loss before interest & tax: GBP5,000
Net assets: GBP1.0
million
Income receivable recognised in year: GBPnil
Valuation basis: Held at cost
Personnel Advisory Services Limited
Personnel Advisory Services is a company that has been set up to seek and invest
into a qualifying trade in the advisory sector.
+---------------------------------------------------+
| Asset class Cost Valuation |
| |
| Ordinary shares GBP300,000 GBP300,000 |
| |
| Loan stock GBP700,000 GBP700,000 |
| -------------- -------------+
| Total GBP1,000,000 GBP1,000,000 |
+---------------------------------------------------+
Investment date: November 2010
Equity held: 30.2%
Equity held by all funds managed by Octopus: 90.6%
Last unaudited accounts: 30 November 2011
Revenues: GBP11,000
Loss before interest & tax: GBP4,000
Net assets: GBP1.0
million
Income receivable recognised in year: GBPnil
Valuation basis: Held at cost
GreenCo Services 2 Limited
GreenCo Services 2 is a company that has been set up to seek and invest into a
qualifying trade in the environmental sector.
+---------------------------------------------------+
| Asset class Cost Valuation |
| |
| Ordinary shares GBP300,000 GBP300,000 |
| |
| Loan stock GBP700,000 GBP700,000 |
| -------------- -------------+
| Total GBP1,000,000 GBP1,000,000 |
+---------------------------------------------------+
Investment date: November 2010
Equity held: 40.9%
Equity held by all funds managed by Octopus: 92.0%
Last unaudited accounts: 30 November 2011
Revenues: GBP11,000
Loss before interest & tax: GBP4,000
Net assets: GBP1.0
million
Income receivable recognised in year: GBPnil
Valuation basis: Held at cost
Saas Business Services Limited
Saas Business Services is a company that has been set up to seek and invest into
a qualifying trade in the business services sector.
+---------------------------------------------------+
| Asset class Cost Valuation |
| |
| Ordinary shares GBP300,000 GBP300,000 |
| |
| Loan stock GBP700,000 GBP700,000 |
| -------------- -------------+
| Total GBP1,000,000 GBP1,000,000 |
+---------------------------------------------------+
Investment date: November 2010
Equity held: 30.2%
Equity held by all funds managed by Octopus: 90.6%
Last unaudited accounts: 30 November 2011
Revenues: GBP11,000
Loss before interest & tax: GBP4,000
Net assets: GBP1.0
million
Income receivable recognised in year: GBPnil
Valuation basis: Held at cost
Directors' Responsibility Statement
The directors are responsible for preparing the Directors' Report and the
financial statements in accordance with applicable law and regulations.
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 laws).
Under Company law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
and 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 accounting estimates that are reasonable and
prudent;
· state whether applicable UK 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 are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and 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
2006. 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.
In so far as each of the directors is 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 directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
To the best of my knowledge:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company; and
· the management 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.
On behalf of the board
James Otter
Chairman
30 May 2012
Income Statement
+---------------------+
| Year to 29 February |
| 2012 |
=-----------------------------------------------+---------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=-----------------------------------------------+---------------------+
| |
| |
Fixed asset investment gain on disposal 9 | - 603 603|
| |
| |
| |
Fixed asset investment holding loss 9 | - (32) (32)|
| |
| |
| |
Investment income 2 | 914 - 914|
| |
| |
| |
Investment management fees 17 | - - -|
| |
| |
| |
Other expenses 3 | (732) - (732)|
| |
| |
=-----------------------------------------------+---------------------+
Return on ordinary activities before tax | 182 571 753|
| |
| |
| |
Taxation on return on ordinary activities 5 | (18) - (18)|
| |
| |
=-----------------------------------------------+---------------------+
Return on ordinary activities after tax | 164 571 735|
=-----------------------------------------------+---------------------+
Earnings per share - basic and diluted 6 | 0.3p 1.1p 1.4p|
+---------------------+
* The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies
* All revenue and capital items in the above statement derive from continuing
operations
* 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.
The accompanying notes are an integral part of the financial statements.
