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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Octopus App.2 | LSE:OAP2 | London | Ordinary Share | GB00B13YVK26 | 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% | 82.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Octopus Apollo VCT 2 plc
Final Results
25 May 2012
Octopus Apollo VCT 2 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 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 Fund was launched in May 2006 together with Octopus Apollo VCT 1 plc. Both
companies have identical 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 Fund
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 unquoted 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 to 30% up-front income tax relief;
· exemption from income tax on dividends paid; and
· exemption from capital gains tax on disposals of shares in
VCTs.
The Company has been 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
+-----------------------+-----------------------+
|Year to 31 January 2012|Year to 31 January 2011|
=------------------------------+-----------------------+-----------------------+
| | |
| | |
Net assets ( GBP'000s) | 8,104| 8,020|
| | |
Net profit after tax ( GBP'000s) | 453| 202|
| | |
Net asset value per share| | |
(NAV) | 94.7| 92.3p|
| | |
Cumulative dividends since| | |
launch | 10.25| 7.25p|
=------------------------------+-----------------------+-----------------------+
Proposed dividend per share | 3.0p| 1.50p|
=------------------------------+-----------------------+-----------------------+
Chairman's Statement
I am pleased to present the sixth Annual Report of Octopus Apollo VCT 2 plc,
covering the year to 31 January 2012.
Performance
I am happy to report a good performance for the year and one that has been in
line with the investment mandate of the Fund. The net asset value ('NAV') of
your Company has increased from 92.3p to 94.7p, which, when adding back the
3.0p of dividends paid during the year results in an increase of 5.9%.
The total return of the Company, being the NAV plus cumulative dividends paid,
has also increased by 3.2p to 104.95p, providing you with a pleasing return on
your investment.
One of the main drivers of the increase in the NAV was the successful divestment
of Autologic Diagnostics as well as strong income streams from our debt
investments which now exceed the running costs of the Fund. As a result the Fund
has a revenue return of GBP200,000 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 3.0 pence per share in respect of the year
ended 31 January 2012. Subject to shareholder approval at the Annual General
Meeting, this dividend will be paid on 26 July 2012 to shareholders on the
register on 29 June 2012. Combined with the 1.50 pence interim dividend paid in
October 2011, this will take dividends in relation to the year ended 31 January
2012 to 4.5 pence.
Investment Portfolio
The Company invested GBP1,153,000 during the year; this includes GBP400,000 invested
to finance the secured loan book of Borro, an online pawn broker and GBP555,000
into two solar renewable energy companies. Shakti Power and Kala Power
constructed and now operate solar sites in two carefully selected locations.
These solar investments have been identified as suitable for the VCT because a
high level of security is obtained through investments being asset backed and
supported by Government subsidies.
Follow on investments totalling GBP198,000 were made in CSL Dualcom, Carebase
(Col) and Autologic Diagnostics.
Investments in Autologic Diagnostics and Ticketing Services 1 and 2 were
realised during the year. Combined, these resulted in a realised gain of
GBP621,000.
Trading results of investee companies on the whole have been positive. This
resulted in uplifts being recognised in Tristar Worldwide and Hydrobolt. These
uplifts were offset by a reduction in the fair value of Bruce Dunlop, leading to
an overall reduction in fair value of the portfolio of GBP242,000.
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 invested sufficiently in order to meet all the requirements for it
to qualify fully as a VCT. It now has the opportunity to make a limited number
of further investments with the aim of growing the NAV of the Fund over the
foreseeable future.
Investment Strategy
As set out in the prospectus, the aim of the Fund is to invest with greater
focus on capital preservation than is typical in a VCT. To date the Investment
Manager has been successful in achieving this aim.
Typically the structure of the investments is weighted more heavily towards loan
based instruments rather than equity. This is considered to be lower risk as
returns are fixed and payments are generally ranked above most other creditors,
allowing for future visibility and security. This strategy also reduces the
downside risk that is part and parcel of an equity investment.
The Fund has been able to take advantage of the reduced liquidity in the
traditional lending market, which has led to solid opportunities to invest in
well managed and profitable businesses with strong recurring cash-flows.
Now that the Fund has passed its five year qualifying period, it is the
intention of the Board for the Company to remain as a VCT and continue to invest
in accordance with the original investment mandate.
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 2012, 80.3% 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 Friday 13 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 3 plc (Apollo 3) and
Octopus Apollo VCT 4 plc (Apollo 4), has agreed in principle to 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 by Apollo 3 to
shareholders of Apollo 1, Apollo 2 and Apollo 4. 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 in due course
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.
Stuart Brocklehurst
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 Fund, 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 the Fund is to seek lower risk investments. The
majority of companies in which the Fund 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 ideally
provide an exit for shareholders within three to five years.
Performance
The Fund made a return of 5.9% between 31 January 2011 and 31 January 2012. The
NAV increased from 92.3p to 94.7p. 3.0p of dividends were paid over the period
bringing cumulative dividends paid to 10.25p.
The strong performance of the Fund was partly due to the entire disposal of its
investment in Autologic Diagnostic Holdings which had realised gains of
GBP618,000. Interest income on the Fund's loan investments is outweighing the
Fund's costs, resulting in a revenue return of GBP200,000.
Fair value uplifts were recognised on Tristar and Hydrobolt, both of whom have
had strong trading performances. However, these uplifts were offset by a
decrease in the fair value of Bruce Dunlop. Whilst we remain confident in the
management of the Company, the media industry in which it operates is still in
recession and the Company continues to suffer from clients delaying projects.
