TIDMOTV4
Octopus Titan VCT 4 plc
Half-Yearly Results
15 June 2011
Octopus Titan VCT 4 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 15 June 2011.
You may shortly view the Half-Yearly Report in full at
www.octopusinvestments.com by navigating to Services, Investor Services, Venture
Capital Trusts, Octopus Titan VCT 4. All other statutory information will also
be found there.
About Octopus Titan VCT 4 PLC
Octopus Titan VCT 4 plc ('Titan 4', '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
predominately unquoted companies. The Company is managed by Octopus Investments
Limited ('Octopus' or 'Investment Manager').
Titan 4 was incorporated on 30 September 2009 and raised a total of GBP22.5
million ( GBP21.4 million net of expenses) through an Offer for Subscription. Titan
4 invests primarily in unquoted UK smaller companies and aims to deliver a
substantial level of returns on its investments over the medium to long term.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for private
individuals to invest in unquoted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* up to 30% up-front income tax relief;
* exemption from income tax on dividends paid; and
* exemption from capital gains tax on disposals of shares in VCTs.
Titan 4 has been provisionally approved as a VCT by 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) 20,870 18,147 21,171
Return on ordinary activities after tax
( GBP'000s) (301) (109) (187)
Net asset value per share (NAV) 92.4p 94.0p 93.8p
=-------------------------------------------------------------------------------
Chairman's Statement
I am pleased to present the results for the six month period ended 30 April
2011.
Performance
During the six month period to 30 April 2011, the net asset value per share
(NAV) has declined from 93.8p to 92.4p representing a decrease of 1.5%. This
fall in NAV is due to a reduction in value of the investment portfolio and to
the standard running costs of the VCT continuing to exceed the yield on the
portfolio from loan interest received. The decline in NAV was partially offset
by an uplift in the Open Ended Investment Companies over the period of GBP189,000.
Titan 4 is still in the early stages of investment, 17% of the portfolio being
in qualifying investments as at 30 April 2011. As mentioned in the first Annual
Report, the NAV will be linked increasingly to the value of the investments in
the portfolio companies as the VCT becomes fully invested.
Investment Portfolio Review
During the period to 30 April 2011, Titan 4 invested in six new companies and
increased its investment in Michelson Diagnostics by GBP75,000. This took the
number of companies in the portfolio to thirteen and there are a number of
further new investments in the pipeline which we expect to complete in the
coming months as we move towards the 70% qualifying investment level prior to
31 October 2012.
As disclosed in the Annual Report for the period ended 31 October 2010, three of
the six new investments were made between the period end and the date that the
accounts were signed: Diverse Energy, which builds an emission-free, low-cost
power solution for mobile phone communication towers in rural areas of
developing countries; 10CMS (Curlet (UK) Limited), which provides online
retailers with tool to quickly add interactive content modules to their
websites; and Vega-Chi, an electronic multilateral trading facility.
Titan 4 also invested GBP255,000 into True Knowledge, a company already in the
portfolio of the earlier Titan VCTs, which has developed internet search
technology providing answers to questions posed as if you were addressing a
human being. The final two companies added to the portfolio during the period
were Certivox, a company providing a service that secures all a company's
documents, media and emails to ensure that the information can only be read by
the intended recipients so preventing information falling into the wrong hands;
and Secret Escapes, a company providing luxury travel offers exclusively to its
members to venues ranging from a quaint spa hotel in rural England to the more
exotic shores of Thailand.
These additions in the period ensure we continue to create a balanced investment
portfolio spanning multiple industries and business sectors.
The majority of our investments reported good trading results in the six months
to 30 April 2011, along with other good news such as the 'mobile app of the
year' being awarded to TouchType at the Mobile World Congress in March and
10CMS launching on key customers' websites such as Waitrose.
On the other hand, Diverse Energy is trading behind expectations and we have
therefore made a reduction in the value of our holding in this company pending
further examination of its prospects.
Your Investment Manager, Octopus, and your Board expect further challenges in
the portfolio prior to seeing the successful businesses come through. This is
typical of the venture capital industry where the businesses in which we invest
are at an early stage and valuations are calculated on a prudent basis as the
shares are illiquid. However, in the medium to long term, we expect to deliver a
good level of return on your investment.
Octopus continues to focus on building the portfolio to ensure that Titan 4 has
exposure to a diversified range of companies in order to limit risk. As at 30
April 2011, approximately GBP10.8 million remained to be invested in qualifying
companies to reach the 70% threshold set by HMRC. Octopus has a number of
investment propositions under review and the flow of new business opportunities
continues to be reasonably strong.