Income Statement
+---------------------+
| Year to 28 February |
| 2011 |
=-----------------------------------------------+---------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=-----------------------------------------------+---------------------+
| |
| |
Fixed asset investment gain on disposal | - - -|
| |
| |
| |
Fixed asset investment holding gain | - 237 237|
| |
| |
| |
Investment income 2 | 602 - 602|
| |
| |
| |
Investment management fees 17 | - - -|
| |
| |
| |
Other expenses 3 | (304) - (304)|
| |
| |
=-----------------------------------------------+---------------------+
Return on ordinary activities before tax | 298 237 535|
| |
| |
| |
Taxation on return on ordinary activities 5 | (43) - (43)|
| |
| |
=-----------------------------------------------+---------------------+
Return on ordinary activities after tax | 255 237 492|
=-----------------------------------------------+---------------------+
Earnings per share - basic and diluted 6 | 0.5p 0.5p 1.0p|
+---------------------+
* The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies
* All revenue and capital items in the above statement derive from continuing
operations
* 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.
The accompanying notes are an integral part of the financial statements.
Reconciliation of Movements in Shareholders' Funds
+----------------+----------------+
| Year to| Year to|
|29 February 2012|28 February 2011|
=---------------------------------------+----------------+----------------+
Shareholders' funds at start of year | 49,765| 4,729|
| | |
Return on ordinary activities after tax| 735| 492|
| | |
Issue of equity (net of expenses) | -| 44,562|
| | |
Shares bought back for cancellation | (59)| (18)|
| | |
Dividends paid | (522)| -|
=---------------------------------------+----------------+----------------+
Shareholders' funds at end of year | 49,919| 49,765|
=---------------------------------------+----------------+----------------+
The accompanying notes are an integral part of the financial statements.
Balance Sheet
+---------------------+-------------------+
| As at 29 February | As at 28 February |
| 2012| 2011|
| | |
Notes| GBP'000 GBP'000| GBP'000 GBP'000|
=------------------------------------+---------------------+-------------------+
| | |
| | |
Fixed asset investments* 9 | 32,705| 8,615|
| | |
Current assets: | | |
| | |
Debtors 10 | 508 | 12 |
| | |
Investments - money market | | |
funds* 11 |10,580 |35,038 |
| | |
Cash at bank | 6,236 | 6,235 |
=------------------------------------+---------------------+-------------------+
|17,324 |41,285 |
| | |
Creditors: amounts falling due | | |
within one year 12 | (110) | (135) |
=------------------------------------+---------------------+-------------------+
Net current assets | 17,214| 41,150|
=------------------------------------+---------------------+-------------------+
Total assets less current | | |
liabilities | 49,919| 49,765|
=------------------------------------+---------------------+-------------------+
| | |
| | |
Called up equity share capital 13 | 521| 522|
| | |
Special distributable reserve 14 | 48,589| 48,827|
| | |
Capital redemption reserve 14 | 1| -|
| | |
Capital reserve holding gains 14 | 205| 237|
| | |
Capital reserve gains on | | |
disposal 14 | 603| -|
| | |
Revenue reserve 14 | -| 179|
=------------------------------------+---------------------+-------------------+
Total shareholders' funds | 49,919| 49,765|
=------------------------------------+---------------------+-------------------+
Net asset value per share 7 | 95.7p| 95.3p|
+---------------------+-------------------+
* Held at fair value through profit and loss
The accompanying notes are an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue on 30 May
2012 and are signed on their behalf by:
James Otter
Chairman
Company No: 06948448
Cash Flow Statement
+-----+---------------------+--------------------+
| | Year to 29 February| Year to 28 February|
|Notes| 2012| 2011|
| | | |
| | GBP'000| GBP'000|
=-----------------------------+-----+---------------------+--------------------+
| | | |
| | | |
Net cash (outflow)/inflow | | | |
from operating activities | | (312)| 264|
| | | |
| | | |
| | | |
Taxation | | (45)| -|
| | | |
| | | |
| | | |
Financial investment | | | |
| | | |
Purchase of fixed asset | | | |
investments | 9 | (30,465)| (8,378)|
| | | |
Sale of fixed asset | | | |
investments | 9 | 6,946| -|
| | | |
| | | |
| | | |
Management of liquid | | | |
resources | | | |
| | | |
Purchase of current asset | | | |
investments | 11 | (16,319)| (64,155)|
| | | |
Sale of current asset | | | |
investments | 11 | 40,777| 29,117|
| | | |
| | | |
| | | |
Dividends paid | 8 | (522)| -|
| | | |
| | | |
| | | |
Financing: | | | |
| | | |
Issue of own shares | | -| 47,156|
| | | |
Share issue expenses | | -| (2,594)|
| | | |
Purchase of own shares | | (59)| (18)|
=-----------------------------+-----+---------------------+--------------------+
Increase in cash | | 1| 1,392|
=-----------------------------+-----+---------------------+--------------------+
The accompanying notes are an integral part of the financial statements.
