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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Octopus AP 4 | LSE:OAP4 | London | Ordinary Share | GB00B39XCB54 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 83.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMOAP4 Octopus Apollo VCT 4 plc Final Results 25 May 2012 Octopus Apollo VCT 4 plc, managed by Octopus Investments Limited, today announces the final results for the year ended 31 January 2012. These results were approved by the Board of Directors on 24 May 2012. You may, in due course, view the Annual Report in full at www.octopusinvestments.com. About Octopus Apollo VCT 4 plc Octopus Apollo VCT 4 plc ('Company', 'Fund') is a venture capital trust ('VCT') which aims to provide shareholders with attractive tax-free dividends and absolute returns on its investments, by investing in a diverse portfolio of predominantly unquoted companies. The Company is managed by Octopus Investments Limited ('Octopus' or 'Manager'). The Fund was launched in June 2008 and raised over GBP11.5 million ( GBP11.0 million net of expenses) through an offer for subscription by the time it closed on 30 June 2009. Venture Capital Trusts (VCTs) VCTs were introduced in the Finance Act 1995 to provide a means for private individuals to invest in unlisted companies in the UK. Subsequent Finance Acts have introduced changes to VCT legislation. The tax benefits currently available to eligible new investors in VCTs include: * up-front income tax relief of up to 30%; · exemption from income tax on dividends paid; and · exemption from capital gains tax on disposals of shares in VCTs. The Company has been provisionally approved as a VCT by HMRC. In order to maintain its approval the Company must comply with certain requirements on a continuing basis: * at least 70% of the Company's investments must comprise 'qualifying holdings'* (as defined in the legislation); * at least 30% of the 70% of qualifying holdings must be invested into Ordinary shares with no preferential rights (from April 2011 this will change to 70% for new investments); * no single investment made can exceed 15% of the total Company value; and * a minimum of 10% of each Qualifying Investment must be in Ordinary shares with no preferential rights. *A 'qualifying holding' consists of up to GBP1 million invested in any one year in new shares or securities in an unquoted UK Company (or companies listed on AIM) which is carrying on a qualifying trade and whose gross assets do not exceed a prescribed limit at the time of investment. The definition of a 'qualifying trade' excludes certain activities such as property investment and development, financial services and asset leasing Financial Summary +-----------------------+ Ordinary shares |Year to 31 January 2012|Year to 31 January 2011 =------------------------------+-----------------------+----------------------- | | | | Net assets ( GBP'000s) | 11,192| 10,644 | | Return after tax ( GBP'000s) | 661| 64 | | Net asset value per share (NAV)| 97.3p| 91.5p | | Proposed dividend per share | 1.0p| - =------------------------------+-----------------------+----------------------- Chairman's Statement Introduction I am delighted to present the fourth Annual Report of Octopus Apollo VCT 4 plc for the year ended 31 January 2012. Performance The performance of the Company has been pleasing and has kept in line with the investment mandate of this VCT. The Net Asset Value ("NAV") has risen from 91.5 pence per share to 97.3 pence per share, amounting to a 6.3% increase. The uplift in the NAV is partly due to the disposal of Autologic Diagnostic Holdings, which realised a gain of GBP573,000. In addition interest income from loan investments now outweighs expenses, resulting in a revenue return of GBP254,000 for the year. Dividend and Dividend Policy It is your Board's policy to maintain a regular dividend flow where possible in order to take advantage of the tax free distributions a VCT is able to provide. Given the strong performance of your Company, your Board has proposed a final dividend of 1.0 pence per share in respect of the year ended 31 January 2012. This dividend, if approved by shareholders at the AGM, will be paid on 9 August 2012 to shareholders on the register on 13 July 2012. Investment Portfolio During the year, the Fund invested GBP3,475,000, of which, GBP500,000 was invested in Donoma Power, a company that constructed and now operates a solar power site. Additionally, GBP1,000,000 was invested in Salus Services 2, a company seeking a suitable site at which to construct an elderly care home. A non-qualifying investment of GBP1,000,000 was made to finance the secured loan book of Borro, an online pawnbroker and GBP600,000 was invested in Atlantic Screen International, a film production company. Follow on investments totalling GBP375,000 were made in CSL Dualcom, Carebase (Col) and Autologic Diagnostic Holdings. A full list of the Company's portfolio is set out on page x. All of the investments are discussed further in the Investment Managers Review on pages x to x. The Fund has now invested sufficiently in order to meet all the requirements for it to fully qualify as a VCT. It now has the opportunity to make a limited number of further investments with the aim of accelerating the NAV of the Fund over the foreseeable future. Investment Strategy As was set out in the prospectus, the aim of the Fund is to make investments that focus more on capital preservation than a typical VCT. To date the Investment Manager has been successful in achieving this aim, as evidenced by the positive return on ordinary activities. Typically the structure of the investments is weighted more heavily towards loan based instruments rather than equity. This is considered to be of a lower risk nature as returns are fixed and payments are generally ranked above most other creditors, allowing for future visibility and security. This strategy also reduces the downward risk that is part and parcel of an equity investment. The Fund has also been able to take strong advantage of the reduced liquidity in the traditional lending market, which has led to good opportunities to invest into well managed and profitable businesses with strong recurring cash-flows. 