TIDMOTV1
Octopus Titan VCT 1 plc
Half-Yearly Results
23 June 2010
Octopus Titan VCT 1 plc, managed by Octopus Investments Limited, today announces
the Half-Yearly results for the six months ended 30 April 2010.
These results were approved by the Board of Directors on 22 June 2010.
You may view the Half-Yearly Report in full atwww.octopusinvestments.com by
navigating to Services, Investor Services, Venture Capital Trusts, Octopus Titan
VCT 1. All other statutory information will also be found there.
About Octopus Titan VCT 1 PLC
Octopus Titan VCT 1 plc ("Titan 1", "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
predominately unquoted companies. The Company is managed by Octopus Investments
Limited ("Octopus" or "Manager").
Titan 1 was incorporated on 12 October 2007 with the first allotment of equity
being 19 December 2007. In collaboration with Octopus Titan VCT 2 plc ("Titan
2"), the funds raised over GBP30.8 million in aggregate ( GBP29.5 million net of
expenses) through an offer for subscription which closed on 16 May 2008. Titan
1 will invest primarily in unquoted UK smaller companies and aims to deliver
absolute returns on its investments.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for private
individuals to invest in unlisted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* up-front income tax relief of 30%
* exemption from income tax on dividends paid
* exemption from capital gains tax on disposals of shares in VCTs
The Company has been approved as a VCT by HM Revenue & Customs. In order to
maintain its approval the Company must comply with certain requirements on a
continuing basis. By the end of the Company's third accounting period at least
70% of the Company's investments must comprise 'qualifying holdings'of which at
least 30% must be in eligible Ordinary shares. A 'qualifying holding'consists
of up to GBP1 million invested in any one year in new shares or securities in an
unquoted company (including companies listed on AIM) which is carrying on a
qualifying trade and whose gross assets do not exceed GBP7 million at the time of
investment, and whose total number of employees is less than 50, also at the
time of investment. The Company will continue to ensure its compliance with
these qualification requirements.
Financial Summary
Six months to Six months to Year to 31
30 April 2010 30 April 2009 October 2009
=-------------------------------------------------------------------------------
Net assets ( GBP'000s) 14,373 14,293 15,014
Return on ordinary activities before
tax ( GBP'000s) (563) 336 1,134
Net asset value per share (NAV) 92.0p 91.5p 96.1p
Cumulative dividends since launch -
paid and declared 2.0p 1.0p 1.5p
=-------------------------------------------------------------------------------
Chairman's Statement
I am pleased to present the half-yearly results for the six month period ended
30 April 2010.
Results and Dividend
During the six month period to 30 April 2010, the total return (being the change
in net asset value per share (NAV) plus cumulative dividends paid) was -3.7% (30
April 2009 +2.3%), comprising a NAV decline of 4.1 pence to 92.0 pence plus
dividends paid of 0.5 pence.
The unquoted portfolio has performed satisfactorily during the period. However
our investments in two Open Ended Investment Company Funds have shown a fall in
value of 6.7% during the period but their combined value remains well above the
original cost of investment.
The revenue return for the period amounted to -0.1p per share. However, your
Board has declared an interim dividend of 0.5p per share payable from capital
reserves on 23 July 2010 to shareholders on the register on 9 July 2010. Your
Board places considerable importance on the maintenance of regular dividends,
particularly given their tax free status in a period when the top rate of tax
for individuals has increased to 50%. There are significant cash or near cash
reserves to make such dividends, but given the low levels of interest available
for cash deposits, the levels of dividends need to remain modest. Our objective
is to increase our dividend distributions once we achieve realisations of our
qualifying investment portfolio but, given the early stage nature of our
investments and the current market conditions, it is unlikely that we will see
any disposals in the immediate future.
