Final Results

 
TIDMOAP2 
 
Octopus Apollo VCT 2 plc 
 
Final Results 
17 May 2011 
Octopus Apollo VCT 2 plc, managed by Octopus Investments Limited, today 
announces the final results for the year ended 31 January 2011. 
These results were approved by the Board of Directors on 16 May 2011. 
You may, in due course, view the Annual Report in full at 
www.octopusinvestments.com by navigating to Services, Investor Services, Venture 
Capital Trusts, Octopus Apollo VCT 2 plc.  All other statutory information can 
also be found there. 
 
About Octopus Apollo VCT 2 plc 
 
Octopus Apollo VCT 2 plc ('Apollo 2', 'Company' or 'Fund') is a venture capital 
trust ('VCT') which aims to provide shareholders with attractive tax-free 
dividends and long-term capital growth, by investing in a diverse portfolio of 
predominantly unquoted companies. The VCT is managed by Octopus Investments 
Limited ('Octopus' or 'Manager'). 
 
The Company was launched in May 2006 together with Octopus Apollo VCT 1 plc. 
Both companies have identical constitutions and investment policies, and 
together launched an offer for subscription comprising 25,000,000 Ordinary 
shares each, or 50,000,000 in aggregate (the 'Offer').   The Offer closed on 5 
April 2007 having raised  GBP17.6 million in aggregate ( GBP16.8 million net of 
expenses).  The objective of the Company is to invest in a diversified portfolio 
of UK smaller companies in order to generate income and capital growth over the 
long-term. The Board of Directors of the Company changed in September 2010 in 
order for the Company to comply with Listing Rule 15.2.11R and to enable the 
Board to act independently. 
 
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 HM Revenue & Customs. 
In order to maintain its approval the Company must comply with certain 
requirements on a continuing basis.  Now the Company has reached the end of its 
third accounting period, at least 70% of the Company's investments must comprise 
'qualifying holdings' of which at least 30% must be in eligible Ordinary 
shares.  A 'qualifying holding' consists of up to  GBP1 million invested in any one 
year in new shares or securities in an unquoted company (including companies 
listed on AIM) which is carrying on a qualifying trade and whose gross assets do 
not exceed  GBP7 million at the time of investment, and whose total number of 
employees is less than 50, also at the time of investment.  The Company will 
continue to ensure its compliance with these qualification requirements. 
 
Financial Summary 
 
 
                                 Year to 31 January 2011 Year to 31 January 2010 
 
 
 
Net assets ( GBP'000s)                                8,020                   8,167 
 
Net profit after tax ( GBP'000s)                        202                     306 
 
Net asset value per share (NAV)                    92.3p                   94.0p 
 
Cumulative    dividends    since 
launch                                             7.25p                   3.25p 
 
Proposed dividend per share                        1.50p                   2.50p 
 
 
Chairman's Statement 
 
This  is the fifth Annual Report of  Octopus Apollo VCT 2 plc, covering the year 
to  31 January 2011. I am happy to report that performance for the year has been 
good, and consistent with our investment mandate. We are nearing full investment 
and the net asset value ('NAV') of your Company has levelled, providing a stable 
return  to your investment. At  the end of the  year the total return, being the 
change  in  NAV  plus  dividends  paid  in  the year, was 2.4%, with the NAV now 
standing at 92.3 pence per share. 
 
Our investee companies are showing, on the whole, positive trading results, with 
uplifts  shown in Bluebell Telecom, Clifford  Thames, CSL DualCom and Hydrobolt. 
These have been slightly offset by a reduction in value in Bruce Dunlop. Overall 
an increase of  GBP195,000 has been recognised for the year. 
 
Dividend 
Your Board aims to maintain a regular dividend flow where prudent and sensible 
to do so, making use of the tax free distributions a VCT is able to provide. 
 