Reconciliation of return before Taxation to Cash Flow from
Operating Activities
+---------------------+----------------------+
| Year to 29 February| Year to 28 February|
| 2012| 2011|
| | |
| GBP'000| GBP'000|
=---------------------------------+---------------------+----------------------+
Return on ordinary activities | 753| 492|
before tax | | |
| | |
Increase in debtors | (496)| (9)|
| | |
(Decrease)/increase in creditors | 2| 18|
| | |
Holding gain/(loss) on fixed | 32| (237)|
asset investments | | |
| | |
Gain on disposal of fixed asset | (603)| -|
investments | | |
=---------------------------------+---------------------+----------------------+
(Outflow)/Inflow from operating | (312)| 264|
activities | | |
+---------------------+----------------------+
Reconciliation of Net Cash Flow to Movement in Net Funds
+------------------------+------------------------+
|Year to 29 February 2012|Year to 28 February 2011|
| | |
| GBP'000| GBP'000|
=----------------------------+------------------------+------------------------+
Increase in cash at bank | 1| 1,392|
| | |
Movement in cash equivalent | (24,458)| 35,038|
securities | | |
| | |
Opening net funds | 41,273| 4,843|
=----------------------------+------------------------+------------------------+
Net funds at 29 February | 16,816| 41,273|
+------------------------+------------------------+
Net Funds at 29 February comprised:
+------------------------+------------------------+
| As at 29 February 2012 | As at 28 February 2011 |
| | |
| GBP'000 | GBP'000 |
=--------------------------+------------------------+------------------------+
Cash at bank | 6,236 | 6,235 |
| | |
Money market funds | 10,580 | 35,038 |
=--------------------------+------------------------+------------------------+
Net Funds at 29 February | 16,816 | 41,273 |
=--------------------------+------------------------+------------------------+
Notes to the Financial Statements
1. Principal accounting policies
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain financial
instruments, and in accordance with UK Generally Accepted Accounting Practice
(UK GAAP), and the Statement of Recommended Practice (SORP) 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' (revised
2009).
The principal accounting policies have remained unchanged from those set out in
the Company's 2011 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.
The Company presents its income statement in a three column format to give
shareholders additional detail of the performance of the Company, split between
items of a revenue or capital nature.
The preparation of the financial statements requires Management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. Estimates and assumptions
mainly relate to the fair valuation of the fixed asset investments particularly
unquoted investments. Estimates are based on historical experience and other
assumptions that are considered reasonable under the circumstances. The
estimates and the assumptions are under continuous review with particular
attention paid to the carrying value of the investments.
Capital valuation policies are those that are most important to the depiction of
the Company's financial position and that require the application of subjective
and complex judgements, often as a result of the need to make estimates about
the effects of matters that are inherently uncertain and may change in
subsequent periods. The critical accounting policies that are declared will not
necessarily result in material changes to the financial statements in any given
period but rather contain a potential for material change. The main accounting
and valuation policies used by the Company are disclosed below. Whilst not all
of the significant accounting policies require subjective or complex judgements,
the Company considers that the following accounting policies should be
considered critical.
The Company has designated all fixed asset investments as being held at fair
value through profit or loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value through
profit or loss. Accordingly, all interest income, fee income, expenses and
investment gains and losses are attributable to assets designated as being at
fair value through profit or loss.
Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Unquoted investments are valued in accordance with
current IPEVC valuation guidelines, although this does rely on subjective
estimates such as appropriate sector earnings multiples, forecast results of
investee companies, asset values of subsidiary companies and liquidity or
marketability of the investments held.
Although the Company believes that the assumptions concerning the business
environment and estimates of future cash flows are appropriate, changes in
estimates and assumptions could require changes in the stated values. This could
lead to additional changes in fair value in the future.
Fixed asset 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 or 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 unquoted investments, fair value is established by using measures
of value such as the price of recent transactions, earnings multiples and net
assets. This is consistent with IPEVC valuation guidelines.
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 - holding gains/(losses). Fixed returns on non-
equity shares and debt securities which are held at fair value are computed
using the effective interest rate, to distinguish between the interest income
receivable (which is disclosed as interest income within the revenue column of
the Income Statement) and other fair value movements arising on these
instruments (which are disclosed as holding gains within the capital column of
the Income Statement.
In the 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 money market funds and are designated as
FVTPL. Gains and losses arising from changes in the fair value of investments
are recognised as part of the capital return within the Income Statement and
allocated to the capital reserve - gains/(losses) on disposal.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the option of the Company. The current
asset investments are held for trading, are actively managed and the performance
is evaluated in accordance with a documented investment strategy. Information
about them has to be provided internally on that basis to the Board.