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 Apollo VCT 4 plc is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT. This is discussed further on page x. A key requirement is to maintain at least the 70% qualifying investment level. As at 31 January 2012, 85.2% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments. Annual General Meeting The Company's Annual General Meeting will take place on Tuesday 24 July 2012 at 3.00 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 In light of the proposed changes to the VCT investment limits (as expected to be introduced by the Finance Bill 2012) and so as to achieve, amongst other things, cost savings and administrative efficiency, the Board, together with the boards of Octopus Apollo VCT 1 plc (Apollo 1), Octopus Apollo VCT 2 plc (Apollo 2) and Octopus Apollo VCT 3 plc (Apollo 3), has agreed in principle for a merger of the four companies. The merger will create a significantly enlarged VCT and is expected to provide benefits for all shareholders. The intention is that the proposed merger will be completed pursuant to schemes of reconstruction under section 110 of the Insolvency Act 1986 whereby Apollo 1, Apollo 2 and Apollo 4 will each transfer their assets and liabilities to Apollo 3 in consideration for new Shares being issued to Apollo 1, Apollo 2 and Apollo 4 shareholders. Each acquisition will require the approval of the shareholders of the relevant Apollo VCTs, will be completed on a relative net asset value basis and will not be conditional on the other acquisitions proceeding. A merger on this basis will be outside the provisions of The City Code on Takeovers and Mergers. The Boards will be writing to their respective shareholders detailing the full terms of the proposed merger. It is also intended to offer existing Apollo VCT shareholders the opportunity to increase their investment, and for new investors to participate, in the new enlarged VCT via a top-up offer, as well as providing shareholders with the opportunity to participate in an enhanced buyback facility. Again details of these proposals will be provided to shareholders in due course. Murray Steele Chairman 24 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 Apollo 4 is to seek lower risk investments. The majority of companies in which Apollo 4 invests operate in sectors where there is a high degree of predictability. Ideally, we seek companies that have contractual revenues from financially sound customers and will provide an exit for shareholders within three to five years. Performance The Fund made a net return of 6.3% over the year with the NAV rising from 91.5 pence per share to 97.3 pence per share. The disposal of Autologic Holdings allowed the Fund to realise a gain of GBP573,000. The majority of investments are loan based on which a steady flow of interest is received. This is now at a level whereby interest income streams outweigh the expenses of the Fund, generating a revenue return of GBP254,000 and a good return on your investment. The acquisition of CSL Dualcom by a private equity house allowed the Fund to restructure its previous debt/equity investment into a majority debt investment. The new structure provides better yields and allows the Fund to retain a small equity holding which we hope will let us recognise uplifts in the future. As a result of the restructure a small reduction in the rolled up interest has been recognised in the fair value movements in the year. Aside from this, it is pleasing to announce no other fair value movements have been made. Portfolio Review In total, GBP3,475,000 has been invested over the year, of which, GBP1,000,000 was invested in Borro, an online pawn broker. Borro provides relatively short fixed term loans on high value assets. Our debt is secured against these assets, which means the investment carries minimal risk for the strong returns available. Whilst this investment is non-qualifying for VCT purposes we see this and similar investments as being a good way to improve the running yield of the Fund whilst investing in line with our mandate. A VCT qualifying investment of GBP600,000 was made in Atlantic Screen International, a Company that commissions, creates and owns original scores which are written and recorded specifically for inclusion in international film and television projects. GBP500,000 has been invested in Donoma Power, a company that constructed and operates a solar renewable energy site that benefits from the Government's feed-in-tariff and GBP1,000,000 was invested in Salus Services 2, a company seeking a suitable site at which to construct an elderly care home. Follow-on investments totalling GBP375,000 were also made in CSL Dualcom, Carebase (Col) and Autologic Diagnostics. Post year end, GBP750,000 has been invested in Technical Software Consultants, a Company that sells industrial crack detectors principally to the oil and gas pipeline market. 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. Stuart Nicol Investment Director Octopus Investments 24 May 2012 Investment Portfolio Fair % Investment value equity % at cost at Movement at 31 held equity 31 January in January Movement by managed Fixed asset 2012 valuation 2012 in year Apollo by investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 4 Octopus =------------------------------------------------------------------------------------ Salus Services 1 Limited Care homes 1,882 - 1,882 - 20.0% 100.0% Clifford Thames Group Limited Automotive 1,336 210 1,546 - 2.0% 8.0% CSL Dualcom Limited Security devices 1,444 - 1,444 (6) 0.4% 3.4% Salus Services 2 Limited Care homes 1,000 - 1,000 - 50.0% 100.0% Resilient Corporate Services Limited Business services 1,000 - 1,000 - 24.5% 49.0% Borro Loan 2 Limited* Pawn Brokers 1,000 - 1,000 - 0.0% 0.0% Atlantic Screen International Media 600 - 600 - 30.0% 100.0% Bluebell Telecom Group Limited Telecommunications 500 55 555 - 1.1% 6.5% Donoma Power Solar 500 - 500 - 18.0% 100.0% Carebase (Col) Limited* Care homes 230 - 230 - 0.0% 0.0% =------------------------------------------------------------------------------------ Total unquoted investments 9,492 265 9,757 (6) Money market funds 1,161 - 1,161 - =------------------------------------------------------------------------------------ Total investments 10,653 265 10,918 (6) Cash at bank 130 Debtors less creditors 144 =------------------------------------------------------------------------------------ Total net assets 11,192 *These are 100% debt investments Valuation Methodology The investments held by Apollo 4 are all unquoted and as such there is 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 has then been made according to any significant under or over performance of the business. If you would like to find out more regarding The International Private Equity and Venture Capital ('IPEVC') Valuation Guidelines, please visit their website at: www.privateequityvaluation.com. Investments are valued in accordance with the accounting policy set out on page -, which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with International Private Equity and Venture Capital Valuations guidelines and current financial reporting standards. Investment Portfolio