TIDMOAP1
Octopus Apollo VCT 1 plc
Final Results
17 May 2011
Octopus Apollo VCT 1 plc, managed by Octopus Investments Limited, today
announces the final results for the year ended 31 January 2011.
These results were approved by the Board of Directors on 16 May 2011.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com by navigating to Services, Investor Services, Venture
Capital Trusts, Octopus Apollo VCT 1 plc. All other statutory information can
also be found there.
About Octopus Apollo VCT 1 plc
Octopus Apollo VCT 1 plc ('Apollo 1', 'Company' or 'Fund') is a venture capital
trust ('VCT') which aims to provide shareholders with attractive tax-free
dividends and long-term capital growth, by investing in a diverse portfolio of
predominantly unquoted companies. The VCT is managed by Octopus Investments
Limited ('Octopus' or 'Manager').
The Fund was launched in May 2006 together with Octopus Apollo VCT 2 plc. Both
companies have identical investment policies, and together launched an offer for
subscription comprising 25,000,000 Ordinary shares each, or 50,000,000 in
aggregate (the 'Offer'). The Offer closed on 5 April 2007 having raised GBP17.6
million in aggregate ( GBP16.8 million net of expenses). The objective of the Fund
is to invest in a diversified portfolio of UK smaller companies in order to
generate income and capital growth over the long-term. The Board of Directors of
the Company changed in September 2010 in order for the Company to comply with
Listing Rule 15.2.11R and to enable the Board to act independently.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for private
individuals to invest in unlisted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* up-front income tax relief of up-to 30%;
· exemption from income tax on dividends paid; and
· exemption from capital gains tax on disposals of shares in
VCTs
The Company has been provisionally approved as a VCT by HM Revenue & Customs.
In order to maintain its approval the Company must comply with certain
requirements on a continuing basis. Now the Company has reached the end of its
third accounting period, at least 70% of the Company's investments must comprise
'qualifying holdings' of which at least 30% must be in eligible Ordinary
shares. A 'qualifying holding' consists of up to GBP1 million invested in any one
year in new shares or securities in an unquoted company (including companies
listed on AIM) which is carrying on a qualifying trade and whose gross assets do
not exceed GBP7 million at the time of investment, and whose total number of
employees is less than 50, also at the time of investment. The Company will
continue to ensure its compliance with these qualification requirements.
Financial Summary
Year to 31 January 2011 Year to 31 January 2010
Net assets ( GBP'000s) 8,020 8,167
Net profit after tax ( GBP'000s) 202 306
Net asset value per share (NAV) 92.3p 94.0p
Cumulative dividends since
launch 7.25p 3.25p
Proposed dividend per share 1.50p 2.50p
Chairman's Statement
I am delighted to present the fifth Annual Report of Octopus Apollo VCT 1 plc
for the year ended 31 January 2011.
Performance
Your Company has recorded a steady performance for the year in line with the
investment mandate of this VCT. Interest income from investments equalled
operating expenses and so the net asset value ('NAV') was stable. Your Company
then made progress towards increases in NAV that could be realised as a result
of the recognition of redemption premiums on loans.
At the year end the total return, being the change in NAV plus dividends paid in
the year, was 2.4%, with the NAV now standing at 92.3 pence per share. The year-
end NAV plus total dividends paid since launch now stands at 99.55 pence share.
Dividend
It is your Board's policy to maintain a regular dividend flow where possible in
order to take advantage of the tax free distributions a VCT is able to provide.
Given the performance of your Company, your Board has proposed a final dividend
of 1.5 pence per share (comprising 0.75 pence from revenue reserves) in respect
of the year ended 31 January 2011. This dividend, if approved by shareholders
at the AGM, will be paid on 8 July 2011 to shareholders on the register on 10
June 2011. Alongside the 1.5 pence interim dividend paid in October 2010, this
will take dividends in relation to the year ended 31 January 2011 to 3.0 pence
(2010: 3.5 pence).
Investment Portfolio
Trading results of investee companies on the whole have been positive. This
resulted in uplifts being recognised in Bluebell Telecom, Clifford Thames, CSL
DualCom and Hydrobolt, which were slightly offset by a reduction in the fair
value of Bruce Dunlop. However, overall an increase of GBP195,000 was recognised
in the year.
A full list of the Company's portfolio is set out on page x. All of the
investments are discussed further in the Investment Managers Review on pages x
to x.
Vulcan Services II, a company set up to seek qualifying investments,
successfully acquired Bluebell Telecom Limited, a company providing landline,
mobile and data solutions to businesses.
A small non-qualifying investment was made into Carebase (Col), a company used
to purchase land in order to build the care home that fellow investee company
Salus Services is funding.
Investment Strategy
As was set out in the prospectus, the aim of the Fund is to make investments on
the basis of taking less risk than a typical VCT. To date the Investment Manager
has been successful in achieving this aim.
Typically the structure of the investments is weighted more heavily towards loan
based instruments rather than equity. This is considered to be of a lower risk
nature as returns are fixed and payments are generally ranked above most other
creditors, allowing for future visibility and security. This strategy also
reduces the downward risk that is part and parcel of an equity investment.
The Fund has also been able to take strong advantage of the reduced liquidity in
the traditional lending market. The Fund has had good opportunities to invest
into well managed and profitable businesses with strong recurring cash-flows.
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 Apollo
VCT 1 plc is in compliance with the conditions laid down by HMRC for maintaining
approval as a VCT. This is discussed further on page x.