As a result, it seemed prudent to provide against 100% of the equity element and
provide against 50% of the debt element. The overall reduction on the Bruce
Dunlop investment now totals GBP334,000, of which GBP309,000 has been recognised
this year, against a total cost of GBP509,000.
The majority of investments are loan based on which a steady flow of interest is
received into the Fund. This is now at the level whereby interest receipts more
than offset the running costs of the Fund. These returns will allow for any
gains on realisations and loan note redemption premiums to be paid out directly
to shareholders, or recognised as an uplift to the value of the investment.
Portfolio Review
VCT qualifying investments totalling GBP554,000 were also made in Shakti Power and
Kala Power, both solar renewable energy investments. These companies have
constructed and now operate solar sites which benefit from the Government's
feed-in-tariffs. Whilst the Government has reduced its feed-in-tariff rates in
the last year, the Company's portfolio of investments will still have exposure
to the higher rates that were originally on offer, due to the dates at which
these investments were completed.
An acquisition of CSL Dualcom by a private equity house allowed the Fund to
restructure its previous debt/equity investment into a majority debt investment,
providing better yields than under the original structure. The Fund still
retains a small equity holding, which we hope will let us recognise uplifts in
the future, especially given the strong performance of CSL.
During the year, GBP400,000 was invested to finance the loan book of Borro, an
online pawn broker. Borro provides relatively short fixed term loans on high
value assets. The Fund's debt is secured against these assets, which means the
investment carries limited 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 its mandate.
Further to the entire disposal of the investment in Autologic Diagnostic
Holdings, small gains as a result of rolled up interest were also made on the
disposals of the investments in Ticketing Services 1 & 2.
Post year end, the Fund made a GBP250,000 investment in Technical Software
Consultants, a Company that sells industrial crack detectors principally to the
oil and gas pipeline market. A further GBP500,000 was invested in Borro and the
loan element of the investment in Tristar Worldwide Limited was also realised at
par.
Outlook
Whilst the UK and Western economies remain challenging we see a number of areas
where the Fund can invest in line with its mandate.
1. There are numerous stable, profitable companies whose owners wish to
partially sell their business now but wait several years for the market to
recover in order to realise a full exit.
2. The traditional banking environment continues to be a challenge for SMEs
and many prefer to use the Fund's more flexible debt to grow their
businesses.
3. Similarly, larger venture capital/ private equity firms are using the Fund
in preference to bank debt as it offers a faster, more partnership
orientated and 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 the market opportunity we will continue to
invest cautiously. We will do our best to ensure that the Fund's portfolio
companies can withstand a worsening of the current harsh economic climate.
Stuart Nicol
Investment Director
Octopus Investments
24 May 2012
Investment Portfolio
Movement Fair
Cost of in fair value %
investment value to at equity %
at 31 31 held equity
Unquoted 31 January January January Movement by managed
fixed asset 2012 2012 2012 in year Apollo by
investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 2 Octopus
=------------------------------------------------------------------------------------
Salus
Services 1
Holdings
Limited Care homes 1,365 - 1,365 - 14.2% 100%
Clifford
Thames Group
Limited Automotive 965 151 1,116 - 1.4% 7.4%
CSL DualCom
Limited Security devices 1,043 - 1,043 (19) 0.3% 3.4%
Tristar
Worldwide
Limited Chauffeur services 500 65 565 65 1.3% 35.0%
Shakti Power
Limited Solar 413 - 413 - 11.0% 100%
Borro Loan 2
Limited* Pawn brokers 400 - 400 - 0.0% 0.0%
Bluebell
Telecom
Services
Limited Telecommunications 225 24 249 - 0.5% 6.5%
Hydrobolt
Limited Manufacturing 197 47 244 21 0.9% 43.3%
Bruce Dunlop
& Associates
International
Limited Media 509 (334) 175 (309) 1.7% 30.0%
Carebase
(Col)
Limited* Care homes 154 - 154 - 0.0% 0.0%
Kala Power Solar 142 - 142 - 5.0% 100%
=------------------------------------------------------------------------------------
Total fixed asset investments 5,913 (47) 5,866 (242)
=------------------------------------------------------------------------------------
Money market
funds 768
Cash at bank 1,462
=------------------------------------------------------------------------------------
Total
investments 8,096
Debtors less
creditors 8
=------------------------------------------------------------------------------------
Total net
assets 8,104
* These are 100% debt investments
Valuation Methodology
The investments held by the Company 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 initially 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.
Investment Portfolio - Ten Largest Portfolio Holdings
Salus Services 1 Holdings Limited
Salus Services 1 Holdings Limited is funding the construction of a care home
based in Colchester.