Salus Services Holdings 1 Limited ('Salus') Salus is Funding the construction of a care home based in Colchester. +-------------------+---+------------+---+------------+ | Asset class | | Cost | | Valuation | +-------------------+---+------------+---+------------+ | A Ordinary shares | | GBP1,882,000 | | GBP1,882,000 | +-------------------+---+------------+---+------------+ | Total | | GBP1,882,000 | | GBP1,882,000 | +-------------------+---+------------+---+------------+ Investment date: January 2010 Equity held: 20.0% 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: GBPnil Valuation basis: Held at cost Clifford Thames Group Limited ('CT') Clifford Thames is a market leading provider of consultancy and business outsourcing services for the automotive industry, and is a key partner of most of the world's leading car manufacturers. With offices in eight countries, Clifford Thames has a well-established and impressive client list including Ford, GM Europe, Jaguar Land Rover, Mazda and Fiat. Further information can be found at the Company's website www.clifford-thames.com. +---------------------+---+------------+---+------------+ | Asset class | | Cost | | Valuation | +---------------------+---+------------+---+------------+ | A Ordinary shares | | GBP305,000 | | GBP305,000 | +---------------------+---+------------+---+------------+ | B preference shares | | GBP3,000 | | GBP3,000 | +---------------------+---+------------+---+------------+ | Loan stock | | GBP1,028,000 | | GBP1,238,000 | +---------------------+---+------------+---+------------+ | Total | | GBP1,336,000 | | GBP1,546,000 | +---------------------+---+------------+---+------------+ Investment date: January 2010 Equity held: 2.0% Last audited accounts: 31 March 2011 Revenues: GBP33.5 million Profit before interest & tax: GBP2.5 million Net assets: GBP11.7 million Income receivable recognised in year: GBP92,000 Valuation basis: Held at cost 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 | | GBP94,000 | | GBP94,000 | +-------------------+---+------------+---+------------+ | Loan stock | | GBP1,350,000 | | GBP1,350,000 | +-------------------+---+------------+---+------------+ | Total | | GBP1,444,000 | | GBP1,444,000 | +-------------------+---+------------+---+------------+ Investment date: February 2009 Equity held: 0.4% 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: GBP126,000 Valuation basis: Held at cost Salus Services 2 Limited ('Salus 2') Salus 2 is currently seeking a suitable site in which to construct an elderly care home. +-------------------+---+------------+---+------------+ | Asset class | | Cost | | Valuation | +-------------------+---+------------+---+------------+ | A Ordinary shares | | GBP300,000 | | GBP300,000 | +-------------------+---+------------+---+------------+ | Loan stock | | GBP700,000 | | GBP700,000 | +-------------------+---+------------+---+------------+ | Total | | GBP1,000,000 | | GBP1,000,000 | +-------------------+---+------------+---+------------+ Investment date: January 2012 Equity held: 50.0% Last audited accounts: 30 November 2011 Revenues: GBP0.0 million Loss before interest & tax: GBP(0.0) million Net assets: GBP1.0 million Income receivable recognised in year: GBPnil Valuation basis: Held at cost Resilient Corporate Services Limited ('Resilient') Resilient has been set up to investigate and seek the acquisition of companies engaged in the provision of business support services. +-------------------+---+------------+---+------------+ | Asset class | | Cost | | Valuation | +-------------------+---+------------+---+------------+ | A Ordinary shares | | GBP300,000 | | GBP300,000 | +-------------------+---+------------+---+------------+ | Loan stock | | GBP700,000 | | GBP700,000 | +-------------------+---+------------+---+------------+ | Total | | GBP1,000,000 | | GBP1,000,000 | +-------------------+---+------------+---+------------+ Investment date: March 2010 Equity held: 24.5% Last unaudited accounts: 28 February 2011 Revenues: GBP0.0 million Profit before interest & tax: GBP0.0 million Net assets: GBP2.9 million Income receivable recognised in year: GBP10,000 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 | +-------------+---+------------+---+------------+ | Loan stock | | GBP1,000,000 | | GBP1,000,000 | +-------------+---+------------+---+------------+ | Total | | GBP1,000,000 | | GBP1,000,000 | +-------------+---+------------+---+------------+ Investment date: December 2011 Equity held: 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: GBP40,000 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. Atlantic Screen International Limited ("ASI") ASI was established to create and exploit music for international film and television productions. It does so by, commissioning, creating and owning original scores which are written and recorded specifically for inclusion in international film and television projects. +-------------------+---+----------+---+-----------+ | Asset class | | Cost | | Valuation | +-------------------+---+----------+---+-----------+ | A Ordinary shares | | GBP600,000 | | GBP600,000 | +-------------------+---+----------+---+-----------+ | Total | | GBP600,000 | | GBP600,000 | +-------------------+---+----------+---+-----------+ Investment date: January 2012 Equity held: 30.0% Last audited accounts: N/A* Revenues: N/A* Profit before interest & tax: N/A* Net assets: N/A* Income receivable recognised in year: N/A* Valuation basis: Held at cost *The first years statutory accounts are yet to be produced Bluebell Telecom Services Limited ('Bluebell') (formerly Vulcan Services II Limited) Bluebell provides landline, mobile and data solutions to businesses, helping to cut costs and improve efficiency through simple rationalisation and more effective deployment of voice and data services. Further information can be found at the Company's website www.bluebelltelecom.com. +-------------------+---+----------+---+-----------+ | Asset class | | Cost | | Valuation | +-------------------+---+----------+---+-----------+ | A Ordinary shares | | GBP54,000 | | GBP54,000 | +-------------------+---+----------+---+-----------+ | Loan stock | | GBP446,000 | | GBP501,000 | +-------------------+---+----------+---+-----------+ | Total | | GBP500,000 | | GBP555,000 | +-------------------+---+----------+---+-----------+ Investment date: September 2010 Equity held: 1.1% Last audited accounts: 30 April 2011 Revenues: GBP7.0 million Profit before interest & tax: GBP0.4 million Net assets: GBP0.3 million Income receivable recognised in year: GBP65,000 Valuation basis: Steady state cashflow multiple Donoma Power Limited Donoma Power Limited constructed and operates a solar renewable energy site at a carefully selected