Income
Fixed returns on non-equity shares and debt securities are recognised on a time
apportionment basis (including time amortisation of any premium or discount to
redemption) so as to reflect the effective interest rate, provided there is no
reasonable doubt that payment will be received in due course. Income from fixed
interest securities and deposit interest is included on an effective interest
rate basis.
Investment income includes interest earned on bank balances and money market
funds 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 funds are recognised
on a time apportionment basis, 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,
where applicable, is charged 25% to the revenue account and 75% to the 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.
The transaction costs incurred when purchasing or selling assets are written off
to the income statement in the period that they occur.
Revenue and capital
The revenue column of the income statement includes all income and revenue
expenses of the Company. The capital column includes gains and losses on
disposal and holding gains and losses on investments. Gains and losses arising
from changes in fair value of investments are recognised as part of the capital
return within the income statement.
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 or
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. This is 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 differences 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),
and investments in money market managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair value which
is usually transaction cost and subsequently measured at amortised cost using
the effective interest method.
Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to
financial instruments.
Capital is defined as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the business
with optimising the return on equity. The Company currently has no borrowings
nor does it anticipate that it will drawdown any borrowing facilities in the
future to fund the acquisition of investments.
The Company does not have any externally imposed capital requirements.
The value of the managed capital is indicated in note 15. The Board considers
the distributable reserves and the total return for the year when recommending a
dividend. In addition, the Board is authorised to make market purchases up to a
maximum of 5% of the issued ordinary share capital of the Company in accordance
with Special Resolution 8 in order to maintain sufficient liquidity in the VCT.
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.
Capital management is monitored and controlled using the internal control
procedures set out on page x of this
report. The capital being managed includes equity and fixed-interest
investments, cash balances and liquid
resources including debtors and creditors. The Company does not have any
externally imposed capital requirements.
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 for interim dividend when they are paid and for final
dividends when they are approved by the shareholders.
2. Income
Year to 29 February 2012 Year to 28 February 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Interest receivable on bank 26 532
balances
Money market securities - 99 66
dividend income
Loan note interest 789 4
receivable
=------------------------------------------------------------------------------
914 602
=------------------------------------------------------------------------------
3. Other expenses
Year to 29 February 2012 Year to 28 February 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Directors' remuneration 50 50
Fees payable to the
Company's auditor for the
audit of the financial
statements 13 7
Fees payable to the
Company's auditor for other
services - tax compliance 3 2
Trail commission 433 18
UK Listing fees 5 5
Other expenses 228 222
=------------------------------------------------------------------------------
732 304
=------------------------------------------------------------------------------
The total expense ratio for the Company (as set out in the prospectus) for the
year to 29 February 2012 was 0.6% (2011: 0.6 per cent).
4. Directors' remuneration
Year to 29 National Year ended 28 National
February 2012 Insurance February 2011 Insurance
GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Directors'
emoluments
James Otter 20 2 20 2
(Chairman)
Charles Breese 15 1 15 1
Chris Hulatt 10 - 15 -
(paid to Octopus
Investments
Limited)
Martijn 5 - - -
Kleibergen (paid
to Octopus
Investments
Limited)
=------------------------------------------------------------------------------
50 3 50 3
=------------------------------------------------------------------------------
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
(2011: three).
5. Tax on ordinary activities
The corporation tax charge for the period was GBP18,000 (2011: GBP43,000).
The current tax charge for the period differs from the standard rate of
corporation tax in the UK of 20.08% (2011: 21%). The differences are explained
below.
Current tax reconciliation: Year ended 29 February Year ended 28 February
2012 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Return on ordinary activities 753 535
before tax
Current tax at 20.08% (2011: 151 112
21%)
Utilisation of tax losses - (5)
Adjustment to prior year tax 2 -
charge
Income not taxable for tax (135) (64)
purposes
=------------------------------------------------------------------------------
Total current tax charge 18 43
=------------------------------------------------------------------------------
The company has excess management charges of GBPnil (2011: GBPnil) to carry forward
to offset against future taxable profits.
6. Return per share
The total return per share is based on 52,192,487 (2011: 49,318,293) shares,
being the weighted average number of Ordinary shares in issue during the period,
and a return for the period totalling GBP735,000 (2011: GBP492,000).
There are no potentially dilutive capital instruments in issue and, therefore no
diluted returns per share figures are relevant. The basic and diluted earnings
per share are therefore identical.
