Half-yearly report

 
TIDMOPV 
 
Octopus Protected VCT 2 plc 
Half-Yearly Results 
 
28 September 2009 
 
Octopus Protected VCT 2 plc, managed by Octopus Investments Limited, 
today announces the Half-Yearly results for the six months ended 31 
July 2009. 
 
These results were approved by the Board of Directors on 28 September 
2009. 
 
You may view the Half-Yearly Report in full at 
www.octopusinvestments.com by navigating to the VCT Meetings & 
Reports under the 'Services' section. 
 
About Octopus Protected VCT 2 
plc 
 
Octopus Protected VCT 2 plc ("Protected 2," "Company" or "Fund") is a 
venture capital trust ("VCT") and is managed by Octopus Investments 
Limited ("Octopus" or "Manager"). 
 
Protected 2 was incorporated on 9 June 2008 with the first allotment 
of equity occurring on 6 October 2008. Protected 2 opened for 
subscription (the "Offer") on 17 July 2008 and, pursuant to the 
supplementary prospectus dated 3 April 2009, the offer was extended 
and subsequently closed, once fully subscribed, on 30 June 2009. The 
Company will invest primarily in unquoted UK smaller companies and 
aims to deliver absolute returns on its investments. 
 
Financial Summary 
 
 
                                  Six months to       Period to 
                                   31 July 2009 31 January 2009 
 
Net assets (GBP'000s)                      10,771           2,087 
Net loss after tax (GBP'000s)               (153)            (84) 
Net asset value per share ("NAV")         92.5p           90.8p 
 
 
Chairman's Statement 
 
Introduction 
I am pleased to present the half-yearly report of Octopus Protected 
VCT 2 plc for the period ended 31 July 2009. 
 
As at 31 July 2009, the Company had raised gross proceeds of GBP11.5 
million through the Offer for new subscriptions. 
 
Performance 
At 31 July 2009 the Company's net asset value per share ("NAV") was 
92.5p which compares to 90.8p at 31 January 2009. This uplift has 
been partially due to the spreading of fixed costs over a larger 
number of shares as full subscription has now been attained. The 
performance of the Fund has also been relatively stable as a large 
proportion of its assets are held in cash and cash equivalent 
securities. Over the longer term, as the underlying portfolio of 
investments is created, the Company's NAV will be linked increasingly 
to the value of the investments in the portfolio companies. 
 
During the period investments have been made, as discussed below. 
These are unchanged in value at the period end. 
 
Investment Portfolio 
As mentioned in the Annual Report, since 31 January 2009 six 
investments have been made. The Fund invested GBP250,000 into CSL 
Dualcom Limited and GBP350,000 in to Diagnos Limited. Furthermore, a 
total of GBP2.4 million was invested into four companies that have been 
established to seek suitable qualifying investments across a range of 
sectors. 
 
CSL DualCom Limited 
CSL DualCom (www.csldual.com) 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. 
 
Diagnos Limited 
Diagnos (www.autologic-diagnos.co.uk) develops and sells 
sophisticated automotive diagnostic software and hardware that 
enables independent mechanics, dealerships and garages to service and 
repair vehicles. Mechanics require a diagnostic tool to communicate 
with the in-car computer in order to measure, monitor and, where 
necessary, fix the electronic process or system. 
 
Both companies remain profitable and have been relatively unaffected 
by the current economic environment. In terms of new investments, we 
are seeing good deal flow and are at offer stage with a number of new 
deals. 
 
Investment Strategy 
The Fund is being invested on the basis of taking less risk than a 
typical VCT.  Typically the Fund will receive its return from 
interest paid on secured loan notes as well as an exposure to the 
value of the shares of a company.   The investment strategy is to 
derive sufficient return from the secured loan notes to achieve the 
Fund's investment aims and to use the equity exposure to boost 
returns.  As portfolio companies are unquoted the Fund will receive a 
return from an equity holding when a company is sold. 
 
The Manager of the Fund aims to reduce risk by investing in well 
managed and profitable businesses with strong recurring cash-flows. 
Furthermore with the majority of the investment being made in the 
form of a secured loan, in the event of the business failing, the 
Fund will rank ahead of unsecured creditors and equity investors. 
 
VCT Qualifying Status 
PricewaterhouseCoopers LLP provides the Board and Investment Manager 
with advice on the ongoing compliance with HM Revenue and Customs 
(HMRC) rules and regulations concerning VCTs.   As at 31 July 2009, 
over 26.4% of the portfolio (as measured by HMRC rules) was invested 
in VCT qualifying investments.  The Manager does not foresee any 
issues with reaching the required investment hurdle of 70% before the 
third anniversary of the end of the financial year in which investors 
subscribed to the Fund. 
 
Principal Risks and Uncertainties 
The principal risks and uncertainties are set out in note 5 of the 
Notes to the Half-Yearly Report on page 10. 
 
Outlook 
While the Fund is insulated from the stock market, all companies face 
challenging trading conditions. In this environment, it is the good 
companies with strong management teams and sound business models, 
such as those in your portfolio, that have the best chance of 
succeeding. 
 