location in Howton, Nottinghamshire. +-------------------+---+----------+---+-----------+ | Asset class | | Cost | | Valuation | +-------------------+---+----------+---+-----------+ | A Ordinary shares | | GBP500,000 | | GBP500,000 | +-------------------+---+----------+---+-----------+ | Total | | GBP500,000 | | GBP500,000 | +-------------------+---+----------+---+-----------+ Investment date: May 2011 Equity held: 18.0% Last unaudited accounts: 31 December 2011 Revenues: GBP0.5 million Loss before interest & tax: GBP0.6 million Net assets: GBP14.0 million Income receivable recognised in year: GBPnil Valuation basis: Held at cost Carebase (Colchester) Limited ('Carebase') Carebase operates an elderly care home in Colchester, Essex. +-----------------+---+----------+---+-----------+ | Asset class | | Cost | | Valuation | +-----------------+---+----------+---+-----------+ | Ordinary shares | | - | | - | +-----------------+---+----------+---+-----------+ | Loan stock | | GBP230,000 | | GBP230,000 | +-----------------+---+----------+---+-----------+ | Total | | GBP230,000 | | GBP230,000 | +-----------------+---+----------+---+-----------+ Investment date: March 2010 Equity held: 0.0% Last unaudited accounts: 31 December 2010 Revenues: GBP0.0 million* Loss before interest & tax: GBP0.0 million* Net assets: GBP0.0 million* Income receivable recognised in year: GBPnil* Valuation basis: Held at cost *These are first year statutory accounts during which the Company was dormant and not trading How Octopus creates and delivers value for the shareholders of Octopus Apollo VCT 4 plc Octopus Apollo VCT 4 plc focuses on providing established, development and expansion funding to predominantly unquoted companies with a typical investment per Company of GBP0.2 million to GBP1.0 million. The Fund is being invested on the basis of taking less risk than a typical VCT. Typically the Fund will receive its return from interest paid on secured loan notes as well as an exposure to the value of the shares of a Company. The investment strategy is to derive sufficient return from the secured loan notes to achieve the Fund's investment aims and to use the equity exposure to boost returns. As portfolio companies are unquoted the Fund will receive a return from an equity holding when a Company is sold. Investment Process The Investment Manager follows a multi-stage process prior to making Qualifying Investments in unquoted companies. Initial Screening If the initial review of the business plan is positive, a meeting is held with the management team of the business in order to assess the team in terms of its ability to achieve the objectives set out in the business plan. The proposition is then discussed and reviewed with the other members of the Octopus team and a decision is taken as to whether to continue discussions with the Company with a view to making an investment. Due Diligence Prior to making an investment, due diligence is carried out on the potential investee Company. The due diligence process includes a review of the investee Company's products and services, discussions with customers and suppliers, competitive analysis, assessment of the capabilities of the management team and financial analysis. In addition, with the potential investees' permission, the input of existing relevant Octopus industry contacts is often sought. Additionally, Octopus also draws on professional input from lawyers, accountants and other specialists as required in order to conduct the due diligence and draw up the required legal documentation in order to complete an investment. Post-Investment Monitoring Octopus will either appoint a Director or a formal observer to the board of each investee Company. The majority of the investments are expected to be held for approximately five years. There may, however, be opportunities to exit profitably on shorter timescales. The Investment Manager will conduct a regular review of the portfolio, during which each investee Company will be assessed in terms of its commercial and financial progress, its strategic positioning, requirement for further capital, progress towards an eventual exit and its current and prospective valuation. As each Company matures, the exit considerations become more specific, with a view to establishing a definitive action plan in order to achieve a successful sale of the investment. Throughout the cycle of an investment, the Investment Manager will remain proactive in determining the appropriate time and route to exit. It is expected that the majority of exits will be by means of trade sale. Directors' Responsibilities 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 are 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 are 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. The Directors confirm, to the best of their knowledge, that: · 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. The financial statements are published at www.octopusinvestments.com, a website maintained by Octopus Investments. The maintenance and integrity of the website is, so far as it relates to the Company, the responsibility of Octopus Investments. The work carried out by the auditor does not involve consideration of the maintenance and integrity of the website and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the accounts since they were originally presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the accounts differ from legislation in other jurisdictions. 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. On behalf of the board Murray Steele Chairman 24 May 2012 Income Statement +---------------------+ | Year to 31 January | | 2012 | =------------------------------------------------+---------------------+ |Revenue Capital Total| | | Notes| GBP'000 GBP'000 GBP'000| =------------------------------------------------+---------------------+ | | | | Gain on disposal of fixed asset investments 9 | - 573 573| | | | | | | Fixed asset investment holding loss 9 | - (6) (6)| | | | | | | Investment income 2 | 528 - 528| | | | | | | Investment management fees 3 | (53) (160) (213)| | | | | | | Other expenses 4 | (221) - (221)| | | | | =------------------------------------------------+---------------------+ Return on ordinary activities before tax | 254 407 661| | | | | | | Taxation on return on ordinary activities 6 | - - -| | | | | =------------------------------------------------+---------------------+ Return on ordinary activities after tax | 254 407 661| =------------------------------------------------+---------------------+ Earnings per share - basic and diluted 7 | 2.2p 3.5p 5.7p| +---------------------+ * 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 31 January | | 2011 | --------------------------------------------------+---------------------+ |Revenue Capital Total| | | Notes| GBP'000 GBP'000 GBP'000| --------------------------------------------------+---------------------+ | | | | Loss on disposal of fixed asset investments | - (12) (12)| | | | | | | Fixed asset investment holding gain | - 271 271| | | | | | | Investment income 2 | 215 - 215| | | | | | | Investment management fees 3 | (53) (160) (213)| | | | | | | Other expenses 4 | (199) - (199)| | | | | --------------------------------------------------+---------------------+ Return on ordinary activities before tax | (37) 101 64| | | | | | | Taxation on return on ordinary activities 6 | - - -| | | | | --------------------------------------------------+---------------------+ Return on ordinary activities after tax | (37) 101 64| --------------------------------------------------+---------------------+ Earnings per share - basic and diluted 7 | (0.3)p 0.9p 0.6p| +---------------------+ * 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 | 31 January 2012 | 31 January 2011 =----------------------------------------+-----------------+----------------- Shareholders' Funds at start of year | 10,644 | 10,591 | | Return on ordinary activities after tax | 661 | 64 | | Shares bought back for cancellation | (113) | (11) =----------------------------------------+-----------------+----------------- Shareholders' Funds at end of year | 11,192 | 10,644 =----------------------------------------+-----------------+----------------- The accompanying notes are an integral part of the financial statements. Balance Sheet +--------------------+ | As at 31 January | As at 31 January | 2012| 2011 | | Notes| GBP'000 GBP'000| GBP'000 GBP'000 =-------------------------------------+--------------------+-------------------- | | | | Fixed asset investments* 9 | 9,757| 7,358 | | Current assets: | | | | Debtors 10 | 189 | 43 | | Investments* 11 |1,161 |1,430 | | Cash at bank | 130 |1,852 =-------------------------------------+--------------------+-------------------- |1,480 |3,325 | | Creditors: amounts falling due | | within one year 12 | (45) | (39) =-------------------------------------+--------------------+-------------------- Net current assets | 1,435| 3,286 =-------------------------------------+--------------------+-------------------- Total assets less current | | liabilities | 11,192| 10,644 =-------------------------------------+--------------------+-------------------- | | | | Called up equity share capital 13 |1,150 |1,164 | | Special distributable reserve 14 |9,720 |9,833 | | Capital redemption reserve 14 | 15 | 1 | | Capital reserve gains and losses | | on disposal 14 | 100 |(313) | | Capital reserve holding gains | | and losses 14 | 265 | 271 | | Revenue reserve 14 | (58) |(312) =-------------------------------------+--------------------+-------------------- Total shareholders' Funds | 11,192| 10,644 =-------------------------------------+--------------------+-------------------- Net asset value per share 8 | 97.3p| 91.5p +--------------------+ * 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 24 May 2012 and are signed on their behalf by: Murray Steele Chairman Company No: 06614754 Cash Flow Statement +--------------------+ | Year to 31 | Year to 31 January | January 2012| 2011 | | Notes| GBP'000| GBP'000 =-------------------------------------+--------------------+-------------------- | | | | Net cash outflow from operating | | activities | (46)| (201) | | | | | | Taxation 6 | -| - | | | | | | Financial investment: | | | | Purchase of fixed asset | | investments 9 | (3,475)| (1,170) | | Disposal of fixed asset | | investments 9 | 1,643| 488 | | | | | | Dividends paid | | - | | | | | | Management of liquid resources: | | | | Purchase of current asset | | investments 11 | (1,885)| (6,477) | | Disposal of current asset | | investments 11 | 2,154| 9,138 | | | | | | Financing: | | | | Purchase of own shares 13 | (113)| (11) | | | | =-------------------------------------+--------------------+-------------------- (Decrease)/increase in cash | (1,722)| 1,767 =-------------------------------------+--------------------+-------------------- The accompanying notes are an integral part of the financial statements. Reconciliation of return before Taxation to Cash Flow from Operating Activities +----------------------+ | Year to 31 January| Year to 31 January | 2012| 2011 | | | GBP'000| GBP'000 =---------------------------------+----------------------+---------------------- Return on ordinary activities | | before tax | 661| 64 | | (Increase)/decrease in debtors | (146)| 43 | | Increase/(decrease) in creditors | 6| (49) | | (Gain)/loss on disposal of fixed | | asset investments | (573)| 12 | | Holding loss/(gain) on fixed asset| | investments | 6| (271) =---------------------------------+----------------------+---------------------- (Outflow) from operating | | activities | (46)| (201) +----------------------+ Reconciliation of Net Cash Flow to Movement in Net Funds +---------------------+ | Year to 31 January| Year to 31 January | 2012| 2011 | | | GBP'000| GBP'000 =-----------------------------------+---------------------+--------------------- (Decrease)/increase in cash at | | bank | (1,722)| 1,767 | | Movement in cash equivalent | | securities | (269)| (2,661) | | Opening net Funds | 3,282| 4,176 =-----------------------------------+---------------------+--------------------- Net Funds at 31 January | 1,291| 3,282 +---------------------+ Net Funds at 31 January comprised: +-------------------------+ | Year to 31 January 2012 | Year to 31 January 2011 | | | GBP'000 | GBP'000 =------------------------+-------------------------+------------------------- Cash at bank | 130 | 1,852 | | Money market Funds | 1,161 | 1,430 =------------------------+-------------------------+------------------------- Net Funds at 31 January | 1,291 | 3,282 =------------------------+-------------------------+ 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' (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 unquoted fixed asset 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 and loss; therefore all gains and losses arising from such investments held are attributable to financial assets held at fair value through profit and loss. Accordingly, all interest income, fee income, expenses and impairment losses are attributable to assets designated as being at fair value through profit and loss. Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current International Private Equity and Venture Capital ('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. For the avoidance of doubt, Octopus Apollo VCT 4 plc only invests in unquoted investments. Although the Company believes that the assumptions concerning the business environment and estimate 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 assets 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 are designated as being at 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 price of recent transaction, earnings multiple and net assets. This is consistent with International Private Equity and Venture Capital 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 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 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 has been 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 holding gains and losses on investments, as well as gains and losses on disposal. 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 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 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 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' comprise disclosures relating to financial instruments. We define capital 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 14. 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 9 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 - 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, when applicable, 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 dividends when they are paid, and for final dividends when they are approved by the shareholders. 2. Income 31 January 2012 31 January 2011 GBP'000 GBP'000 =-------------------------------------------------------------------------- Money market Funds, bonds and bank balances 27 23 Loan note interest receivable 501 192 =-------------------------------------------------------------------------- 528 215 =-------------------------------------------------------------------------- 3. Investment management fees 31 January 2012 31 January 2011 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 =-------------------------------------------------------------------- Investment management fee 53 160 213 53 158 211 =-------------------------------------------------------------------- For the purposes of the revenue and capital columns in the income statement, the management fee 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 Investments provides investment management and accounting and administration services to the Company under a management agreement which runs for a period of five accounting periods with effect from 21 July 2008 and may be terminated at any time thereafter by not less than 12 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 18 to the financial statements. 4. Other expenses 31 January 2012 31 January 2011 GBP'000 GBP'000 =------------------------------------------------------------------------------- Directors' remuneration 50 50 Fees payable to the Company's auditor for the audit of the financial statements 12 9 Fees payable to the Company's auditor for other services - tax compliance 3 2 Accounting and administration services 32 29 Legal and professional expenses 1 4 Other expenses 123 105 =------------------------------------------------------------------------------- 221 199 =------------------------------------------------------------------------------- The total expense ratio for the Company for the year to 31 January 2012 was 3.4 per cent (2011: 3.2 per cent). Running costs in the period, as defined in the prospectus, were 3.4% of the average Company's net assets during the year, which has exceeded the annual limit of 3.2%. The overspend of GBP26,000 will be reimbursed by Octopus Investments Limited through a reduced investment management fee in the year to 31 January 2013. 5. Directors' remuneration 31 January National 31 January National 2012 Insurance 2011 Insurance GBP'000 GBP'000 GBP'000 GBP'000 =------------------------------------------------------------------------------- Directors' emoluments Murray Steele 20 - 20 - (Chairman) Chris Powles 15 1 15 1 Chris Hulatt (paid 13 - 15 - to Octopus Investments Limited)* Martijn Kleibergen 2 - (paid by Octopus Investments Limited)* =------------------------------------------------------------------------------- 50 1 50 1 =------------------------------------------------------------------------------- *Chris Hulatt resigned on 07.12.2011, on the same date Martijn Kleibergen was appointed. 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). 6. Tax on ordinary activities The corporation tax charge for the year was GBPnil (2011: GBPnil). The current tax charge for the year differs from the standard rate of corporation tax in the UK of 26.32% (2011: 28%). The differences are explained below. Current tax reconciliation: 31 January 2012 31 January 2011 GBP'000 GBP'000 =----------------------------------------------------------------------------- Return on ordinary activities before tax 661 64 Non taxable gains (567) (259) =----------------------------------------------------------------------------- Net return/(loss) on ordinary activities 94 (195) Current tax at 26.32% (2011: 28%) 24 (55) Utilisation of tax losses (24) - =----------------------------------------------------------------------------- Total current tax charge - - =----------------------------------------------------------------------------- The Company has excess management charges of approximately GBP197,000 (2011: GBP221,000) to carry forward to offset against future taxable profits. 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 deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments. 7. Earnings/(loss) per share The revenue earnings per share is based on 11,528,879 (31 January 2011: 11,615,546) shares, being the weighted average number of shares in issue during the year, and a revenue profit after tax of GBP254,000 (2011: loss of GBP37,000). The capital earnings per share is based on 11,528,879 (31 January 2011: 11,615,546) shares, being the weighted average number of shares in issue during the year, and a capital profit for the year totalling GBP407,000 (31 January 2011: GBP101,000 ). The total earnings per share is based on 11,528,879 (31 January 2011: 11,615,546) shares, being the weighted average number of shares in issue during the year, and a profit for the year totalling GBP661,000 (31 January 2011: GBP64,000) 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. 8. Net asset value per share The calculation of net asset value per share as at 31 January 2012 is based on net assets of GBP11,192,000 (31 January 2011: GBP10,644,000) and 11,498,447 (31 January 2011: 11,637,267) Ordinary shares in issue at that date. 9. Fixed asset investments Financial Reporting Standard 29 Financial Instruments: Disclosures regarding financial instruments that are measured in the balance sheet at fair value requires disclosure of fair value measurements by level in 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 classified as held for trading. 