7. Net asset value per share
The calculation of net asset value per share as at 29 February 2012 is based on
net assets of GBP49,919,000 (2011: GBP49,765,000) and 52,145,218 (2011: 52,214,787)
Ordinary shares in issue at that date.
8. Dividends
29 February 2012 28 February 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Recognised as distributions in the financial
statements for the year
Previous year's final dividend 522 -
Current year's interim dividend - -
=------------------------------------------------------------------------------
522 -
=------------------------------------------------------------------------------
29 February 2012 28 February 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Paid and proposed in respect of the year
Interim dividend paid - -
Final dividend 1.0p per share (2011: 1.0p
per share) 511 522
=------------------------------------------------------------------------------
511 522
=------------------------------------------------------------------------------
The final dividend of 1.0p per share for the year ended 29 February 2012,
subject to shareholder approval at the Annual General Meeting, will be paid on
19 July 2012 to shareholders on the register on 22 June 2012.
9. Fixed asset investments at fair value through profit or loss
The Company has adopted Financial Reporting Standard 29 Financial Instruments:
Disclosures regarding financial instruments that are measured in the balance
sheet at fair value; this requires disclosure of fair value measurements by
level of the following fair value measurement hierarchy:
Level 1: quoted prices in active markets for identical assets and liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available, and those prices represent
actual and regularly occurring market transactions on an arm's length basis. The
quoted market price used for financial assets held is the current bid price.
These instruments are included in level 1 and comprise money market funds and
AIM quoted investments classified as held at fair value through profit or loss.
Level 2: the fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable data where it is available and rely as
little as possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included
in level 2. The Company holds no such investment in the current or prior year.
Level 3: the fair value of financial instruments that are not traded in an
active market (for example investments in unquoted companies) is determined by
using valuation techniques such as earnings multiples. If one or more of the
significant inputs is not based on observable market data, the instrument is
included in level 3.
There have been no transfers between these classifications in the year (2011:
none). The change in fair value for the current and previous year is recognised
through the profit and loss account.
All items held at fair value through profit or loss were designated as such upon
initial recognition. Movements in investments at fair value through profit or
loss during the year to 29 February 2012 are summarised below.
Fixed asset investments:
Level 1: AIM- Level 3: Level 3:
quoted Equity Unquoted equity Unquoted loan Total unquoted
investments investments investments investments
GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Valuation and
net book
amount:
Book cost at 1 378 8,378
March 2011 2,400 5,600
Cumulative 237 237
revaluation - -
=------------------------------------------------------------------------------
Valuation at 1 615 8,615
March 2011 2,400 5,600
Movement in the
year:
Purchases at - 30,465
cost 13,445 17,020
Proceeds from - (6,946)
the sale of
investments (703) (6,243)
Gain on - 603
disposal of
investments 603 -
Change in fair (32) (32)
value in year - -
=------------------------------------------------------------------------------
Closing fair 583 32,705
value at 29
February 2012 15,745 16,377
=------------------------------------------------------------------------------
Closing cost at 378 32,500
29 February
2012: 15,745 16,377
Closing holding 205
loss at 29
February 2012: -
=------------------------------------------------------------------------------
Valuation at 583 32,705
29 February
2012 15,745 16,377
=------------------------------------------------------------------------------
Level 3 valuations include assumptions based on non-observable market data, such
as discounts applied either to reflect impairment of financial assets held at
the price of recent investment, or to adjust earnings multiples. The sensitivity
of these valuations to a reasonable possible change in such assumptions is given
in note 15.
The loan and equity investments are considered to be one instrument due to the
legal binding within the investment agreement.
Further details of the fixed asset investments held by the Company are shown
within the Investment Manager's Review on pages x to x.
10. Debtors
As at 29 February 2012 As at 28 February 2011
GBP'000 GBP'000
=----------------------------------------------------------------------------
Prepayments and accrued income 508 12
11. Current Asset Investments
Current asset investments at 29 February 2012 comprised money market funds (28
February 2011: money market funds).
Level 1: money market funds
=------------------------------------------------------------------------
GBP'000 GBP'000
=------------------------------------------------------------------------
Valuation and net book amount:
Book cost at 1 March 2011:
Money market funds 35,038
------------
Revaluation to 1 March 2011:
Money market funds -
------------
35,038
=------------------------------------------------------------------------
Valuation as at 1 March 2011 35,038
Movement in the year:
Purchases at cost:
Money market funds 16,319
------------
Disposal proceeds:
Money market funds (40,777)
------------
Profit in year on realisation of investments:
Money market funds -
------------
Revaluation in year:
Money market funds - (24,458)
------------
=------------------------------------------------------------------------
Valuation as at 29 February 2012 10,580
=------------------------------------------------------------------------
Cost at 29 February 2012:
Money market funds 10,580
Revaluation to 29 February 2012:
Money market funds -
=------------------------------------------------------------------------
Valuation as at 29 February 2012 10,580
=------------------------------------------------------------------------
All current asset investments held at the year end sit with the level 1
hierarchy for the purposes of FRS 29.