Investment Portfolio Review
During the six month period our Investment Manager has made four new investments
on behalf of the Company. We invested GBP421,000 into AQS, which operates in the
environmental sector, GBP268,000 into Metrasens, a technology business
specialising in ferro magnetic detection equipment for use in hospitals and in
secure environments such as prisons, GBP312,000 into Money Workout, an online
business helping customers with mortgage applications and GBP429,000 into Mi-Pay,
which provides payment services within the mobile money sector.
In addition we have made a follow-on investment of GBP500,000 into Calastone, the
cross-border transaction network for the mutual fund industry. Calastone has
used the new investment to expand into Europe following the achievement of a
milestone of sending its 2 millionth message.
Finally, we have decided to reduce the value of two of our investments, Phase
Vision and Phasor Solutions, by GBP50,000 each given their current trading outlook
in these challenging economic times.
Cash and Liquid Resources
From the outset of the Fund's life we have invested a significant part of the
capital raised in a portfolio of bonds, floating rate notes, cash and cash-plus
funds. These have provided a yield well above current market rates but are now
maturing. This has been designed to provide the liquidity to achieve the
required 70% level of qualifying investments before the deadline of October
2010.
As these bonds have matured, your Board has ensured the cash held remains liquid
and is exposed to minimal capital risk, prior to using the funds for investment
into the unquoted company portfolio. Income yields on cash funds have reduced
significantly in the past 18 months, but your Board believes the policy of
capital preservation of un-invested cash is the right approach.
Open Ended Investment Companies (OEICs)
The CF Octopus UK Micro Cap Growth Fund has fallen by 4.6% over the six months
to 30 April 2010, during what has been a turbulent period for smaller quoted
companies. Following the strong performance of smaller companies during 2009,
there has been some profit taking and in view of political uncertainties,
investors have sought refuge in larger companies where there is generally a
higher exposure to overseas earnings.
The CF Octopus Absolute UK Equity Fund has fallen by 7.8% over the six months to
30 April 2010, following considerable outperformance in previous periods.
Although there was a strong start to 2010 the fund lost some value during the
market volatility at the end of the period.
Your Board continues to keep the investments in these OEICs under review.
Top-up
I am delighted to report that Titan 1, along with its sister VCT, Titan 2, is
raising further money through a top-up. This will be open to existing investors
as well as prospective new investors. However, given a limit to the amount
which may be raised (approximately GBP1.5 million per VCT), priority will be given
to applications received by 31 July, where the investor is already a shareholder
in the fund.
As with your initial investment when Titan 1 launched, your investment will be
split equally between both Titan 1 and Titan 2. A letter announcing the top-up
was recently sent to all financial advisers who have investors in the VCTs, and
in the case of direct investors (i.e. those who invested without a financial
adviser), an application form will be enclosed with this half-yearly report.
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 1 is in compliance with the conditions
laid down by HMRC for maintaining approval as a VCT.
A key requirement now is to achieve the 70% qualifying investment level prior to
31 October 2010. As at 30 April 2010, over 50% 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.
Share price information
At present Titan 1's share price is published daily in the Financial Times at a
significant cost. Since we are still within the initial five year holding
period, the number of shareholders wishing to sell is minimal and so we have
decided not to renew our subscription when it expires in September. The
Company's share price is available from a number of financial websites
includingwww.londonstockexchange.com. The Company's share price may be found
using the TIDM/EPIC code OTV1
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 ways in which they are
managed, are described in more detail in the Company's Annual Report and
Accounts for the period ended 31 October 2009. The Company's principal risks and
uncertainties have not changed materially since the date of that report.
Outlook
Recently, several refinements have been made to fulfil European requirements but
the Titan family of VCTs will conform to all currently proposed changes and we
do not expect future alterations to legislation to be retrospective. We are
members of the Association of Investment Companies, who are an effective voice
for the sector, and we are active in their deliberations.
It is also important to recognise that small companies find the recovery period
from a recession a time of continuing pressure and no more so than in the
current climate where our investee companies continue to experience difficulties
in raising working capital from banks. We will continue to support those
companies in our portfolio which are performing in line with or ahead of plan
and have good prospects.
