TIDMOVCT
Octopus VCT plc
Final Results
3 June 2013
Octopus VCT plc, managed by Octopus Investments Limited, today announces
the final results for the year ended 28 February 2013.
These results were approved by the Board of Directors on 3 June 2013.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com.
Chairman's Statement
Introduction
I am pleased to present the Annual Report of Octopus VCT plc for the
year ended 28 February 2013.
Performance
The Company has had a good year and is trading in line with its
objective of focusing more on capital preservation than a typical VCT.
It is pleasing to report that the total return (being the net asset
value ('NAV') plus cumulative dividends paid to date) has increased from
96.7 pence per share as at 29 February 2012 to 98.2 pence per share as
at 28 February 2013. This 1.6% increase is due to interest income
received on the Company's loan investments exceeding the standard
running costs.
Dividend
Given the level of interest income earned during the year from
investments, the Board has proposed a final dividend of 1.0 pence per
share in respect of the year ended 28 February 2013 (2012: 1.0 pence per
share). This dividend, if approved by shareholders at the AGM, will be
paid on 24 July 2013 to shareholders on the register on 28 June 2013.
Investment Portfolio
A total of GBP17.8 million was invested in the year, all into companies
which both the investment manager and Board deem in line with the
investment policy of the Company, being a focus on capital preservation.
GBP7.8 million of this total was invested into solar companies,
including three follow-on investments into GreenCo Services 2, Shakti
Power and Sula Power. To extend the Company's investments in the
renewable energy sector, GBP4.0 million was invested into four companies
that operate ground source heat pumps.
The Company also diversified its portfolio by investing GBP3.5 million
into three companies operating in the media sector. Two of these
companies specialise in the commission and copyright of music scores for
film and television projects, whilst the third company produces video
games for video game publishers.
Finally, GBP1.0m was invested into Mablaw 555, an engineering company
trading as Technical Software Consultants, and GBP1.5m was invested into
Healthcare Services and Technology.
Loans to Salus Services Holdings 1 and Season Ticket Credit were fully
repaid during the year, whilst partial loan repayments were made by
Helaku Power and Michabo Power which, in total, returned GBP2.0m in cash
back to the Company.
A continued growth in the share price of the Company's only AIM quoted
investment, EKF Diagnostics, has led to an unrealised gain of GBP82,000.
This gain was partially offset by small revaluations in Quickfire Films
and Quickfire Films 2, on reflection of their latest trading results.
Therefore unrealised gains totalling GBP63,000 have been recognised for
the year ended 28 February 2013.
A full list of the Company's investment portfolio as at the year end is
set out on page X.
Investment Strategy
As set out in the prospectus, the Company has adopted a strategy that is
aimed at making investments that focus more on capital preservation than
are typically available from investments in unquoted companies. The
Qualifying Investments have been made into companies where the Octopus
team has been confident that there was the opportunity to invest in a
manner that should provide the Company with a high level of capital
security. These companies typically have contractual revenues from
financially sound customers or a revenue stream that is generated from
predictable transactions with a range of customers.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice concerning ongoing compliance with Her Majesty's Revenue &
Customs (HMRC) rules and regulations concerning VCTs. The Board has been
advised that Octopus VCT plc is in compliance with the conditions laid
down by HMRC for maintaining approval as a VCT.
A key requirement is to reach at least the 70% qualifying investment
level by the end of the third accounting period. As at 28 February 2013,
73.7% of the portfolio, as measured by HMRC rules, was invested in VCT
qualifying investments.
Annual General Meeting
The Company's Annual General Meeting will take place on Wednesday, 10
July 2013 at 11.30 a.m. I look forward to meeting as many shareholders
as possible at the meeting to be held at the offices of Octopus
Investments Limited at 20 Old Bailey, London, EC4M 7AN. Directions to
their offices can be found on their website: www.octopusinvestments.com.
Electronic Communications
Based on feedback from shareholders, and in order to reduce the cost of
printing and the consequential 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 X of this report.
Outlook
There remains economic uncertainty in the UK, posing a challenge to many
businesses and investors. Your Board and Investment Manager remain
focused on boosting growth and profitability in the underlying portfolio
and we are pleased that the Company has a strong, diversified portfolio
of companies that have continued to trade well despite the tough
macroeconomic climate.
We strongly believe that the investments will continue to develop,
building on the strong foundations they have already established, and
that the Company's NAV will continue to make steady progress and achieve
its investment objectives.
James Otter
Chairman
3 June 2013
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 uncertainty, 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 Investments Limited was established in 2000 and has a strong
commitment to both smaller companies and to VCTs. We currently manage 13
VCTs, including this Company, and manage nearly GBP340 million in the
VCT sector. Octopus has over 230 employees and has previously been voted
as 'Best VCT Provider of the Year' by the financial adviser industry.
Investment Policy
The investment approach of Octopus VCT plc is to seek investments that
focus more on capital preservation than a typical VCT. Nearly all of
the companies in which Octopus VCT invests operate in sectors where
there is a high degree of predictability. Investments are sought in
companies that have contractual revenues from financially sound
customers and will provide an exit for shareholders within three to five
years.