Level 1 money market funds: Level 1 valuations are based on quoted prices
(unadjusted) in active markets for identical assets or liabilities.
At 29 February 2012 and 28 February 2011 there were no commitments in respect of
investments approved by the Manager but not yet completed.
12. Creditors: amounts falling due within one year
As at 29 February 2012 As at 28 February 2011
GBP'000 GBP'000
=-------------------------------------------------------------------
Corporation tax 16 43
Accruals 94 75
Other creditors - 17
=-------------------------------------------------------------------
110 135
=-------------------------------------------------------------------
13. Share capital
As at 29 February 2012 As at 28 February 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Authorised:
100,000,000 Ordinary shares of 1,000 1,000
1.00p
=------------------------------------------------------------------------------
Allotted and fully paid up:
52,145,218 Ordinary shares of 521 522
1.00p (2011: 52,214,787)
=------------------------------------------------------------------------------
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 x.
The Company is not subject to any externally imposed capital requirements, other
than those imposed by company law.
During the year the Company did not issue any shares (2011: 47,150,659).
During the year the Company repurchased the following shares for cancellation:
* 4 November 2011: 69,569 Ordinary shares at a price of 84.4p
The total nominal value of the shares repurchased was GBP695.69 representing
0.13% of the issued share capital.
14. Reserves
Capital Capital
Special reserve reserve Capital
Share distributable holding gains on redemption Revenue
capital reserve* gains disposal* reserve reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=-------------------------------------------------------------------------------
As at 1
March 2011 522 48,827 237 - - 179 49,765
Repurchase
of own
shares (1) (59) - 1 - (59)
Profit on
ordinary
activities
after tax - - - - - 164 164
Current year
gains/losses
on disposal - - - 603 - - 603
Current
period
gains/losses
on fair
value of
investments - - (32) - - - (32)
Dividends
paid - (179) - - - (343) (522)
=-------------------------------------------------------------------------------
As at 29
February
2012 521 48,589 205 603 1 - 49,919
=-------------------------------------------------------------------------------
*Reserves available for potential dividend
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 to net asset value at which the Company's Ordinary shares
trade. In the event that the revenue reserve and capital reserve gains/(losses)
on disposal do not have sufficient funds to pay dividends, these will be paid
from the special distributable reserve.
All fixed asset investments are designated as fair value through profit or loss
at 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 holding gains or
losses unrealised.
When the Company revalues the investments still held during the period, any
gains or losses arising are credited/ charged to the Capital reserve - holding
gains/(losses).
When an investment is sold any balance held on the Capital reserve - holding
gains & losses is transferred to the
Capital reserve - gains/(losses) on disposal as a movement in reserves.
At 29 February 2012 there were no commitments in respect of investments approved
by the Investment Manager but not yet completed.
Reserves available for potential distribution by way of a dividend are:
GBP'000
=---------------------------------
As at 1 March 2011 49,006
Movement in year 186
=---------------------------------
As at 29 February 2012 49,192
=---------------------------------
15. Financial instruments and risk management
The Company's financial instruments comprise equity, investments, unquoted
loans, cash balances and liquid resources including debtors and creditors. The
Company holds financial assets in accordance with its investment policy of
investing mainly in a portfolio of VCT qualifying unquoted securities whilst
holding a proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.
Classification of financial instruments
Octopus VCT held the following categories of financial instruments, all of which
are included in the balance sheet at fair value, at 29 February 2012:
29 February 2012 28 February 2011
GBP000 GBP000
Assets at fair value through profit or loss
Investments 32,705 8,615
Current asset investments 10,580 35,038
=-----------------------------------------------------------------------------
Total 43,285 43,653
Loans and receivables
Cash at bank 6,236 6,235
Accrued income 499 11
=-----------------------------------------------------------------------------
Total 6,735 6,246
Liabilities at amortised cost
Accruals and other creditors 110 135
=-----------------------------------------------------------------------------
Total 110 135
Fixed asset investments (see note 9) are valued at fair value. Unquoted
investments are carried at fair value as determined by the Directors in
accordance with current venture capital industry guidelines. 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 period-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 x. 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 Directors' Report
on pages x to x, 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 page x.