A key requirement is to maintain at least the 70% qualifying investment level.
As at 31 January 2011, 81.2% of the portfolio, as measured by HMRC rules, was
invested in VCT qualifying investments.
Outlook
There is concern in the UK about the sustainability of the economic recovery,
inflationary pressures and the fragile condition of public finances. These
factors combined with the volatility of oil prices provide an uncertain
environment for many businesses. The Board and Investment Manager will conduct
the investment activities with these factors in mind.
However, the majority of investments in your Company's portfolio have continued
to report good trading results and the continued tightness in the traditional
banking markets in lending to small companies continues to provide opportunities
to invest in attractive businesses. Accordingly the Board remains confident
that the Company will achieve its investment objectives.
Andrew Boyle
Chairman
16 May 2011
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 17 VCTs, including
this Company, and manage nearly GBP320 million in the VCT sector. Octopus has over
180 employees and has been voted as 'Best VCT Provider of the Year' by the
financial adviser community for the last four years.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.
Investment Policy
The investment approach of the Fund is to seek lower risk investments. The
majority of companies in which Apollo 1 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
The Fund made a net return of 2.4% between 31 January 2010 and 31 January 2011.
The NAV decreased from 94.0p to 92.3p over the period, but this drop in value
was more than offset by the 4.0p of cumulative dividends paid.
The valuation uplifts in Clifford Thames, CSL DualCom and Bluebell Telecom have
resulted from our valuing a proportion of the redemption premiums that have been
negotiated and are due to be paid on the repayment of the loans issued to the
companies. There has also been an uplift in Hydrobolt that has been recognised
as a result of the company's strong trading results.
A small reduction in fair value was shown in Bruce Dunlop as the equity
proportion of the investment was written down to nil. This decrease is in
recognition of the fact that Bruce Dunlop, in common with most media related
companies, is finding trading tough. We remain confident in the management's
running of the business and hope the Company will trade its way back to budget
in the coming years. This decrease in fair value amounts to a reduction in value
of GBP24,000, against a total cost of GBP509,000, with the remainder of our funds
being invested in debt that ranks ahead of all other investors on exit. This is
an example of how the structure of the investments made in this VCT are heavily
sheltered from the downside risk of investing into small companies.
The majority of investments are loan based on which a steady flow of interest is
received into the Fund. This is now nearing the level whereby interest receipts
offset the running costs of the Fund. This income versus expenditure parity will
allow for any profits on realisations and loan note redemption premiums to be
paid out directly to shareholders, or recognised as an uplift to the value of
your investment.
Portfolio Review
We have been successful during the year in deploying the funds held by Vulcan
Services II into Bluebell Telecom, and have also made a small, non-qualifying
investment into Carebase (Col). We believe both investments follow the
investment mandate of this VCT; Bluebell has strong recurring cash flows and a
good management team and Carebase (Col) is asset backed.
Further to this, post year end, we have used the funds held in GreenCo Services
to further our investment into CSL DualCom, and the funds of PubCo Services to
acquire Salus Services, injecting further capital into the company to enable the
business to build another care home. GreenCo and PubCo were initially intending
to invest into the environmental sector and the restaurant and bar sector
respectively. However at the time, no suitable opportunities were found in these
sectors. We have also invested amounts totalling GBP266,000 into Evaki Power and
Kala Power, companies involved in the construction of solar power units.
Investments made post year end into CSL DualCom and PubCo Services have been
into a businesses that we have already invested into, and therefore, we know
well and are confident of their continued success. In addition to investing
more funds into CSL DualCom, we have significantly increased the return on our
investment. We believe we have done so without taking significantly more risk.
Outlook
We remain cautious about the year ahead and continue to be on the lookout for
potential difficulties in the portfolio to enable ourselves to be prepared and
plan appropriately. However in general we are confident that the investee
companies are well positioned to weather the uncertain times ahead and we remain
optimistic that your Company's NAV will be able to make progress, despite the
economic environment in which we find ourselves.
Stuart Nicol
Investment Director
Octopus Investments
16 May 2011
Investment Portfolio
Movement
Cost of in fair Fair %
investment value to value equity %
Unquoted at 31 31 at 31 held equity
qualifying January January January Movement by managed
fixed asset 2011 2011 2011 in year Apollo by
investments Sector ( GBP'000) ( GBP'000) ( GBP'000) ( GBP'000) 1 Octopus
=-----------------------------------------------------------------------------------
Clifford
Thames Group
Limited Automotive 965 152 1,117 152 1.4% 7.4%
Diagnos
Limited* Automotive 825 - 825 - - -
Pubco
Services
Limited Restaurants & bars 750 - 750 - 11.4% 56.9%
CSL DualCom
Limited* Security devices 700 16 716 16 - -
Salus
Services 1
Limited Care homes 615 - 615 - 15.7% 100.0%
Tristar
Worldwide
Limited Chauffeur services 500 - 500 - 1.3% 35.0%
Greenco
Services
Limited Environmental 500 - 500 - 8.2% 57.4%
Bruce Dunlop
& Associates
International
Limited Media 509 (24) 485 (24) 1.7% 30.0%
Bluebell
Telecom
Services
Limited Telecommunications 225 25 250 25 0.5% 6.5%
Hydrobolt
Limited Manufacturing 197 26 223 26 0.9% 43.3%
Businessco 2
Services
Limited Business services 200 - 200 - 5.0% 49.0%
Ticketing
Services 1
Limited Ticketing 200 - 200 - 25.3% 100.0%
Ticketing
Services 2
Limited Ticketing 200 - 200 - 25.3% 100.0%
=-----------------------------------------------------------------------------------
Total qualifying fixed asset
investments 6,386 195 6,581 195
Non-
qualifying
investments 110 - 110 -
Total fixed
asset
investments 6,496 195 6,691 195
=-----------------------------------------------------------------------------------
Money market
funds 1124
Cash at bank 153
=-----------------------------------------------------------------------------------
Total
investments 7,968
Debtors less
creditors 52
=-----------------------------------------------------------------------------------
Total net
assets 8,020
*Debt based investment
Valuation Methodology
The investments held by Apollo the Fund are all unquoted and as such there is
no trading platform from which prices can be easily obtained. As a result, the
methodology used in fair valuing the investments is initially the transaction
price of the recent investment round. Subsequent adjustment to the fair value
has then been made according to any significant under or over performance of the
business.