+-----------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP1,365,000 GBP1,365,000 |
| |
| Loan stock - - |
| -------------- -------------+
| Total GBP1,365,000 GBP1,365,000 |
+-----------------------------------------------------+
Investment date: January 2010
Equity held: 14.2%
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
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 GBP222,000 GBP222,000 |
| |
| Loan stock GBP743,000 GBP894,000 |
| ------------ -------------+
| Total GBP965,000 GBP1,116,000 |
+---------------------------------------------------+
Investment date: January 2009
Equity held: 1.4%
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: GBP67,000
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 GBP68,000 GBP68,000 |
| |
| Loan stock GBP975,000 GBP975,000 |
| -------------- -------------+
| Total GBP1,043,000 GBP1,043,000 |
+-----------------------------------------------------+
Investment date: February 2009
Equity held: 0.3%
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: GBP83,000
Valuation basis: Held at cost
Tristar Worldwide Limited ('Tristar')
Tristar is one of the world's leading chauffeur companies, carrying over
500,000 passengers for 400 clients in the last year alone. The business operates
in 70 countries with its own vehicles in the UK and a rapidly expanding service
in the US. It has a blue-chip customer base which includes Virgin, Emirates, BP,
Goldman Sachs and Bank of America-Merrill Lynch. The market for chauffeur
services has been heavily affected in the current economic environment but we
believe has now stabilised. Tristar has achieved a good performance in the
circumstances where many of its competitors are suffering to a greater extent.
The Company's focus on a joined up international service is proving to be an
important selling feature for clients; the Company has offices in the UK, US and
Hong Kong as well as an affiliate network providing service in over 70 countries
worldwide. Further information can be found at the Company's website
www.tristarworldwide.com.
+--------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP10,000 GBP75,000 |
| |
| B Ordinary shares GBP140,000 GBP140,000 |
| |
| Loan stock GBP350,000 GBP350,000 |
| ------------ ------------+
| Total GBP500,000 GBP565,000 |
+--------------------------------------------------+
Investment date: January 2008
Equity held: 1.3%
Last audited accounts: 31 May 2011
Revenues: GBP37.4 million
Profit before interest & tax: GBP1.0 million
Net assets: GBP2.2
million
Income receivable recognised in year: GBP74,000
Valuation basis: Earnings multiple
Shakti Power Limited
Shakti Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Dunsfold, Surrey.
+--------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP413,000 GBP413,000 |
| |
| Loan stock - - |
| ------------ ------------+
| Total GBP413,000 GBP413,000 |
+--------------------------------------------------+
Investment date: December 2011
Equity held: 11.0%
Last unaudited accounts: 31 December 2011
Revenues: GBP0.0 million
Loss before interest & tax: GBP0.2
million
Net assets: GBP5.8
million
Income receivable recognised in year: GBPnil
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 |
| |
| Ordinary shares - - |
| |
| Loan stock GBP400,000 GBP400,000 |
| ------------ ------------+
| Total GBP400,000 GBP400,000 |
+------------------------------------------------+
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: GBPnil*
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.
Bluebell Telecom Services Limited ('Bluebell')
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 GBP24,000 GBP24,000 |
| |
| Loan stock GBP201,000 GBP225,000 |
| ------------ ------------+
| Total GBP225,000 GBP249,000 |
+--------------------------------------------------+
Investment date: September 2010
Equity held: 0.5%
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: GBP31,000
Valuation basis: Held at cost
Hydrobolt Limited ('Hydrobolt')
Hydrobolt is a specialist manufacturer of high integrity fasteners for the oil
and gas and energy sectors.
+--------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP8,000 GBP55,000 |
| |
| B Ordinary shares GBP51,000 GBP51,000 |
| |
| Loan stock GBP138,000 GBP138,000 |
| ------------ ------------+
| Total GBP197,000 GBP244,000 |
+--------------------------------------------------+
Investment date: April 2008
Equity held: 0.9%
Last audited accounts: 31 March 2011
Revenues: GBP15.4 million
Profit before interest & tax: GBP2.1
million
Net assets: GBP5.6
million
Income receivable recognised in year: GBP20,000
Valuation basis: Earnings multiple
Bruce Dunlop & Associates International Limited ('BDA')
BDA provides promotion and design services to broadcasters and advertisers
worldwide and also creates brand films and internal communications for leading
UK corporations. Trading in the media sector remains tough but management are
working hard with our support to take the business back into profitability.
Further information can be found at the Company's website www.bdacreative.com.
+--------------------------------------------------+
| Asset class Cost Valuation |
| |
| A Ordinary shares GBP24,000 - |
| |
| B Ordinary shares GBP135,000 - |
| |
| Loan stock GBP350,000 GBP175,000 |
| ------------ ------------+
| Total GBP509,000 GBP175,000 |
+--------------------------------------------------+
Investment date: December 2007
Equity held: 1.7%
Last audited accounts: 30 June 2011
Revenues: GBP9.2 million
Loss before interest & tax: GBP0.3 million
Net assets: GBP0.4
million
Income receivable recognised in year: GBP21,000
Valuation basis: Earnings multiple
Carebase (Colchester) Limited ('Carebase')
Carebase operates an elderly carehome in Colchester, Essex.