Open Ended Investment Companies (OEICs)
Titan 4 continues to hold investments in four OEICs which continued to see an
overall uplift in fair value in the six months to 30 April 2011. Having
increased by GBP239,000 in the period ended 31 October 2010, there was a further
GBP189,000 uplift in value in this reporting period. The best performance
continued to be in the CF Octopus UK Micro Cap Growth Fund which increased in
value by 14.7%.
Your Board continues to keep the investments in the OEICs under review and
believes it is important to reduce the risk profile of our non-qualifying
investments to protect the capital. Therefore, we have decided to realise our
holding in the Octopus Absolute European Fund and place the proceeds in a money
market fund where it will be readily available for qualifying investments. As
the VCT builds its investment portfolio, there will be further cash requirements
beyond the funds held on deposit and in money market accounts and we will
continue to realise these investments to maintain the necessary degree of
liquidity.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides both the Board and Investment Manager with
advice on the ongoing compliance with HMRC rules and regulations concerning
VCTs. The Board has been advised that Titan 4 is in compliance with the
conditions laid down by HMRC for maintaining provisional approval as a VCT.
A key requirement is to achieve the 70% qualifying investment level prior to 31
October 2012. As at 30 April 2011, over 17% 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. Should
approval be obtained, this will widen our range of investment opportunities.
Principal Risks and Uncertainties
The Company's assets consist of equity and fixed-rate interest investments, cash
and liquid resources. Its principal risks are therefore market risk, credit risk
and liquidity risk. Other risks faced by the Company include economic, loss of
approval as a VCT, investment and strategic, regulatory, reputational,
operational and financial risks. These risks, and the ways in which they are
managed, are described in more detail in the Company's Annual Report and
Accounts for the period ended 31 October 2010. The Company'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
As anticipated in the Annual Report to 31 October 2010, economic growth in the
first few months of 2011 has been weak. There continue to be concerns about the
macro-economic climate in the form of the sustainability of the economic
recovery, inflationary pressures and the fragile condition of public finances
within the UK. These factors, combined with the recent increases in oil prices,
provide an uncertain environment for many businesses. Our portfolio continues to
make progress, despite the tough trading conditions, and we look forward to the
coming few years as Titan 4 becomes fully invested and our portfolio starts to
mature.
Gregor Michie
Chairman
15 June 2011
Investment Portfolio
%
Investment Carrying Change in equity %
cost at Unrealised value at valuation held equity
30 April profit/ 30 April in the by managed
Qualifying 2011 (loss) 2011 period Titan by
investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 4 Octopus
=----------------------------------------------------------------------------------------
Vega-Chi Technology 4.4% 14.2%
Limited 500 - 500 -
Curlet (UK) Technology 9.0% 32.7%
Limited 450 - 450 -
UltraSoc
Technologies Technology 361 - 361 - 8.0% 44.4%
Limited
Michelson Consumer lifestyle
Diagnostics & wellbeing 323 - 323 - 4.0% 25.6%
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 -
True
Knowledge Media 255 - 255 - 1.2% 46.0%
Limited
Diverse
Energy Environmental 367 (184) 183 (184) 5.1% 27.8%
Limited
Certivox Technology 4.8% 10.6%
Limited 113 - 113 -
TouchType
Limited Telecommunications 53 - - 1.4% 7.2%
53
Secret Consumer lifestyle
Escapes & wellbeing 43 - - 2.1% 5.4%
Limited 43
=----------------------------------------------------------------------------------------
Total qualifying investments (184) (184)
3,645 3,461
=----------------------------------------------------------------------------------------
Money market securities
11,392 - 11,392
OEICs
5,580 427 6,007
Cash at bank
133 - 133
=----------------------------------------------------------------------------------------
Total investments
20,750 243 20,993
=----------------------------------------------------------------------------------------
Net current assets (123)
=----------------------------------------------------------------------------------------
Total net assets
20,870
=----------------------------------------------------------------------------------------
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
Gregor Michie
Chairman
15 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 | - (184) (184)| - - - - - -
| |
Current | |
asset | |
investment | |
holding | |
gains | - 189 189| - - - - 239 239
| |
| |
| |
Other | |
income | 31 - 31| - - - 34 - 34
| |
| |
| |
Investment | |
management | |
fees | (53) (159) (212)| (9) (28) (37) (59) (176) (235)
| |
| |
| |
Other | |
expenses | (125) - (125)| (72) - (72) (225) - (225)
| |
| |
=----------+----------------------+---------------------------------------------
Return on | |
ordinary | |
activities | |
before tax | (147) (154) (301)| (81) (28) (109) (250) 63 (187)
| |
| |
| |
Taxation on| |
return on | |
ordinary | |
activities | - - -| - - - - - -
| |
| |
=----------+----------------------+---------------------------------------------
Return on | |
ordinary | |
activities | |
after tax | (147) (154) (301)| (81) (28) (109) (250) 63 (187)
=----------+----------------------+---------------------------------------------
Earnings | |
per share -| |
basic and | |
diluted | (0.7)p (0.7)p (1.4)p| (1.0)p (0.4)p (1.4)p (2.2)p 0.5p (1.7)p
+----------------------+
* The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies.