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 date 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 31 January 2012 are summarised below. Fixed asset investments: Level 3: Unquoted Level 3: Unquoted Total investments equity investments loan investments GBP'000 GBP'000 GBP'000 =------------------------------------------------------------------------------- Valuation and net book amount: Cost as at 1 4,382 7,087 February 2011 2,705 Revaluation as at 1 - 271 February 2011 271 =------------------------------------------------------------------------------- Fair value at 1 4,382 7,358 February 2011 2,976 =------------------------------------------------------------------------------- Movement in the year: Purchases at cost 1,400 2,075 3,475 Disposal proceeds (855) (788) (1,643) Gain on realisation 573 573 of investments in year - Holding losses in (6) year (6) =------------------------------------------------------------------------------- Closing fair value 5,500 9,757 at 31 January 2012 4,257 =------------------------------------------------------------------------------- Closing cost at 31 5,500 9,492 January 2012 3,992 Closing holding - 265 gains at 31 January 2012 265 =------------------------------------------------------------------------------- Fair value at 31 5,500 9,757 January 2012 4,257 =------------------------------------------------------------------------------- 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 them being bound together when assessing portfolios returns to shareholders. This is consistent with their investment policy and results in certain loan notes achieving an upwards revaluation. Further details of the fixed asset investments held by the Company are shown within the Investment Manager's Review on pages - to -. 10. Debtors 31 January 2012 31 January 2011 GBP'000 GBP'000 =------------------------------------------------------------------- Prepayments and accrued income 189 43 =------------------------------------------------------------------- 11. Current Asset Investments Current asset investments at 31 January 2012 comprised money market Funds (31 January 2011: money market Funds). Level 1: money market Funds =--------------------------------------------------------------------- Total GBP'000 GBP'000 =--------------------------------------------------------------------- Valuation and net book amount: Book cost at 1 February 2011: Money market Funds 1,430 ----------- 1,430 Revaluation to 1 February 2011: Money market Funds - ----------- - =--------------------------------------------------------------------- Valuation as at 1 February 2011 1,430 Movement in the year: Purchases at cost: Money market Funds 1,885 ----------- 1,885 Disposal proceeds: Money market Funds (2,154) ----------- (2,154) =--------------------------------------------------------------------- Valuation as at 31 January 2012 1,161 =--------------------------------------------------------------------- Cost at 31 January 2012: Money market Funds 1,161 ----------- 1,161 Revaluation to 31 January 2012: Money market Funds - ----------- - =--------------------------------------------------------------------- Valuation as at 31 January 2012 1,161 =--------------------------------------------------------------------- All current asset investments held at the year end sit with the level 1 hierarchy for the purposes of FRS 29. At 31 January 2012 and 31 January 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 31 January 2012 31 January 2011 GBP'000 GBP'000 =---------------------------------------------------- Accruals 45 34 Other creditors - 5 =---------------------------------------------------- 45 39 =---------------------------------------------------- 13. Share capital 31 January 2012 31 January 2011 GBP'000 GBP'000 =------------------------------------------------------------------------------- Authorised: 50,000,000 Ordinary shares of 10p 5,000 5,000 =------------------------------------------------------------------------------- Allotted and fully paid up: 11,498,447 (2011: 11,637,267) Ordinary shares of 1,150 1,164 10p =------------------------------------------------------------------------------- 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 -. The Company is not subject to any externally imposed capital requirements. The Company did not issue any Ordinary shares during the year (2011: nil). During the year to 31 January 2012, the Company bought back for and cancelled the following shares: * 3 June 2011: 37,570 Ordinary shares at a price of 80.0 pence per share * 29 July 2011: 101,250 Ordinary shares at a price of 81.7 pence per share The total nominal value of the shares re-purchased was GBP13,882, representing 0.01% of the issued share capital. 14. Reserves Capital Capital reserve Special Capital reserve gains/ holding Share distributable redemption (losses) on gains/ Revenue capital reserve* reserve disposal* (losses) reserve* GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 =---------------------------------------------------------------------------------------------- As at 1 February 2011 1,164 9,833 1 (313) 271 (312) Repurchase of own shares (14) (113) 14 - - - Return on ordinary activities after tax - - - - - 254 Management fees allocated as capital expenditure - - - (160) - - Current year gains on disposal - - - 573 - - Current period holding gains on fair value of investments - - - - (6) - =---------------------------------------------------------------------------------------------- As at 31 January 2012 1,150 9,720 15 100 265 (58) =---------------------------------------------------------------------------------------------- *Available for potential distribution by way of a dividend 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. 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 31 January 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 February 2011 9,208 Movement in year 554 =------------------------------ As at 31 January 2012 9,762 =------------------------------ 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. 15. Financial instruments and risk management The Company's financial instruments comprise equity and fixed interest 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. 31 January 2012 31 January 2011 GBP000 GBP000 Assets at fair value through profit or loss Investments 9,757 7,358 Current asset investments 130 1,430 =-------------------------------------------------------------------------- Total 9,887 8,788 Loans and receivables Cash at bank 130 1,852 Accrued income 119 36 =-------------------------------------------------------------------------- Total 249 1,888 Liabilities at amortised cost Accruals and other creditors 45 39 =-------------------------------------------------------------------------- Total 45 39 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 as detailed within the Investment Manager's Review. 