The Investment Manager is in a strong position to provide the support 
that companies need, which is especially crucial while banks refuse 
to lend or impose high lending terms. Our strategy is focused on 
strengthening businesses for the future through guidance and funding. 
In these ways, we are working to ensure ongoing value from your VCT 
investment. 
 
Protected 2 invests alongside three other VCTs with the same 
investment strategy under the management of Octopus. 
It is expected that co-investment will allow Protected 2 to invest in 
larger, safer companies and to invest on more 
favourable terms. Your Board monitors the development of Octopus 
closely. The growing resources of Octopus as well as its day-to-day 
management of the Fund continue to give us confidence that the 
company will perform well under Octopus management. 
 
If you have any questions on any aspect of your investment, please 
call one of the team on 0800 316 2347. 
 
 
Murray Steele 
Chairman 
28 September 2009 
 
Investment Portfolio 
 
                                                                                    % 
                                                                               equity 
                                                       Carrying               held by 
                                                       value at                   all 
                                                             31    % equity     funds 
Unquoted                  Investment      Unrealised    January     held by   managed 
qualifying                   at cost   profit/(loss)       2009   Protected        by 
investments Sector           (GBP'000)         (GBP'000)    (GBP'000)           2   Octopus 
CSL Dualcom Security 
Limited     devices              250               -        250         N/A       N/A 
Diagnos 
Limited     Automotive           350               -        350         N/A       N/A 
PubCo 
Services    Restaurants & 
Limited     pubs                 600               -        600       14.5%     49.0% 
GreenCo 
Services 
Limited     Environmental        600               -        600       14.5%     49.0% 
Salus 
Services I 
Limited     Healthcare           600                        600       14.5%     49.0% 
BusinessCo 
Services    Business 
Limited     services             600               -        600       14.5%     49.0% 
Total unquoted qualifying 
investments                    3,000               -      3,000 
Money 
market 
funds                          7,461               -      7,461 
Cash at 
bank                             412               -        412 
Total money market funds 
and cash at bank               7,873               -      7,873 
Total 
investments                   10,873               -     10,873 
Net current 
assets                                                      102 
Total net 
assets                                                   10,771 
 
 
 
Responsibility Statement of the Directors in respect of the 
Half-Yearly Report 
 
We confirm that to the best of our knowledge: 
 
 
  * the half-yearly financial statements have been prepared in 
    accordance with the statement "Half-Yearly Financial Reports" 
    issued by the UK Accounting Standards Board; 
 
  * the half-yearly report includes a fair review of the information 
    required by the Financial Services Authority Disclosure and 
    Transparency Rules, being: 
 
       * an indication of the important events that have occurred 
         during the first six months of the financial year and their 
         impact on the condensed set of financial statements. 
       * a description of the principal risks and uncertainties for 
         the remaining six months of the year; and 
       * a description of related party transactions that have taken 
         place in the first six months of the current financial year, 
         that may have materially affected the financial position or 
         performance of the Company during that period and any 
         changes in the related party transactions described in the 
         last annual report that could do so. 
 
 
On behalf of the Board 
 
Murray Steele 
Chairman 
28 September 2009 
Income Statement 
 
 
                                                Period to 31 January 
                   Six months to 31 July 2009           2009 
                   Revenue Capital       Total Revenue Capital  Total 
                     GBP'000   GBP'000       GBP'000   GBP'000   GBP'000  GBP'000 
 
Income                  25       -          25       -       -      - 
 
Investment 
management fees       (18)    (55)        (73)     (2)     (7)    (9) 
 
Other expenses       (105)       -       (105)    (75)       -   (75) 
 
Loss on ordinary 
activities before 
tax                   (98)    (55)       (153)    (77)     (7)   (84) 
 
Taxation on 
profit/(loss) on 
ordinary 
activities               -       -           -       -       -      - 
 
Loss on ordinary 
activities after 
tax                   (98)    (55)       (153)    (77)     (7)   (84) 
Earnings per 
share - basic and 
diluted             (1.2)p (0.7)p       (1.9)p  (4.8)p  (0.4)p (5.2)p 
 
 
 
  * 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 accompanying notes are an integral part of the half-yearly 
    report 
  * The Company has no recognised gains or losses other than those 
    disclosed in the income statement. 
 
 
 
Reconciliation of Movements in Shareholders' Funds 
 
                                   Six months ended       Period to 
                                       31 July 2009 31 January 2009 
                                              GBP'000           GBP'000 
Shareholders' funds at start of 
period                                        2,087               - 
Loss on ordinary activities after 
tax                                           (153)            (84) 
Issue of equity (net of expenses)             8,837           2,171 
Shareholders' funds at end of 
period                                       10,771           2,087 
 
 
 
 
Balance Sheet 
 
 
                             As at 31 July 2009 As at 31 January 2009 
                                GBP'000     GBP'000      GBP'000      GBP'000 
 
Fixed asset investments                   3,000          -          - 
Current assets: 
Money market securities         7,461                2,000 
Debtors                            12                    1 
Cash at bank                      412                  240 
                                7,885                2,241 
Creditors: amounts falling 
due within one year             (114)                (154) 
Net current assets                        7,771                 2,087 
Net assets                               10,771                 2,087 
 
