TIDMOTV3
Octopus Titan VCT 3 plc
Half-Yearly Results
16 June 2011
Octopus Titan VCT 3 plc, managed by Octopus Investments Limited, today announces
the Half-Yearly results for the six months ended 30 April 2011.
These results were approved by the Board of Directors on 16 June 2011.
You may shortly view the Half-Yearly Report in full atwww.octopusinvestments.com
by navigating to Services, Investor Services, Venture Capital Trusts, Octopus
Titan VCT 3. All other statutory information will also be found there.
About Octopus Titan VCT 3 PLC
Octopus Titan VCT 3 plc ('Titan 3', 'Company' or 'VCT') is a venture capital
trust ('VCT') which aims to provide shareholders with attractive tax-free
dividends and long-term capital growth, by investing in a diverse portfolio of
predominantly unquoted companies. The Company is managed by Octopus Investments
Limited ('Octopus' or 'Investment Manager').
Titan 3 was incorporated on 4 March 2008 and raised over GBP20.0 million ( GBP19.2
million net of expenses) through an Offer for Subscription. Titan 3 invests
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 unquoted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* up to 30% up-front income tax relief;
* exemption from income tax on dividends paid; and
* exemption from capital gains tax on disposals of shares in VCTs.
Titan 3 has been provisionally approved as a VCT by HM Revenue & Customs (HMRC).
In order to maintain its approval the Company must comply with certain
requirements on a continuing basis. By the end of the Company's third
accounting period at least 70% of the Company's investments must comprise
'qualifying holdings' 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 (or companies quoted on AIM)
which is carrying on a qualifying trade and whose gross assets do not exceed a
prescribed limit at the time of investment. The definition of a 'qualifying
trade' excludes certain activities such as property investment and development,
financial services and asset leasing. The Company will continue to ensure its
compliance with these qualification requirements.
Financial Summary
Six months to Six months to Year to 31
30 April 2011 30 April 2010 October 2010
=-------------------------------------------------------------------------------
Net assets ( GBP'000s) 19,309 19,576 19,607
Return on ordinary activities after tax
( GBP'000s) (282) (714) (683)
Net asset value per share (NAV) 95.3p 96.6p 96.7p
=-------------------------------------------------------------------------------
Chairman's Statement
I am pleased to present the half-yearly results for the six month period ended
30 April 2011.
Results
As at 30 April 2011 the net asset value (NAV) stood at 95.3p, compared to 96.7p
at 31 October 2010 which represents a decline of 1.4% in the six month period.
The main driver of the fall in NAV was the standard running costs of the VCT
which continued to exceed the yield on the cash reserves. Interest rates remain
very low resulting in the VCT receiving minimal returns from the cash deposits
and money market funds. Although there was a small decrease in value of the
unquoted portfolio during the period, this was offset by an uplift in the Open
Ended Investment Company Funds which increased in value by nearly GBP460,000 in
the six months to 30 April 2011.
Investment Portfolio Review
During the six month period, the VCT has made five new investments and eight
follow-on investments amounting to a total of GBP3 million. As mentioned in the
Annual Report to 31 October 2010, investments were made into Diverse Energy,
Curlet (trading as 10CMS) and Vega-Chi before the annual results were announced.
Diverse Energy builds an emission-free, low-cost power solution for mobile phone
communication towers in rural areas of developing countries, 10CMS provides
online retailers with a single, intuitive toolset with which to quickly add
interactive content modules to existing eCommerce websites, and Vega-Chi is
Europe's first electronic multilateral trading facility dedicated to high yield
and convertible bonds. The final two new investments in the period were made
into Certivox and Secret Escapes. Certivox is a service which completely secures
all of a company's documents, media and the emails it sends to make sure that
these are only read by the intended recipients. In contrast, Secret Escapes
provides online luxury travel offers worldwide, with discounts of up to 70%,
exclusively to its members.
The eight follow-on investments comprised 50% of the GBP3 million invested in the
six months to 30 April 2011 and were into the following companies: Zoopla,
Skills Market, Money Workout, Mi-Pay, e-Therapeutics, Semafone, True Knowledge
and Michelson Diagnostics.
The e-Therapeutics loan of GBP225,000 was repaid in March 2011, in addition to
GBP53,000 of accrued loan interest, at the same time as we invested a further
GBP342,000 of equity in the company. We are pleased to report that the company's
shares have since increased in value resulting in an uplift in our holding of
GBP134,000 at 30 April 2011.
Many of the other businesses in our portfolio continue to perform well with a
number of these businesses out performing their business plans. There has also
been some particularly noteworthy news over the period including Touchtype
winning the 'mobile app of the year' award at the Mobile World Congress in March
and 10CMS launching on key customers' websites such as Waitrose.
At the same time, some of our portfolio companies are trading behind
expectations and we have reduced the value of one such company, Diverse Energy,
to reflect this. This is unfortunate given the short period of time we have had
a holding in this company but Octopus is working closely with the management
team to address the issues.
Money Workout went into administration in April despite receiving further
funding in January from our VCT as well as from Titan 1 and Titan 2 in order to
explore additional sources of revenue. Skills Market has also continued to
struggle to maintain sales levels and the Board decided to write this company's
value down to nil at 30 April 2011. Regrettably, the company went into
administration after the balance sheet date.
Although we have mixed news to report for the period, the UK economy remains in
a fragile state and it is not unusual to see the valuation of unquoted
portfolios lag changes in the stock market, as the latter tends to anticipate
change, whilst valuations of unquoted companies are based on actual performance.
As mentioned in the Annual Report to 31 October 2010, it is likely that the NAV
will continue to track downwards before profitable realisation of investments is
achieved due to the nature of VCTs and the continuing lower interest rates
achievable on our liquid reserves. However, we remain positive that the majority
of the investee companies will make progress in the coming few periods as the
portfolio starts to mature.
Open Ended Investment Companies (OEICs)
As mentioned above, the two Octopus OEICs held by Titan 3 have seen an overall
uplift in value of GBP457,000 in the six months to 30 April 2011 contributing
2.3p to the NAV. The CF Octopus UK Micro Cap Growth Fund has performed
particularly well, increasing in value by 14.7% in this reporting period, and
the CF Octopus Absolute UK Equity Fund has stabilised after falling
significantly in 2010 increasing in value by a modest 0.8%.
Your Board continues to keep the investments in these OEICs under review and
plans to commence selling down the Absolute UK Equity Fund as other cash
resources are depleted. There will be significant investment activity in the
coming months and we will ensure that we manage our liquid reserves effectively
to assist in achieving our main goal of reaching the 70% qualifying investments
threshold before October.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides both the Board and Octopus with advice
concerning ongoing compliance with HMRC rules and regulations concerning VCTs.
The Board has been advised that Titan 3 is in compliance with the conditions
laid down by HMRC for maintaining provisional approval as a VCT.
As mentioned above, a key requirement now is to achieve the 70% qualifying
investment level prior to 31 October 2011. As at 30 April 2011, over 55% 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.
The Budget
It is encouraging that, subject to EU approval, the gross asset limit for
investee companies for VCTs is to be raised from GBP7m to GBP15m and the number of
employees is to be raised from 50 to 250, with effect from 6 April 2012.
Principal Risks and Uncertainties
The VCT'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 Titan 3 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 Titan 3's Annual Report and Accounts for the year
ended 31 October 2010. The VCT's principal risks and uncertainties have not
changed materially since the date of that report.
Octopus Titan VCT 5 plc
In the Annual Report to 31 October 2010, I reported that Octopus launched a
further VCT called Octopus Titan VCT 5 plc with the aim of investing alongside
the existing Titan VCTs. This gives the Titan VCT family additional investment
capacity which we believe will be an advantage to our existing VCT funds. This
VCT has so far raised GBP10.4 million (net of expenses) and will remain open until
the end of the summer.
Outlook
A significant number of new investments have been made in the last six months,
taking the total number of companies in the portfolio to 27. We anticipate that
there will be few additions to the portfolio in the coming months and the
majority of the funds deployed will be by way of follow-on investments into the
existing investee businesses to assist them in their strategic direction. We are
required to invest a further GBP3 million before 31 October to meet the 70%
threshold and are confident that the Investment Manager will achieve this whilst
ensuring due diligence is maintained at a high level to reduce risk.
Informed commentators continue to express their concerns about the major issues
facing the world's economy and the difficulty politicians will have finding and
implementing solutions. These have remained largely the same over the last year
- the sustainability of recovery, inflationary pressures, the fragile condition
of public finances in many countries, and the long term effects of the remedial
measures being taken. These issues have been exacerbated in the last six months
by a sharply higher oil price reflecting political turmoil in the Middle East
and North Africa.
In view of the current economic climate, it is not surprising that the portfolio
performance has been mixed as many companies struggle to survive the adverse
trading conditions. However, we continue to remain confident that we are
building a strong and diverse portfolio of companies that will be able to
respond to market conditions quickly due to their small size and take advantage
of the opportunities the environment offers.
I look forward to writing to you again at the year end to provide a more
detailed review of the portfolio.
Mark Hawkesworth
Chairman
16 June 2011
Investment Portfolio
%
Carrying Change in equity %
Investment Unrealised value at valuation held equity
cost at 30 profit/ 30 April in the by managed
Qualifying April 2011 (loss) 2011 period Titan by
investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 3 Octopus
=------------------------------------------------------------------------------------------
Zoopla Limited Media 2.2% 14.9%
669 709 1,378 -
True Knowledge Media 5.1% 46.0%
Limited 1,217 - 1,217 -
Nature Consumer lifestyle
Delivered & wellbeing 798 55 853 - 6.5% 25.6%
Limited
Mi-Pay Limited Telecommunications 4.9% 21.2%
549 - 549 -
e-Therapeutics Consumer lifestyle 0.3% 8.8%
plc & wellbeing 401 128 529 135
Calastone Technology 4.5% 31.0%
Limited 520 - 520 -
Vega-Chi Technology 4.4% 14.2%
Limited 500 - 500 -
Curlet (UK) Technology 9.0% 32.7%
Limited 450 - 450 -
AQS Holdings Environmental 5.5% 26.0%
Limited 421 - 421 -
UltraSoc
Technologies Technology 361 - 361 - 8.0% 44.4%
Limited
Semafone Telecommunications 3.9% 35.2%
Limited 360 - 360 -
Phase Vision Technology (50) 11.0% 47.5%
Limited 400 350 -
Michelson Consumer lifestyle
Diagnostics & wellbeing 323 - 323 - 4.0% 25.6%
Limited
Surrey
Nanosystems Technology 320 - 320 - 5.4% 29.3%
Limited
Elonics Technology - - 2.7% 16.7%
Limited 305 305
Executive
Channel Media 300 - 300 - 4.6% 30.5%
Limited
PrismaStar Media 4.5% 30.0%
Inc. 300 - 300 -
Bowman Power Environmental 2.4% 16.1%
Limited 275 - 275 -
GetOptics Consumer lifestyle (90) 7.5% 34.8%
Limited & wellbeing 361 271 -
Metrasens Consumer lifestyle 4.3% 24.0%
Limited & wellbeing 268 - 268 -
Diverse Energy Environmental (184) (184) 5.1% 27.8%
Limited 367 183
Certivox Technology - - 4.8% 10.6%
Limited 113 113
TouchType Telecommunications 1.4% 7.2%
Limited 53 - 53 -
Secret Escapes Consumer lifestyle - 2.1% 5.4%
Limited & wellbeing 43 - 43
Phasor
Solutions Technology 50 (25) 25 - 0.9% 31.0%
Limited
Skills Market Technology (186) (136) 2.7% 12.2%
Limited 186 -
Money Workout Technology (445) (289) 6.7% 32.6%
Limited * 445 -
=------------------------------------------------------------------------------------------
Total qualifying investments (88) (474)
10,355 10,267
=------------------------------------------------------------------------------------------
Money market securities
3,176 - 3,176
OEICs
4,248 1,554 5,802
Cash at bank
110 - 110
=------------------------------------------------------------------------------------------
Total investments
17,889 1,466 19,355
=------------------------------------------------------------------------------------------
Net current assets (46)
=------------------------------------------------------------------------------------------
Total net assets
19,309
=------------------------------------------------------------------------------------------
* in
administration
at 30 April
2011
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
Mark Hawkesworth
Chairman
16 June 2011
Income Statement
+----------------------+
