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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Octopus T. 4 | LSE:OTV4 | London | Ordinary Share | GB00B5467F20 | 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% | 92.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMOTV4 Octopus Titan VCT 4 plc Final Results 10 February 2011 Octopus Titan VCT 4 plc (the "Company"), managed by Octopus Investments Limited, today announces the final results for the year ended 31 October 2010. These results were approved by the Board of Directors on 10 February 2011. You may view the Annual Report in full at www.octopusinvestments.com shortly by navigating to VCT Meetings & Reports under the 'Services' section. About Octopus Titan VCT 4 plc Octopus Titan VCT 4 plc ('Titan 4' or 'the VCT') 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 predominately unquoted companies. The Company is managed by Octopus Investments Limited ('Octopus' or 'Investment Manager'). Titan 4 was incorporated on 30 September 2009 with the first allotment of equity taking place on 1 February 2010. The Offer for new subscriptions for shares was open until 31 August 2010 by which time the Offer had become fully subscribed and the total amount raised was GBP22.48 million. The Company invests primarily in unquoted UK smaller companies and aims to deliver a substantial level of returns on its investments over the medium to long term. Further details of the VCT's progress are discussed in the Chairman's Statement and Investment Manager's Review on pages X to X. On 31 August 2010 the VCT changed its Registered Office from 8 Angel Court, London, EC2R 7HP to 20 Old Bailey, London, EC4M 7AN. 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. Titan 4 has been provisionally approved as a VCT by Her Majesty's Revenue & Customs (HMRC). In order to maintain its approval, the Company must comply with certain requirements on a continuing basis. By the end of the Company's third accounting period at least 70% of the Company's investments must comprise 'qualifying holdings' (as defined in the legislation) of which at least 30% must be in eligible ordinary shares. A 'qualifying holding' consists of up to GBP1 million invested in any one year in new shares or securities in an unquoted 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. The Company will do all it can to ensure its compliance with these qualification requirements. Financial Summary +---------------------------+ Ordinary shares | Period to 31 October 2010 | | | | | | | Net assets ( GBP'000s) | 21,171 | | | Return on ordinary activities after tax ( GBP'000s) | (187) | | | Net asset value per share | 93.8p | =-------------------------------------------------+---------------------------+ Chairman's Statement Introduction I am pleased to present the first Annual Report of Octopus Titan VCT 4 plc for the 13-month period ended 31 October 2010. Performance As at 31 October 2010 the VCT's net asset value per share (NAV) has declined from the initial NAV of 94.5p to 93.8p at the period end which is primarily due to the standard running costs of the VCT. There was a revenue loss of GBP250,000 for the period which reflects the low interest rates on liquid resources as well as the yield on our early stage portfolio yet to develop. In time, as more qualifying investments are made, income should flow from the investment portfolio allowing for the expenses to be covered. Over the longer term, as the underlying portfolio of investments is created, the VCT's NAV will be linked increasingly to the value of the investments in the portfolio companies. Investment Portfolio During the period, the VCT made seven investments totalling GBP1.84 million. All of these investments are discussed in more detail in the Investment Manager's Review on pages X to X in which you will see that we have made investments in a diverse range of companies in some exciting market sectors. There was no change in valuation of the portfolio during the year as all of the investments were made in the latter few months and therefore cost is considered to be a reasonable approximation to fair value at the balance sheet date. On balance, we are encouraged by the performance of the portfolio so far and the good flow of investment opportunities which it is seeing. By value, 8.7% of the VCTs net assets are in unquoted investments, 27.5% in Octopus Open Ended Investment Companies (OEICs) and 63.8% is currently in cash or cash equivalents. The current surplus cash of the VCT is invested in a range of Standard & Poor's AAA-rated money market funds to fit with the Board's policy of preserving the capital of the VCT before its deployment into qualifying investments. Open Ended Investment Companies (OEICs) The VCT invested in four OEICs during the period which cumulatively saw an uplift in fair value of GBP239,000. The best performance was seen by the Octopus UK Micro Cap Growth Fund which increased in value by 12% between investment in June 2010 and the period end. The Board has met with the respective fund managers and believe it is in the best interests to continue to hold investments in OEICs for the foreseeable future, as set out in the original prospectus. Further details of the OEICs may be found at www.octopusinvestments.com where monthly factsheets are available. Investment Strategy Your Board will continue to review the investment strategy in respect of the non-qualifying portfolio and specifically how we invest our cash resources. As envisaged in the VCT's prospectus, between 15% and 25% of the VCT will be retained for liquidity and follow-on investments in the existing portfolio. As our existing portfolio of unquoted companies matures, we will find that some companies may require further rounds of investment but these investments may not be qualifying for VCT purposes (for instance in situations where the company now employs more than 50 people). Your Board believes that there will be circumstances where it will be in our shareholders' interests to continue to invest, not least to avoid dilution. Since this was not set out clearly in our prospectus, we have sought to further clarify the investment strategy and added a second paragraph to the Non-Qualifying section as set out on page · of the Directors' Report. We intend that the remainder of our cash reserves will continue to be invested in Octopus managed OEICS