Performance
As at 28 February 2013 the total return (being the NAV ('net asset
value') plus cumulative dividends paid) stood at 98.2 pence per share
compared to 96.7 pence at 29 February 2012, an increase of 1.6%.
This increase is partly due to strong interest income earned on loan
investments, totalling GBP1,427,000 in the year, exceeding the standard
running costs of the Company, totalling GBP543,000 in the year. Such
strong returns allow for any gains on realisations and loan note
redemption premiums to be paid out to shareholders by way of dividends,
or recognised as an uplift to the value of your investment.
Portfolio Review
We have made significant advances in achieving the dual target of both
ensuring Octopus VCT plc is in a qualifying position by the end of its
third accounting period, and investing the cash and cash equivalents
held as at 29 February 2012 into appropriate investments that will help
the NAV to make progress in achieving the desired return for investors.
Overall, GBP17.8 million was invested in the year into 19 companies
operating in the sectors of solar energy sites, ground source heat pumps,
media, engineering and healthcare technology. Of this total GBP7.8
million was invested into solar companies, three of which are follow-on
investments into companies that have already constructed and are
operating solar energy sites (Shakti Power, Sula Power and GreenCo
Services 2). The other solar companies are currently seeking suitable
sites in which to commence construction of solar facilities.
To extend the Company's portfolio in the renewable energy sector, four
new investments were made into Superior Heat, Tanganyika Heat, Caspian
Heat and Erie Heat. These are companies which have or are currently
seeking to construct and operate ground source heat pumps, utilising a
different kind of renewable energy in heat.
To diversify the portfolio, investments totalling GBP3.5 million were
made into three media companies: 3AM Music and 5AM Music, both of which
commission and copyright music scores for films and television projects;
and Game Development and Management, which is involved in the production
of video games for video game publishers.
Finally, GBP1 million was invested into Mablaw 555, a company trading as
Technical Software Consultants, which provides engineering solutions to
detect cracks, primarily in the oil and gas industries, and GBP1.5
million into Healthcare Services and Technology, a company currently
seeking an investment in the healthcare technology sector.
All of these investments have been made bearing in mind the Company's
mandate, being an emphasis on capital preservation.
A strong appreciation of the share price in the Company's sole AIM
quoted investment, EKF Diagnostics, and small downward revaluations in
Quickfire Films and Quickfire Films 2, two of the Company's seven media
investments, have led to total unrealised gains of GBP63,000 being
recognised in the accounts for the year ended 28 February 2013. The
revaluations in Quickfire and Quickfire Films 2 reflect their latest
trading results but we remain confident in the performance of both
companies overall.
Outlook
With continued economic uncertainty prevailing in the UK, many smaller
and medium sized businesses are being subjected to the pressures of
tough trading conditions and tight working capital. Banks are continuing
to frustrate businesses with tight lending restrictions preventing them
from growing as they otherwise might. This has presented us with a
number of investment opportunities as we have found many businesses
often prefer our approach of a more partnership orientated, intelligent
form of investment.
Now that the Company has invested the majority of its available funds,
we remain optimistic both about the existing portfolio and future
investment opportunities. We will continue to invest cautiously and in
line with the mandate of this VCT and remain confident that our
portfolio companies can deliver long term value to the Company.
If you have any questions on any aspect of your investment, please call
one of the team on 0800 316 2349.
Benjamin Davis
Investment Director
Octopus Investments
3 June 2013
Investment Portfolio
*100% loan based investment
Valuation Methodology
The unquoted investments held by Octopus VCT plc have no trading
platform from which prices can be easily obtained. As a result, the
methodology used in fair valuing the investments is the transaction
price of the recent investment round. Subsequent adjustment to the fair
value of unquoted investments has been made using sector multiples based
on information as at 28 February 2013 where applicable, and adjustment
to the fair value has also been made according to any significant under
or over performance of the business.
Quoted investments are valued at market bid price. No discounts are
applied.
If you would like to find out more regarding the International Private
Equity and Venture Capital ('IPEVC') Valuation Guidelines, please visit
the following website: www.privateequityvaluation.com.
Largest Holdings
Listed below are the 10 largest investments by value as at 28 February
2013:
CSL DualCom Holdings Limited ('CSL')
CSL is the UK's leading supplier of dual path signalling devices, which
link burglar alarms to the police or a private security firm. The
devices communicate using a telephone line or broadband connection and a
wireless link. CSL has developed a number of new products for the sector,
which have enabled the business to steadily grow its market share of new
connections and its profitability since the initial investment. Further
information can be found at the company's website www.csldual.com.
Asset class Cost Valuation
A Ordinary shares GBP300,000 GBP300,000
Loan stock GBP3,540,000 GBP3,540,000
Total GBP3,840,000 GBP3,840,000
Investment date: March 2011
Equity held: 1.4%
Equity held by all funds managed by Octopus: 3.4%
Last audited accounts: 31 March 2012
Revenues: GBP11.0 million
Profit before interest & tax: GBP2.5 million
Net assets: GBP5.7 million
Income receivable recognised in year:
GBP316,000
Valuation basis: Transaction price
Helaku Power Limited ('Helaku')
Helaku constructed and operates a solar renewable energy site at a
selected location in Trevemper, Cornwall.
Asset class Cost Valuation
A Ordinary shares GBP500,000 GBP500,000
Loan stock GBP2,777,000 GBP2,777,000
Total GBP3,277,000 GBP3,277,000
Investment date: March 2011
Equity held: 25.0%
Equity held by all funds managed by Octopus: 50.0%
Last audited accounts: 31 December 2011
Revenues: GBP0.0 million
Loss before interest & tax:
GBP0.2 million
Net assets: GBP1.8 million
Income receivable recognised in year:
GBP42,000
Valuation basis: Transaction price
Borro Loan 2 Limited ('Borro')
Founded in 2008, Borro is an online consumer finance business providing
short term loans secured against high value assets to customers
nationwide. Further information can be found at the company's website
www.borro.com.
Asset class Cost Valuation
Loan stock GBP2,000,000 GBP2,000,000
Total GBP2,000,000 GBP2,000,000
Investment date: December 2011
Equity held: 0.0%*
Equity held by all funds managed by Octopus: 0.0%*
Last audited accounts: 31 December 2011
Revenues: GBPnil*
Profit before interest & tax: GBPnil*
Net assets: GBPnil*
Income receivable recognised in year:
GBP240,000
Valuation basis: Transaction price
*Borro Loan 2 Limited is the loan book company and 100% subsidiary of
Borro Limited, a company registered in England and whose results are
publicly available from Companies House. Accordingly, Borro Loan 2
Limited has nil revenues and nominal net assets.
Shakti Power Limited ('Shakti')
Shakti constructed and operates a solar renewable energy site at a
selected location in Dunsfold, Surrey.
Asset class Cost Valuation
Loan stock GBP1,665,000 GBP1,665,000
Total GBP1,665,000 GBP1,665,000
Initial investment date: July 2011
Equity held: 0.0%
Equity held by all funds managed by Octopus: 100.0%
Last audited accounts: 31 December 2011
Revenues GBP0.0 million
Loss before interest & tax: GBP0.2 million
Net assets: GBP3.5 million
Income receivable recognised in year:
GBP246,000
Valuation basis: Transaction price
GreenCo Services 2 Limited ('GreenCo')
GreenCo constructed and operates a solar renewable energy site at a
selected location in South Brent, Devon.
Asset class Cost Valuation
Ordinary shares GBP1,600,000 GBP1,600,000
Total GBP1,600,000 GBP1,600,000
Investment date: November 2010
Equity held: 40.9%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: 30 November 2011
Revenues: GBP0.0 million
Loss before interest & tax: GBP0.0 million
Net assets: GBP1.0 million
Income receivable recognised in year:
GBP2,000
Valuation basis: Transaction price
3AM Music Limited ('3AM')
3AM is managed by the Cutting Edge Group and commissions and owns
copyrights to music scores for films and television projects.
Asset class Cost Valuation
Ordinary shares GBP1,500,000 GBP1,500,000
Total GBP1,500,000 GBP1,500,000
Investment date: August 2012
Equity held: 49.9%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: 30 June 2012
Revenues: GBPnil
Loss before interest & tax: GBP0.3 million
Net assets: GBP1.7 million
Income receivable recognised in year:
GBPnil
Valuation basis: Transaction price
Healthcare Services and Technology Limited ('Healthcare Services and
Technology')
Healthcare Services and Technology is a company currently seeking a
suitable investment within the healthcare technology sector.
Asset class Cost Valuation
Ordinary shares GBP150,000 GBP150,000
Loan stock GBP1,350,000 GBP1,350,000
Total GBP1,500,000 GBP1,500,000
Investment date: February 2013
Equity held: 49.9%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: N/A
revenues: N/A
Loss before interest & tax: N/A
Net assets: N/A
Income receivable recognised in year:
GBPnil
Valuation basis: Transaction price
The company's first set of annual accounts are due on 19 November 2014.
Therefore no annual results were available at the date of this report.
Donoma Power ('Donoma')
Donoma constructed and operates a solar renewable energy site at a
selected location in Hawton, Nottinghamshire.
Asset class Cost Valuation
Ordinary shares GBP1,220,000 GBP1,220,000
Total GBP1,220,000 GBP1,220,000
Investment date: April 2011
Equity held: 44.9%
Equity held by all funds managed by Octopus: 100.0%
Last audited accounts: 31 December 2012
Revenues: GBP1.7 million
Profit before interest & tax: GBP0.6 million
Net assets: GBP1.5 million
Income receivable recognised in year:
GBPnil
Valuation basis: Transaction price
5AM Music Limited ('5AM')
5AM is managed by the Cutting Edge Group and commissions and owns
copyrights to music scores for films and television projects.
Asset class Cost Valuation
Ordinary shares GBP1,000,000 GBP1,000,000
Total GBP1,000,000 GBP1,000,000
Investment date: April 2012
Equity held: 49.9%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: 30 June 2012
Revenues: GBPnil
Loss before interest & tax: GBP0.1 million
Net assets: GBP1.9 million
Income receivable recognised in year:
GBPnil
Valuation basis: Transaction price
Atlantic Screen International Limited ('ASI')
ASI commissions and owns copyrights to music scores for films and
television programmes.
Asset class Cost Valuation
Ordinary shares GBP1,000,000 GBP1,000,000
Total GBP1,000,000 GBP1,000,000
Investment date: January 2011
Equity held: 49.9%
Equity held by all funds managed by Octopus: 100.0%
Last unaudited accounts: 31 December 2011
Revenues: GBPnil
Loss before interest & tax: GBPnil
Net assets: GBP2.0 million
Income receivable recognised in year:
GBPnil
Valuation basis: Transaction price
The following companies as listed on the investment portfolio table on
page X also have a cost value and fair value of GBP1,000,000 at 28
February 2013. Further details of these companies including their latest
report and accounts can be found at Companies House, at their website:
www.companieshouse.gov.uk.
-- Caspian Heat Ltd
-- Erie Heat Ltd
-- Game Development and Management Ltd
-- Healthcare Education Business Services Ltd
-- Horrebow Energy Ltd
-- Huitzilopochtli Ltd
-- Jokim Ltd
-- Mablaw 555 Ltd
-- Mallina Power Ltd
-- MediaCo Business Services Ltd
-- Misae Power Ltd
-- Paivatar Power Ltd
-- Personnel Advisory Services Ltd
-- Resilient Corporate Services Ltd
-- Saas Business Services Ltd
-- Salus Services 2 Ltd
-- Sula Power Ltd
-- Superior Heat Ltd
-- Tanganyika Heat Ltd
Directors' Responsibilities Statement
The Directors are responsible for preparing the Directors' Report, the
Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable laws). Under company law the Directors must not
approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs and profit or loss of
the Company for that period. 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 and
the Directors' remuneration report 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
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable laws), 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 consideration 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
James Otter
Chairman
3 June 2013
Income Statement
Year to 28 February 2013
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Fixed asset investment holding gain 9 - 63 63
Investment income 2 1,448 - 1,448
Investment management fees 17 - - -
Other expenses 3 (543) - (543)
Return on ordinary activities before tax 905 63 968
Taxation on return on ordinary activities 5 (210) - (210)
Return on ordinary activities after tax 695 63 758
Earnings per share - basic and diluted 6 1.3p 0.1p 1.4p
-- 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 year as set out above.
The accompanying notes are an integral part of the financial statements.
Income Statement
Year to 29 February 2012
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Fixed asset investment gain on disposal - 603 603
Fixed asset investment holding loss - (32) (32)
Investment income 2 914 - 914
Investment management fees 17 - - -
Other expenses 3 (732) - (732)
Return on ordinary activities before tax 182 571 753
Taxation on return on ordinary activities 5 (18) - (18)
Return on ordinary activities after tax 164 571 735
Earnings per share - basic and diluted 6 0.3p 1.1p 1.4p
-- 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 year as set out above.
The accompanying notes are an integral part of the financial statements.
Reconciliation of Movements in Shareholders' Funds
Year to Year to
28 February 2013 29 February 2012
Shareholders' funds at start of year 49,919 49,765
Return on ordinary activities after tax 758 735
Shares bought back for cancellation - (59)
Dividends paid (1,042) (522)
Shareholders' funds at end of year 49,635 49,919
The accompanying notes are an integral part of the financial statements.
Balance Sheet
As at 28 February 2013 As at 29 February 2012
Notes GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset
investments* 9 48,538 32,705
Current assets:
Debtors 10 726 508
Investments -
money market
funds* 11 5 10,580
Cash at bank 712 6,236
1,443 17,324
Creditors:
amounts falling
due within one
year 12 (346) (110)
Net current
assets 1,097 17,214
Total assets
less current
liabilities 49,635 49,919
Called up equity
share capital 13 521 521
Special
distributable
reserve 14 48,568 48,589
Capital
redemption
reserve 14 1 1
Capital reserve
holding gains 14 268 205
Capital reserve
gains on
disposal 14 - 603
Revenue reserve 14 277 -
Total
shareholders'
funds 49,635 49,919
Net asset value 7 95.2p 95.7p
per share
* Held at fair value through profit and loss
The accompanying notes are an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue
on 3 June 2013 and are signed on their behalf by:
James Otter
Chairman
Company No: 06948448
Cash Flow Statement
Year to 28 February Year to 29 February
Notes 2013 2012
GBP'000 GBP'000
Net cash
inflow/(outflow) from
operating activities 923 (312)
Taxation (210) (45)
Financial investment
Purchase of fixed
asset investments 9 (17,807) (30,465)
Sale of fixed asset
investments 9 2,037 6,946
Management of liquid
resources
Purchase of current
asset investments 11 (1,017) (16,319)
Sale of current asset
investments 11 11,592 40,777
Dividends paid 8 (1,042) (522)
Financing:
Issue of own shares - -
Share issue expenses - -
Purchase of own shares - (59)
(Decrease)/increase in
cash (5,524) 1
The accompanying notes are an integral part of the financial statements.
Reconciliation of return before Taxation to Cash Flow
from Operating Activities
Year to 28 February 2013 Year to 29 February 2012
GBP'000 GBP'000
Return on ordinary
activities before tax 968 753
Increase in debtors (218) (496)
Increase in creditors 236 2
Holding (gain)/loss on
fixed asset investments (63) 32
Gain on disposal of fixed
asset investments - (603)
Inflow/(outflow) from
operating activities 923 (312)
Reconciliation of Net Cash Flow to Movement in Net
Funds
Year to 28 February 2013 Year to 29 February 2012
GBP'000 GBP'000
(Decrease)/increase in
cash at bank (5,524) 1
Movement in cash
equivalent securities (10,575) (24,458)
Opening net funds 16,816 41,273
Net funds at 28 February 717 16,816
Net Funds at 28 February comprised:
As at 28 February 2013 As at 29 February 2012
GBP'000 GBP'000
Cash at bank 712 6,236
Money market funds 5 10,580
Net Funds at 28 February 717 16,816
Notes to the Financial Statements
1. Principal accounting policies
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 and Venture
Capital Trusts' (revised 2009).
The principal accounting policies have remained unchanged from those set
out in the Company's 2012 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 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.
Investments are regularly reviewed to ensure that the fair values are
appropriately stated. 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 the subsidiary
companies of investee 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.
Fixed asset 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 a documented
investment strategy. The Company's investments are measured at
subsequent reporting dates at fair value.
In the case of unquoted investments, fair value is established by using
measures of value such as the price of recent transactions, earnings
multiples and net assets. This is consistent with IPEVC valuation
guidelines.
Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the income statement and
allocated to the capital reserve - holding gains/(losses). Fixed returns
on non-equity shares and debt securities which are held at fair value
are computed using the effective interest rate, to distinguish between
the interest income receivable (which is disclosed as interest income
within the revenue column of the Income Statement) and other fair value
movements arising on these instruments (which are disclosed as holding
gains within the capital column of the Income Statement.
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.
Investments deemed to be associates, due to the shareholding and level
of influence exerted over the Company are measured at fair value using a
consistent methodology to the rest of the Company's portfolio as
permitted by FRS 9.
Current asset investments
Current asset investments comprise money market funds and are designated
as FVTPL. Gains and losses arising from changes in the fair value of
investments are recognised as part of the capital return within the
Income Statement and allocated to the capital reserve - gains/(losses)
on disposal.
The current asset investments are all invested with the Company's cash
manager and are readily convertible into cash at the 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.
Income
Fixed returns on non-equity shares and debt securities are recognised on
a time apportionment basis (including time amortisation of any premium
or discount to redemption) so as to reflect the effective interest rate,
provided there is no reasonable doubt that payment will be received in
due course. Income from fixed interest securities and deposit interest
is included on an effective interest rate basis.
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 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, where applicable, is charged 25% to the revenue
account and 75% to the capital reserve to reflect, in the Directors'
opinion, the expected long-term split of returns in the form of income
and capital gains respectively from the investment portfolio.
The transaction costs incurred when purchasing or selling assets are
written off to the income statement in the period that they occur.
Revenue and capital
The revenue column of the income statement includes all income and
revenue expenses of the Company. The capital column includes gains and
losses on disposal and holding gains and losses on investments. Gains
and losses arising from changes in fair value of investments are
recognised as part of the capital return within the income statement.
Taxation
Corporation tax payable is applied to profits chargeable to corporation
tax, if any, at the current rate. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and
revenue return on the "marginal" basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the balance
sheet date or where transactions or events have occurred at that date
that will result in an obligation to pay more, or a right to pay less
tax. This is with the exception that deferred tax assets are recognised
only to the extent that the Directors consider that it is more likely
than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in
hand and deposits repayable on demand, less overdrafts payable on
demand. Liquid resources are current asset investments which are
disposable without curtailing or disrupting the business and are either
readily convertible into known amounts of cash at or close to their
carrying values or traded in an active market. Liquid resources
comprise term deposits of less than one year (other than cash), and
investments in money market managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair
value which is usually 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.
Capital is defined 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 15. 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 VCT.
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.
Capital management is monitored and controlled using the internal
control procedures set out on page X of this
report. The capital being managed includes equity and fixed-interest
investments, cash balances and liquid
resources including debtors and creditors. The Company does not have any
externally imposed capital requirements.
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 dividend when
they are approved by the Board and for final dividends when they are
approved by the shareholders.
2. Income
Year to 28 February 2013 Year to 29 February 2012
GBP'000 GBP'000
Interest receivable on
bank balances 10 26
Money market securities -
dividend income 11 99
Loan note interest
receivable 1,427 789
1,448 914
3. Other expenses
Year to Year to
28 29
February February
2013 2012
GBP'000 GBP'000
Directors' remuneration 50 50
Fees payable to the Company's auditor for the audit
of the financial statements 15 13
Fees payable to the Company's auditor for other services
- tax compliance 3 3
Trail commission 252 433
UK Listing fees 6 5
Other expenses 217 228
543 732
The total expense ratio for the Company (as set out in the prospectus)
for the year to 28 February 2013 was 0.6% (2012: 0.6%).