We are proposing a final dividend of 1.5 pence per share (comprising 0.75 pence 
from revenue reserves) in respect of the year ended 31 January 2011.  If 
approved by shareholders at the AGM, this dividend will be paid on 8 July 2011 
to shareholders on the register on 10 June 2011. Combined with the 1.50 pence 
interim dividend paid in October 2010, this will take dividends in relation to 
the year ended 31 January 2011 to 3.0 pence. 
 
Investment Portfolio 
Your portfolio is listed on page x. Vulcan Services II, a company set up to seek 
qualifying  investments, was successful in acquiring Bluebell Telecom Limited, a 
company  providing  landline,  mobile  and  data  solutions  to  businesses.  In 
addition,  a small  non-qualifying investment  was made  into Carebase  (Col), a 
company used to purchase land on which fellow investee company Salus Services is 
funding the construction of a care home. 
 
Further  information on  the portfolio  may be  found in the Investment Managers 
Review on pages x to x. 
 
The  Company now meets all the requirements for it to qualify fully as a VCT. It 
now  has the opportunity to  make a few further  low risk investments which will 
hopefully  make a small addition to the NAV  of the Company over the next couple 
of years. 
 
Investment Strategy 
As  the prospectus stated, the objective of the Company is to invest taking less 
risk  than a typical VCT. So far  the Investment Manager has achieved this, with 
no significant falls in portfolio valuations. 
 
The structure of investments is mainly weighted towards loan based instruments 
rather than equity. This is considered of lower risk as returns are less 
variable and payments are generally ranked above most other creditors. This 
approach also limits the downside risk that is inherent in an equity investment. 
 
Your Company has had good opportunities to invest in well managed and profitable 
businesses with strong recurring cash-flows. Prior to mid 2008 these companies 
would typically have taken advantage of cheaper debt issued by the banks. 
 
VCT Qualifying Status 
PricewaterhouseCoopers   LLP  advises  the  Board  and  the  Investment  Manager 
regarding  ongoing compliance with Her Majesty's  Revenue & Customs (HMRC) rules 
and  regulations concerning VCTs. The Board has been advised that Octopus Apollo 
VCT 2 plc is in compliance with the conditions laid down by HMRC for maintaining 
approval as a VCT. This is explained further on page x. 
 
A key requirement is to maintain at least the 70% qualifying investment level. 
As at 31 January 2011, 81.2% of the portfolio, as measured by HMRC rules, was 
invested in VCT qualifying investments. 
 
Outlook 
Clearly  the macro-economic climate  provides an uncertain  environment for many 
businesses. However the majority of investments in your Company's portfolio have 
continued to report good trading results and limited credit available from banks 
for  smaller businesses continues  to open relevant  investment opportunities in 
financially strong firms. 
 
At present we expect that your Company will continue to align its performance 
with its original objectives. 
 
 
Stuart Brocklehurst 
Chairman 
16 May 2011 
 
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 17 VCTs, including 
this Company, and manage nearly  GBP320 million in the VCT sector. Octopus has over 
180 employees and has been voted as 'Best VCT Provider of the Year' by the 
financial adviser community for the last four years. 
 
 
Investment Policy 
 
The investment approach of the Company is to seek lower risk investments.  The 
majority of companies in which the Company 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 
The Company made a net return of 2.4% between 31 January 2010 and 31 January 
2011. The NAV decreased from 94.0p to 92.3p over the period, but this drop in 
value was more than offset by the 4.0p of cumulative dividend paid out. 
 
The valuation uplifts in Clifford Thames, CSL DualCom and Bluebell Telecom have 
resulted from our valuing a proportion of the redemption premiums that have been 
negotiated and are due to be paid on the repayment of the loans issued to the 
companies. There has also been an uplift in Hydrobolt that has been recognised 
as a result of the company's strong trading results. 
 
A small reduction in fair value was shown in Bruce Dunlop as the equity 
proportion of the investment was written down to nil. This decrease is in 
recognition of the fact that Bruce Dunlop, in common with most media related 
companies, is finding trading tough. We remain confident in the management's