+------------------------------------------------+
| Asset class Cost Valuation |
| |
| Ordinary shares - - |
| |
| Loan stock GBP154,000 GBP154,000 |
| ------------ ------------+
| Total GBP154,000 GBP154,000 |
+------------------------------------------------+
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 2 plc
Octopus Apollo VCT 2 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 million. The Company is being invested on the
basis of taking less risk than a typical VCT. Principally the Company 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 Company's
investment aims and to use the equity exposure to boost returns. As portfolio
companies are unquoted the Company 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 is aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
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
Stuart Brocklehurst
Chairman
24 May 2012
Income Statement
+---------------------+
| Year to 31 January |
| 2012 |
=--------------------------------------------------------+---------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=--------------------------------------------------------+---------------------+
| |
| |
Realised gain on disposal of fixed asset | |
investments 10 | - 621 621|
| |
| |
| |
Fixed asset investment holding losses 10 | - (242) (242)|
| |
| |
| |
Investment income 2 | 426 - 426|
| |
| |
| |
Investment management fees 3 | (35) (107) (142)|
| |
| |
| |
Other expenses 4 | (191) - (191)|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities before tax | 200 272 472|
| |
| |
| |
Taxation on return on ordinary activities 6 | (19) - (19)|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities after tax | 181 272 453|
=--------------------------------------------------------+---------------------+
Earnings per share - basic and diluted 8 | 2.1p 3.1p 5.2p|
+---------------------+
* 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|
=--------------------------------------------------------+---------------------+
| |
| |
Realised loss on disposal of fixed asset | |
investments | - (6) (6)|
| |
Realised gain on disposal of current asset | |
investments | - 6 6|
| |
| |
| |
Fixed asset investment holding gains | - 195 195|
| |
| |
| |
Investment income 2 | 378 - 378|
| |
| |
| |
Investment management fees 3 | (42) (125) (167)|
| |
| |
| |
Other expenses 4 | (202) - (202)|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities before tax | 134 70 204|
| |
| |
| |
Taxation on return on ordinary activities 6 | (2) - (2)|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities after tax | 132 70 202|
=--------------------------------------------------------+---------------------+
Earnings per share - basic and diluted 8 | 1.5p 0.8p 2.3p|
+---------------------+
* 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 ended | Year ended
| 31 January 2012 | 31 January 2011
| |
| GBP'000 | GBP'000
=-----------------------------------------+-----------------+-----------------
Shareholders' funds at start of year | 8,020 | 8,167
| |
Return on ordinary activities after tax | 453 | 202
| |
Cancellation of own shares | (110) | -
| |
Dividends paid | (259) | (349)
=-----------------------------------------+-----------------+-----------------
Shareholders' funds at end of year | 8,104 | 8,020
+-----------------+
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* 10 | 5,866| 6,691
| |
Current assets: | |
| |
Debtors 11 | 114 | 92
| |
Investments - money market | |
funds* 12 | 768 |1,124
| |
Cash at bank |1,462 | 153
=--------------------------------------+-------------------+-------------------
|2,344 |1,369
| |
Creditors: amounts falling due | |
within one year 13 | (87) | (40)
=--------------------------------------+-------------------+-------------------
Net current assets | 2,257| 1,329
=--------------------------------------+-------------------+-------------------
Total assets less current | |
liabilities | 8,123| 8,020
=--------------------------------------+-------------------+-------------------
| |
| |
Called up equity share capital 14 | 855 | 869
| |
Special distributable reserve 15 |6,971 |7,081
| |
Capital redemption reserve 15 | 30 | 16
| |
Capital reserve - gains & losses | |
on disposals 15 | 199 |(315)
| |
- | |
holding gains & losses 15 | (46) | 196
| |
Revenue reserve 15 | 114 | 173
=--------------------------------------+-------------------+-------------------
Total shareholders' funds | 8,123| 8,020
=--------------------------------------+-------------------+-------------------
Net asset value per share 9 | 94.9p| 92.3p
+-------------------+
*At fair value through profit or loss
The statements were approved by the Directors and authorised for issue on 24 May
2012 and are signed on their behalf by:
Stuart Brocklehurst
Chairman
Company number: 05770744
The accompanying notes are an integral part of the financial statements.
Cash Flow Statement
+---------------+
| Year to| Year to
|31 January 2012|31 January 2011
| |
Notes| GBP'000| GBP'000
=----------------------------------------------+---------------+---------------
| |
| |
Net cash inflow/(outflow) from operating | |
activities | 137| (53)
| |
| |
| |
Taxation 6 | (19)| (2)
| |
| |
| |
Financial investment: | |
| |
Purchase of fixed asset investments 10 | (1,153)| (109)
| |
Sale of fixed asset investments 10 | 2,357| 269
| |
| |
| |
Equity dividends 7 | (259)| (349)
| |
| |
| |
Management of liquid resources: | |
| |
Purchase of current asset investments 12 | (2,979)| (1,819)
| |
Sale of current asset investments 12 | 3,334| 2,122
| |
| |
| |
Financing | |
| |
Purchase of own shares 14 | (110)| -
| |
| |
=----------------------------------------------+---------------+---------------
Increase in cash | 1,309| 59
+---------------+---------------
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 | 472| 204
| |
(Increase) in debtors | (22)| (50)
| |
Increase/(decrease) in creditors | 66| (12)
| |
Gain on disposal of current asset | |
investments | -| (6)
| |
(Gain)/loss on disposal of fixed | |
asset investments | (621)| 6
| |
Holding loss/(gain) on fixed asset| |
investments | 242| (195)
=----------------------------------+---------------------+---------------------
Outflow/(inflow) from operating | |
activities | 137| (53)
+---------------------+
Reconciliation of Net Cash Flow to Movement in Net Funds
+-----------------------+
|Year to 31 January 2012|Year to 31 January 2011
| |
| GBP'000| GBP'000
=------------------------------+-----------------------+-----------------------
Movement in cash at bank | 1,309| 59
| |
Movement in cash equivalent | |
securities | (356)| (297)
| |
Opening net funds | 1,277| 1,515
=------------------------------+-----------------------+-----------------------
Net funds at 31 January | 2,230| 1,277
+-----------------------+
Net funds at 31 January comprised:
+-----------------------+
| As at 31 January 2012 | As at 31 January 2011
| |
| GBP'000 | GBP'000
=-------------------------+-----------------------+-----------------------
Cash at bank | 1,462 | 153
| |
Money market funds | 768 | 1,124
=-------------------------+-----------------------+-----------------------
Net funds at 31 January | 2,230 | 1,277
+-----------------------+
Notes to the Financial Statements
1. Principal accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain financial
instruments, and in accordance with UK Generally Accepted Accounting Practice
(UK GAAP), and the Statement of Recommended Practice (SORP) 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' (revised
2009).