If you would like to find out more regarding the International Private Equity
and Venture Capital (IPEVC) valuation guidelines, please visit their website at:
www.privateequityvaluation.com.
Investments are valued in accordance with the accounting policy set out on page
x, which takes account of current industry guidelines for the valuation of
venture capital portfolios and is compliant with IPEVC valuation Guidelines and
current financial reporting standards.
Investment Portfolio - Ten Largest Qualifying Portfolio Holdings
Clifford Thames Group Limited
Clifford Thames is a market leading provider of consultancy and business
outsourcing services for the automotive industry, and is a key partner of most
of the world's leading car manufacturers. With offices in eight countries
Clifford Thames has a well-established and impressive client list including
Ford, GM Europe, Jaguar Land Rover, Mazda and Fiat. Further information can be
found at the company's websitewww.clifford-thames.com.
+-------------------+---+----------+---+------------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+------------+
| A Ordinary shares | | GBP222,000 | | GBP222,000 |
+-------------------+---+----------+---+------------+
| Loan stock | | GBP743,000 | | GBP895,000 |
+-------------------+---+----------+---+------------+
| Total | | GBP965,000 | | GBP1,117,000 |
+-------------------+---+----------+---+------------+
Investment date: January 2009
Equity held: 1.4%
Last audited accounts: 31 March 2010
Revenues: GBP31.6 million
Profit before interest & tax: GBP2.7 million
Net assets: GBP10.1
million
Income receivable recognised in year: GBP67,000
Valuation basis: Earnings multiple
Diagnos Limited
Diagnos develops and sells sophisticated automotive diagnostic software and
hardware that enables independent mechanics, dealerships and garages to service
and repair vehicles. Mechanics require a diagnostic tool to communicate with the
in-car computer in order to measure, monitor and, where necessary, fix the
electronic process or system. Further information can be found at the company's
websitewww.autologic-diagnos.co.uk.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| B Ordinary shares | | GBP41,000 | | GBP41,000 |
+-------------------+---+----------+---+-----------+
| C Ordinary shares | | GBP41,000 | | GBP41,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP743,000 | | GBP743,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP825,000 | | GBP825,000 |
+-------------------+---+----------+---+-----------+
Investment date: February 2009
Equity held: 0.0%
Last audited accounts: 31 December 2009
Revenues: GBP6.2 million
Profit before interest & tax: GBP1.8 million
Net assets: GBP2.6
million
Income receivable recognised in year: GBP31,000
Valuation basis: Earnings multiple
PubCo Services Limited ('PubCo')
PubCo was set up to acquire VCT qualifying trades. Since the year end, the funds
have been used successfully to acquire the net assets of Salus Services 1
Limited, enabling the company to fund the construction of a second care home.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP226,000 | | GBP226,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP524,000 | | GBP524,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP750,000 | | GBP750,000 |
+-------------------+---+----------+---+-----------+
Investment date: April 2009
Equity held: 11.4%
Last audited accounts: N/A
Revenues: GBP0.0 million
Profit before interest & tax: GBP0.0 million
Net assets: GBP0.8
million
Income receivable recognised in year: GBP1,000
Valuation basis: Earnings multiple
CSL DualCom Limited ('DualCom')
DualCom 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 from
Vodafone, which has been a partner since 2000. DualCom 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
websitewww.csldual.com.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| C Ordinary shares | | GBP70,000 | | GBP70,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP630,000 | | GBP646,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP700,000 | | GBP716,000 |
+-------------------+---+----------+---+-----------+
Investment date: February 2009
Equity held: 0.0%
Last audited accounts: 31 March 2010
Revenues: GBP8.2 million
Profit before interest & tax: GBP1.2 million
Net assets: GBP1.2
million
Income receivable recognised in year: GBP32,000
Valuation basis: Steady state cashflow
multiple
Salus Services 1 Limited
Salus Services I Limited is funding the construction of a care home based in
Colchester.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP615,000 | | GBP615,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | - | | - |
+-------------------+---+----------+---+-----------+
| Total | | GBP615,000 | | GBP615,000 |
+-------------------+---+----------+---+-----------+
Investment date: January 2010
Equity held: 15.7%
Last audited accounts: 31 December 2009
Revenues: GBP0.0 million
Loss before interest & tax: GBP(0.0) million
Net assets: GBP0.6
million
Income receivable recognised in year: GBP31,000
Valuation basis: Earnings multiple
Tristar Worldwide Limited ('Tristar')
Tristar is one of the world's leading chauffeur companies, carrying over
500,000 passengers for 400 clients in the last year alone. The business operates
in 70 countries with its own vehicles in the UK and a rapidly expanding service
in the US. It has a blue-chip customer base which includes Virgin, Emirates, BP,
Goldman Sachs and Bank of America-Merrill Lynch. The market for chauffeur
services has been heavily affected in the current economic environment but we
believe has now stabilised. Tristar has achieved a good performance in the
circumstances where many of its competitors are suffering to a greater extent.
The company's focus on a joined up international service is proving to be an
important selling feature for clients; the Company has offices in the UK, US and
Hong Kong as well as an affiliate network providing service in over 70 countries
worldwide. Further information can be found at the company's
websitewww.tristarworldwide.com.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP10,000 | | GBP10,000 |
+-------------------+---+----------+---+-----------+
| B Ordinary shares | | GBP140,000 | | GBP140,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP350,000 | | GBP350,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP500,000 | | GBP500,000 |
+-------------------+---+----------+---+-----------+
Investment date: January 2008
Equity held: 1.25%
Last audited accounts: 31 May 2010
Revenues: GBP32.6 million
Profit before interest & tax: GBP0.1 million
Net assets: GBP2.0
million
Income receivable recognised in year: GBP94,000
Valuation basis: Earnings multiple
GreenCo Services Limited ('GreenCo')
GreenCo was set up to acquire VCT qualifying trades. Since the year end the
funds have been used to invest further into DualCom due to the company's
positive financial performance since initial investment.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP152,000 | | GBP152,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP348,000 | | GBP348,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP500,000 | | GBP500,000 |
+-------------------+---+----------+---+-----------+
Investment date: April 2009
Equity held: 8.20%
Last audited accounts: N/A
Revenues: GBP0.0 million
Profit before interest & tax: GBP0.0 million
Net assets: GBP0.5
million
Income receivable recognised in year: GBP1,000
Valuation basis: Earnings multiple
Bruce Dunlop & Associates International Limited ('BDA')
BDA provides promotion and design services to broadcasters and advertisers
worldwide and also creates brand films and internal communications for leading
UK corporations. Trading in the media sector remains tough but management are
working hard with our support to take the business back into a profit. Further
information can be found at the company's websitewww.bdacreative.com.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP24,000 | | - |
+-------------------+---+----------+---+-----------+
| B Ordinary shares | | GBP135,000 | | GBP135,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP350,000 | | GBP350,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP509,000 | | GBP485,000 |
+-------------------+---+----------+---+-----------+
Investment date: December 2007
Equity held: 1.7%
Last audited accounts: June 2010
Revenues: GBP8.6 million
Loss before interest & tax: GBP0.6 million
Net liabilities: GBP0.03
million
Income receivable recognised in year: GBP61,000
Valuation basis: Earnings multiple
Bluebell Telecom Services Limited ('Bluebell') (formerly Vulcan Services II
limited)
Bluebell provides landline, mobile and data solutions to businesses, helping to
cut costs and improve efficiency through simple rationalisation and more
effective deployment of voice and data services. Further information can be
found at the company's websitewww.bluebelltelecom.com.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP24,000 | | GBP24,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP201,000 | | GBP226,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP225,000 | | GBP250,000 |
+-------------------+---+----------+---+-----------+
Investment date: September 2010
Equity held: 0.5%
Last audited accounts: N/A*
Revenues: N/A*
Profit before interest & tax: N/A*
Net assets: N/A*
Income receivable recognised in year: GBP9,000
Valuation basis: Earnings multiple
*The first years statutory accounts are yet to be produced
Hydrobolt Limited ('Hydrobolt')
Hydrobolt is a specialist manufacturer of high integrity fasteners for the oil
and gas and energy sectors.
+-------------------+---+----------+---+-----------+
| Asset class | | Cost | | Valuation |
+-------------------+---+----------+---+-----------+
| A Ordinary shares | | GBP8,000 | | GBP34,000 |
+-------------------+---+----------+---+-----------+
| B Ordinary shares | | GBP51,000 | | GBP51,000 |
+-------------------+---+----------+---+-----------+
| Loan stock | | GBP138,000 | | GBP138,000 |
+-------------------+---+----------+---+-----------+
| Total | | GBP197,000 | | GBP223,000 |
+-------------------+---+----------+---+-----------+
Investment date: April 2008
Equity held: 0.9%
Last audited accounts: 31 March 2010
Revenues: GBP14.5 million
Profit before interest & tax: GBP1.5 million
Net assets: GBP1.6
million
Income receivable recognised in year: GBP20,000
Valuation basis: Earnings multiple
Directors' Responsibility Statement
The directors are responsible for preparing the Directors' 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 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 are 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 are aware of that information.
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.
The Directors confirm, to the best of their knowledge, that:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company; and
· the management report includes a fair review of the development and
performance of the business and the position of the company, together with a
description of the principal risks and uncertainties that they face.