* All revenue and capital items in the above statement derive from continuing
operations.
* The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds.
* The Company has no recognised gains or losses other than the results for the
period as set out above.
* The accompanying notes 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 | 21,171| - -
| |
| |
| |
Return on ordinary | |
activities after tax | (301)| (109) (187)
| |
Issue of equity (net of | |
expense) | -| 18,313 21,447
| |
Redemption of shares | -| (57) (89)
=------------------------+-----------------+------------------------------------
Shareholders' funds at | |
end of period | 20,870| 18,147 21,171
+-----------------+
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*| 3,461| - 1,842
| |
Current assets: | |
| |
Money market securities | |
and other deposits* |17,399 | - 19,297
| |
Debtors | 8 | 127 15
| |
Cash at bank | 133 |18,097 112
=-----------------------+-----------------+-------------------------------------
|17,540 |18,224 19,424
| |
Creditors: amounts | |
falling due within one | |
year | (131) | (77) (95)
=-----------------------+-----------------+-------------------------------------
Net current assets | 17,409| 18,147 19,329
=-----------------------+-----------------+-------------------------------------
| |
=-----------------------+-----------------+-------------------------------------
Net assets | 20,870| 18,147 21,171
=-----------------------+-----------------+-------------------------------------
| |
| |
Called up equity share | |
capital | 2,258 | 1,930 2,258
| |
Share premium | - |16,320 -
| |
Special distributable | |
reserve |19,092 | - 19,092
| |
Capital redemption | |
reserve | 8 | 6 8
| |
Capital reserve - losses| |
on disposal | (335) | (28) (176)
| |
| |
- holding gains | 244 | - 239
| |
Revenue reserve | (397) | (81) (250)
=-----------------------+-----------------+-------------------------------------
Total equity | |
shareholders' funds | 20,870| 18,147 21,171
=-----------------------+-----------------+-------------------------------------
Net asset value per | |
share | 92.4p| 94.0p 93.8p
+-----------------+
*At fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 15
June 2011 and are signed on their behalf by:
Gregor Michie
Chairman
Company Number: 07035434
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 | (263)| (159) (346)
| |
| |
| |
Financial investment: | |
| |
Purchase of fixed asset| |
investments | (1,802)| - (1,842)
| |
| |
| |
Management of liquid | |
resources: | |
| |
Purchase of current | |
asset investments | (9,034)| - (27,008)
| |
Disposal of current | |
asset investments | 11,120| - 7,950
| |
| |
| |
Taxation | -| - -
| |
| |
| |
Dividends paid | -| - -
| |
| |
| |
Financing: | |
| |
Issue of equity | -| 18,313 21,447
| |
Redemption of shares | -| (57) (89)
=----------------------+------------------+-------------------------------------
Increase in cash | |
resources at bank | 21| 18,097 112
+------------------+
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
=----------------------+-------------------+------------------------------------
Increase in cash | |
resources at bank | 21| 18,097 112
| |
Movement in cash | |
equivalents | (1,898)| - 19,297
| |
Opening net cash | |
resources | 19,409| - -
=----------------------+-------------------+------------------------------------
Net funds at period end| 17,532| 18,097 19,409
+-------------------+
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 | (301)| (109) (187)
| |
Loss on valuation of fixed | |
asset investments | 184| - -
| |
Gain on valuation of current | |
asset investments | (189)| - (239)
| |
Decrease/(increase) in | |
debtors | 7| (127) (15)
| |
Increase in creditors | 36| 77 95
=----------------------------+----------------+---------------------------------
Outflow from operating | |
activities | (263)| (159) (346)
+----------------+
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
period 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 period 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 22,587,706 (30 April 2010: 7,824,319 and 31
October 2010: 11,541,206) 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 22,578,706 (30
April 2010: 19,297,301 and 31 October 2010: 22,578,706) ordinary shares in issue
at that date.
5. 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 GBP212,000 payable to Octopus (30
April 2010: GBP37,000 and 31 October 2010: GBP235,000). 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 GBP15,000 per annum for company
secretarial services.
6.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 4 PLC via Thomson Reuters ONE
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