4. Directors' remuneration
Year to 28 Year ended 29
February National February National
2013 Insurance 2012 Insurance
GBP'000 GBP'000 GBP'000 GBP'000
Directors'
emoluments
James Otter
(Chairman) 20 2 20 2
Charles Breese 15 1 15 1
Chris Hulatt
(paid to Octopus
Investments
Limited) - - 10 -
Martijn
Kleibergen (paid
to Octopus
Investments
Limited) 15 - 5 -
50 3 50 3
None of the Directors received any other remuneration or benefit 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 (2012: three).
5. Tax on ordinary activities
The corporation tax charge for the period was GBP210,000 (2012:
GBP18,000).
The current tax charge for the period differs from the standard rate of
corporation tax in the UK of 23.47% (2012: 20.08%). The differences
are explained below.
Current tax Year ended 28 February Year ended 29 February
reconciliation: 2013 2012
GBP'000 GBP'000
Return on ordinary
activities before tax 968 753
Current tax at 23.47%
(2012: 20.08%) 227 151
Adjustment to prior year
tax charge - 2
Income not taxable for
tax purposes (17) (135)
Total current tax charge 210 18
The company has excess management charges of GBPnil (2012: GBPnil) to
carry forward to offset against future taxable profits.
6. Earnings per share
The revenue earnings per share is based on 52,145,218 (2012: 52,192,487)
shares, being the weighted average number of shares in issue during the
year, and on a revenue return after tax of GBP695,000 (2012:
GBP164,000).
The capital earnings per share is based on 52,145,218 (2012: 52,192,487)
shares, being the weighted average number of shares in issue during the
year, and on a capital return after tax of GBP63,000 (2012: GBP571,000).
The total earnings per share is based on 52,145,218 (2012: 52,192,487)
shares, being the weighted average number of shares in issue during the
year, and on a total return after tax of GBP758,000 (2012: GBP735,000).
There are no potentially dilutive capital instruments in issue and, as
such, the basic and diluted earnings per share are therefore identical.
7. Net asset value per share
The calculation of net asset value per share as at 28 February 2013 is
based on net assets of GBP49,635,000 (2012: GBP49,919,000) and
52,145,218 (2012: 52,145,218) Ordinary shares in issue at that date.
8. Dividends
28 29
February February
2013 2012
GBP'000 GBP'000
Recognised as distributions in the financial statements
for the year
Previous year's final dividend 521 522
Current year's interim dividend 521 -
1,042 522
28 February 2013 29 February 2012
GBP'000 GBP'000
Paid and proposed in respect of the year
Interim dividend paid 521 -
Final dividend 1.0p per share (2012: 1.0p
per share) 521 521
1,042 521
The final dividend of 1.0p per share for the year ended 28 February
2013, subject to shareholder approval at the Annual General Meeting,
will be paid on 24 July 2013 to shareholders on the register on 28 June
2013.
9. Fixed asset investments at fair value through profit or loss
Financial Reporting Standard 29 Financial Instruments: Disclosures
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 money market funds and
AIM quoted 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 holds 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
(2012: none). The change in fair value for the current and previous year
is recognised through the profit and loss account.
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 28 February 2013 are
summarised below.
Fixed asset investments:
Level 1:
AIM-quoted
Equity
investments Level 3: Unquoted equity investments Level 3: Unquoted loan investments Total unquoted investments
GBP'000 GBP'000 GBP'000 GBP'000
Valuation
and net
book
amount:
Book cost at
1 March
2012 378 15,745 16,377 32,500
Cumulative
revaluation 205 - - 205
Valuation at
1 March
2012 583 15,745 16,377 32,705
Movement in
the year:
Purchases at
cost - 13,350 4,457 17,807
Proceeds
from the
sale of
investments - (1,005) (1,032) (2,037)
Change in
fair value
in year 82 (19) - 63
Closing fair
value at 28
February
2013 665 28,071 19,802 48,538
Closing cost
at 28
February
2013: 378 28,090 19,802 48,270
Closing
holding
loss at 28
February
2013: 287 (19) - 268
Valuation at
28 February
2013 665 28,071 19,802 48,538
Level 3 valuations include assumptions based on non-observable market
data, such as discounts applied either to reflect impairment of
financial assets held at the price of recent investment, or to adjust
earnings multiples. The sensitivity of these valuations to a reasonable
possible change in such assumptions is given in note 15.
The loan and equity investments are considered to be one instrument due
to the legal binding within the investment agreement.
Further details of the fixed asset investments held by the Company are
shown within the Investment Manager's Review on pages X to X.
10. Debtors
As at 28 February 2013 As at 29 February 2012
GBP'000 GBP'000
Prepayments and accrued income 726 508
11. Current Asset Investments
Current asset investments at 28 February 2013 comprised money market
funds (29 February 2012: money market funds).
As at 28 February 2013 As at 29 February 2012
GBP'000 GBP'000
Money market funds 5 10,580
5 10,580
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.
At 28 February 2013 and 29 February 2012 there were no commitments in
respect of investments approved by the Manager but not yet completed.