Called up equity share 
capital                         1,165                  230 
Share premium account           9,843                1,941 
Capital reserve - Realised       (62)                  (7) 
Revenue Reserve                 (175)                 (77) 
Total equity shareholders' 
funds                                    10,771                 2,087 
Net asset value per share                 92.5p                 90.8p 
 
 
 
 
Cash Flow Statement 
 
 
 
                                        Six months to       Period to 
                                         31 July 2009 31 January 2009 
                                                GBP'000           GBP'000 
 
Net cash (outflow)/inflow from 
operating activities                            (204)              69 
 
Financial investment : 
Purchase of  fixed asset investments          (3,000)               - 
 
Management of liquid resources : 
Purchase of current asset investments         (5,711)         (2,000) 
Disposal of current asset investments             250               - 
 
Financing 
Issue of own shares                             9,307           2,249 
Share issue expenses                            (470)            (78) 
Increase in cash at bank                          172             240 
 
 
 
 
Reconciliation of Net Cash Flow to Movement in Net Funds 
 
 
                                       Six months to       Period to 
                                        31 July 2009 31 January 2009 
                                               GBP'000           GBP'000 
Increase in cash at bank                         172             240 
Increase in cash equivalent securities         5,461           2,000 
Opening net cash resources                     2,240               - 
Net cash resources at end of period            7,873           2,240 
 
 
 
 
 
Reconciliation of Loss  before Taxation to  Cash Flow from  Operating 
Activities 
 
 
                                        Six months to       Period to 
                                         31 July 2009 31 January 2009 
                                                GBP'000           GBP'000 
Loss on ordinary activities before tax          (153)            (84) 
Increase in debtors                              (11)             (1) 
(Decrease)/increase in creditors                 (40)             154 
Net cash (outflow)/inflow from 
operating activities                            (204)              69 
 
 
Notes to the Half-Yearly Report 
 
1.             Basis of preparation 
The unaudited half-yearly results which cover the six months to 31 
July 2009 have been prepared in accordance with the Accounting 
Standard Board's (ASB) statement on half-yearly financial reports 
(July 2007) and adopting the accounting policies set out in the 
statutory accounts of the Company for the year ended 31 January 2009, 
which were prepared under UK GAAP and in accordance with the 
Statement of Recommended Practice for Investment Companies issued by 
the Association of Investment Companies in January 2009. 
 
2.             Publication of non-statutory accounts 
The unaudited half-yearly results for the six months ended 31 July 
2009 do not constitute statutory accounts within the meaning of 
Section 240 of the Companies Act 1985 and have not been delivered to 
the Registrar of Companies. The comparative figures for the period 
ended 31 January 2009 have been extracted from the audited financial 
statements for that year, which have been delivered to the Registrar 
of Companies. The independent auditor's report on those financial 
statements under Section 235 of the Companies Act 1985 was 
unqualified. This half-yearly report has not been reviewed by the 
Company's auditor. 
 
3.             Earnings per share 
The earnings per share at 31 July 2009 is calculated on the basis of 
8,148,112 (31 January 2009: 1,609,161) shares, being the weighted 
average number of shares in issue during the year. 
 
There are no potentially dilutive capital instruments in issue and, 
therefore, no diluted return per share figures are relevant. The 
basic and diluted earnings per share are therefore identical. 
 
4.             Net asset value per share 
The net asset value per share is based on net assets as at 31 July 
2009 divided by 11,650,327 (31 January 2009: 2,297,666) Shares in 
issue at that date. 
 
5.             Principal Risks and Uncertainties 
The Company's assets consist of equity and fixed-rate interest 
investments, cash and liquid resources. Its principal risks are 
therefore market risk, credit risk and liquidity risk. Other risks 
faced by the Company include economic, loss of approval as a VCT, 
investment and strategic, regulatory, reputational, operational and 
financial risks. These risks, and the way in which they are managed, 
are described in more detail in the Company's Annual Report and 
Accounts for the year ended 31 January 2009. The Company's principal 
risks and uncertainties have not changed materially since the date of 
that report. 
 
6.             Related Party Transactions 
Octopus acts as the investment manager of the Company. Under the 
management agreement, Octopus receives a fee of 2.0 per cent per 
annum of the net assets of the Company for the investment management 
services. During the period, the Company incurred management fees of 
GBP73,000 (31 January 2009: GBP9,000) payable to Octopus. At the period 
end there was GBPNil (31 January 2008: Nil) outstanding to Octopus. 
Furthermore, Octopus Investments Limited provides administration and 
company secretarial services to the Company.  Octopus Investments 
Limited receives a fee of 0.3 per cent per annum of net assets of the 
Company for administration services and GBP10,000 per annum for company 
secretarial services. 
 
7.             Copies of this statement are being sent to all 
shareholders. Copies are also available from the registered office of 
the Company at 8 Angel Court, London, EC2R 7HP, and will also be 
available to view on the Investment Manager's website at 
www.octopusinvestments.com. 
 
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This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement.