TIDMOTV1
Octopus Titan VCT 1 plc
Final Results
14 February 2012
Octopus Titan VCT 1 plc, managed by Octopus Investments Limited, today announces
the final results for the year ended 31 October 2011.
These results were approved by the Board of Directors on 14 February 2012.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com by navigating to Services, Investor Services, Venture
Capital Trusts, Octopus Titan VCT 1 plc. All other statutory information will
also be found there.
Chairman's Statement
I am pleased to present the annual results for Octopus Titan VCT 1 plc (the
"Company") for the year ended 31 October 2011.
Performance
During the year the Total Return of the Company, being the Net Asset Value (NAV)
plus cumulative dividends paid, has declined from 96.9 pence per share to 95.0
pence per share. This decline reflects the running costs of the Company
together with a small net movement in the investment portfolio.
Last year I noted how it was pleasing to report that we had achieved our
obligation to have 70% of our assets represented by qualifying holdings at the
year end. Following this, the Company has now been granted full approval as a
VCT by HMRC.
Investment Portfolio
The Company made one new investment during the year totalling GBP0.3 million, and
further supported existing portfolio companies by making thirteen follow-on
investments amounting to GBP2.5 million. All of our investments are discussed in
more detail in the Investment Manager's Review on pages X to X in which you will
see that we continue to have a portfolio of investments which is well spread in
a diverse range of companies.
Significant increases in fair value, reflecting improved trading performances,
have been recognised in Calastone, Nature Delivered (trading as Graze) and
TouchType, totalling GBP1.6 million. Elsewhere the portfolio has suffered
decreases in fair value, with Diverse Energy, Money Workout and The Skills
Market being written down to nil. Overall the fair value of the qualifying
investee company portfolio has decreased by GBP98,000 during the year.
When building a portfolio of early stage investments there is always an
expectation that some of these businesses will falter and suffer a decrease in
fair value, and typically this will occur prior to the opportunity of seeing
increases in valuations from other members of the portfolio. As the companies in
our portfolio mature, we are cautiously optimistic that we have a number of
strong companies within our portfolio of 23 companies that will prosper further
and allow the NAV to make upward progress in coming years.
Top-up
I am pleased to announce that the Company, together with the four other Titan
VCTs managed by Octopus Investments Limited (Octopus), is offering the
opportunity to invest into the Titan family of funds through a Top-up fund
raising. With the capacity to raise up to GBP1.25 million into each VCT without
the expense of issuing a full prospectus, this will provide shareholders and
other investors with the opportunity to benefit from the tax reliefs available
to qualifying investors, and the expected future capital gains intended from the
VCTs which are allowed to be paid to shareholders as tax free dividends.
These shares will be issued at a price equal to the most recently published NAV
per share adjusted for the offer costs of 5.5%, so as not to dilute the value of
the existing shareholdings.
The funds raised will be used in the main to further support existing investee
companies where the Investment Manager sees the opportunity for potential gains.
We may also seek to invest in new companies when proposed by the Investment
Manager and where are deemed appropriate for this VCT.
For further details, including a copy of the full brochure, please do not
hesitate to contact the Company Secretary at Octopus using the contact details
provided on page X of this report.
Open Ended Investment Companies (OEICs) managed by Octopus Investments
During the year the investment in the Absolute UK Equity Fund was disposed of in
its entirety. Over the lifetime of the investment, a profit of GBP0.8 million was
realised, being 39% above the original cost, rendering the investment a success
and greatly reducing the low return cash drag typically experienced in the early
stages of a VCT's life.
A GBP1.1 million investment in the UK Microcap Growth Fund was also disposed of at
a small loss of GBP2,000, with the remainder of the Company's investment in this
particular OEIC showing an unrealised gain of GBP90,000 at the year end.
Furthermore, in August 2011, the Company invested GBP0.8 million into the Omnis
Cautious Fund. At the year end this investment showed a small decrease in fair
value of GBP1,000.
Overall, the investments in the OEIC portfolio generated an unrealised gain of
GBP89,000 during the year.
The Board continues to monitor these funds and believes it remains a sensible
strategy to maintain part of our non-qualifying portfolio in OEICs due to their
highly liquid status and potential to achieve greater returns when compared to
cash deposits that focus on capital preservation. Further details of these OEICs
may be found at www.octopusinvestments.com where monthly factsheets are
available.
Investment Strategy
As our portfolio of unquoted companies matures, your Board will continue to
review the portfolio's strategy which includes making further investments into
those companies where the Investment Managers believe this will move them
towards maturity and in due course profitable exits for the VCT's shareholders.
This may result in making investments in some companies which have become non-
qualifying for VCT purposes but where your Board believes that it will be in
shareholders' interests to continue to invest, not least to avoid dilution and
to protect value.
We expect to increase the cash reserves for such further investments from the
Top-up described above and that our reserves, unless required for the portfolio,
will continue to be invested in Octopus managed OEICs and lower risk, readily
realisable investments including cash deposits.
Dividend and Dividend Policy
We look forward to creating capital gains from the investments in our qualifying
portfolio companies which can then be distributed as tax free dividends. At this
time your Board views the prospects for the portfolio with cautious optimism and
so your Board's policy is to try to maintain a regular dividend flow where
possible and this results in a final dividend for the year ended 31 October
2011 of 1.00 pence per share (2010: 0.75 pence per share) making distributions
for the year of 1.75 pence per share (2010: 1.25 pence per share).
Subject to shareholder approval at the Annual General Meeting, this dividend
will be paid on 13 April 2012 to those shareholders on the register on 9 March
2012. New shares issued under the Top-up offer will not be eligible for this
final dividend.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides both the Board and the Investment Manager
with advice concerning ongoing compliance with HMRC rules and regulations
concerning VCTs. The Board has been advised that the Company is in compliance
with the conditions laid down by HMRC for maintaining approval as a VCT.
A key requirement is for 70% of the portfolio to remain continually invested in
qualifying investments. As at 31 October 2011, over 87% of the portfolio (as
measured by HMRC rules) was invested in VCT qualifying investments.
You will have read about imminent changes to the VCT legislation. We believe
that these will be positive for early stage funds and thus for our Titan family
of funds.
Annual General Meeting
The Company's Annual General Meeting will take place on 28 March 2012. I look
forward to welcoming you to the meeting which will be held at the offices of
Octopus Investments Limited, at 20 Old Bailey, London, EC4M 7AN.
Electronic communications
Based on feedback from shareholders, and in order to reduce the cost of printing
and the impact on the environment, we now offer shareholders the opportunity to
forgo their printed report and account documents, in favour of receiving email
or letter notification with details of how to view the documents online. If you
would like to change the format in which you receive this report, please contact
Octopus using the contact details provided on page 64 of this report.
Outlook
Uncertainty over the current economic climate continues and this has the effect
of dissuading investors from small unquoted companies. Early stage companies
should not, in our view, seek to rely on bank finance. However the continuing
and well reported absence of such finance for SMEs does mean that we have seen
increasing levels of deal flow. Although many of the Company's investee
companies are less affected by the macro-economic situation than larger listed
companies, the effects of the continuing credit squeeze and flat economy has
inevitably caused our portfolio companies some challenges but at the same time
this has provided welcome opportunities.. That said, the portfolio continues to
show positive signs from a number of investee companies, and we expect this to
show through in the improvement of the NAV in the medium term.
Our interests remain aligned with that of the entrepreneurs who manage and own
the companies we have invested into, being that of boosting growth and
profitability, and your Board has confidence that the Company has been
successful in adhering to the mandate offered in the prospectus, being that of
investing in the equity of early stage companies, with the potential of making
absolute returns. To this end we believe that we have seen the value of the
Octopus Investments strategy of leveraging off both the investment and expertise
offered by the Venture Partners and believe that this improves and
differentiates the Titan funds markedly from other VCTs investing in early stage
businesses.
Lewis Jarrett
Chairman
14 February 2012
Investment Manager's Review
Personal Service
At Octopus, we focus on both managing your investments and keeping you informed
throughout the investment process. We are committed to providing our investors
with regular and open communication. Our updates are designed to keep you
informed about the progress of your investment. During this time of economic
upheaval, we consider it particularly important to be in regular contact with
our investors and are working hard to manage your money in the current climate.
Octopus was established in 2000 and has a strong commitment to both smaller
companies and to VCTs. We currently manage 19 VCTs, including this VCT, and
manage over GBP340 million in the VCT sector. Octopus has over 200 employees and
has been voted 'Best VCT Provider of the Year' by the financial adviser
community every year since 2006.
Investment Policy Summary
The investment approach of the Company is not designed to deliver a return that
is measured against a stock market index. Instead, the focus of the Company is
on generating absolute returns over the medium-term. In order to achieve this,
the Company focuses on providing early stage, development and expansion funding
to unquoted companies with a typical deal size of GBP0.5 million to GBP1 million and
will continue to comprise 20-25 unquoted companies, predominantly focussed
within the environment, technology, media, telecoms and consumer lifestyle and
well-being sectors.
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 has 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 have created a balanced investment portfolio spanning multiple industries
and business sectors.
Having reached the level of invested funds required by HMRC, our focus has now
shifted to managing the portfolio and helping the investee companies growth. The
current portfolio of holdings built by the Company now encompass investments in
23 unquoted companies and one AIM-quoted company, with a focus on the
environmental, technology, media, telecoms and consumer lifestyle and wellbeing
sectors.
As Investment Manager, we have typically purchased a significant minority equity
stake in these qualifying companies, providing financial capital to the business
to build and grow its operations and then to sell to an acquirer at some point
in the future. These entrepreneurial early stage businesses, which we invest in,
frequently face challenges as they seek to establish themselves in their market,
often developing new products and services. The amount of capital we initially
deploy is intended to be only the first investment that we will make into a
business, prior to seeing if the company meets or exceeds its initial
objectives.
If the business is unsuccessful in meeting these first objectives, we strive to
minimise the financial exposure the Company faces without committing further
money to the investment, as is commonly referred to as "good money after bad".
Other businesses which meet some of their objectives, but not necessarily all,
will require more time to prove their concept and these businesses will
typically be reduced in value prior to our making a further investment. This is
in order for us to see them progress forward and prove their business model and
opportunity. Finally, there are those that meet and exceed the expectations
originally set. It is these businesses which we wish to increase our exposure of
investment from the Company as they remain on course to create a large business.
We maintain liquidity in the Company to ensure adequate resources are available
to support further portfolio funding needs as they arise. This situation should
be further aided following the Top-up as described in the Chairman's Statement,
and it is an important feature of our model in delivering returns to
shareholders.
Portfolio Review
As at 31 October 2011 the NAV plus cumulative dividends was 95.0p per share,
compared to 96.9p per share at 31 October 2010. This represents a reduction of
2.0%. The period showed satisfactory performance, with a small overall reduction
in value amounting to GBP98,000 in the qualifying holdings that the Company holds.
However, this was largely offset by an appreciation in value of GBP89,000 within
the OEIC holdings. The change in NAV plus cumulative dividends is therefore
largely accounted for by the standard running costs of the Company.
The Company now holds over 87% of assets in qualifying holdings from an HMRC
perspective and we continue to work with each portfolio business as they develop
their proposition in their respective markets. As Investment Manager and as
discussed above, 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. This
approach can be demonstrated through the further investments in Executive
Channel, Metrasens and TouchType during the year.
Since the balance sheet date, although no new investments have been made, the
Company has continued to support investee companies by investing a further
GBP179,000 into MiPay, GBP12,000 into GetOptics, GBP124,000 into PrismaStar, GBP74,000
into Phase Vision and GBP50,000 into AQS Holdings.
Outlook
The macro-economic environment has remained challenging for smaller companies,
which have felt the effects of the reduced availability of finance and the
economic slowdown. Small companies also find themselves under pressure from
suppliers who want to be paid earlier, customers who delay payments and weaker
trading conditions. The resulting pressure on cash will remain, even as the
economy recovers, due to increasing working capital requirements.
Ironically, this environment also provides opportunities for entrepreneurial
growth businesses to attract talented individuals to join them. These
individuals help to deliver the business plan and small companies are able to
react quickly to customer needs and deliver an enhanced customer service by
comparison to slower moving large corporate businesses. It is noticeable that a
number of the businesses in the portfolio have these characteristics and
continue to grow aggressively, despite the inclement economic environment.
The continuing turmoil in the Eurozone does have a significant impact on the
confidence of not only the consumer, but also on large corporate purchasers and
institutional investors. Until we start to see a return of confidence it is
likely that the mergers and acquisitions market will remain quiet and there is
unlikely to be uplift in the number of IPOs on the stock market.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2349.
Alex Macpherson
Octopus Investments Limited
14 February 2012
Investment Portfolio
Movement %
Movement Fair in fair % equity
in fair value value in voting held by
Investment value to as at year to rights all
cost as at 31 31 31 held funds
31 October October October October by managed
Fixed asset 2011 2011 2011 2011 Titan by
investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 1 Octopus
=----------------------------------------------------------------------------------
Zoopla
Limited Media 1,071 1,400 2,471 - 6.70% 21.73%
Nature
Delivered Consumer lifestyle
Limited & wellbeing 798 907 1,705 852 7.44% 31.66%
Calastone
Limited Technology 1,135 566 1,701 567 10.80% 34.10%
True
Knowledge
Limited Media 1,420 (7) 1,413 (7) 10.00% 55.72%
e-
Therapeutics Consumer lifestyle
plc & wellbeing 632 15 647 22 1.73% 6.35%
Executive
Channel
Limited Media 529 76 605 76 6.40% 36.76%
TouchType
Limited Telecommunications 385 164 549 164 4.20% 20.07%
Michelson
Diagnostics Consumer lifestyle
Limited & wellbeing 442 - 442 - 5.57% 42.47%
Mi-Pay
Limited Telecommunications 670 (260) 410 (260) 9.64% 32.12%
Surrey
Nanosystems
Limited Technology 383 - 383 - 5.75% 31.24%
Metrasens Consumer lifestyle
Limited & wellbeing 338 43 381 43 5.01% 28.03%
UltraSoC
Technologies
Limited Technology 362 - 362 - 10.04% 55.55%
Semafone
Limited Telecommunications 360 - 360 - 8.29% 41.45%
GetOptics Consumer lifestyle
Limited & wellbeing 410 (90) 320 - 7.52% 34.79%
Bowman Power
Limited Environmental 275 28 303 28 2.33% 15.56%
AQS Holdings
Limited Environmental 536 (296) 240 (296) 8.52% 38.64%
Phase Vision
Limited Technology 400 (165) 235 (115) 12.18% 52.88%
PrismaStar
Inc. Media 300 (150) 150 (150) 4.80% 31.97%
Elonics
Limited Technology 305 (229) 76 (229) 3.11% 19.54%
Phasor
Solutions
Limited Technology 100 (50) 50 - 1.74% 32.14%
Diverse
Energy
Limited Environmental 367 (367) - (367) 5.54% 30.17%
Money
Workout
Limited Technology 445 (445) - (290) 6.89% 33.51%
Skills
Market
Limited Technology 186 (186) - (136) 2.71% 12.28%
The Key
Revolution
Limited Telecommunications 641 (641) - - 12.36% 35.88%
=----------------------------------------------------------------------------------
Total fixed
asset
investments 12,490 313 12,803 (98)
=----------------------------------------------------------------------------------
Money market
securities 379 - 379 -
Open ended
investment
companies 1,518 88 1,606 89
Cash at bank 92 - 92 -
=----------------------------------------------------------------------------------
Total
investments 14,479 401 14,880 (9)
=----------------------------------------------------------------------------------
Debtors less
creditors (38)
=----------------------------------------------------------------------------------
Total net
assets 14,842
=----------------------------------------------------------------------------------
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 measure is
used where appropriate. Subsequent adjustment to the fair value of unquoted
investments can be made using sector multiples based on information as at 31
October 2011, 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.
Quoted investments are valued at market bid price. No discounts are applied.
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 year one new investment was made totalling GBP0.3 million, together
with thirteen follow-on investments amounting to GBP2.5 million.
Quoted and 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.
Listed below are details of the Company's 10 largest investments by value.
Zoopla Limited
Zoopla.co.uk is the UK's most comprehensive property website, focused on
empowering consumers with the resources they need to make better-informed
property decisions by combining property listings with market value data, local
information and community tools. By combining free, instant value estimates for
every UK home with sold prices, local market information and hundreds of
thousands of properties available for sale and to rent, Zoopla.co.uk has rapidly
become the destination for property consumers to search for property and do
their market research, and, as a result, has become one of the most valued
sources of both applicant and vendor leads for UK estate agents. Zoopla has been
awarded numerous accolades including being listed in the Top 10 UK Tech
Companies (Guardian) and the Top 10 Most Innovative UK Companies (Smarta 100),
as well as being voted the UK's Best Property Portal (Web User, Daily Mail
Awards, Website of the Year).
Initial investment date: January
2009
Cost:
GBP1,071,000
Valuation:
GBP2,471,000
Voting rights held by Fund:
6.70%
Equity held by all funds managed by Octopus: 21.73%
Last submitted audited accounts: 31 December
2010
Turnover GBP8,035,036
Loss before tax:
( GBP497,321)
Net assets:
GBP2,417,978
Nature Delivered Limited
Graze.com delivers tasty nutritious snacks to grazers up and down the country.
All boxes are hand picked from over 100 delicious snacks and delivered in the
post. Founded in 2007 and launched in 2009, graze.com was created to solve
office snacking for the better. Delivered directly to customers' desks or home
anywhere in the UK through Royal Mail, each graze box is packed with four
snacks, from flavoured nuts, traditional rice crackers and exotic dried fruits
to freshly baked bread, marinated olives and dips. Grazers choose the foods
they like then graze.com hand picks the perfect box and sends it to them for
just GBP3.49, including delivery using Royal Mail. The boxes fit perfectly through
the letter box and arrive with the rest of your post, they are being delivered
everywhere in the UK, from the Channel Islands to the Shetland Islands.
Graze.com won New Product of the Year at the Growing Business Awards in 2009 and
were voted Venture Candy's Best Food and Drink Company 2010 by Metro readers; it
is also part of the Smarta 100.
Initial investment date: June
2009
Cost:
GBP798,000
Valuation:
GBP1,705,000
Voting rights held by Fund:
7.44%
Equity held by all funds managed by Octopus: 31.66%
Last submitted audited accounts: 28 February
2011
Turnover GBP8,110,771
Loss before tax:
( GBP1,469,453)
Net assets:
GBP1,884,388
Calastone Limited
Calastone is the UK's only independent transaction service for the mutual fund
industry. It enables buyers and sellers of mutual funds on different platforms
to communicate orders electronically, by providing a universal message
communication and 'translation' service - the "Calastone Transaction Network"
(CTN). This is being welcomed in an industry which has not previously been able
to invest in the real-time exchange of information between participants. Orders
are commonly communicated by fax or telephone with a high level of manual re-
keying and manual error correction. Calastone's 'translation' service means that
neither the transmitter nor receiver need to purchase additional technology or
change their existing systems.
Initial investment date: October
2008
Cost:
GBP1,135,000
Valuation:
GBP1,701,000
Voting rights held by Fund:
10.8%
Equity held by all funds managed by Octopus: 34.1%
Last submitted accounts: 30 September
2010
Turnover GBP1,523,185
Loss before tax:
( GBP1,180,742)
Net assets:
GBP482,635
True Knowledge Limited
True Knowledge has developed artificial intelligence software that understands
natural language text (initially just in English) and answers questions. Finding
information on the Internet currently involves a process of trial and error,
hoping that the search engine retrieves the information you are looking for.
True Knowledge has devised patented technology that resolves this fundamental
problem by operating along a more intuitive system. It intelligently answers
questions asked on any topic in plain English.
True Knowledge was pursuing a strategy of advertising to the 1 million users per
week of its trueknowledge.com website. Earlier in 2011 the board agreed to focus
on the mobile market enabling individuals to use their smartphones to answer
questions on local search and over time a wide range of subjects.
Initial investment date: July
2008
Cost:
GBP1,420,000
Valuation:
GBP1,413,000
Voting rights held by Fund:
10.0%
Equity held by all funds managed by Octopus: 55.72%
Last submitted audited accounts: 30 November
2010
Turnover GBP116,063
Loss before tax:
( GBP1,486,886)
Net assets:
GBP551,174
e-Therapeutics plc
e-Therapeutics is an AIM-quoted drug discovery and development company. It
pioneered and exploits 'network pharmacology' to evaluate swiftly and accurately
how medicines interact with cells in the body. This approach optimises the
probability of identifying drug candidates with desirable efficacy and minimal
side effects. Network pharmacology has many applications, and is particularly
suited to addressing complex diseases in which current treatment options are few
and ineffective. e-Therapeutics' current drug discovery programmes are focused
mainly on areas of high unmet medical need, such as neurodegeneration and
oncology. Four drugs resulting from e-Therapeutics' earlier discovery projects
are now in clinical development.
Initial investment date: March
2009
Cost:
GBP632,000
Valuation:
GBP647,000 (bid price)
Voting rights held by Fund:
1.73%
Equity held by all funds managed by Octopus: 6.35%
Last submitted audited group accounts: 31 January 2011
Turnover GBPnil
Loss before tax: ( GBP2,655,000)
Net assets:
GBP3,097,000
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. Executive
Channel is leveraging the industry move in the media market from static
billboards, to interactive digital formats.
Initial investment date:
September 2010
Cost:
GBP529,000
Valuation:
GBP605,000
Voting rights held by Fund:
6.40%
Equity held by all funds managed by Octopus: 36.76%
Last submitted group accounts: 30 June
2010
Turnover Not reported
Loss before tax: ( GBP682,303)
Net assets:
( GBP681,303)
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. TouchType's core product is the Fluency prediction
engine. It is a set of software algorithms which improve upon the existing
market leader's 'keystroke per character' performance by 44%. This results in
users having to make less than half the number of keystrokes compared to a
standard QWERTY keyboard. A patent for the engine is pending. The Fluency
prediction engine powers TouchType's award winning Apps, Swiftkey and Swiftkey
X, for use on Android phones and tablets, which have been downloaded more than
4 million times since launch.
Initial investment date: August
2010
Cost:
GBP385,000
Valuation:
GBP549,000
Voting rights held by Fund:
4.20%
Equity held by all funds managed by Octopus: 20.07%
Last submitted group accounts: 31 December
2010
Turnover GBP152,181
Loss before tax: ( GBP362,138)
Net assets:
GBP504,479
Michelson Diagnostics Limited
Michelson Diagnostics is the medical equipment and scanner specialist, whose
unique laser scanning technology can image skin and other surface tissue at a
much higher resolution than ever before. Michelson Diagnostics' 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 is certified by the CE & Food and Drug
Administration (FDA) regulatory clearance for clinical use in Europe and the
USA. The 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. Michelson
Diagnostics has gained acceptance with several leading Key Opinion Leaders and
has now placed its first machines with dermatologists in order to prove the
business model.
Initial investment date: October
2010
Cost:
GBP442,000
Valuation:
GBP442,000
Voting rights held by Fund:
5.57%
Equity held by all funds managed by Octopus: 42.47%
Last submitted audited group accounts: 31 March 2011
Turnover GBP250,800
Loss before tax: GBP(904,642)
Net assets:
GBP1,958,546
Mi-Pay Limited
Mi-Pay was founded in 2004 with the objective to establish itself as a leading
processor of payments for the fast-emerging mobile money sector. The service
enables customers to 'top-up' their pre-paid mobile phone directly online, or
via their mobile phone, rather than using indirect brand channels such as
PayPoint or bank ATMs. Benefits of the direct service include cost reductions
for mobile network operators and a more personal engagement with customers,
removing the anonymity of customer relationships and allowing for substantial
improvements in customer retention.
Mi-Pay continues to make progress in a very dynamic and fast moving market, most
recently agreeing terms with several tier one European, Middle Eastern and
African mobile operators to provide its direct top up service.
Initial investment date:
February 2010
Cost:
GBP670,000
Valuation:
GBP410,000
Voting rights held by Fund:
9.64%
Equity held by all funds managed by Octopus: 32.12%
Last submitted group accounts: 31 December
2010
Turnover GBP1,945,591
Loss before tax: GBP2,737,455
Net assets:
GBP251,803
Surrey NanoSystems Limited
Surrey NanoSystems has developed a leading technology portfolio addressing the
needs of the global nanoelectronics sector. Its proven technologies deliver
precise, ordered nanomaterial structures for advanced manufacturing processes,
meeting the scaling challenges of the semiconductor industry.
Surrey NanoSystems works with its partners to deliver practical nano-materials
and technologies to the semiconductor, renewable-energy and clean technology
industries. This partnering approach facilitates the migration of materials and
processes developed on Surrey NanoSystems bespoke research platforms to
production-ready tooling.
Initial investment date: July
2009
Cost:
GBP383,000
Valuation:
GBP383,000
Voting rights held by Fund:
5.75%
Equity held by all funds managed by Octopus: 31.24%
Last submitted group accounts: 30 June
2010
Turnover GBP614,386
Loss before tax: ( GBP762,550)
Net assets:
GBP1,268,907
Directors' Responsibilities 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 they must not approve unless they are satisfied that they
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company for that period. Under that law the Directors have
elected to prepare financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable laws).
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgments and accounting estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
In so far as each of the Directors is aware:
· there is no relevant audit information of which the Company's
auditor 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
Lewis Jarrett
Chairman
14 February 2012
Income Statement
+----------------------+
| Year to 31 October |
| 2011 |
=-------------------------------------------------------+----------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=-------------------------------------------------------+----------------------+
| |
| |
Realised gain on disposal of current asset | |
investments 12 | - 156 156|
| |
| |
| |
Fixed asset investment holding losses 10 | - (98) (98)|
| |
Current asset investment holding gains 12 | - 89 89|
| |
| |
| |
Other income 2 | 65 - 65|
| |
| |
| |
Investment management fees 3 | (78) (233) (311)|
| |
Other expenses 4 | (228) - (228)|
| |
| |
=-------------------------------------------------------+----------------------+
Return on ordinary activities before tax | (241) (86) (327)|
| |
| |
| |
Taxation on return on ordinary activities 6 | - - -|
| |
| |
=-------------------------------------------------------+----------------------+
Return on ordinary activities after tax | (241) (86) (327)|
=-------------------------------------------------------+----------------------+
Earnings per share - basic and diluted 8 | (1.5)p (0.5)p (2.0)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.
Income Statement
+---------------------+
| Year to 31 October |
| 2010 |
=--------------------------------------------------------+---------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=--------------------------------------------------------+---------------------+
| |
| |
Realised loss on disposal of current asset | |
investments 12 | - (101) (101)|
| |
| |
| |
Fixed asset investment holding gains 10 | - 822 822|
| |
Current asset investment holding losses 12 | - (408) (408)|
| |
| |
| |
Other income 2 | 180 - 180|
| |
| |
| |
Investment management fees 3 | (70) (212) (282)|
| |
Other expenses 4 | (193) - (193)|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities before tax | (83) 101 18|
| |
| |
| |
Taxation on return on ordinary activities 6 | - - -|
| |
| |
=--------------------------------------------------------+---------------------+
Return on ordinary activities after tax | (83) 101 18|
=--------------------------------------------------------+---------------------+
Earnings per share - basic and diluted 8 | (0.5)p 0.6p 0.1p|
+---------------------+
* 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
+------------------------+-----------------------+
| Year ended 31 October| Year ended 31 October|
| 2011| 2010|
| | |
| GBP'000| GBP'000|
=-----------------------------+------------------------+-----------------------+
Shareholders' funds at start | | |
of year | 15,523| 15,014|
=-----------------------------+------------------------+-----------------------+
Return on ordinary activities | | |
after tax | (327)| 18|
| | |
Issue of equity (net of | | |
expenses) | -| 647|
| | |
Purchase of own shares | (111)| -|
| | |
Dividends paid | (243)| (156)|
=-----------------------------+------------------------+-----------------------+
Shareholders' funds at end of | | |
period | 14,842| 15,523|
=-----------------------------+------------------------+-----------------------+
The accompanying notes form an integral part of the financial statements.
Balance Sheet
+-------------------+
| As at 31 October|
| 2011|As at 31 October 2010
| |
Notes| GBP'000 GBP'000| GBP'000 GBP'000
=-------------------------------------+-------------------+---------------------
| |
| |
Fixed asset investments* 10 | 12,803| * 10,465
| |
* Current assets: | |
| |
* Debtors 11 | 11 | * 588
| |
* Money market securities and | |
other depositis* 12 | 1,985 | * 4,457
| |
* Cash at bank | 92 | * 71
=-------------------------------------+-------------------+---------------------
| 2,088 | * 5,116
| |
* Creditors: amounts falling | |
due within one year 13 | (49) | a. (58)
=-------------------------------------+-------------------+---------------------
Net current assets | 2,039| * 5,058
=-------------------------------------+-------------------+---------------------
| |
=-------------------------------------+-------------------+---------------------
Net assets | 14,842| * 15,523
=-------------------------------------+-------------------+---------------------
| |
| |
* Called up equity share | |
capital 14 | 1,622 | * 1,635
| |
* Share premium 15 | 574 | * 574
| |
* Special distributable | |
reserve 15 |12,686 | * 13,040
| |
* Capital redemption reserve 15 | 13 | * -
| |
* Capital reserve - losses on | |
disposals 15 | (210) | a. (773)
| |
* - | |
holding gains 15 | 401 | * 1,050
| |
* Revenue reserve 15 | (244) | a. (3)
=-------------------------------------+-------------------+---------------------
Total equity shareholders' funds | 14,842| * 15,523
=-------------------------------------+-------------------+---------------------
Net asset value per share 9 | 91.5p| * 94.9p
+-------------------+
*Held at fair value through profit or loss
The statements were approved by the Directors and authorised for issue on 14
February 2012 and are signed on their behalf by:
Lewis Jarrett
Chairman
Company No: 06397764
The accompanying notes form an integral part of the financial statements.
Cash Flow Statement
+---------------+---------------+
| Year to| Year to|
|31 October 2011|31 October 2010|
| | |
Notes| GBP'000| GBP'000|
=----------------------------------------------+---------------+---------------+
| | |
| | |
Net cash inflow/(outflow) from operating | | |
activities | 94| (828)|
| | |
| | |
| | |
Financial investment: | | |
| | |
Purchase of fixed asset investments 10 | (2,818)| (5,273)|
| | |
Sale of fixed asset investments 10 | 382| -|
| | |
| | |
| | |
Management of liquid resources: | | |
| | |
Purchase of current asset investments 12 | (2,201)| (4,791)|
| | |
Sale of current asset investments 12 | 4,918| 9,894|
| | |
| | |
Taxation | -| -|
| | |
| | |
Dividends paid 7 | (243)| (156)|
| | |
| | |
| | |
Financing: | | |
| | |
Issue of shares | -| 647|
| | |
Purchase of own shares 14 | (111)| -|
=----------------------------------------------+---------------+---------------+
Increase/(decrease) in cash resources at | | |
bank | 21| (507)|
+---------------+---------------+
The accompanying notes form an integral part of the financial statements.
Reconciliation of Return before Taxation to Cash Flow from
Operating Activities
+--------------------+---------------+
| Year to| Year to|
| 31 October 2011|31 October 2010|
| | |
| GBP'000| GBP'000|
=-----------------------------------------+--------------------+---------------+
Return on ordinary activities before tax | (327)| 18|
| | |
(Gain)/loss on disposal of current asset | | |
investments | (156)| 101|
| | |
Loss/(gain) on valuation of fixed asset | | |
investments | 98| (822)|
| | |
(Gain)/loss on valuation of current | | |
asset investments | (89)| 408|
| | |
Decrease/(increase) in debtors | 577| (491)|
| | |
(Decrease)/increase in creditors | (9)| (42)|
=-----------------------------------------+--------------------+---------------+
Inflow/(outflow) from operating | | |
activities | 94| (828)|
+--------------------+---------------+
Reconciliation of Net Cash Flow to Movement in Net Funds
+-----------------+-----------------+
| Year to | Year to |
| 31 October 2011 | 31 October 2010 |
| | |
| GBP'000 | GBP'000 |
=----------------------------------------+-----------------+-----------------+
Increase/(decrease) in cash at bank | 21 | (507) |
| | |
Movement in cash equivalents | (2,472) | (5,612) |
| | |
Opening net cash resources | 4,528 | 10,647 |
=----------------------------------------+-----------------+-----------------+
Net funds at 31 October | 2,077 | 4,528 |
+-----------------+-----------------+
Net funds at 31 October comprised:
+-----------------+-----------------+
| Year to | Year to |
| 31 October 2011 | 31 October 2010 |
| | |
| GBP'000 | GBP'000 |
=------------------------+-----------------+-----------------+
Cash at bank | 92 | 71 |
| | |
Money market funds | 380 | 602 |
| | |
OEICs | 1,605 | 3,855 |
=------------------------+-----------------+-----------------+
Net funds at 31 October | 2,077 | 4,528 |
=------------------------+-----------------+-----------------+
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).
The Company's business activities and the factors likely to affect its future
development, performance and position are set out in the Chairman's Statement
and Investment Manager's Review on pages X to X. Further details on the
management of financial risk may be found in note 16 to the Financial
Statements.
The Board receives regular reports from the Investment Manager and the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. The assets of the
company consist of cash, Money Market Funds and OEIC Investments, which are
readily realisable (14% of net assets) and accordingly, the company has adequate
financial resources to continue in operational existence for the foreseeable
future. Thus, as no material uncertainties leading to significant doubt about
going concern have been identified, it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
The principal accounting policies have remained unchanged from those set out in
the Company's 2010 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.
The Company presents its income statement in a three column format to give
shareholders additional detail of the performance of the Company, split between
items of a revenue or capital nature.
The preparation of the financial statements requires Management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. Estimates and assumptions
mainly relate to the fair valuation of the fixed asset investments, particularly
that which are unquoted investments. Estimates are based on historical
experience and other assumptions that are considered reasonable under the
circumstances. The estimates and the assumptions are under continuous review
with particular attention paid to the carrying value of the investments.
Capital valuation policies are those that are most important to the depiction of
the Company's financial position and that require the application of subjective
and complex judgements, often as a result of the need to make estimates about
the effects of matters that are inherently uncertain and may change in
subsequent periods. The critical accounting policies that are declared will not
necessarily result in material changes to the financial statements in any given
period but rather contain a potential for material change. The main accounting
and valuation policies used by the Company are disclosed below. Whilst not all
of the significant accounting policies require subjective or complex judgements,
the Company considers that the following accounting policies should be
considered critical.
The Company has designated all fixed asset investments as being held at fair
value through profit or loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value through
profit or loss. Accordingly, all interest income, fee income, expenses and
investment gains and losses are attributable to assets designated as being at
fair value through profit or loss.
Current asset investments comprising money market funds are held at fair value
through the profit or loss. Cash and short term deposits are held at amortised
cost.
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 IPEVC valuation guidelines, although this does rely on subjective
estimates such as appropriate sector earnings multiples, forecast results of
investee companies, asset values of subsidiary companies and liquidity or
marketability of the investments held.
Although the Company believes that the assumptions concerning the business
environment and estimates of future cash flows are appropriate, changes in
estimates and assumptions could require changes in the stated values. This could
lead to additional changes in fair value in the future.