|Six months to 30 April|Six months to 30 April Year to 31 October
| 2011 | 2010 2010
| |
|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
=-------------+----------------------+---------------------------------------------
| |
| |
Fixed asset | |
investment | |
holding | |
(losses)/gains| - (474) (474)| - (75) (75) - 287 287
| |
Current asset | |
investment | |
holding | |
gains/(losses)| - 457 457| - (358) (358) - (427) (427)
| |
| |
| |
Other income | 55 - 55| 53 - 53 150 - 150
| |
| |
| |
Investment | |
management | |
fees | (49) (146) (195)| (51) (150) (201) (101) (302) (403)
| |
| |
| |
Other expenses| (125) - (125)| (133) - (133) (290) - (290)
| |
| |
=-------------+----------------------+---------------------------------------------
Return on | |
ordinary | |
activities | |
before tax | (119) (163) (282)| (131) (583) (714) (241) (442) (683)
| |
| |
| |
Taxation on | |
return on | |
ordinary | |
activities | - - -| - - - - - -
| |
| |
=-------------+----------------------+---------------------------------------------
Return on | |
ordinary | |
activities | |
after tax | (119) (163) (282)| (131) (583) (714) (241) (442) (683)
=-------------+----------------------+---------------------------------------------
Earnings per | |
share - basic | |
and diluted | (0.6)p (0.8)p (1.4)p| (0.6)p (2.9)p (3.5)p (1.2)p (2.2)p (3.4)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 are an integral part of the half-yearly report.
Reconciliation of Movements in Shareholders' Funds
+-----------------+
|Six months to 30 |Six months to 30 Year to 31 October
| April 2011| April 2010 2010
| |
| GBP'000| GBP'000 GBP'000
=------------------------+-----------------+------------------------------------
Shareholders' funds at | |
start of period | 19,607| 20,290 20,290
| |
| |
| |
Return on ordinary | |
activities after tax | (282)| (714) (683)
| |
Purchase of own shares | (16)| - -
=------------------------+-----------------+------------------------------------
Shareholders' funds at | |
end of period | 19,309| 19,576 19,607
+-----------------+
Balance Sheet
+-----------------+
| As at 30 April | As at 30 April As at 31 October
| 2011 | 2010 2010
| |
| GBP'000 GBP'000| GBP'000 GBP'000 GBP'000 GBP'000
=-----------------------+-----------------+-------------------------------------
| |
| |
Fixed asset investments*| 10,267| 4,413 7,961
| |
Current assets: | |
| |
Money market securities | |
and other deposits* | 8,978 |15,174 11,509
| |
Debtors | 8 | 13 59
| |
Cash at bank | 110 | 73 159
=-----------------------+-----------------+-------------------------------------
| 9,096 |15,260 11,727
| |
Creditors: amounts | |
falling due within one | |
year | (54) | (97) (81)
=-----------------------+-----------------+-------------------------------------
Net current assets | 9,042| 15,163 11,646
=-----------------------+-----------------+-------------------------------------
| |
=-----------------------+-----------------+-------------------------------------
Net assets | 19,309| 19,576 19,607
=-----------------------+-----------------+-------------------------------------
| |
| |
Called up equity share | |
capital | 2,025 | 2,027 2,027
| |
Special distributable | |
reserve |17,139 |17,155 17,155
| |
Capital redemption | |
reserve | 2 | - -
| |
Capital reserve - losses| |
on disposal | (652) | (350) (506)
| |
| |
- holding gains | 1,465 | 1,189 1,482
| |
Revenue reserve | (670) | (445) (551)
=-----------------------+-----------------+-------------------------------------
Total equity | |
shareholders' funds | 19,309| 19,576 19,607
=-----------------------+-----------------+-------------------------------------
Net asset value per | |
share | 95.3p| 96.6p 96.7p
+-----------------+
*Held at fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 16
June 2011 and are signed on their behalf by:
Mark Hawkesworth
Chairman
Company Number: 06523078
Cash flow statement
+------------------+
| Six months to 30 | Six months to 30 Year to 31 October
| April 2011| April 2010 2010
| |
| GBP'000| GBP'000 GBP'000
=----------------------+------------------+-------------------------------------
| |
| |
Net cash outflow from | |
operating activities | (241)| (286) (611)
| |
| |
| |
Financial investment: | |
| |
Purchase of fixed asset| |
investments | (3,006)| (1,771) (4,957)
| |
Disposal of fixed asset| |
investments | 224| - -
| |
| |
| |
Management of liquid | |
resources: | |
| |
Purchase of current | |
asset investments | (2,960)| (1,793) (4,617)
| |
Disposal of current | |
asset investments | 5,950| 3,424 9,845
| |
| |
| |
Financing: | |
| |
Purchase of own shares | (16)| - -
=----------------------+------------------+-------------------------------------
Decrease in cash | |
resources at bank | (49)| (426) (340)
+------------------+
Reconciliation of net cash flow to movement in net funds
+------------------+
| Six months to 30 | Six months to 30 Year to 31 October
| April 2011| April 2010 2010
| |
| GBP'000| GBP'000 GBP'000
=----------------------+------------------+-------------------------------------
Decrease in cash | |
resources at bank | (49)| (426) (340)
| |
Movement in cash | |
equivalents | (2,531)| (1,990) (5,655)
| |
Opening net cash | |
resources | 11,668| 17,663 17,663
=----------------------+------------------+-------------------------------------
Net funds at period end| 9,088| 15,247 11,668
+------------------+
Reconciliation of return before taxation to cash flow from operating activities
+----------------+
| Six months to| Six months to Year to 31
| 30 April 2011| 30 April 2010 October 2010
| |
| GBP'000| GBP'000 GBP'000
=----------------------------+----------------+---------------------------------
Return on ordinary activities| |
before tax | (282)| (714) (683)
| |
Loss/(gain) on valuation of | |
fixed asset investments | 474| 75 (287)
| |
(Gain)/loss on valuation of | |
current asset investments | (457)| 358 427
| |
Decrease/(increase) in | |
debtors | 51| (1) (47)
| |
Decrease in creditors | (27)| (4) (21)
=----------------------------+----------------+---------------------------------
Outflow from operating | |
activities | (241)| (286) (611)
+----------------+
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 April 2011
have been prepared in accordance with the Accounting Standard Board's (ASB)
statement on half-yearly financial reports (July 2007) and adopting the
accounting policies set out in the statutory accounts of the Company for the
year ended 31 October 2010, 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 2011 do not
constitute statutory accounts within the meaning of Section 415 of the Companies
Act 2006. The comparative figures for the year ended 31 October 2010 have been
extracted from the audited financial statements for that year, which have been
delivered to the Registrar of Companies. The independent auditor's report on
those financial statements, in accordance with chapter 3, part 16 of the
Companies Act 2006, 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 20,261,304 (30 April 2010: 20,268,149 and 31
October 2010: 20,268,149) 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 2011 is based on 20,250,554 (30
April 2010: 20,268,149 and 31 October 2010: 20,268,149) ordinary shares in issue
at that date.
5. Buy Backs
During the six months ended 30 April 2011 the Company bought back 17,595
ordinary shares at a weighted average price of 88.5 pence per share (six months
ended 30 April 2010: nil and year ended 31 October 2010: nil). No shares were
issued during the period.
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 GBP196,000 payable to Octopus (30
April 2010: GBP201,000 and 31 October 2010: GBP403,000). At the period end there was
GBPnil outstanding to Octopus (30 April 2010: GBPnil and 31 October 2010: GBPnil).
Furthermore, Octopus provides administration and company secretarial services to
the Company. Octopus receives a fee of 0.3 per cent per annum of net assets of
the Company for administration services and GBP10,000 per annum for company
secretarial services.
7.Copies of this report are available from the registered office of the Company
at 20 Old Bailey, London, EC4M 7AN.
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 3 PLC via Thomson Reuters ONE
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