64.3% (28 February 2011: 17.3%) by value of the Company's net assets comprises
investments in unquoted companies held at fair value. The valuation methods
used by the Company include the application of a price/earnings ratio derived
from listed companies with similar characteristics, and consequently the value
of the unquoted element of the portfolio can be indirectly affected by price
movements on the London Stock Exchange. A 10% overall increase in the valuation
of the unquoted investments at 29 February 2012 would have increased net assets
and the total profit for the year by GBP3,212,100 (28 February 2011: GBP861,500) an
equivalent change in the opposite direction would have reduced net assets and
the total profit for the year by the same amount.
The Investment Manager considers that the majority of the investment valuations
are based on earnings multiples which are ascertained with reference to the
individual sector multiple or similarly listed entities. It is considered that
due to the diversity of the sectors, the 10% sensitivity discussed above
provides the most meaningful potential impact of average multiple changes across
the portfolio.
Interest rate risk
At the year end, some of the Company's financial assets are interest-bearing,
some of which are at variable rates. As a result, the Company is exposed to
fair value interest rate risk due to fluctuations in the prevailing levels of
market interest rates.
Fixed rate
The table below summarises weighted average effective interest rates for the
fixed interest-bearing financial instruments:
As at 29 February 2012 As at 28 February 2011
=------------------------------------------------------------------------------
Weighted
Weighted Total average
Total fixed average fixed rate time for
rate Weighted time for portfolio Weighted which
portfolio average which rate by average rate is
by interest is fixed value interest fixed in
value GBP'000 rate % in years GBP'000 rate % years
=------------------------------------------------------------------------------
Unquoted
fixed-
interest
investments 11,369 8.0% 3 - - -
Floating rate
The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts and, where appropriate, within interest bearing money market
funds. The benchmark rate which determines the rate of interest receivable on
such investments is the bank base rate, which was 0.5% at 29 February 2012 (28
February 2011: 0.5%). The amounts held in floating rate investments at the
balance sheet date were as follows:
29 February 2012 28 February 2011
GBP'000 GBP'000
=----------------------------------------------------------------------------
Cash on deposit & money market funds 16,816 41,273
=----------------------------------------------------------------------------
A 1% increase in the base rate would increase income receivable from these
investments and the total return by GBP168,160 (2011: GBP412,730) on an annualised
basis.
Credit risk
Credit risk is the risk that counterparty 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 29 February 2012 the Company's financial assets exposed to credit risk
comprised the following:
29 February 2012 28 February 2011
GBP000 GBP000
=---------------------------------------------------------------------------
Cash on deposit 6,236 6,235
Investments in fixed rate investments 11,369 -
Investments in floating rate instruments 10,580 35,038
Accrued dividends and interest receivable 499 11
=---------------------------------------------------------------------------
28,684 48,899
Credit risk relating to listed money market funds is mitigated by investing in a
portfolio of investment instruments of high credit quality, comprising
securities issued by the UK Government and major UK institutions. Credit risk
relating to loans to and preference shares in unquoted companies is considered
to be part of market risk.
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 Bank plc and the Cooperative bank. The Investment Manager has in place a
monitoring procedure in respect of counterparty risk which is reviewed on an
ongoing basis. Should the credit quality or the financial position of either
entity deteriorate significantly the Investment Manager will move the cash
holdings to another bank.
Other than cash or liquid money market funds, there were no significant
concentrations of credit risk to counterparties at 29 February 2012 or 28
February 2011.
Liquidity risk
The Company's listed money market funds 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 29 February 2012
these investments were valued at GBP16,816,000 (2011: GBP41,273,000).