On behalf of the board
Andrew Boyle
Chairman
16 May 2011
Income Statement
+---------------------+
| Year to 31 January |
| 2011 |
| |
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
| |
| |
| |
Loss on disposal of fixed asset investments 10 | - (6) (6)|
| |
Gain on disposal of current asset investments 12 | - 6 6|
| |
| |
| |
Fixed asset investment holding gains 10 | - 195 195|
| |
| |
| |
Investment income 2 | 378 - 378|
| |
| |
| |
Investment management fees 3 | (42) (125) (167)|
| |
| |
| |
Other expenses 4 | (202) - (202)|
| |
| |
| |
Return on ordinary activities before tax | 134 70 204|
| |
| |
| |
Taxation on return on ordinary activities 6 | (2) - (2)|
| |
| |
| |
Return on ordinary activities after tax | 132 70 202|
| |
Earnings per share - basic and diluted 8 | 1.5p 0.8p 2.3p|
+---------------------+
* The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies.
* All revenue and capital items in the above statement derive from continuing
operations.The 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 is not required and has not included the effects of fair value
accounting when considering historical cost, profits and losses.
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 31 January
2010
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Gain on disposal of fixed asset investments 10 - 223 223
Gain on disposal of current asset investments - 7 7
Current asset investment holding gains - 61 61
Investment income 2 341 - 341
Investment management fees 3 (40) (120) (160)
Other expenses 4 (157) - (157)
Return on ordinary activities before tax 144 171 315
Taxation on return on ordinary activities 6 (9) - (9)
Return on ordinary activities after tax 135 171 306
Earnings per share - basic and diluted 8 1.5p 2.0p 3.5p
* 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 is not required and has not included the effects of fair value
accounting when considering historical cost, profits and losses.
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 ended | Year ended
| 31 January 2011 | 31 January 2010
| |
| GBP'000 | GBP'000
| |
Shareholders' funds at start of year | 8,167 | 8119
| |
Return on ordinary activities after tax | 202 | 306
| |
Cancellation of own shares | - | (84)
| |
Dividends paid | (349) | (174)
| |
Shareholders' funds at end of year | 8,020 | 8,167
+-----------------+
The accompanying notes are an integral part of the financial statements.
Balance Sheet
+-------------------+
| As at 31 January| As at 31 January
| 2011| 2010
| |
Notes| GBP'000 GBP'000| GBP'000 GBP'000
| |
| |
| |
Fixed asset investments* 10 | 6,691| 6,662
| |
Current assets: | |
| |
Debtors 11 | 92 | 42
| |
Investments - money market funds* 12 |1,124 |1,421
| |
Cash at bank | 153 | 94
| |
|1,369 |1,557
| |
Creditors: amounts falling due | |
within one year 13 | (40) | (52)
| |
Net current assets | 1,329| 1,505
| |
Total assets less current | |
liabilities | 8,020| 8,167
| |
| |
| |
Called up equity share capital 14 | 869 | 869
| |
Special distributable reserve 15 |7,081 |7,343
| |
Capital redemption reserve 15 | 16 | 16
| |
Capital reserve - gains & losses | |
on disposals 15 |(315) | (60)
| |
- holding | |
gains & losses 15 | 196 |(129)
| |
Revenue reserve 15 | 173 | 128
| |
Total shareholders' funds | 8,020| 8,167
| |
Net asset value per share 9 | 92.3p| 94.0p
+-------------------+
*At fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 16 May
2011 and are signed on their behalf by:
Andrew Boyle
Chairman
Company number: 05770752
The accompanying notes are an integral part of the financial statements.
Cash Flow Statement
+---------------+
| Year to| Year to
|31 January 2011|31 January 2010
| |
Notes| GBP'000| GBP'000
| |
| |
| |
Net cash (outflow)/inflow from operating | |
activities | (53)| 35
| |
| |
| |
Taxation 6 | (2)| (9)
| |
| |
| |
Financial investment: | |
| |
Purchase of fixed asset investments 10 | (109)| (4,965)
| |
Sale of fixed asset investments 10 | 269| 1,098
| |
| |
| |
Equity dividends 7 | (349)| (174)
| |
| |
| |
Management of funds: | |
| |
Purchase of current asset investments 12 | (1,819)| (4,443)
| |
Sale of current asset investments 12 | 2,122| 7,061
| |
| |
| |
Financing | |
| |
Purchase of own shares 14 | -| (84)
| |
| |
| |
Increase/(decrease) in cash | 59| (1,481)
+---------------+---------------
The accompanying notes are an integral part of the financial statements.
Reconciliation of return before Taxation to Cash Flow from Operating Activities
+----------------------+
| Year to 31 January| Year to 31 January
| 2011| 2010
| |
| GBP'000| GBP'000
| |
Return on ordinary activities | |
before tax | 204| 315
| |
(Increase)/decrease in debtors | (50)| 44
| |
Decrease in creditors | (12)| (33)
| |
Gain on disposal of current asset | |
investments | (6)| (7)
| |
Loss/(gain) on disposal of fixed | |
asset investments | 6| (223)
| |
Holding gain on current asset | |
investments | -| (61)
| |
Holding gain on fixed asset | |
investments | (195)| -
| |
Inflow from operating activities | (53)| 35
+----------------------+
Reconciliation of Net Cash Flow to Movement in Net Funds
+-----------------------+
|Year to 31 January 2011|Year to 31 January 2010
| |
| GBP'000| GBP'000
| |
Movement in cash at bank | 59| (1,481)
| |
Movement in cash equivalent | |
securities | (297)| (2,550)
| |
Opening net funds | 1,515| 5,546
| |
Net funds at 31 January | 1,277| 1,515
+-----------------------+
Net funds at 31 January comprised:
+-----------------------+
| As at 31 January 2011 | As at 31 January 2010
| |
| GBP'000 | GBP'000
| |
Cash at bank | 153 | 94
| |
Money market funds | 1,124 | 1,421
| |
Net funds at 31 January | 1,277 | 1,515
+-----------------------+
Notes to the Financial Statements
1. Principal accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain financial
instruments, and in accordance with UK Generally Accepted Accounting Practice
(UK GAAP), and the Statement of Recommended Practice (SORP) 'Financial
Statements of Investment Trust Companies' (revised 2009).