Investments
Purchases and sales of investments are recognised in the financial statements at
the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a fair
value basis in accordance with a documented investment strategy and information
about them has to be provided internally on that basis to the Board.
Accordingly, as permitted by FRS 26, the investments will be designated as fair
value through profit or loss (FVTPL) on the basis that they qualify as a group
of assets managed, and whose performance is evaluated, on a fair value basis in
accordance with the documented investment strategy. The Company's investments
are measured at subsequent reporting dates at fair value with the holding gains
and losses recorded in the income statement each year. In accordance with the
investment strategy, the investments are held with a view to long-term capital
growth and it is therefore possible that individual holdings may increase in
value to a point where they represent a significantly higher proportion of total
assets than the original cost.
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 IPEVC valuation 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 or losses arising from the revaluation of investments at the year end are
recognised as part of the capital return within the income statement and
allocated to the capital reserve - investment 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 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 - investment gains/(losses) on
disposal.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the option of the Company. The current
asset investments are held for trading, are actively managed and the performance
is evaluated in accordance with a documented investment strategy. Information
about them has to be provided internally on that basis to the Board.
Other income
Investment income includes interest earned on bank balances and money market
funds and includes income tax withheld at source. Dividend income is shown net
of any related tax credit.
Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt that payment
will be received. Fixed returns on debt and money market funds are recognised so
as to reflect the effective interest rate; provided there is no reasonable doubt
that payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged wholly
to revenue with the exception of the investment management fee, which has been
charged 25% to the revenue account and 75% to the capital reserve to reflect, in
the Directors' opinion, the expected long-term split of returns in the form of
income and capital gains respectively from the investment portfolio.
The transaction costs incurred when purchasing or selling assets are written off
to the Income Statement in the year that they occur.
Revenue and capital
The revenue column of the income statement includes all income and revenue
expenses of the Company. The capital column includes gains and losses on
disposal and gains and losses arising from the revaluation of investments at the
period end. 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 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
funds, as well as OEICs.
Loans and receivables
The Company's loans and receivables are initially recognised at fair value which
is normally transaction cost and subsequently measured at amortised cost using
the effective interest method.
Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures relating to
financial instruments.
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.
The value of the managed capital is indicated in note 14. The Board considers
the distributable reserves and the total return for the year when recommending a
dividend. In addition, the Board is authorised to make market purchases up to a
maximum of 5% of the issued Ordinary share capital of the Company in accordance
with Special Resolution 8 in order to maintain sufficient liquidity in the
Company.
Capital management is monitored and controlled using the internal control
procedures set out on page · of this report. The capital being managed includes
equity and fixed-interest investments, cash balances and liquid resources
including debtors and creditors.
Financial instruments
The Company's principal financial assets are its investments and the policies in
relation to those assets are set out above. Financial liabilities and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this is classed
as an equity instrument. Dividends and distributions relating to equity
instruments are debited direct to equity.
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 declared by the
Board, and for final dividends when they are approved by the shareholders.
2. Other income
Year to Year to
31 October 2011 31 October 2010
GBP'000 GBP'000
=------------------------------------------------------------------
Money market funds & OEICs 9 31
Bond interest receivable - 42
Loan note interest receivable 56 107
=------------------------------------------------------------------
65 180
=------------------------------------------------------------------
3. Investment Management Fees
Year to 31 October Year to 31 October
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=--------------------------------------------------------------------
Investment management fee 78 233 311 70 212 282
For the purposes of the revenue and capital columns in the income statement, the
management fee has been allocated 25% to revenue and 75% to capital, in line
with the Board's expected long-term return in the form of income and capital
gains respectively from the Company's investment portfolio.
Octopus provides investment management and accounting and administration
services to the Company under a management agreement. This agreement runs for a
period of five years with effect from 2 November 2007 and may be terminated at
any time thereafter by not less than 12 months' notice given by either party.
No compensation is payable in the event of terminating the agreement by either
party, if the required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would have been paid
should continuous service be provided, or the required notice period was given.
The basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.
4. Other Expenses
Year to Year to
31 October 2011 31 October 2010
GBP'000 GBP'000
=-------------------------------------------------------------------------------
* Directors' remuneration 38 33
* Fees payabe to the Company's auditor for the 9 9
audit of the financial statements
* Fees payable to the Company's auditor for 2 2
other services - tax compliance
* Legal and professional expenses 3 3
* Accounting and administration services 46 46
* Trail commission 53 25
* Printing fees 24 23
* Other expenses 53 52
=-------------------------------------------------------------------------------
228 193
=-------------------------------------------------------------------------------
Total annual running costs are capped at 3.2% of net assets (excluding
irrecoverable VAT). For the year to 31 October 2011 the running costs, as
defined in the prospectus, were 3.2% of net assets (2010: 2.9%). This is
calculated excluding VAT, trail commission and non-recurring expenses.
5. Directors' Remuneration
Year to Year to
31 October 2011 31 October 2010
GBP'000 GBP'000
=-------------------------------------------------------------
Directors' emoluments
Lewis Jarrett (Chairman) 18 15
Kevin D'Silva 12 10
Matt Cooper 8 8
=-------------------------------------------------------------
38 33
=-------------------------------------------------------------
None of the Directors received any other remuneration from the Company during
the year. The Company has no employees other than non-executive Directors. The
average number of non-executive Directors in the year was three (2010: three).
6. Tax on Ordinary Activities
The corporation tax charge for the period was GBPnil (2010: GBPnil).
Factors affecting the tax charge for the current year:
The current tax charge for the period differs from the standard rate of
corporation tax in the UK of 26.83% (2010: 28%).
The differences are explained below.
Current tax reconciliation: Year to Year to
31 October 2011 31 October 2010
GBP'000 GBP'000
=-----------------------------------------------------------------------------
Return on ordinary activities before tax (327) 18
Current tax at 26.83% (2010: 28%) (88) 5
Income not taxable for tax purposes (41) (54)
Unrelieved tax losses 129 49
=-----------------------------------------------------------------------------
Total current tax charge - -
=-----------------------------------------------------------------------------
Excess management charges of GBP1,048,000 (2010: GBP567,000) have been carried
forward at 31 October 2010 and are available for offset against future taxable
income subject to agreement with HMRC. The Company has not recognised the
deferred tax asset of GBP293,000 (2010: GBP159,000) in respect of these excess
management charges.
Approved VCTs are exempt from tax on capital gains within the Company. Since the
Directors intend that the Company will continue to conduct its affairs so as to
maintain its approval as a VCT, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or disposal of
investments.
7. Dividends
Year to Year to
31 October 2011 31 October 2010
GBP'000 GBP'000
=-------------------------------------------------------------------------------
Recognised as distributions in the financial
statements for the period
Previous year's final dividend 122 78
Current period's interim dividend 121 78
=-------------------------------------------------------------------------------
243 156
=-------------------------------------------------------------------------------
Paid and proposed in respect of the period
Interim dividend paid - 0.75p per share (2010:
0.5p per share) 122 78
Proposed final dividend - 1.0p per share (2010:
0.75p per share) 162 123
=-------------------------------------------------------------------------------
284 201
=-------------------------------------------------------------------------------
The final dividend of 1.0p per share for the year ended 31 October 2011, subject
to shareholder approval at the Annual General Meeting, will be paid on 13 April
2012 to those shareholders on the register on 9 March 2012.