12. Creditors: amounts falling due within one year
As at 28 February 2013 As at 29 February 2012
GBP'000 GBP'000
Corporation tax 210 16
Accruals 136 94
346 110
13. Share capital
As at 28 February 2013 As at 29 February 2012
GBP'000 GBP'000
Authorised:
100,000,000 Ordinary shares of
1.00p 1,000 1,000
Allotted and fully paid up:
52,145,218 Ordinary shares of
1.00p (2012: 52,145,218) 521 521
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, other than those imposed by company law.
During the year the Company did not issue any shares (2012: nil).
During the year the Company did not repurchase any shares for
cancellation (2012: 69,569 at a price of 84.4p)
The total nominal value of the shares repurchased was GBPnil (2012:
GBP695.69) representing 0.00% (2012: 0.13%) of the issued share capital.
14. Reserves
*Reserves available for potential dividend
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.
All fixed asset investments are designated as fair value through profit
or loss at the time of acquisition, and all capital gains or losses on
investments so designated. Given the nature of the Company's venture
capital investments, the changes in fair value of such investments
recognised in these financial statements are not considered to be
readily convertible to cash in full at the balance sheet date and
accordingly these gains are treated as holding gains or losses
unrealised.
When the Company revalues the investments still held during the period,
any gains or losses arising are credited/ charged 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.
At 28 February 2013 there were no commitments in respect of investments
approved by the Investment Manager but not yet completed.
Reserves available for potential distribution by way of a dividend are:
GBP'000
As at 1 March 2012 49,192
Movement in year (347)
As at 28 February 2013 48,845
15. Financial instruments and risk management
The Company's financial instruments comprise equity, investments,
unquoted loans, 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
Octopus VCT plc held the following categories of financial instruments,
all of which are included in the balance sheet at fair value, at 28
February 2013:
28 February 2013 29 February 2012
GBP'000 GBP'000
Assets at fair value through profit or
loss
Investments 48,538 32,705
Current asset investments 5 10,580
Total 48,543 43,285
Loans and receivables
Cash at bank 712 6,236
Accrued income 719 499
Total 1,431 6,735
Liabilities at amortised cost
Accruals and other creditors 346 110
Total 346 110
Fixed asset investments (see note 9) are valued at fair value. Unquoted
investments are carried at fair value as determined by the Directors in
accordance with current venture capital industry guidelines. The fair
value of all other financial assets and liabilities is represented by
their carrying value in the balance sheet. The Directors believe that
the fair value of the assets held at the period-end is equal to their
book value.
In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are price risk, interest rate risk, credit risk
and liquidity risk. The Company's approach to managing these risks is
set out below together with a description of the nature and amount of
the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined with
regard to the Company's investment objective, as outlined on page X. The
management of market risk is part of the investment management process
and is a central feature of venture capital investment. The Company's
portfolio is managed in accordance with the policies and procedures
described in the Directors' Report 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 smaller
companies, by their nature, usually involve a higher degree of risk than
investments in larger 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.
97.8% (29 February 2012: 64.3%) 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 28 February 2013 would have increased net assets
and the total profit for the year by GBP4,787,300 (29 February 2012:
GBP3,212,100) an equivalent change in the opposite direction would have
reduced net assets and the total profit for the year by the same amount.
The Investment Manager considers that, as a number of the investment
valuations are based on earnings multiples which are ascertained with
reference to the individual sector multiple or similarly listed entities,
it is considered that due to the diversity of the sectors, the 10%
sensitivity discussed above provides the most meaningful potential
impact of average multiple changes across the portfolio.
Interest rate risk
At the year end, some of the Company's financial assets are
interest-bearing, some of which are at variable rates. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations
in the prevailing levels of market interest rates.
Fixed rate
The table below summarises weighted average effective interest rates for
the fixed interest-bearing financial instruments:
As at 28 February 2013 As at 29 February 2012
Weighted Weighted
average average
time for time for
Weighted which Weighted which
average rate is average rate is
Total fixed rate portfolio by interest fixed in Total fixed rate portfolio by interest fixed in
value GBP'000 rate % years value GBP'000 rate % years
Unquoted
fixed-interest
investments 19,802 10.0% 3 11,369 8.0% 3
Floating rate
The Company's floating rate investments comprise cash held on
interest-bearing deposit accounts and, where appropriate, within
interest bearing money market funds. The benchmark rate which
determines the rate of interest receivable on such investments is the
bank base rate, which was 0.5% at 28 February 2013 (29 February 2012:
0.5%). The amounts held in floating rate investments at the balance
sheet date were as follows:
28 February 2013 29 February 2012
GBP'000 GBP'000
Cash on deposit & money market funds 717 16,816
A 1% increase in the base rate would increase income receivable from
these investments and the total return by GBP7,170 (2012: GBP168,160) on
an annualised basis.
Credit risk
Credit risk is the risk that counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into
with the Company. The Investment Manager and the Board carry out a
regular review of counterparty risk. The carrying values of financial
assets represent the maximum credit risk exposure at the balance sheet
date.