16. Post balance sheet events
The following events occurred between the balance sheet date and the signing of
these financial statements:
* 20 March 2012: GBP1,000,000 was invested into Horrebow Energy Limited, a
company that invests in ground source heat source pumps
* 20 March 2012: GBP1,000,000 was invested into Huizilopochtli Energy Limited, a
company that invests in ground source heat source pumps
* 20 March 2012: GBP1,000,000 was invested into Jokim Limited, a company that
invests in solar power
* 20 March 2012: GBP1,000,000 was invested into Mallina Power Limited, a company
that invests in solar power
* 20 March 2012: GBP1,000,000 was invested into Misae Power Limited, a company
that invests in solar power
* 20 March 2012: GBP1,000,000 was invested into Paivatar Power Limited, a
company that invests in solar power
* 2 April 2012: GBP1,000,000 was invested into Technical Software Consultants
Limited, a company that sells industrial crack detectors principally to the
oil and gas sector
* 3 April 2012: GBP1,000,000 was invested into Superior Heat Limited, a company
that invests in ground source heat source pumps
* 3 April 2012: GBP1,000,000 was invested into Erie Heat Limited, a company that
invests in ground source heat source pumps
* 3 April 2012: GBP1,000,000 was invested into Tanganyika Heat Limited, a
company that invests in ground source heat source pumps
* 3 April 2012: GBP1,000,000 was invested into Caspian Heat Limited, a company
that invests in ground source heat source pumps
* 4 April 2012: GBP1,000,000 was invested into Sula Power Limited, a company
that invests in solar power
* 5 April 2012: GBP1,000,000 was invested into Game Development Limited, a media
company
· 5 April 2012: GBP1,000,000 was invested into 5AM Music
Limited, a company involved in the music industry
17. Contingencies, guarantees and financial commitments
Under the terms of the Investment Management agreement, Octopus is entitled to
an annual management fee of 2.0% of net assets. However, the annual management
fee will be rolled up (without interest) and will only be paid to Octopus once
shareholders have received dividends and distributions during the life of the
Fund totalling or exceeding 105p per share. Octopus will only be entitled to
receive an annual management fee for the period from the date on which shares
are first allotted under the Offer until the date on which the general meeting
is held (expected to be in August 2015) at which shareholders will be asked to
approve a motion regarding the future of the company.
In view of the early stage of the investment process, the Directors do not
currently believe there is sufficient certainty that any management fee will be
paid, and have therefore made no accrual in respect of any fee potentially
payable. In relation to management fees, there was a contingent liability of
GBP1,950,000 as at 29 February 2012 (2011: GBP954,000).
Provided that an intermediary continues to act for a shareholder and the
shareholder continues to be the beneficial owner of the shares, intermediaries
will be paid an annual trail commission up to 0.5% of the initial net asset
value. Trail commission of GBP433,000 was paid during the year (2011: GBP18,000) and
there was GBPnil outstanding at the year end.
There were no further contingencies, guarantees or financial commitments as at
29 February 2012 (2011: none).
18. Related party transactions
Chris Hulatt, a non-executive director of Octopus VCT plc prior to his
resignation during the year to 29 February 2012, is a director of Octopus
Investments Limited. Martijn Kleibergen, who was appointed as a non-executive
director of Octopus VCT plc during the year to 29 February 2012, is an employee
of Octopus Investments Limited. Octopus VCT plc has employed Octopus throughout
the year as Investment Manager. Octopus VCT plc has paid Octopus GBPnil in the
year as a management fee and there is GBPnil outstanding at the balance sheet
date.
Octopus provides investment management and administration & accounting services
to the Company under a management agreement which runs for a period of five
years with effect from 16 September 2009 and may be terminated at any time
thereafter by not less than twelve 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 administration and accounting fee is payable quarterly in arrears for a fee
of 0.3% of the NAV calculated at annual intervals as at 29 February. During the
year GBP149,000 (2011: GBP141,000) was paid to Octopus Investments and there was
GBPnil outstanding at the balance sheet date (2011: GBP954,000), for the accounting
and administrative services.
Octopus is entitled to an annual management fee of 2.0% of net assets. In order
to ensure the alignment of interests between Octopus and Shareholders, the
annual management fee will be rolled up (without interest) and will only be paid
to Octopus once shareholders have received dividends during the life of the Fund
and distributions totaling or exceeding 105p per Share. Octopus will only be
entitled to receive an annual management fee for the period from the date on
which shares are first allotted under the Offer until the date on which the
general meeting is held (expected to be in August 2015) at which shareholders
will be asked to approve a notion regarding the future of the Company. In
relation to management fees, there was a contingent liability of GBP1,950,000 as
at 29 February 2012 (2011: GBPnil).
In addition, Octopus also provides secretarial services for an additional fee of
GBP15,000 per annum. During the year GBP15,000 (2011: GBP15,000) was due to Octopus
Investments Limited and there was GBPnil (2011: GBPnil) outstanding at the balance
sheet date.
Octopus will also be entitled to receive a performance related incentive fee of
20% on returns to shareholders
in excess of 105p per share. The calculation of this fee is based wholly on the
payment of cash proceeds to
shareholders and will, therefore, not be paid until after the general meeting in
2015. No contingent liability has been recognised on the basis that the Board
believe there is insufficient certainty that a fee will be payable and that no
reliable measurement can be made.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Octopus VCT PLC via Thomson Reuters ONE
[HUG#1616234]
Oberon Aim Vct (LSE:OVCT)
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