8. Earnings per Share
The total, revenue and capital earnings per share is based on 16,270,784 (31
October 2010: 15,790,677) 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 return per share figures are relevant. The basic and diluted earnings
per share are therefore identical.
9. Net Asset Value per Share
The calculation of NAV per share as at 31 October 2011 is based on 16,225,740
(31 October 2010: 16,354,502) Ordinary shares in issue at that date.
10. Fixed Asset Investments
Effective from 1 November 2009, the Company 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.
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 (2010:
one). 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
2011 are summarised below and in
note 12.
Level 1: Level 3: Total
AIM-quoted Unquoted investments investments
31-Oct-11
GBP'000 GBP'000 GBP'000
=-------------------------------------------------------------------------------
Valuation and net book amount:
As at 1 November 2010 450 9,605 10,055
Cumulative revaluation as at 1
November 2010 (7) 417 410
=-------------------------------------------------------------------------------
Valuation at 1 November 2010 443 10,022 10,465
Movement in the year:
Purchases at cost 564 2,254 2,818
Disposal proceeds (382) - (382)
Profit/(loss) on realisation of
investments - current year - - -
Revaluation in year 22 (120) (98)
=-------------------------------------------------------------------------------
Valuation at 31 October 2011 647 12,156 12,803
=-------------------------------------------------------------------------------
Book cost at 31 October 2011 632 11,859 12,491
Revaluation to 31 October 2011 15 297 312
=-------------------------------------------------------------------------------
Valuation at 31 October 2011 647 12,156 12,803
=-------------------------------------------------------------------------------
The investment portfolio is managed with capital growth as the primary focus.
The loan and equity investments are considered to be one instrument for
valuation purposes due to the legal binding within the investment agreement and
therefore they are combined in the table shown above.
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.
At 31 October 2011 and 31 October 2010, there were no commitments in respect of
investments not yet completed.
11. Debtors
31 October 2011 31 October 2010
GBP'000 GBP'000
=---------------------------------------------------
Prepayments 11 13
Accrued income - 575
=---------------------------------------------------
11 588
=---------------------------------------------------
12. Current Asset Investments
Current asset investments at 31 October 2011 comprised money market funds and
OEICs.
GBP'000 GBP'000
=------------------------------------------------------------------
Valuation and net book amount:
Book cost as 1 November 2010
- Money Market Funds 602
- OEICs 3,215
=------------------------------------------------------------------
3,817
Revaluation as at 1 November 2010
- Money Market Funds -
- OEICs 640
=------------------------------------------------------------------
640
=------------------------------------------------------------------
Valuation as at 1 November 2010 4,457
=------------------------------------------------------------------
*
- Money Market Funds 1,401
- OEICs 800
=------------------------------------------------------------------
2,201
Disposal proceeds
- Money Market Funds (1,623)
- OEICs (3,295)
=------------------------------------------------------------------
(4,918)
Profit in year on realisation of investments:
- OEICs 156
=------------------------------------------------------------------
156
Revaluation in the year
- OEICs 89
=------------------------------------------------------------------
89
=------------------------------------------------------------------
Valuation as at 31 October 2011 1,985
=------------------------------------------------------------------
Book cost as 31 October 2011
- Money Market Funds 379
- OEICs 1,518
=------------------------------------------------------------------
1,897
Revaluation as at 31 October 2011
- OEICs 88
=------------------------------------------------------------------
88
=------------------------------------------------------------------
Valuation as at 31 October 2011 1,985
=------------------------------------------------------------------
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 and OEIC's at 31 October 2011 was GBP1,985,000
(2010: GBP4,457,000).
13. Creditors: Amounts Falling Due Within One Year
31 October 2011 31 October 2010
GBP'000 GBP'000
=-----------------------------------------------------
Accruals 49 58
14. Share Capital
31 October 2011 31 October 2010
GBP'000 GBP'000
=-------------------------------------------------------------------------------
Authorised:
50,000,000 Ordinary shares of 10p 5,000 5,000
=-------------------------------------------------------------------------------
Allotted and fully paid up:
16,225,740 (2010: 16,354,502) Ordinary shares 1,622 1,635
of 10p
=-------------------------------------------------------------------------------
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.
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 Board considers the distributable reserves and the total return for the year
when recommending a dividend. In addition, the Board is authorised to make
market purchases up to a maximum of 5% of the issued Ordinary share capital of
the Company in accordance with Special Resolution 8 in order to maintain
sufficient liquidity in the Company.
Capital management is monitored and controlled using the internal control
procedures set out on page · of this report. The capital being managed includes
equity and fixed-interest investments, cash balances and liquid resources
including debtors and creditors.
There were no shares issued during the year (2010: 737,621 Ordinary shares at a
weighted average price of 92.9p per share).
The Company repurchased the following Ordinary shares for cancellation (2010:
nil shares):
113,004 at a price of 86p per
· 21 February 2011: share
· 21 June 2011: 15,758 at a price of 83p per share
15. Reserves
Capital
Capital reserve
Special reserve holding Capital
Share distributable gains/(losses) gains/ redemption Revenue
premium reserve on disposal (losses) reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=-------------------------------------------------------------------------------
As at 1
November 2010 574 13,040 (773) 1,050 - (3)
Buy back of
shares - (111) - - 13 -
(Loss)/Profit
on ordinary
activities
after tax - - - - - (241)
Management
fees allocated
as capital
expenditure - - (233) - - -
Current year
gains/losses
on disposal - - 156 - - -
Prior period
holding loss
on disposal - - 640 (640) - -
Current period
gains/losses
on fair value
of investments - - - (9) - -
Dividends paid - (243) - - - -
=-------------------------------------------------------------------------------
Balance as at
31 October
2011 574 12,686* (210)* 401 13 (244)*
=-------------------------------------------------------------------------------
*Reserve considered when calculating potential distribution by way of a
dividend.
When the Company revalues its investments during the year, any gains or losses
arising are credited/charged to the income statement. Unrealised gains/losses
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.
Reserves available for potential distribution by way of a dividend are:
GBP'000
=-------------------------------
As at 1 November 2010 12,264
Movement in year (32)
=-------------------------------
As at 31 October 2011 12,232
=-------------------------------
The purpose of the special distributable reserve was to create a reserve which
will be capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a view to
narrowing the discount to net asset value at which the Company's Ordinary shares
trade. In the event that the revenue reserve and capital reserve gains/(losses)
on disposal do not have sufficient funds to pay dividends, these will be paid
from the special distributable reserve.
16. Financial Instruments and Risk Management
The Company's financial instruments comprise equity and fixed interest
investments, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy of
investing mainly in a portfolio of VCT qualifying unquoted securities whilst
holding a proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.
Classification of financial instruments
the Company held the following categories of financial instruments, all of which
are included in the balance sheet at fair value, at 31 October 2011.