and lower risk, readily realisable investments. VCT Qualifying Status PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice concerning ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that Titan 4 is complaint with the conditions laid down by HMRC for maintaining provisional approval as a VCT. A key requirement now is to achieve the 70% qualifying investment level prior to 31 October 2012. As at 31 October 2010, 8.8% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments. In view of the current investment activity, the Board continues to be confident that the 70% target will be met by the required date. Annual General Meeting I look forward to meeting as many shareholders as possible at our first Annual General Meeting on 6 April 2011 to be held at the offices of Octopus Investments Limited, 20 Old Bailey, London, EC4M 7AN. The AGM will start at 3.00 p.m. Outlook Economic recovery is still in a very early phase and the environment in which portfolio companies are operating remains fragile. Ongoing uncertainty, exacerbated by the change in government and the associated spending review, contributed to businesses delaying some decisions and reacting cautiously to the unpredictable change in growth prospects. It is anticipated that growth in the first half of the next financial year will be weak. We do not expect interest rates to change significantly over the next six months, which is positive for small companies. Whilst banks remain reluctant to lend, this should not have a significant impact on our early stage portfolio companies, which rely predominately on equity capital for their finance. Your Board is pleased with the overall progress to date being made by the Investment Manager in investing the VCT's funds. We remain confident that the VCT will be able to meet its investment objectives and produce returns for shareholders that are consistent with the objectives of the VCT. Octopus has recently launched Octopus Titan VCT 5 plc giving the Titan VCT family even greater presence in the marketplace which we believe will continue to be an advantage as new opportunities arise. Gregor Michie Chairman 10 February 2011 Investment Manager's Review Personal Service At Octopus we have a dual focus, on 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 upheaval, we consider it particularly important to be in contact with our investors. We 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 18 VCTs, including this VCT, and manage over GBP300m in the VCT sector. Octopus has over 180 employees and has been voted as 'Best VCT Provider of the Year' by the financial adviser community for the last four years. Investment Policy The focus of Titan 4 is on generating a substantial level of returns over the medium to long term by providing early stage, development and expansion funding to unquoted companies with a typical deal size of GBP0.2 million to GBP2 million. It is expected that the portfolio of holdings that will be built will encompass investments in 20-30 unquoted companies. The Directors control the overall risk of the portfolio by ensuring that the Company has exposure to a diversified range of companies from a number of different sectors. In order to limit the risk to the portfolio that is derived from any particular investment, no more than 15% by value of the Company's investments (at the time of investment) will be invested in any single company (including both Qualifying and Non-Qualifying investments). Investment Strategy The investee companies are those that we believe have great potential but need some financial support to realise it. Each company that we target will have the potential to create a large business by taking a relatively modest market share. We are particularly interested in businesses that address current market trends and aim to create a balanced investment portfolio spanning multiple industries and business sectors. We expect that the portfolio of holdings built by Titan 4 will encompass investments focussing on the environmental, technology, media, telecoms and consumer lifestyle and wellbeing sectors. It is envisaged that, at the end of the three year initial investment period, 75-85% of the proceeds of the Offer will be invested in a range of qualifying investments with 15-25% invested in a combination of cash, Open Ended Investment Companies (OEICs)* managed by Octopus and money market securities managed by third party specialists. *Titan 4 has invested in four OEICs, two of which are managed by Octopus, the CF Octopus Absolute UK Equity Fund and the CF Octopus Micro Cap Growth Fund. Portfolio Review As at 31 October 2010 the NAV stood at 93.8p, compared to the initial NAV of 94.5p. This decline in NAV is due to the standard running costs of the VCT. Over the longer term, the NAV will be linked increasingly to the value of the investments in the portfolio companies. There have been no changes in the valuations of the investee companies at 31 October 2010 as all of the investments were made in the latter few months of the period and so cost is considered to be a reasonable approximation to fair value at the balance sheet date. However, we are pleased with the general performance across the portfolio with a number of companies showing strength in their niche markets so we expect an uplift in the NAV in the future. Titan 4 now holds 8.8% in qualifying funds from an HMRC perspective and we continue to work with each portfolio business as they develop their propositions in their respective markets. As Investment Manager it is our intention to take those businesses in which we have invested a small amount of money as a first investment and invest further as they meet or exceed the initial milestone objectives we agreed with them. In this way we are able to invest further into those businesses that are meeting and exceeding expectations. Since the balance sheet date, Titan 4 has invested GBP367,000 into Diverse Energy, a company focusing on the infrastructure of energy for global telecommunications, GBP450,000 into 10CMS, an interactive merchandising platform and GBP500,000 into Vega-Chi, an electronic multilateral trading facility. This has brought the total portfolio to 10 current trading businesses. Outlook At the time of writing, we are looking to make a number of further investments to support the current portfolio. It is encouraging to note the uplift