Our Investment Manager continues to closely monitor our portfolio companies.
Overall, most of our portfolio companies are progressing according to plan or
ahead of it. With a little more stability returning to the economic environment,
we look forward to continuing work with these businesses in order to deliver
value for investors in Titan 1.
Your Board remains confident that the Fund will be able to meet its investment
objectives and produce good returns for shareholders. The imperative is to
provide early stage, development and expansion funding to those companies in our
portfolio who have the potential to create a large business by achieving a
relatively modest share in a fast growing market.
Lewis Jarrett
Chairman
22 June 2010
Investment Portfolio
%
Carrying Change in equity %
Investment value at valuation held equity
at cost 30 30 in by managed
Qualifying April 2010 Unrealised April the Titan by
investments Sector ( GBP'000) profit/(loss) 2010 period 1 Octopus
=-------------------------------------------------------------------------------------------
Calastone Technology 1,135 - 1,135 - 9.8% 31.0%
Limited
Zoopla Limited Media 764 277 1,041 - 3.2% 11.3%
True Knowledge Technology 1,032 - 1,032 - 4.3% 36.4%
Limited
e-Therapeutics Consumer lifestyle 450 27 477 - 0.3% 8.8%
plc & wellbeing
Mi-Pay Limited Telecommunications 429 - 429 - 4.9% 21.2%
AQS Group Environmental 421 - 421 - 5.5% 26.0%
Limited
Surrey Technology 320 - 320 - 5.4% 29.3%
Nanosystems
Limited
Money Workout Technology 312 - 312 - 6.7% 32.6%
Limited
GetOptics Consumer lifestyle 285 - 285 - 3.6% 32.8%
Limited & wellbeing
Nature Consumer lifestyle 275 - 275 - 4.3% 17.9%
Delivered & wellbeing
Limited
Metrasens Technology 268 - 268 - 4.3% 24.0%
Limited
Phase Vision Technology 200 (50) 150 (50) 7.4% 40.6%
Limited
The Skills Technology 100 (50) 50 - 4.6% 18.8%
Market Limited
Phasor Technology 100 (75) 25 (50) 1.7% 30.1%
Solutions
Limited
The Key Telecommunications 641 (641) - - 11.4% 33.2%
Revolution
Limited
=-------------------------------------------------------------------------------------------
Total qualifying investments 6,732 (512) 6,220 (100)
=-------------------------------------------------------------------------------------------
Money market securities 3,624 (70) 3,554
OEICs 3,542 992 4,534
Cash at bank 76 - 76
=-------------------------------------------------------------------------------------------
Total investments 13,974 410 14,384
=-------------------------------------------------------------------------------------------
Net current assets (11)
=-------------------------------------------------------------------------------------------
Total net assets 14,373
=-------------------------------------------------------------------------------------------
Valuation Methodology
The qualifying investments held by Titan 1 are generally early stage businesses
with growth opportunities. As a result the methodology used in fair valuing the
investments is the transaction price of the recent investment round. Subsequent
adjustments to the fair value have then been made to reflect significant under
or over performance of each company since the time of investment.
Quoted investments are valued at market bid price. No discounts are applied.
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.