31 October 2011 31 October 2010
GBP000 GBP000
Assets at fair value through profit or loss
Fixed Asset Investments 12,803 10,465
Current asset investments 1,985 4,457
=--------------------------------------------------------------------------
Total 14,788 14,922
Loans and receivables
Cash at bank 92 71
Accrued income - 575
=--------------------------------------------------------------------------
Total 92 646
Liabilities at amortised cost
Accruals and other creditors 49 58
=--------------------------------------------------------------------------
Total 49 58
Fixed asset investments (see note 10) are carried 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 in
accordance with the policies and procedures described in the Corporate
Governance statement on pages X to X, having regard to the possible effects of
adverse price movements, with the objective of maximising overall returns to
shareholders. Investments in 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 page X to X.
81.9% (2010: 67.4%) by value of the Company's net assets comprises investments
in unquoted companies held at fair value. The valuation methods used by the
Company include the application of a price/earnings ratio derived from listed
companies with similar characteristics, and consequently the value of the
unquoted element of the portfolio can be indirectly affected by price movements
on the London Stock Exchange. A 10% overall increase in the valuation of the
unquoted investments at 31 October 2011 would have increased net assets and the
total return for the year by GBP1,215,600 (2010: GBP1,046,500) an equivalent change
in the opposite direction would have reduced net assets and the total return for
the year by the same amount.
13.4% (2010: 28.7%) 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 2011 would have
increased net assets and the total return for the year by GBP198,500 (2010:
GBP445,700) 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, of which some are
at fixed rates and some variable. As a result, the Company is exposed to fair
value interest rate risk due to fluctuations in the prevailing levels of market
interest rates.
Fixed rate
The table below summarises weighted average effective interest rates for the
fixed interest-bearing financial instruments:
As at 31 October 2011 As at 31 October 2010
=-------------------------------------------------------------------------------
Weighted
Weighted average
Total fixed average Total fixed time for
rate Weighted time for rate Weighted which
portfolio average which rate portfolio average rate is
by value interest is fixed by value interest fixed in
GBP'000 rate % in years GBP'000 rate % years
=-------------------------------------------------------------------------------
Fixed-rate
investments
in unquoted
companies 953 12% 2.5 382 12% 3.5
=-------------------------------------------------------------------------------
953 382
Due to the relatively short period to maturity of the fixed rate investments
held within the portfolio, it is considered that an increase or decrease of 1%
in interest rates as at the reporting date would not have had a significant
effect on the Company's net assets or total return for the year.
Floating rate
The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts, libor rate on one loan note and, where appropriate, within
interest bearing money market securities. 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 2011. The amounts held in floating rate investments at
the balance sheet date were as follows:
31 October 2011 31 October 2010
GBP000 GBP000
=-------------------------------------------------------------------------------
Floating-rate investments in unquoted
companies - 315
Cash on deposit & money market funds 473 673
=-------------------------------------------------------------------------------
473 988
A 1% increase in the base rate would increase income receivable from these
investments and the total return for the year by GBP5,000 (2010: GBP10,000).
Credit risk
There were no significant concentrations of credit risk to counterparties at 31
October 2011. By cost, no individual investment exceeded 9.6% (2010: 11.4%) of
the Company's net assets at 31 October 2011.
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Company. The Investment Manager and the Board carry out a regular review of
counterparty risk. The carrying values of financial assets represent the maximum
credit risk exposure at the balance sheet date.
At 31 October 2011 the Company's financial assets exposed to credit risk
comprised the following:
31 October 2011 31 October 2010
GBP000 GBP000
=-----------------------------------------------------------------------------
Cash on deposit & money market funds 473 673
Fixed rate investments in unquoted companies 953 382
Accrued dividends and interest receivable - 75
=-----------------------------------------------------------------------------
1,426 1,130
Credit risk relating to listed money market securities 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.
Credit risk relating to loans to and preference shares in unquoted companies is
considered to be part of market risk.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians (BlackRock in the case of
listed money market securities and Capita Financial in the case of quoted equity
securities). Bankruptcy or insolvency of a custodian could cause the Company's
rights with respect to securities held by the custodian to be delayed or
limited.
Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.
The Company's interest-bearing deposit and current accounts are maintained with
HSBC Bank plc.
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. They also include investments in AIM-quoted companies, which, by their
nature, involve a higher degree of risk than investments on the main market. As
a result, the Company may not be able to realise some of its investments in
these instruments quickly at an amount close to their fair value in order to
meet its liquidity requirements, or to respond to specific events such as
deterioration in the creditworthiness of any particular issuer.
The Company's listed money market securities are considered to be readily
realisable as they are of high credit quality as outlined above.
The Company's liquidity risk is managed on a continuing basis by the Investment
Manager in accordance with policies and procedures laid down by the Board. The
Company's overall liquidity risks are monitored on a quarterly basis by the
Board.
The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses. At 31 October 2011
these investments were valued at GBP1,985,000 (2010: GBP4,500,000).
17. Post Balance Sheet Events
The following events occurred between the balance sheet date and the signing of
these financial statements:
* On 22 November 2011 a further GBP12,000 was invested into GetOptics Limited
* On 22 November 2011 a further GBP179,000 was invested into Mi-PayLimited
* On 25 November 2011 a further GBP124,000 was invested into PrismaStar Limited
* On 21 November 2011 a further GBP74,000 was invested into Phase Vision
* On 23 December 2011 a further GBP50,000 was invested into Soil Xchange
18. Contingencies, Guarantees and Financial Commitments
Provided that an 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 GBP53,000 was paid during the year (2010: GBP25,000) and there
was GBPnil outstanding at the year end.
There were no other contingencies, guarantees or financial commitments as at 31
October 2011 (2010: nil).
19. Related Party Transactions
Octopus Titan VCT 1 plc has employed Octopus Investments Limited throughout the
year as the Investment Manager.
Matt Cooper, a Non-Executive Director of Octopus Titan VCT 1 plc, is also
Chairman of Octopus Investments. Octopus Titan VCT 1 plc has paid Octopus
GBP311,000 (2010: GBP282,000) in the year as a management fee and there is GBPnil
outstanding at the balance sheet date. The management fee is payable quarterly
in advance and is based on 2.0% of the net asset value calculated at annual
intervals as at 31 October.
Octopus Investments Limited also provides accounting, administrative and company
secretarial 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 year GBP46,000 (2010: GBP46,000) was paid to Octopus Investments Limited
and there is GBPnil outstanding at the balance sheet date, for the accounting and
administrative services.
In addition, Octopus 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 2011 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
VCT 1 plc falls short of the Performance Value on the previous financial year
end, no incentive fee will arise. If, on a subsequent financial year end, the
performance exceeds the previous best Performance Value of Octopus Titan VCT 1
plc, 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 2011 on the
basis that the directors consider that the liability becomes due at the point
that the performance criteria are met; this has not been achieved and therefore
no liability has been recognised.
The Directors received the following dividends from the Company:
31 October 2011 31 October 2010
Lewis Jarrett (Chairman) GBP78 GBP52
Kevin D'Silva GBP79 GBP52
Matt Cooper GBP505 GBP336
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 1 PLC via Thomson Reuters ONE
[HUG#1585645]
Octopus T. 1 (LSE:OTV1)
Historical Stock Chart
From Jun 2024 to Jul 2024
Octopus T. 1 (LSE:OTV1)
Historical Stock Chart
From Jul 2023 to Jul 2024