in prices on the stock markets in recent months. This is filtering through to smaller listed businesses, although it has yet to have a dramatic effect on prices for unquoted businesses. This, combined with the current increase in activity in mergers and acquisitions is an encouraging indicator for the economy and for small trading businesses. However, we have not yet seen a significant uplift in the number of small businesses being listed on the stock market. Assuming this general trend continues it is a positive one for the future of high growth businesses as this area of the market tends to lag the listed business market. We do need to remain mindful of the impact the austerity measures being put in place by the UK Government will have on the UK consumer. There is also a concern that a rise in the level of inflation will in turn cause interest rates to rise which could have an adverse knock on effect on the economy. Overall, the environment provides a great opportunity for businesses like those in the Titan 4 portfolio to take advantage of, as their size enables them to move quickly to adapt and respond to market conditions resulting in greater market share. While the current market is not without its challenges, which a number of our portfolio businesses are facing at the moment, it still enables us to be cautiously optimistic about the future for small high growth businesses in general and our investment strategy specifically. If you have any questions on any aspect of your investment, please call one of the team on 0800 316 2347. Alex Macpherson Octopus Investments Limited 10 February 2011 % Fair equity Investment value % held by Portfolio Investment as at equity all cost as at 31 held funds 31 October October by managed Qualifying 2010 Movement in fair value to 2010 Titan by investments Sector ( GBP'000) 31 October 2010 ( GBP'000) ( GBP'000) 4 Octopus UltraSoC Technologies Limited Technology 361 - 361 10.0% 55.6% Elonics Limited Technology 305 - 305 3.1% 19.5% PrismaStar Inc. Media 300 - 300 4.5% 30.0% Executive Channel Limited Media 300 - 300 4.8% 32.2% Bowman Power Limited Environmental 275 - 275 2.7% 17.9% Michelson Diagnostics Consumer lifestyle Limited & wellbeing 248 - 248 4.4% 28.1% TouchType Limited Telecommunications 53 - 53 1.5% 8.0% Total qualifying investments 1,842 - 1,842 Money market securities 13,478 - 13,478 OEICs 5,580 239 5,819 Cash at bank 112 - 112 Total investments 21,012 239 21,251 Net current assets (80) Total net assets 21,171 Valuation Methodology Initial measurement Financial assets are measured at fair value. The initial best estimate of fair value of a financial asset that is either quoted or not quoted in an active market is the transaction price (i.e. cost). Subsequent measurement Further funding rounds are a good indicator of fair value and this is measure is used were appropriate. Subsequent adjustment to the fair value of unquoted investments can be made using sector multiples based on information as at 31 October 2010, where applicable. In some cases the multiples can be compared to equivalent companies, especially where a particular sector multiple does not appear appropriate. It is currently industry norm to discount the quoted earnings multiple to reflect the lack of liquidity in the investment, there being no ready market for our holding. Typically the discount is 30% but this can be increased where the relevant multiple appears too high. A lower discount would also be possible if an investment was close to an exit event. In accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines investments made within 12 months are usually kept at cost unless performance indicates that fair value has changed. If you would like to find out more regarding the IPEVC valuation guidelines, please visit their website at: www.privateequityvaluation.com. Review of Investments During the period, Titan 4 made seven investments amounting to GBP1.84 million. The unquoted investments are in ordinary shares with full voting rights as well as loan note securities. Unquoted investments are valued in accordance with the accounting policy set out on page X, which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with IPEVC valuation guidelines and current financial reporting standards. UltraSoC Technologies Limited UltraSoC Technologies, is a pioneering company developing advanced debugging technology for the embedded electronic systems increasingly used in many everyday products from cars to mobile phones. UltraSoC was spun-out from the universities of Essex and Kent in 2008 after being founded by Cambridge entrepreneur Dr Karl Heeks and Professor Klaus McDonald-Maier, Research Director at the University of Essex's School of Computer Science and Electronic Engineering. The company is developing UltraDebug, an advanced debugging technology for multiple processor systems used to debug the application software that delivers the functionality and performance in many modern embedded electronic systems. Initial investment date: September 2010 Cost: GBP361,494 Valuation: GBP361,494 (latest funding round) Equity held: 10.0% Equity held by all funds managed by Octopus: 55.6% Last submitted accounts: 31 December 2009 (abbreviated) Net assets GBP174,013 Elonics Limited Elonics is a semiconductor company specialising in the design and development of multi-band radio frequency integrated circuit products. Founded in 2003 and based in Livingston, United Kingdom, Elonics has developed an innovative radio frequency architecture called DigitalTune that is the foundation for a family of silicon tuners for television and radio. Elonics' innovative technology allows manufacturers to design high performance consumer electronics products with unrivalled performance, power consumption and low system cost. Elonics' first product family is the E4000 series of silicon tuner solutions targeted at the reception of multi-standard digital TV and radio. Initial investment date: September 2010 Cost: GBP305,349 Valuation: GBP305,349 (latest funding round) Equity held: 3.1% Equity held by all funds managed by Octopus: 19.5% Last submitted accounts: 31 December 2009 Net assets ( GBP507,024) PrismaStar Inc. Founded in 2005, PrismaStar is a 'software as a service' business providing patented technology to help consumers shopping online find the very best products and services, personalised to their individual