The principal accounting policies have remained unchanged from those set out in
the Company's 2011 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.
The Company presents its income statement in a three column format to give
shareholders additional detail of the performance of the Company, split between
items of a revenue or capital nature.
The preparation of the financial statements requires Management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. Estimates and assumptions
mainly relate to the fair valuation of the fixed asset investments particularly
unquoted investments. Estimates are based on historical experience and other
assumptions that are considered reasonable under the circumstances. The
estimates and the assumptions are under continuous review with particular
attention paid to the carrying value of the investments.
Capital valuation policies are those that are most important to the depiction of
the Company's financial position and that require the application of subjective
and complex judgements, often as a result of the need to make estimates about
the effects of matters that are inherently uncertain and may change in
subsequent periods. The critical accounting policies that are declared will not
necessarily result in material changes to the financial statements in any given
period but rather contain a potential for material change. The main accounting
and valuation policies used by the Company are disclosed below. Whilst not all
of the significant accounting policies require subjective or complex judgements,
the Company considers that the following accounting policies should be
considered critical.
The Company has designated all fixed asset investments as being held at fair
value through profit or loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value through
profit or loss. Accordingly, all interest income, fee income, expenses and
investment gains and losses are attributable to assets designated as being at
fair value through profit or loss.
Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Unquoted investments are valued in accordance with
current IPEVC valuation guidelines, although this does rely on subjective
estimates such as appropriate sector earnings multiples, forecast results of
investee companies, asset values of subsidiary companies and liquidity or
marketability of the investments held.
Although the Company believes that the assumptions concerning the business
environment and estimates of future cash flows are appropriate, changes in
estimates and assumptions could require changes in the stated values. This could
lead to additional changes in fair value in the future.
Fixed asset investments
Purchases and sales of investments are recognised in the financial statements at
the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a fair
value basis in accordance with a documented investment strategy and information
about them has to be provided internally on that basis to the Board.
Accordingly, as permitted by FRS 26, the investments will be designated as fair
value through profit or loss (FVTPL) on the basis that they qualify as a group
of assets managed, and whose performance is evaluated, on a fair value basis in
accordance with a documented investment strategy. The Company's investments are
measured at subsequent reporting dates at fair value.
In the case of unquoted investments, fair value is established by using measures
of value such as the price of recent transactions, earnings multiples and net
assets. This is consistent with IPEVC valuation guidelines.
Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the income statement and
allocated to the capital reserve - holding gains/(losses). Fixed returns on non-
equity shares and debt securities which are held at fair value are computed
using the effective interest rate, to distinguish between the interest income
receivable (which is disclosed as interest income within the revenue column of
the Income Statement) and other fair value movements arising on these
instruments (which are disclosed as holding gains within the capital column of
the Income Statement.
In the preparation of the valuations of assets the Directors are required to
make judgements and estimates that are reasonable and incorporate their
knowledge of the performance of the investee companies.
Current asset investments
Current asset investments comprise money market funds and are designated as
FVTPL. Gains and losses arising from changes in the fair value of investments
are recognised as part of the capital return within the Income Statement and
allocated to the capital reserve - gains/(losses) on disposal.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the option of the Company. The current
asset investments are held for trading, are actively managed and the performance
is evaluated in accordance with a documented investment strategy. Information
about them has to be provided internally on that basis to the Board.
Income
Fixed returns on non-equity shares and debt securities are recognised on a time
apportionment basis (including time amortisation of any premium or discount to
redemption) so as to reflect the effective interest rate, provided there is no
reasonable doubt that payment will be received in due course. Income from fixed
interest securities and deposit interest is included on an effective interest
rate basis.
Investment income includes interest earned on bank balances and money market
funds and includes income tax withheld at source. Dividend income is shown net
of any related tax credit.
Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt that payment
will be received. Fixed returns on debt and money market funds are recognised
on a time apportionment basis, provided there is no reasonable doubt that
payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
wholly to revenue with the exception of the investment management fee, which 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 gains and losses on
disposal and holding gains and losses on investments. Gains and losses arising
from changes in fair value of investments are recognised as part of the capital
return within the income statement.
Taxation
Corporation tax payable is applied to profits chargeable to corporation tax, if
any, at the current rate. The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue return on the
"marginal" basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all timing
differences that have originated but not reversed at the balance sheet date or
where transactions or events have occurred at that date that will result in an
obligation to pay more, or a right to pay less tax. This is with the exception
that deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can
be deducted.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand. Liquid
resources are current asset investments which are disposable without curtailing
or disrupting the business and are either readily convertible into known amounts
of cash at or close to their carrying values or traded in an active market.