The principal accounting policies have remained unchanged from those set out in
the Company's 2010 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.
The Company presents its income statement in a three column format to give
shareholders additional detail of the performance of the Company, split between
items of a revenue or capital nature.
Current asset investments comprising money market funds and deposits are held at
amortised cost.
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 and loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value through
profit and 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 subsidiary companies and liquidity or
marketability of the investments held.
Although the Company believes that the assumptions concerning the business
environment and estimate 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 and 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 multiple 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.
Current asset investments
Current asset investments comprise money market funds and are designated as
FVTPL. Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the Income Statement and
allocated to the capital reserve - 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
on a time apportionment basis, provided there is no reasonable doubt that
payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
wholly to revenue with the exception of the investment management fee, which has
been charged 25% to the revenue account and 75% to the capital reserve to
reflect, in the Directors' opinion, the expected long-term split of returns in
the form of income and capital gains respectively from the investment portfolio.
The transaction costs incurred when purchasing or selling assets are written off
to the income statement in the 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 dividends when they are paid, and for final
dividends when they are approved by the shareholders.
2. Income
31 January 2011 31 January 2010
GBP'000 GBP'000
Money market funds, bonds and bank balances 9 49
Loan note interest receivable 369 292
378 341
3. Investment management fees
31 January 2011 31 January 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 42 125 167 40 120 160
For the purposes of the revenue and capital columns in the income statement, the
management fee has been allocated 25% to revenue and 75% to capital, in line
with the Board's expected long term return in the form of income and capital
gains respectively from the Company's investment portfolio.
Octopus provides investment management and accounting and administration
services to the Company under a management agreement which runs for a period of
five years with effect from 16 October 2006 and may be terminated at any time
thereafter by not less than 12 months' notice given by either party. No
compensation is payable in the event of terminating the agreement by either
party, if the required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would have been paid
should continuous service be provided, or the required notice period was given.
The basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.
4. Other expenses
31 January 2011 31 January 2010
GBP'000 GBP'000
Directors' remuneration 40 35
Fees payable to the Company's auditor for the
audit of the financial statements 10 9
Fees payable to the Company's auditor for other
services - tax compliance 3 3
Accounting and administration services 24 23
Legal and professional expenses - 3
Other expenses 125 84
202 157
5. Directors' remuneration
31 January National 31 January National
2011 Insurance 2010 Insurance
GBP'000 GBP'000 GBP'000 GBP'000
Directors'
emoluments
Mr Andrew Boyle 14 1 11 1
(Chairman)
Mr Roger Penlington 7 - 8 -
(resigned
28.09.2010)
Mr Stuart 5 - 8 -
Brocklehurst
(resigned
28.09.2010)
Mr Matt Cooper 8 - 8 -
Mr Rupert Bell 6 - - -
(appointed
28.09.2010)
40 1 35 1
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 four
(2009: four).
6. Tax on ordinary activities
The corporation tax charge for the year was GBP2,000 (2010: GBP9,000).
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 28% (2010: 28%). The differences are explained
below.
Current tax reconciliation: 31 January 2011 31 January 2010
GBP'000 GBP'000
------------------------------------
Non-taxable capital gains/(loss) 202 306
Non taxable gains (195) (291)
=--------------------------------------------
Net return on ordinary activities 7 15
=--------------------------------------------
Current tax at 28% (2010: 28%) 2 4
Unrelieved tax losses and other deductions 39 53
Income not deductable for tax (41) (66)
Total current tax charge - (9)
Tax in relation to prior year 2 -
The Company has excess management charges of approximately GBPnil (2010: GBP190,000)
to carry forward to offset against future taxable profits.
Approved VCTs are exempt from tax on capital gains within the Company. Since
the Directors intend that the Company will continue to conduct its affairs so as
to maintain its approval as a VCT, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or disposal of
investments.
7. Dividends
31 January 2011 31 January 2010
GBP'000 GBP'000
Recognised as distributions in the financial
statements for the year
Previous year's final dividend 217 87
Current year's interim dividend 132 87
=-------------------------------------------------------------------------------
349 174
31 January 2011 31 January 2010
GBP'000 GBP'000
Paid and proposed in respect of the year
Interim dividend paid - 1.50p per share (2010:
1.00p per share) 132 87
Final dividend 1.50p per share (2010: 2.50p per
share) 130 217
=-------------------------------------------------------------------------------
262 304
The final dividend of 1.5p per share for the year ended 31 January 2011, subject
to shareholder approval at the Annual General Meeting, will be paid on 8 July
2011 to shareholders on the register on 10 June 2011.
8. Earnings per share
The revenue per share is based on the revenue profit after tax of GBP132,000
(2010: GBP135,000) and on 8,693,486 (2010: 8,751,722) shares, being the weighted
average number of shares in issue during the year.