tastes. You can trial the company's technology by visiting:http://www.prismastar.com/our- solution/answeroil-demo/. Following our investment in the summer, Prismastar has been busy building its management team and closing sales contracts. It recently launched a new suite of software with Mothercare, and is rolling out its service to Vodafone across more product categories in the UK. Recent versions of the product will enable the company to open and close sales with a greater number of eCommerce retailers and affiliates. The challenges ahead include filling key management positions, supporting sales, software implementation, and product development. These will take some time to fill, but once in place the business has ample scope to grow its customer base in the EU and USA. Initial investment date: September 2010 Cost: GBP300,000 Valuation: GBP300,000 (latest funding round) Equity held: 4.5% Equity held by all funds managed by Octopus: 30.0% Last submitted accounts: n/a Executive Channel Limited Executive Channel installs digital display screens in office buildings which it uses to display advertising, up-to-date news and information, via the internet. These screens are usually located in the elevator lobby to engage an exclusive audience, with high spending power in an uncluttered environment. The company continues to grow ahead of budget. Initial investment date: September 2010 Cost: GBP299,990 Valuation: GBP299,990 (latest funding round) Equity held: 4.8% Equity held by all funds managed by Octopus: 32.2% Last submitted accounts: n/a (none filed) Bowman Power Limited Bowman Power is a leader in the development of clean power generation technology, designed to substantially increase the performance of standard diesel and gas fuelled engines. Based in Southampton, Bowman Power's core product is a turbogenerator, which recovers waste heat from engines, in order to both boost their power and efficiency, whilst reducing their emissions. Bowman Power is the first company worldwide to emerge with economical, production grade solutions to turn waste heat in exhausts into electrical power. The period was dominated by dealing with the results of deploying the first 20 units in customer sites with a German power generation company. Initial trials had shown that the equipment worked and delivered the required performance, substantial operating hours in the field are needed to test durability and overall functionality in real use. Initial investment date: July 2010 Cost: GBP274,950 Valuation: GBP274,950 (latest funding round) Equity held: 2.7% Equity held by all funds managed by Octopus: 17.9% Last submitted audited group accounts: 30 September 2009 Turnover GBP589,057 Loss before tax: ( GBP2,054,360) Net assets: ( GBP639,521) Michelson Diagnostics Limited Michelson Diagnostics is the medical equipment and scanner specialists, whose unique laser scanning technology can image skin and other surface tissue at a much higher resolution than ever before. CEO Jon Holmes founded Michelson with four colleagues in 2006. The company's first product based on its patented technology, the VivoSight scanner, may revolutionise the market for the non- invasive diagnosis and treatment of non-melanoma skin cancer (NMSC). The VivoSight scanner has already won CE & Food and Drug Administration (FDA) regulatory clearance for clinical use in Europe and the USA, and is now being trialled by leading skin cancer specialists at their clinics. Michelson's VivoSight scanner will, for the first time, enable clinicians to 'see' under the skin surface in real time, to help them decide whether to treat a lesion, what treatment to use, and to show them how far a tumour has spread, so that surgery is required only once and conserves healthy tissue. This is expected to make non-melanoma skin cancer treatment more efficient and cost effective, and to be better for the patient by reducing unnecessary surgery. Initial investment date: October 2010 Cost: GBP247,554 Valuation: GBP247,554 (latest funding round) Equity held: 4.4% Equity held by all funds managed by Octopus: 28.1% Last submitted accounts: 31 March 2010 (abbreviated) Net assets GBP582,998 TouchType Limited TouchType is a leader in the development of text prediction technology designed to significantly boost the accuracy, fluency and speed of text entry on mobile and computing devices. The company's core product, the Fluency prediction engine, is a patent pending set of software algorithms which improve upon the existing market leader's keystroke per character performance by 44% resulting in users having to make less than half the number of keystrokes compared to a standard QWERTY keyboard. The Fluency prediction engine powers the company's mobile phone application, Swiftkey, for use on Android phones. Having released Swiftkey initially in beta form, the company moved to a paid application in September 2010 and has now been downloaded more than 700,000 times in total. Swiftkey was received very well and it became the top downloaded application in the Android market in over 25 countries within two weeks of its launch, while attracting a great deal of interest across the internet, social media and technical blogs. Whilst the company remains at an early stage in its development, the reception from the industry has been very positive and Swiftkey was recently placed third in the CES 2011 Mobile App Showdown, the pre-eminent consumer electronics show globally. Initial investment date: August 2010 Cost: GBP52,505 Valuation: GBP52,505 (latest funding round) Equity held: 1.5% Equity held by all funds managed by Octopus: 8.0% Last submitted accounts: 31 August 2009 (abbreviated) Net assets GBP474,000 Directors' Responsibility Statement The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). In preparing these financial statements, the Directors are required to: · select suitable accounting policies and then apply them consistently; · make judgements and 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 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 the Directors are aware: · there is no relevant audit information of which the Company's auditor is unaware; and · the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. To the best of my knowledge: · the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and · the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. 