Liquid resources comprise term deposits of less than one year (other than cash),
and investments in money market managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair value which
is usually transaction cost and subsequently measured at amortised cost using
the effective interest method.
Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to
financial instruments.
Capital is defined as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the business
with optimising the return on equity. The Company currently has no borrowings
nor does it anticipate that it will drawdown any borrowing facilities in the
future to fund the acquisition of investments.
The Company does not have any externally imposed capital requirements.
The value of the managed capital is indicated in note 15. The Board considers
the distributable reserves and the total return for the year when recommending a
dividend. In addition, the Board is authorised to make market purchases up to a
maximum of 5% of the issued ordinary share capital of the Company in accordance
with Special Resolution 8 in order to maintain sufficient liquidity in the VCT.
Financial instruments
The Company's principal financial assets are its investments and the policies in
relation to those assets are set out above. Financial liabilities and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this is classed
as an equity instrument. Dividends and distributions relating to equity
instruments are debited direct to equity.
Capital management is monitored and controlled using the internal control
procedures set out on page x of this
report. The capital being managed includes equity and fixed-interest
investments, cash balances and liquid
resources including debtors and creditors. The Company does not have any
externally imposed capital requirements.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established. This
liability is established for interim and 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 10 9
Loan note interest receivable 416 369
=---------------------------------------------------------------------------
426 378
=---------------------------------------------------------------------------
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 35 107 142 42 125 167
=---------------------------------------------------------------------
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 provides investment management and accounting and administration
services to the Company under a management agreement which runs for a period of
five years with effect from 16 October 2006 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
19 to the financial statements.
4. Other expenses
31 January 2012 31 January 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Directors' remuneration 48 40
Fees payable to the Company's auditor for the
audit of the financial statements 12 10
Fees payable to the Company's auditor for
other services - tax compliance 3 3
Accounting and administration services 24 24
Other expenses 104 125
=------------------------------------------------------------------------------
191 202
=------------------------------------------------------------------------------
5. Directors' remuneration
31 January 2011 31 January 2012
Emoluments National Emoluments National
Insurance Insurance
=------------------------------------------------------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Directors'
emoluments
Stuart Brocklehurst 21 2 14 1
(Chairman)
Roger Penlington - - 7 -
(resigned
28.09.2010)
Andrew Boyle - - 5 -
(resigned
28.09.2010)
Matt Cooper 8 - 8 -
Alan Pepper 16 1 6 -
=------------------------------------------------------------------------------
45 3 40 1
=------------------------------------------------------------------------------
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: four).
6. Tax on ordinary activities
The corporation tax charge for the year was GBP19,000 (2011: GBP2,000).
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 20.16% (2011: 28%). The differences are explained
below.
Current tax reconciliation: 31 January 2012 31 January 2011
GBP'000 GBP'000
=--------------------------------------------------------------------------
Non-taxable capital gains 379 202
Taxable gains/losses 93 (195)
=--------------------------------------------------------------------------
Net return on ordinary activities 472 7
=--------------------------------------------------------------------------
Current tax at 20.16% (2011: 28%) 95 2
Unrelieved tax losses and other deductions 39
Income not deductable for tax (77) (41)
=--------------------------------------------------------------------------
Total current tax charge 18 -
=--------------------------------------------------------------------------
Tax in relation to prior year 1 2
=--------------------------------------------------------------------------
The Company has excess management charges of approximately GBPnil (2011: GBPnil) to
carry forward to offset against future taxable profits.
Approved VCTs 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 VCT, no deferred tax has been provided in respect
of any capital gains or losses arising on the revaluation or disposal of
investments.
7. Dividends
31 January 2012 31 January 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Recognised as distributions in the financial
statements for the year
Previous year's final dividend 130 217
Current year's interim dividend 129 132
=------------------------------------------------------------------------------
259 349
=------------------------------------------------------------------------------
31 January 2012 31 January 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Paid and proposed in respect of the year
Interim dividend paid - 1.50p per share (2011:
1.50p per share) 129 132
Final dividend 3.0p per share (2011: 1.50p per
share) 257 130
=------------------------------------------------------------------------------
386 262
=------------------------------------------------------------------------------
The final dividend of 3.0p per share for the year ended 31 January 2012, subject
to shareholder approval at the Annual General Meeting, will be paid on 26 July
2012 to shareholders on the register on 29 June 2012.
8. Earnings per share
The revenue per share is based on the revenue profit after tax of GBP181,000
(2011: GBP132,000) and on 8,658,471 (2011: 8,693,486) shares, being the weighted
average number of shares in issue during the year.
The capital per share is based on the capital profit after tax of GBP272,000
(2011: GBP70,000) and on 8,658,471 (2011: 8,693,486) shares, being the weighted
average number of shares in issue during the year.
The total earnings per share is based on total profit after tax of GBP453,000
(2011: GBP202,000) and on 8,658,471 (2011: 8,693,486) shares, being the weighted
average number of shares in issue during the year.
There are no potentially dilutive capital instruments in issue and, as such, the
basic and diluted earnings per share are therefore identical.
9. Net asset value per share
The calculation of NAV per share as at 31 January 2012 is based on net assets of
GBP8,104,000 (2011: GBP8,020,000) divided by the 8,556,886 (2011: 8,693,486) shares
in issue at that date.