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 are 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. Fair value methods and assumptions Where investments are in quoted stocks, fair value is set as market price, discounted if appropriate. Unquoted investments are valued in line with IPEVC valuation guidelines. Market risk The Company's strategy for managing investment risk is determined with regard to the Company's investment objective, as outlined on page -. 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 with regard to the possible effects of adverse price movements and, with the objective of maximising overall returns to shareholders. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in 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 -. 87.2% (2010: 69.1%) 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 31 January 2012 would have increased net assets and the total return for the period by GBP975,700 (2011: GBP735,800) an equivalent change in the opposite direction would have reduced net assets and the total return for the period 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. 10.4% (2011: 13.4%) by value of the Company's net assets comprises of money market Funds held at fair value. A 1% overall increase in the valuation of the money market Funds at 31 January 2012 would have increased net assets and the total return for the year by GBP11,610 (2011: GBP14,300) an equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount. 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 31 January 2012 As at 31 January 2011 =------------------------------------------------------------------------------- Weighted Weighted average Total fixed average Total fixed time for rate Weighted time for rate Weighted which portfolio average which rate portfolio average rate is by interest is fixed by interest fixed in value GBP'000 rate % in years value GBP'000 rate % years =------------------------------------------------------------------------------- Unquoted fixed- interest investments 4,148 10.4% 2 2,013 9.2% 2 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 31 January 2012 (2011: 0.5%). The amounts held in floating rate investments at the balance sheet date were as follows: 31 January 2012 31 January 2011 GBP000 GBP000 =------------------------------------------------------------------------- Cash on deposit & money market Funds 1,291 3,282 =------------------------------------------------------------------------- A 1% increase in the base rate would increase income receivable from these investments and the total return by GBP12,910 (2011: GBP32,820), on an annualised basis. Credit risk Credit risk is the risk that the 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 31 January 2012 the Company's financial assets exposed to credit risk comprised the following: 31 January 2012 31 January 2011 GBP000 GBP000 =------------------------------------------------------------------------------ Investments in floating rate instruments 1,161 1,430 Cash on deposit 130 1,852 Investments in fixed rate instruments 3,096 4,702 Accrued dividends and interest receivable 119 36 =------------------------------------------------------------------------------ 4,506 8,020 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 the Co-operative Bank and HSBC. 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 31 January 2012 or 31 January 2011. Liquidity risk The Company's financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which generally may be illiquid. 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 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 31 January 2012 these investments were valued at GBP1,291,000 (2011: GBP3,282,000). 16. Post balance sheet events The following events occurred between the balance sheet date and the signing of these financial statements: * on 2 April 2012 - the Company invested GBP750,000 in Technical Software Consultants Limited. 17. Contingencies, guarantees and financial commitments There were no contingencies, guarantees or financial commitments as at 31 January 2012 (2011: GBPnil). 18. Related party transactions Chris Hulatt, a non-executive Director of Octopus Apollo VCT 4 plc during the year, prior to his resignation, is a Director of Octopus Investments Limited. Octopus Apollo VCT 4 plc has employed Octopus Investments throughout the period as Investment Manager. Octopus Apollo VCT 4 plc has paid Octopus GBP213,000 (2011: GBP211,000) in the year as a management fee and there was GBPnil outstanding at the balance sheet date (2011: GBPnil). The management fee is payable quarterly in advance and is based on 2.0% of the net asset value calculated at annual intervals as at 31 January. Octopus Investments Limited provides accounting and administrative services to the Company, payable quarterly in advance for a fee of 0.3% of the net asset value calculated at annual intervals as at 31 January. Octopus Investments also provides secretarial services for an additional fee of GBP10,000 per annum. During the year GBP10,000 (2011: GBP10,000) was paid to Octopus Investments Limited and there is GBPnil outstanding at the balance sheet date (2011: GBPnil). In addition, Octopus Investments also provides accounting and administrative services to the Company, payable quarterly in advance for a fee of 0.3% of the NAV calculated at annual intervals as at 31 January. During the year GBP32,000 (2011: GBP29,000) was paid to Octopus Investments and there is GBPnil outstanding at the balance sheet date, for the accounting and administrative services. No performance related incentive fee will be payable over the first five years. Thereafter, Octopus Investments will be entitled to an annual performance related incentive fee. This performance fee is equal to 20% of the amount by which the NAV from the start of the sixth accounting and subsequent accounting period exceeds simple interest of the HSBC Bank plc base rate for the same period. The NAV at the start of the sixth accounting period must be at least 100p. Any distributions paid out by the Fund will be added back when calculating this performance fee. The Board considers that the liability becomes due at the point that the performance criteria are met; this has not been achieved and therefore no liability has been recognised. 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 Apollo VCT 4 PLC via Thomson Reuters ONE [HUG#1614864]
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