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
Lewis Jarrett
Chairman
22 June 2010
Income Statement
+----------------------+
| Six months to | Six months to Year to
| 30 April 2010 | 30 April 2009 31 October 2009
| |
|Revenue Capital Total|Revenue Capital Total Revenue Capital Total
| |
| GBP'000 GBP'000 GBP'000| GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=------------+----------------------+-------------------------------------------
| |
Loss on | |
disposal | |
of fixed | |
asset | |
investments | - - -| - - - - (315) (315)
| |
(Loss)/gain | |
on disposal | |
of current | |
asset | |
investments | - (15) (15)| - 73 73 - 45 45
| |
| |
| |
Loss on | |
valuation | |
of fixed | |
asset | |
investments | - (100) (100)| - (372) (372) - (206) (206)
| |
(Loss)/gain | |
on valuation | |
of current | |
asse | |
investments | - (331) (331)| - 527 527 1,676 1,676
| |
| |
| |
Investment | |
income | 111 - 111| 339 - 339 438 - 438
| |
| |
| |
Investment | |
management | |
fees | (38) (113) (151)| (34) (104) (138) (73) (208) (281)
| |
| |
| |
Other | |
expenses | (77) - (77)| (93) - (93) (223) - (223)
| |
| |
=------------+----------------------+-------------------------------------------
Return on | |
ordinary | |
activities | |
before tax | (4) (559) (563)| 212 124 336 142 992 1,134
| |
| |
| |
Taxation | |
on | |
profit/(loss)| |
on ordinary | |
activities | - - -| - - - - - -
| |
| |
=------------+----------------------+-------------------------------------------
Return on | |
ordinary | |
activities | |
after tax | (4) (559) (563)| 212 124 336 142 992 1,134
=------------+----------------------+-------------------------------------------
Earnings per | |
share - basic| |
and diluted | (0.1)p (3.5)p (3.6)p| 1.4p 0.8p 2.2p 0.9p 6.4p 7.3p
+----------------------+
* 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 accompanying notes are an integral part of the half-yearly report
* 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 those disclosed in
the income statement.
Reconciliation of Movements in Shareholders' Funds
+---------------------------+
|Six months to 30 April 2010|Six months to 30 April 2009 Year to 31 October 2009
| |
| GBP'000| GBP'000 GBP'000
=------------+---------------------------+---------------------------------------------------
Shareholders'| |
funds at | |
start of | |
period | 15,014| 14,036 14,036
| |
| |
| |
Return on | |
ordinary | |
activities | |
after tax | (563)| 336 1,134
| |
Dividends | |
paid | (78)| (79) (156)
=------------+---------------------------+---------------------------------------------------
Shareholders'| |
funds at end | |
of period | 14,373| 14,293 15,014
+---------------------------+
Balance Sheet
+-----------------+
| As at 30 April | As at 30 April
| 2010 | 2009 As at 31 October 2009
| |
| GBP'000 GBP'000| GBP'000 GBP'000 GBP'000 GBP'000
=---------------------+-----------------+---------------------------------------
| |
| |
Fixed asset | |
investments* | 6,220| 2,729 4,370
| |
| |
Current assets: | |
| |
Investments - money | |
market securities* | 8,088 |11,517 10,069
| |
Debtors | 36 | 50 97
| |
Cash at bank | 76 | 99 578
=---------------------+-----------------+---------------------------------------
| 8,200 |11,666 10,744
| |
Creditors: amounts | |
falling due within one| |
year | (48) | (102) (100)
=---------------------+-----------------+---------------------------------------
Net current assets | 8,152| 11,564 10,644
=---------------------+-----------------+---------------------------------------
| |
=---------------------+-----------------+---------------------------------------
Net assets | 14,372| 14,293 15,014
=---------------------+-----------------+---------------------------------------
| |
| |
Called up equity share| |
capital | 1,562 | 1,562 1,562
| |
Share premium | - |13,196 -
| |
Special distributable | |
reserve |13,196 | - 13,196
| |
Capital redemption | |
reserve | - | - -
| |
Capital reserve | |
- gains/(losses) on | |
disposal | (832) | (115) (708)
| |
- holding | |
gains/(losses) | 410 | (578) 884
| |
Revenue reserve | 36 | 228 80
=---------------------+-----------------+---------------------------------------
Total equity | |
shareholders' funds | 14,372| 14,293 15,014
=---------------------+-----------------+---------------------------------------
Net asset value per | |
share | 92.0p| 91.5p 96.1p
+-----------------+
*At fair value through profit and loss
Company Number: 06397764