10. Fixed asset investments at fair value through profit or loss
Financial Reporting Standard 29 Financial Instruments: Disclosures regarding
financial instruments that are measured in the balance sheet at fair value; this
requires disclosure of fair value measurements by level of the following fair
value measurement hierarchy:
Level 1: quoted prices in active markets for identical assets and liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available, and those prices represent
actual and regularly occurring market transactions on an arm's length basis. The
quoted market price used for financial assets held is the current bid price.
These instruments are included in level 1 and comprise money market funds
classified as held at fair value through profit or loss (FVTPL).
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 FVTPL were designated as such upon initial recognition.
Movements in investments at FVTPL during the year to 31 January 2012 are
summarised below.
Fixed asset investments:
Level 3: Unquoted Level 3: Unquoted Total unquoted
equity investments loan investments investments
GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
Valuation and net
book amount:
Book cost at 1 2,316
February 2011 4,180 6,496
Cumulative 2
revaluation 193 195
=------------------------------------------------------------------------------
Valuation at 1 2,318
February 2011 4,373 6,691
Movement in the
year:
Purchases at cost 709 444 1,153
Proceeds from the (1,953)
sale of investments (404) (2,357)
Gain on realisation 617
of investments 4 621
Change in fair 85
value in year (327) (242)
=------------------------------------------------------------------------------
Closing fair value 1,776
at 31 January 2012 4,090 5,866
=------------------------------------------------------------------------------
=------------------------------------------------------------------------------
Closing cost at 31 1,689
January 2012 4,224 5,913
Closing unrealised 87
movement at 31
January 2012 (134) (47)
=------------------------------------------------------------------------------
Valuation at 31 1,776
January 2012 4,090 5,866
=------------------------------------------------------------------------------
Level 3 valuations include assumptions based on non-observable market data, such
as discounts applied either to reflect the fair value of financial assets held
at the price of recent investment, or, in the case of unquoted investments, to
adjust earnings multiples. The sensitivity of these valuations to a reasonable
possible change in such assumptions is given in note 16.
The loan and equity investments are considered to be one instrument due to them
being bound together when assessing portfolio 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 x to x.
11. Debtors
31 January 2012 31 January 2011
GBP'000 GBP'000
=--------------------------------------------------------------------
Prepayments and accrued income 114 92
=--------------------------------------------------------------------
114 92
=--------------------------------------------------------------------
12. 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 1,124
---------
1,124
Revaluation to 1 February 2011:
Money market funds -
---------
-
=------------------------------------------------------------------------------
Valuation as at 1 February 2011 1,124
Movement in the year:
Purchases at cost: Money market
funds 2,978
---------
2,978
Disposal proceeds:
Money market funds (3,334)
---------
(3,334)
Profit in year on realisation of investments:
Money market funds -
---------
-
Revaluation in year:
Money market funds -
---------
-
=------------------------------------------------------------------------------
Valuation as at 31 January 2012 768
=------------------------------------------------------------------------------
Cost at 31 January 2012:
Money market funds 768
---------
768
Revaluation to 31 January 2012:
Money market funds -
---------
-
=------------------------------------------------------------------------------
Valuation as at 31 January 2012 768
=------------------------------------------------------------------------------
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.
13. Creditors: amounts falling due within one year
31 January 2012 31 January 2011
GBP'000 GBP'000
=----------------------------------------------
Accruals 106 40
=----------------------------------------------
106 40
=----------------------------------------------
14. Share capital
31 January 2012 31 January 2011
GBP'000 GBP'000
=------------------------------------------------------------------------------
Authorised:
25,000,000 Ordinary shares of 10p 2,500 2,500
=------------------------------------------------------------------------------
Allotted and fully paid up:
8,556,886 Ordinary shares of 10p (2011:
8,693,486) 855 869
=------------------------------------------------------------------------------
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 out on page
x. The Company is not subject to any externally imposed capital requirements.
No shares were issued in the year (2011: nil).
During the year 136,600 shares were bought back for cancellation at an average
price of 82.38 pence per share (2011: none).
15. Reserves
=------------------------------------------------------------------------------
Capital Capital
reserve reserve
Special Capital gains/ holding
distributable redemption (losses) on gains/ Revenue
reserve* reserve disposal* (losses) reserve*
=------------------------------------------------------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------------------------------------------------------------------------
As at 1
February 2011 7,081 16 (315) 196 173
Repurchase of
own shares (110) 14 - - -
Profit on
ordinary
activities
after tax - - - - 181
Management
fees allocated
as capital
expenditure - - (107) - -
Current year
gains on
disposal of
investments - - 621 - -
Current period
gains on fair
value of
investments - - - 84 -
Current period
losses on fair
value of
investments - - - (326) -
Dividends paid - - - - (259)
=------------------------------------------------------------------------------
Balance as at
31 January
2012 6,971 30 199 (46) 95
*Reserves available for distribution
All investments are designated as FVTPL from the time of acquisition, and all
capital gains or losses on investments so designated.
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 Manager but not yet completed.
Reserves available for potential distribution by way of a dividend are:
GBP'000
=-------------------------------
As at 1 February 2011 6,939
Movement in year 326
=-------------------------------
As at 31 January 2012 7,265
=-------------------------------
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.
16. Financial instruments and risk management
The Company's financial instruments comprise equity and fixed interest
investments, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy of
investing mainly in a portfolio of VCT qualifying unquoted securities whilst
holding a proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.