At 28 February 2013 the Company's financial assets exposed to credit
risk comprised the following:
28 February 2013 29 February 2012
GBP000 GBP000
Cash on deposit 712 6,236
Investments in fixed rate investments 19,002 11,369
Money market funds 5 10,580
Accrued dividends and interest receivable 719 499
20,438 28,684
Credit risk relating to listed money market funds is mitigated by
investing in a portfolio of investment instruments of high credit
quality, comprising securities issued by the UK Government and major UK
institutions. Credit risk relating to loans to and preference shares in
unquoted companies is considered to be part of market risk.
Credit risk arising on the sale of investments is considered to be small
due to the short settlement and the contracted agreements in place with
the settlement lawyers.
The Company's interest-bearing deposit and current accounts are
maintained with HSBC Bank plc and the Cooperative bank. The Investment
Manager has in place a monitoring procedure in respect of counterparty
risk which is reviewed on an ongoing basis. Should the credit quality or
the financial position of either entity deteriorate significantly the
Investment Manager will move the cash holdings to another bank.
Other than cash or liquid money market funds, there were no significant
concentrations of credit risk to counterparties at 28 February 2013 or
29 February 2012.
Liquidity risk
The Company's listed money market funds 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 aims to maintain sufficient investments in cash and readily
realisable securities at any time to pay accounts payable and accrued
expenses as they fall due. At 28 February 2013 these investments were
valued at GBP717,000 (2012: GBP16,816,000).
16. Post balance sheet events
No significant events occurred between the balance sheet date and the
signing of these financial statements.
17. Contingencies, guarantees and financial commitments
Under the terms of the Investment Management agreement, Octopus is
entitled to an annual management fee of 2.0% of net assets. However,
the annual management fee will be rolled up (without interest) and will
only be paid to Octopus once shareholders have received dividends and
distributions during the life of the Company totalling or exceeding 105p
per share. Octopus will only be entitled to receive an annual
management fee for the period from the date on which shares are first
allotted under the Offer until the date on which the general meeting is
held (expected to be in August 2015) at which shareholders will be asked
to approve a motion regarding the future of the company.
In view of the early stage of the investment process, the Directors do
not currently believe there is sufficient certainty that any management
fee will be paid, and have therefore made no accrual in respect of any
fee potentially payable. In relation to management fees, there was a
contingent liability of GBP2,950,000 as at 28 February 2013 (2012:
GBP1,950,000).
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 up to 0.5% of the
initial net asset value. Trail commission of GBP252,000 was paid during
the year (2012: GBP433,000) and there was GBP21,000 (2012: GBPnil)
outstanding at the year end.
There were no further contingencies, guarantees or financial commitments
as at 28 February 2013 (2012: none).
18. Transactions with manager
Octopus VCT plc has employed Octopus throughout the year as the
investment Manager.
Octopus provides investment management and administration & accounting
services to the Company under a management agreement which runs for a
period of five years with effect from 16 September 2009 and may be
terminated at any time thereafter by not less than twelve 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 administration
and accounting fee is payable quarterly in arrears for a fee of 0.3% of
the NAV calculated at annual intervals as at 28 February. During the
year GBP149,000 (2012: GBP149,000) was paid to Octopus Investments and
there was GBP37,000 outstanding at the balance sheet date (2012: GBPnil),
for the accounting and administrative services.
Octopus VCT plc has paid Octopus GBPnil in the year as a management fee
and there is GBPnil outstanding at the balance sheet date. Octopus is
entitled to an annual management fee of 2.0% of net assets. In order to
ensure the alignment of interests between Octopus and shareholders, the
annual management fee will be rolled up (without interest) and will only
be paid to Octopus once shareholders have received dividends during the
life of the Company and distributions totaling or exceeding 105p per
share. Octopus will only be entitled to receive an annual management fee
for the period from the date on which shares are first allotted under
the Offer until the date on which the general meeting is held (expected
to be in August 2015) at which shareholders will be asked to approve a
motion regarding the future of the Company. In relation to management
fees, there was a contingent liability of GBP2,950,000 as at 28 February
2013 (2012: GBP1,950,000).
Octopus also provides secretarial services for an additional fee of
GBP15,000 per annum. During the year GBP15,000 (2012: GBP15,000) was
due to Octopus Investments Limited and there was GBP4,000 (2012: GBPnil)
outstanding at the balance sheet date.
Octopus will also be entitled to receive a performance related incentive
fee of 20% on returns to shareholders
in excess of 105p per share. The calculation of this fee is based wholly
on the payment of cash proceeds to
shareholders and will, therefore, not be paid until after the general
meeting in 2015. No contingent liability has been recognised on the
basis that the Board believe there is insufficient certainty that a fee
will be payable and that no reliable measurement can be made.
19. Related party transactions
Martijn Kleibergen, a non-executive director of Octopus VCT plc, is also
an employee of Octopus Investments Limited. Martijn Kleibergen's
Director's fee is payable to Octopus Investments Limited. Further
details of Director's remuneration can be found in the Directors'
remuneration report on page X.
During the year to 28 February 2013, the Directors received the
following dividends from the Company:
Dividend received
James Otter (Chairman) GBP106
Charles Breese GBP106
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 VCT PLC via Thomson Reuters ONE
HUG#1706716
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Octopus Vct (LSE:OVCT)
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