The capital per share is based on the capital profit after tax of GBP70,000 (2010:
GBP171,000) and on 8,693,486 (2010: 8,751,722) shares, being the weighted average
number of shares in issue during the year.
The total earnings per share is based on total profit after tax of GBP202,000
(2010: GBP306,000) and on 8,693,486 (2010: 8,751,722) shares, being the weighted
average number of shares in issue during the year.
There are no potentially dilutive capital instruments in issue and, as such, the
basic and diluted earnings per share are therefore identical.
9. Net asset value per share
The calculation of NAV per share as at 31 January 2011 is based on net assets of
GBP8,020,000 (2010: GBP8,167,000) divided by the 8,693,486 (2010: 8,693,486) shares
in issue at that date.
10. Fixed asset investments at fair value through profit or loss
Effective from 1 January 2009 the Company adopted the amendment to 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
classified as held at fair value through profit or loss (FVTPL).
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 date 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 period (2010:
none). The change in fair value for the current and previous year is recognised
through the profit and loss account.
All items held at FVTPL were designated as such upon initial recognition.
Movements in investments at FVTPL during the year to 31 January 2011 are
summarised below.
Fixed asset investments:
Level 3: Unquoted equity Level 3:
investments Unquoted loan Total unquoted
investments investments
GBP'000 GBP'000 GBP'000
Valuation and
net book amount:
Book cost at 1 2,346
February 2010 4,316 6,662
Cumulative -
revaluation - -
Valuation at 1 2,346
February 2010 4,316 6,662
Movement in the
year:
Purchases at -
cost 109 109
Proceeds from (29)
the sale of
investments (240) (269)
Gain on (1)
realisation of
investments (5) (6)
Change in fair 2
value in year 193 195
Closing fair 2,318
value at 31
January 2011 4,373 6,691
Closing cost at
31 January 2011 2,316 4,180 6,496
Closing 2
unrealised
movement at 31
January 2011 193 195
Valuation at 31 2,318
January 2011 4,373 6,691
Level 3 valuations include assumptions based on non-observable market data, such
as discounts applied either to reflect fair value of financial assets held at
the price of recent investment, or, in the case of unquoted investments, to
adjust earnings multiples. The sensitivity of these valuations to a reasonable
possible change in such assumptions is given in note 16.
The loan and equity investments are considered to be one instrument due to them
being bound together. This is consistent with their investment policy.
Further details of the fixed asset investments held by the Company are shown
within the Investment Manager's Review on pages x to x.
11. Debtors
31 January 2011 31 January 2010
GBP'000 GBP'000
Prepayments and accrued income 92 42
92 42
=-------------------------------------------------------------------
12. Current Asset Investments
Current asset investments at 31 January 2011 comprised money market funds (31
January 2010: money market funds).
Level 1: money market funds
Total
GBP'000 GBP'000
Valuation and net book amount:
Book cost at 1 February 2010:
Money market funds 1,421
---------
1,421
Revaluation to 1 February 2010:
Money market funds -
---------
-
Valuation as at 1 February 2010 1,421
Movement in the year:
Purchases at cost: Money market
funds 1,819
---------
1,819
Disposal proceeds:
Money market funds (2,122)
---------
(2,122)
Profit in year on realisation of investments:
Money market funds 6
---------
6
Revaluation in year:
Money market funds -
---------
-
Valuation as at 31 January 2011 1,124
Cost at 31 January 2011:
Money market funds 1,124
---------
1,124
Revaluation to 31 January 2011:
Money market funds -
---------
-
Valuation as at 31 January 2011 1,124
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 31 January 2011 and 31 January 2010 there were no commitments in respect of
investments approved by the Manager but not yet completed.
13. Creditors: amounts falling due within one year
31 January 2011 31 January 2010
GBP'000 GBP'000
Accruals 40 52
40 52
=---------------------------------------------
14. Share capital
31 January 2011 31 January 2010
GBP'000 GBP'000
Authorised:
25,000,000 Ordinary shares of 10p 2,500 2,500
Allotted and fully paid up:
8,693,486 Ordinary shares of 10p (2010:
8,693,486) 869 869
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 out on page
x. The Company is not subject to any externally imposed capital requirements.
No shares were issued in the year (2010: nil).
No shares were bought back during the year (2010: 100,500).
15. Reserves
Capital Capital
reserve reserve
Special Capital gains/ holding
distributable redemption (losses) on gains/ Revenue
reserve* reserve disposal (losses) reserve*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
February 2010 7,343 16 (60) (129) 128
Profit on
ordinary
activities
after tax - - - - 132
Management fees
allocated as
capital
expenditure - - (125) - -
Prior period
holding
gains/losses
now realised - - (130) 130 -
Current period
gains/losses on
fair value of
investments - - - 195 -
Dividends paid (262) - - - (87)
Balance as at
31 January
2011 7,081 16 (315) 196 173
*Reserves available for distribution
All investments are designated as FVTPL from the time of acquisition, and all
capital gains or losses on investments so designated.
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 31 January 2011 there were no commitments in respect of investments approved
by the Manager but not yet completed.
Reserves available for potential distribution by way of a dividend are:
GBP'000
As at 1 February 2010 7,411
Movement in year (472)
As at 31 January 2011 6,939
The purpose of the special distributable reserve was to create a reserve which
will be capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a view to
narrowing the discount to net asset value at which the Company's ordinary shares
trade. In the event that the revenue reserve and capital reserve gains/(losses)
on disposal do not have sufficient funds to pay dividends, these will be paid
from the special distributable reserve.