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 considerations 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 Gregor Michie Chairman 10 February 2011 Income Statement +------------------------------------------+ |Period from 30 September 2009 to 31 | |October 2010 | | | |Revenue Capital Total| | | Notes| GBP'000 GBP'000 GBP'000| | | | | | | Current asset investment | | holding gains 11 | - 239 239| | | | | | | Other income 2 | 34 - 34| | | | | | | Investment management fees 3 | (59) (176) (235)| | | | | | | Other expenses 4 | (225) - (225)| | | | | | | Return on ordinary activities | | before tax | (250) 63 (187)| | | | | | | Taxation on return on ordinary | | activities 6 | - - -| | | | | | | Return on ordinary activities | | after tax | (250) 63 (187)| | | Earnings per share - basic and | | diluted 7 | (2.2)p 0.5p (1.7)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 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 period as set out above. The accompanying notes form an integral part of the financial statements. Reconciliation of Movements in Shareholders' Funds +--------------------+ | Period from | | 30 September 2009 | | to 31 October 2010 | | | | GBP'000 | | | Shareholders' funds at start of year | - | | | Return on ordinary activities after tax | (187) | | | Issue of equity (net of expenses) | 21,358 | | | Shareholders' funds at end of period | 21,171 | +--------------------+ The accompanying notes form an integral part of the financial statements. Balance Sheet +-------------------+ | As at 31 October| | 2010| | | Notes| GBP'000 GBP'000| | | Fixed asset investments* 9 | 1,842| | | | | | | Current assets: | | | | Debtors 10 | 15 | | | Money market securities and other deposits* 11 |19,297 | | | Cash at bank | 112 | | | |19,424 | | | Creditors: amounts falling due within one year 12 | (95) | | | Net current assets | 19,329| | | Net assets | 21,171| | | | | | | Called up equity share capital 13 | 2,258 | | | Share premium 14 | - | | | Special distributable reserve 14 |19,092 | | | Capital redemption reserve 14 | 8 | | | Capital reserve - (losses) on disposals 14 | (176) | | | - holding gains 14 | 239 | | | Revenue reserve 14 | (250) | | | Total shareholders' funds | 21,171| | | Net asset value per share 8 | 93.8p| +-------------------+ *Held at fair value through profit and loss The statements were approved by the Directors and authorised for issue on 10 February 2011 and are signed on their behalf by: Gregor Michie Chairman Company No: 07035434 The accompanying notes form an integral part of the financial statements. Cash Flow Statement +--------------------------+ | Period from 30 September| | 2009 to 31 October 2010| | | | GBP'000| | | | | | | Net cash outflow from | | operating activities | (346)| 12 | | | | | | Financial investment: | | | | Purchase of fixed asset investments 9 | (1,842)|(3,054) | | | | | | Management of funds: | | | | Purchase of current asset investments 11| (27,008)|(2,146) | | Sale of current asset investments 11| 7,950| 5,461 | | | | | | Financing: | | | | Issue of shares | 21,447| - | | Redemption of shares | (89)| =------------------------------------------+--------------------------+ Increase in cash resources | | at bank | 112| The accompanying notes form an integral part of the financial statements. Reconciliation of Return before Taxation to Cash Flow from Operating Activities +-------------------------------------+ | Period from 30 September 2009 to 31 | | October 2010| | | | GBP'000| | | Return on ordinary activities before tax| (187)| | | Gain on valuation of current asset | | investments | (239)| | | Increase in debtors | (15)| | | Increase in creditors | 95| | | Inflow from operating activities | (346)| +-------------------------------------+ Reconciliation of Net Cash Flow to Movement in Net Funds +-------------------------------------+ | Period from 30 September 2009 to 31 | | October 2010| | | | GBP'000| | | Increase in cash resources | 112| | | Movement in cash equivalent securities | 19,297| | | Opening cash funds | -| | | Net funds at 31 October | 19,409| +-------------------------------------+ Net Funds at 31 October comprised: +--------------------------------------------------+ | Period from 30 September 2009 to 31 October 2010 | | | | GBP'000 | | | Cash at bank | 112 | | | Money market funds | 13,478 | | | OEICs | 5,819 | | | Net Funds at 31 October | 19,409 | =------------------------+--------------------------------------------------+ The accompanying notes form an integral part of the financial statements. 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" (revised 2009). 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 and loss; therefore all gains and losses arising from investments held are attributable to financial assets held at fair value through profit and loss. Accordingly, all interest income, fee income, expenses and impairment losses are attributable to assets designated as being at fair value through profit and loss. Current asset investments comprising money market funds and deposits are held for trading and are therefore automatically classified as fair value through profit or loss. Investments are regularly reviewed to ensure that the fair values are appropriately stated. Quoted investments are valued in accordance with the bid- price on the relevant date, unquoted investments are valued in accordance with current International Private Equity and Venture Capital ('IPEVC') valuation guidelines, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies, asset values of subsidiary companies and liquidity or marketability of the investments held. Although the Company believes that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could require changes in the stated values. This could lead to additional changes in fair value in the future. 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 and 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 investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. This is consistent with the International Private Equity and Venture Capital ('IPEVC') guidelines. In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings multiple 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). 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, bonds and OEICs and are designated as FVTPL. Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - gains/(losses) on disposal. The current asset investments are all invested with the Company's cash manager and are readily convertible into cash at the choice of the Company. The current asset investments are held for trading, are actively managed and the performance is evaluated on a fair value basis in accordance with a documented investment strategy. Information about them has to be provided internally on that basis to the Board. Income Investment income includes interest earned on bank balances and money market funds and includes income tax withheld at source. Fixed returns on debt and money market funds are recognised on a time apportionment basis so as to reflect the effective yield, 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 is to be 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 of investments and on holding 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), government securities, investment grade bonds and investments in money market managed funds, as well as OEICs. Loans and receivables The Company's loans and receivables are initially recognised at fair value 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. We define capital as shareholders' funds and our financial strategy in the medium term is to manage a level of cash that balances the risks of the business with optimising the return on equity. The Company currently has no borrowings nor does it anticipate that it will drawdown any borrowing facilities in the future to fund the acquisition of investments. The company does not have any externally imposed capital requirements. Financial instruments During the course of the year, the Company held non-current asset investments, shares in OEICs (open ended investment companies), money market funds and cash deposits. The Company holds financial assets that comprise investments in unlisted companies. The carrying value for all financial assets and liabilities is fair value. 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 dividends when they are paid, and for final dividends when they are approved by the shareholders. 2. Income Period ended 31 October 2010 GBP'000 Interest receivable on bank balances 34 3. Investment Management Fees Period ended 31 October 2010 Revenue Capital Total GBP'000 GBP'000 GBP'000 Investment management fee 59 176 235 For the purposes of the revenue and capital columns in the income statement, the management fee has been allocated 25% to revenue and 75% to capital, in line with the Board's expected long term return in the form of income and capital gains respectively from the Company's investment portfolio. Octopus Investments provides investment management and accounting and administration services to the Company under a management agreement which runs for a period of five accounting periods with effect from 1 February 2010 and may be terminated at any time thereafter by not less than 12 months' notice given by either party. No compensation is payable in the event of terminating the agreement by either party, if the required notice period is given. The fee payable, should insufficient notice be given, will be equal to the fee that would have been paid should continuous service be provided, or the required notice period was given. The basis upon which the management fee is calculated is disclosed within note 18 to the financial statements. 4. Other expenses Period ended 31 October 2010 GBP'000 Directors' remuneration 37 Fees payable to the Company's auditor for the audit of the financial statements 7 Fees payable to the Company's auditor for other services - tax compliance 1 Accounting and administration services 46 UK Listing Fees 30 Trail commission 62 Other expenses 42 225 Total annual running costs are capped at 3.2% of net assets (excluding irrecoverable VAT). For the period to 31 October 2010 the running costs, as defined in the prospectus, were 1.9% of net assets. 5. Directors' remuneration Period ended 31 October 2010 GBP'000 Directors' emoluments Gregor Michie (Chairman) 15 Lars McBride 11 Chris Hulatt (paid to Octopus Investments Limited) 11 37 None of the Directors received any other remuneration or benefit from the Company during the period. The Company has no employees other than non- executive Directors. The average number of non-executive Directors in the period was three. The Company's policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. The fees are not specifically related to the Directors' performance, either individually or collectively. There are no service contracts, long-term incentive schemes, share option schemes or pension schemes in place. 6. Tax on ordinary activities The corporation tax charge for the period was GBPnil. The current tax charge for the period differs from the standard rate of corporation tax in the UK of 28%. The differences are explained below. Current tax reconciliation: 31 October 2010 GBP'000 Loss on ordinary activities before tax (187) Current tax at 28% (52) Unutilised tax losses 119 Income not taxable for tax purposes (67) Total current tax charge - The company has excess management charges of approximately GBP426,000 to carry forward to offset against future taxable profits subject to agreement with HMRC. The Company has not recognised the deferred tax asset of GBP119,000 in respect of these excess management charges. Approved VCT 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 current deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments. 7. Earnings per Share The total, revenue and capital earnings per share is based on 11,541,206 ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no potentially dilutive capital instruments in issue and, therefore no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical. 8. Net asset value per share The calculation of net asset value per share as at 31 October 2010 is based on net assets of GBP21,171,000 and 22,578,706 ordinary shares in issue at that date. 9. Fixed asset investments The Company has adopted the amendment to FRS 29 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 AIM-listed investments classified as held at fair value through profit or loss. The Company held no such investment in the current or prior year. Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. The Company held 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. The change in fair value for the current and previous year is recognised through the income statement. All items held at fair value through profit or loss were designated as such upon initial recognition. Movements in investments at fair value through profit or loss during the year to 31 October 2010 are summarised below and in note 11. Level 3: Unquoted investments Equity and loan investments Total investments 31 October 2010 31 October 2010 GBP'000 GBP'000 Valuation and net book amount: Book cost as at 1 November 2009 - - Cumulative revaluation - - Valuation at 1 November 2009 - - Movement in the year: Purchases at cost 1,842 1,842 Profit/(loss) on realisation of investments - current year - - Revaluation in year - - Valuation at 31 October 2010 1,842 1,842 Book cost at 31 October 2010: 1,842 1,842 Revaluation to 31 October 2010: - - Valuation at 31 October 2010 1,842 1,842 Level 3 valuations include assumptions based on non-observable market data, such as discounts applied either to reflect fair value of financial assets held at the price of recent investment, or, in the case of unquoted investments, to adjust earnings multiples. Further details in respect of the methods and assumptions applied in determining the fair value of the investments are disclosed in the Investment Manager's review and within the principal accounting policies in note 1. The sensitivity of these valuations to a reasonable possible change in such assumptions is given in note X. Further details of the fixed asset investments held by the Company are shown within the Investment Manager's Review on pages X to X. At 31 October 2010, there were no commitments in respect of investments not yet completed. 10. Debtors 31 October 2010 GBP'000 Other debtors 5 Prepayments 4 Accrued income 6 15 11. Current Asset Investments Current asset investments at 31 October 2010 comprised money market funds and OEICs. GBP'000 GBP'000 Valuation and net book amount: Book cost as 30 September 2009 - OEICs - Revaluation as at 30 September 2009 - OEICs - Valuation as at 30 September 2009 - Purchase at cost: - Money market funds 21,428 - OEICs 5,580 27,008 Disposal proceeds - Money market funds (7,950) (7,950) Revaluation in the year - OEICs 239 239 Valuation as at 31 October 2010 19,297 Book cost as 1 November 2010 - Money market funds 13,478 - OEICs 5,580 19,058 Revaluation as at 1 November 2010 - Money market funds - - OEICs 239 239 Valuation as at 31 October 2010 19,297 All current asset investments held at the year end sit with the level 1 hierarchy for the purposes of FRS 29. Level 1 money market funds: Level 1 valuations are based on quoted prices (unadjusted) in active markets for identical assets or liabilities. The valuation of money market funds at 31 October 2010 was GBP19,297,000. 12. Creditors: amounts falling due within one year 31 October 2010 GBP'000 Accruals 85 Other creditors 10 95 13. Share capital 31 October 2010 GBP'000 Authorised: 50,000,000 ordinary shares of 10p 5,000 Allotted and fully paid up: 22,578,706 ordinary shares of 10p 2,258 The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page X. The Company is not subject to any externally imposed capital requirements. The Company issued 22,578,706 ordinary shares during the period at a price of 100p per share. On 1 February 2010 the Company made an allotment of 50,000 redeemable preference shares of GBP1 each. These shares were allotted at par and GBP0.25 was paid on each share. These were subsequently redeemed on 1 February 2010 out of the proceeds of a first share issue. Following this redemption a resolution was passed whereby these preference shares were re-designated as ordinary shares of 10p each and rank pari passu with the existing ordinary shares. 14. Reserves Capital Capital reserve reserve Capital Share Special gains/(losses) holding redemption Revenue Share capital premium distributable on disposal gains/ reserve reserve GBP'000 GBP'000 reserve GBP'000 GBP'000 (losses) GBP'000 GBP'000 As at date of - - - - - incorporation - - Issue of 2,266 19,172 - - - equity - - Share (8) (80) - - 8 cancellation - - Share premium - (19,092) 19,092 - - - - account cancellation Return on - - - - - (250) ordinary - activities after tax Management - - - (176) - - - fees allocated as capital expenditure Current period - - - - 239 - - gains on revaluation Balance as at 2,258 - 19,092 (176) 8 31 October 2010 239 (250) When the Company revalues its investments during the period, any gains or losses arising are credited/ charged to the income statement. Changes in fair value of investments held are then transferred 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. Following the Company's petition, the Companies Court ordered that the special resolution passed be the shareholders on 20 October 2010 to effect the cancellation of the share premium account be confirmed. The Order relating to the same was duly registered by the Registrar of Companies on the same date. The purpose of the special distributable reserve is to create a reserve which will be capable of being used by the Company to pay dividends and for the purpose of making repurchases of its own shares in the market with a view to narrowing the discount to net asset value at which the Company's ordinary shares trade. In the event that the revenue reserve and capital reserve gains/(losses) on disposal do not have sufficient funds to pay dividends, these will be paid from the special distributable reserve. 15. Financial instruments and risk management The Company's financial instruments comprise cash balances and liquid resources including debtors and creditors. The Company intends to hold 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 October 2010. 31 October 2010 GBP000 Assets at fair value through profit or loss Investments 1,842 Current asset investments 19,297 Total 21,139 Loans and receivables Cash at bank 112 Other debtors 5 Accrued income 6 Total 123 Liabilities at amortised cost Accruals and other creditors 95 Total 95 Fixed asset investments (see note 9) are valued at fair value. Unquoted investments are carried at fair value as determined by the directors in accordance with current venture capital industry guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets held at the period end is equal to their book value. In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are price risk, interest rate risk, credit risk and liquidity risk. The Company's approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date. Market risk The Company's strategy for managing investment risk is determined with regard to the Company's investment objective, as outlined on page X. The management of market risk is part of the investment management process and is a central feature of venture capital investment. The Company's portfolio is managed with regard to the possible effects of adverse price movements and, with the objective of maximising overall returns to shareholders. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company's assets is regularly monitored by the Board. Details of the Company's investment portfolio at the balance sheet date are set out on pages X and X. An analysis of investments is given in note 9. 8.7% 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 October 2010 would have increased net assets and the total return for the period by GBP184,200. An equivalent change in the opposite direction would have reduced net assets and the total return for the period by the same amount. 91.1% by value of the Company's net assets comprises of OEICs and money market securities held at fair value. A 10% overall increase in the valuation of the OEICs and money market securities at 31 October 2010 would have increased net assets and the total return for the year by GBP1,929,700. An equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount. Interest rate risk Some of the Company's financial assets are interest-bearing, some of which are at variable rates. As a result, the Company is exposed to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates. 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 October 2010. The amounts held in floating rate investments at the balance sheet date were as follows: 31 October 2010 GBP'000 Cash on deposit & money market funds 13,591 A 1% increase in the base rate would increase income receivable from these investments and the total return for the period by GBP135,910. Credit risk There were no significant concentrations of credit risk to counterparties at 31 October 2010. By cost, no individual investment exceeded 7.5% of the Company's net assets at 31 October 2010. Credit risk is the risk that counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager and the Board carry out a regular review of counterparty risk. The carrying values of financial assets represent the maximum credit risk exposure at the balance sheet date. At 31 October 2010 the Company's financial assets exposed to credit risk comprised the following: 31 October 2010 GBP000 Cash on deposit & money market funds 13,591 Credit risk relating to listed money market funds is mitigated by investing in a portfolio of investment instruments of high credit quality, comprising securities issued by the UK Government and major UK companies and institutions. Bankruptcy or insolvency of a custodian could cause the Company's rights with respect to securities held by a 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 and BlackRock Inc. 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 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 October 2010 these investments were valued at GBP19,409,000. 16. Post balance sheet events The following events occurred between the balance sheet date and the signing of these financial statements: · On 7 December 2010 a new investment of GBP367,000 was made into Diverse Energy Limited · On 24 December 2010 a new investment of GBP450,000 was made into Curlet (UK) Limited (10CMS) · On 28 January 2011 a new investment of GBP500,000 was made into Vega-Chi Limited 17. Contingencies, guarantees and financial commitments Provided that intermediary continues to act for a shareholder and the shareholder continues to be the beneficial owner of the shares, intermediaries will be paid an annual trail commission of 0.5% of the initial net asset value. Trail commission of GBP62,000 was paid during the year and there was GBPnil outstanding at the year end. There were no contingencies, guarantees or financial commitments as at 31 October 2010. 18. Related party transactions Chris Hulatt, a non-executive director of Octopus Titan VCT 4 plc, is a Director of Octopus Investments Limited. Octopus Titan VCT 4 plc has employed Octopus throughout the period as Investment Manager. Octopus Titan VCT 4 plc has paid Octopus GBP235,200 in the period 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 October. Octopus Investments Limited also 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 October. During the period GBP35,280 was paid to Octopus Investments and there is GBPnil outstanding at the balance sheet date, for the accounting and administrative services. In addition, Octopus also provides secretarial services for a fee of GBP15,000 per annum. During the period GBP11,250 was due to Octopus Investments Limited and there is GBPnil outstanding at the balance sheet date. In addition, Octopus Investments is entitled to performance related incentive fees. The incentive fees are designed to ensure that there are significant tax- free dividend payments made to Shareholders as well as strong performance in terms of capital and income growth, before any performance related incentive fee payment is made. Therefore, only if by the end of a financial year (commencing no earlier than close of the 2013 financial year), declared distributions per Share have reached 40p in aggregate and if the Performance Value at that date exceeds 130p per Share, a performance incentive fee equal to 20% of the excess of such Performance Value over 100p per Share will be payable to Octopus. If, on a subsequent financial year end, the Performance Value of Octopus Titan 4 falls short of the Performance Value on the previous financial year end, no incentive fee will arise. If, on a subsequent financial period end, the performance exceeds the previous best Performance Value of Octopus Titan 4, the Investment Manager will be entitled to 20% of such excess in aggregate. No performance fee has been recognised for the year ended 31 October 2010 on the basis that the directors do not believe that the necessary criteria will be met in the foreseeable future, and therefore the amount of any possible obligation is not material. 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 Titan VCT 4 PLC via Thomson Reuters ONE [HUG#1487909]
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