Classification of financial instruments
The Company held the following categories of financial instruments, all of which
are included in the balance sheet at fair value, at 31 January 2012:
31 January 2012 31 January 2011
GBP'000 GBP'000
Assets at fair value through profit or loss
Investments 5,866 6,691
Current asset investments 768 1,124
=---------------------------------------------------------------------------
Total 6,634 7,815
Loans and receivables
Cash at bank 1,462 153
Accrued income 110 87
=---------------------------------------------------------------------------
Total 1,572 240
Liabilities at amortised cost
Accruals and other creditors 87 40
=---------------------------------------------------------------------------
Total 87 40
Fixed asset investments (see note 10) 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 in the
Investment Managers Review, the fair value of all other financial assets and
liabilities are represented by their carrying value in the balance sheet. The
Directors believe that the fair value of the assets held at the period-end is
equal to their book value.
In carrying on its investment activities, the Company is exposed to various
types of risk associated with the financial instruments and markets in which it
invests. The most significant types of financial risk facing the Company are
price risk, interest rate risk, credit risk and liquidity risk. The Company's
approach to managing these risks is set out below together with a description of
the nature and amount of the financial instruments held at the balance sheet
date.
Market risk
The Company's strategy for managing investment risk is determined with regard to
the Company's investment objective, as outlined on page x. The management of
market risk is part of the investment management process and is a central
feature of venture capital investment. The Company's portfolio is managed in
accordance with the policies and procedures described in the Corporate
Governance statement on pages x to x, having regard to the possible effects of
adverse price movements, with the objective of maximising overall returns to
shareholders. Investments in smaller companies, by their nature, usually involve
a higher degree of risk than investments in larger companies quoted on a
recognised stock exchange, though the risk can be mitigated to a certain extent
by diversifying the portfolio across business sectors and asset classes. The
overall disposition of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance sheet date are set
out on page x.
72.2% (31 January 2011: 83.4%) 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 profit for the year by GBP586,600 (31 January 2011: GBP669,100) an
equivalent change in the opposite direction would have reduced net assets and
the total profit for the year by the same amount.
The Investment Manager considers that the majority of the investment valuations
are based on earnings multiples which are ascertained with reference to the
individual sector multiple or similar 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.
9.5% (31 January 2011: 14.0%) 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 profit for the year by GBP7,680 (31 January 2011: GBP11,240) an
equivalent change in the opposite direction would have reduced net assets and
the total profit for the year by the same amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates. All interest-bearing assets are held
at FVTPL.
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 Total average
Total fixed average fixed rate time for
rate Weighted time for portfolio Weighted which
portfolio average which rate by average rate is
by interest is fixed value interest fixed in
value GBP'000 rate % in years GBP'000 rate % years
=------------------------------------------------------------------------------
Unquoted
fixed-
interest
investments 3,936 12.30% 2 2,268 13.20% 3.0
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 (31
January 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
=------------------------------------------------------------------
Unquoted floating rate notes 154 1,500
Cash on deposit 2,230 1,277
=------------------------------------------------------------------
2,384 2,777
Every 1% increase or decrease in the base rate would increase or decrease income
receivable from these investments and the total profit for the year by GBP23,840
(31 January 2011: GBP27,770)
Credit risk
Credit risk is the risk that a 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 154 1,500
Investments in fixed rate instruments 3,936 2,268
Cash on deposit 2,230 1,277
Accrued dividends and interest receivable 110 87
=-------------------------------------------------------------------------
6,430 5,132
Credit risk relating to listed money market funds is mitigated by investing in a
portfolio of investment instruments of high credit quality, comprising major UK
institutions. Credit risk relating to loans to and preference shares in unquoted
companies is considered to be part of market risk.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians. Bankruptcy or insolvency
of a custodian could cause the Company's rights with respect to securities held
by the custodian to be delayed or limited.
Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.
The Company's interest-bearing deposit and current accounts are maintained with
HSBC Bank plc. 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 GBP2,230,000 (31 January 2011: GBP1,277,000).
17. Post balance sheet events
The following events occurred between the balance sheet date and the signing of
these financial statements:
* 6 February 2012 - the Company disposed of the loan part of its investment in
Tristar Worldwide Limited for GBP350,000.
* 2 April 2012 - the Company invested GBP250,000 in Technical Software
Consultants ('TSC').
* 23 April 2012 - the Company invested GBP500,000 in Borro.
18. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as at 31
January 2012 (2011: GBPnil).
19. Related party transactions
Matt Cooper, a non-executive Director of Octopus Apollo VCT 2 plc, is the
Chairman of Octopus Investments Limited. Octopus Apollo VCT 2 plc has employed
Octopus Investments throughout the year as Investment Manager. The Company paid
Octopus GBP142,000 (2011: GBP167,000) in the year as a management fee and there is
GBPnil outstanding at the balance sheet date. 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 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.
In addition, Octopus also provides Company secretarial services for an
additional fee of GBP7,500 per annum.
During the year GBP24,100 (2011: GBP24,500) was paid to Octopus Investments and
there is GBPnil outstanding at the balance sheet date, for the accounting and
administrative services.
Now the fund has passed its first five year period, Octopus 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 forthcoming accounting
period (being the sixth accounting period) 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.
During the year to 31 January 2012, the Directors received the following
dividends from the Company:
Dividend received
Stuart Brocklehurst (Chairman) GBP158
Matt Cooper GBP150
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 VCT2 plc via Thomson Reuters ONE
[HUG#1614866]
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