Cash flow statement
+---------------------------+
|Six months to 30 April 2010|Six months to 30 April 2009 Year to 31 October 2009
| |
| GBP'000| GBP'000 GBP'000
=------------------+---------------------------+---------------------------------------------------
| |
| |
Net cash | |
(outflow)/inflow | |
from operating | |
activities | (111)| 235 12
| |
| |
| |
Financial | |
investment: | |
| |
Purchase of | |
investments | (1,950)| (1,264) (3,054)
| |
Sale of investments| -| - -
| |
| |
| |
Management of | |
liquid resources: | |
| |
Purchase of cash | |
equivalent | |
investments | (3,097)| (1,551) (2,146)
| |
Sale of cash | |
equivalent | |
investments | 4,732| 2,297 5,461
| |
| |
| |
Dividends paid: | (78)| (79) (156)
| |
| |
| |
Financing: | |
| |
Issue of equity | -| - -
| |
Share issue | |
expenses | -| - -
| |
Repurchase of own | |
shares | -| - -
=------------------+---------------------------+---------------------------------------------------
(Decrease)/increase| |
in cash resources | |
at bank | (504)| (362) 117
+---------------------------+
Reconciliation of net cash flow to movement in liquid resources
+---------------------------+
|Six months to 30 April 2010|Six months to 30 April 2009 Year to 31 October 2009
| |
| GBP'000| GBP'000 GBP'000
=-------------------+---------------------------+---------------------------------------------------
(Decrease)/increase| |
in cash resources at| |
bank | (504)| (362) 117
| |
Decrease in cash | |
equivalents | (1,982)| (146) (1,594)
| |
Opening net liquid | |
resources | 10,642| 12,124 12,124
=-------------------+---------------------------+---------------------------------------------------
Net funds at period| |
end | 8,156| 11,616 10,647
+---------------------------+
Reconciliation of profit before taxation to cash flow from operating activities
+---------------------------+
|Six months to 30 April 2010|Six months to 30 April 2009 Year to 31 October 2009
| |
| GBP'000| GBP'000 GBP'000
=------------------+---------------------------+---------------------------------------------------
Return on ordinary | |
activities before | |
tax | (568)| 336 1,134
| |
Loss on disposal of| |
fixed asset| |
investments | -| - 315
| |
Loss/(gain) on| |
disposal of current| |
asset investments | 15| (73) (45)
| |
Loss/(gain) on | |
valuation of fixed | |
asset investments | 100| (372) 206
| |
Loss/(gain) on | |
valuation of | |
current asset | |
investments | 331| (527) (1,676)
| |
Decrease/(increase)| |
in debtors | 61| 112 65
| |
(Decrease)/increase| |
in creditors | (50)| 15 13
=------------------+---------------------------+---------------------------------------------------
Net cash | |
(outflow)/inflow | |
from operating | |
activities | (111)| 235 12
+---------------------------+
Notes to the Half Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 April 2010
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
period ended 31 October 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 30 April 2010 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 October 2009 have been extracted
from the audited financial statements for that period, 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 is based on 15,616,879 (30 April 2009: 15,616,879 and 31
October 2009: 15,616,879) shares, being the weighted average number of shares in
issue during the period.
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.
4. Net asset value per share
The calculation of NAV per share as at 30 April 2010 is based on 15,616,879 (30
April 2009: 15,616,879 and 31 October 2009: 15,616,879) Ordinary shares in issue
at that date.
5. Dividends
The interim dividend declared of 0.5 pence per share for the six months ending
30 April 2010 will be paid on 23 July 2010, to those shareholders on the
register on 9 July 2010.
A final dividend of 0.5 pence per share for the year ending 31 October 2009 was
paid on 23 April 2010 to those shareholders on the register on 5 March 2010.
6. Related Party Transactions
Octopus Investments Limited 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 GBP151,000 payable to Octopus. At
the period end there was GBPnil outstanding to Octopus.
[HUG#1426549]
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(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.
All reproduction for further distribution is prohibited.
Source: Octopus Titan VCT 1 PLC via Thomson Reuters ONE
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