16. Financial instruments and risk management
The Company's financial instruments comprise equity and fixed interest
investments, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy of
investing mainly in a portfolio of VCT qualifying unquoted securities whilst
holding a proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.
Classification of financial instruments
Apollo 1 held the following categories of financial instruments, all of which
are included in the balance sheet at fair value, at 31 January 2011:
31 January 2011 31 January 2010
GBP000 GBP000
Assets at fair value through profit or loss
Investments 6,691 6,662
Current asset investments 1,124 1,421
Total 7,815 8,083
Loans and receivables
Cash at bank 153 94
Accrued income 87 36
Total 240 130
Liabilities at amortised cost
Accruals and other creditors 40 52
Total 40 52
Fixed asset investments (see note 10) 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. As detailed in the
Investment Managers Review, the fair value of all other financial assets and
liabilities is represented by their carrying value in the balance sheet. The
Directors believe that the fair value of the assets held at the period-end is
equal to their book value.
In carrying on its investment activities, the Company is exposed to various
types of risk associated with the financial instruments and markets in which it
invests. The most significant types of financial risk facing the Company are
price risk, interest rate risk, credit risk and liquidity risk. The Company's
approach to managing these risks is set out below together with a description of
the nature and amount of the financial instruments held at the balance sheet
date.
Market risk
The Company's strategy for managing investment risk is determined with regard to
the Company's investment objective, as outlined on page x. The management of
market risk is part of the investment management process and is a central
feature of venture capital investment. The Company's portfolio is managed in
accordance with the policies and procedures described in the Corporate
Governance statement on pages x to x, having regard to the possible effects of
adverse price movements, with the objective of maximising overall returns to
shareholders. Investments in 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.
83.4% (31 January 2010: 81.6%) by value of the Company's net assets comprises
investments in unquoted companies held at fair value. The valuation methods
used by the Company include the application of a price/earnings ratio derived
from listed companies with similar characteristics, and consequently the value
of the unquoted element of the portfolio can be indirectly affected by price
movements on the London Stock Exchange. A 10% overall increase in the valuation
of the unquoted investments at 31 January 2011 would have increased net assets
and the total profit for the year by GBP669,100 (31 January 2010: GBP666,200) 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 the majority 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.
14.0% (31 January 2010: 17.4%) by value of the Company's net assets comprises of
money market funds held at fair value. A 1% overall increase in the valuation
of the money market funds at 31 January 2011 would have increased net assets and
the total profit for the year by GBP11,240 (31 January 2010: GBP14,210) an
equivalent change in the opposite direction would have reduced net assets and
the total profit for the year by the same amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates. All interest-bearing assets are held
at FVTPL.
Fixed rate
The table below summarises weighted average effective interest rates for the
fixed interest-bearing financial instruments:
As at 31 January 2011 As at 31 January 2010
Weighted
Weighted average
Total fixed average Total fixed time for
rate Weighted time for rate Weighted which
portfolio average which rate portfolio average rate is
by interest is fixed by interest fixed in
value GBP'000 rate % in years value GBP'000 rate % years
Unquoted
fixed-
interest
investments 2,268 13.20% 3.0 2,858 15.05% 3.0
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 31 January 2011 (31
January 2010: 0.5%). The amounts held in floating rate investments at the
balance sheet date were as follows:
31 January 2011 31 January 2010
GBP000 GBP000
Unquoted floating rate notes 1,500 1,455
Cash on deposit 1,277 1,515
2,777 2,970
Every 1% increase or decrease in the base rate would increase or decrease income
receivable from these investments and the total profit for the year by GBP27,770
(31 January 2010: GBP29,700)
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Company. The Investment Manager and the Board carry out a regular review of
counterparty risk. The carrying values of financial assets represent the maximum
credit risk exposure at the balance sheet date.
At 31 January 2011, the Company's financial assets exposed to credit risk
comprised the following:
31 January 2011 31 January 2010
GBP000 GBP000
Investments in floating rate instruments 1,500 1,455
Investments in fixed rate instruments 2,268 2,858
Cash on deposit 1,277 1,515
Accrued dividends and interest receivable 87 36
5,132 5,864
Credit risk relating to listed money market funds is mitigated by investing in a
portfolio of investment instruments of high credit quality, comprising major UK
institutions. Credit risk relating to loans to and preference shares in unquoted
companies is considered to be part of market risk.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians. Bankruptcy or insolvency
of a custodian could cause the Company's rights with respect to securities held
by the custodian to be delayed or limited.
Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.
The Company's interest-bearing deposit and current accounts are maintained with
HSBC Bank plc. 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 31 January 2011 or 31 January
2010.
Liquidity risk
The Company's financial assets include investments in unquoted equity securities
which are not traded on a recognised stock exchange and which generally may be
illiquid. As a result, the Company may not be able to realise some of its
investments in these instruments quickly at an amount close to their fair value
in order to meet its liquidity requirements, or to respond to specific events
such as deterioration in the creditworthiness of any particular issuer.
The Company's listed money market 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 maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses. At 31 January 2011
these investments were valued at GBP1,277,000 (31 January 2010: GBP1,515,000).
17. Post balance sheet events
The following events occurred between the balance sheet date and the signing of
these financial statements:
* 23 March 2011 - the Company disposed of part of GreenCo Services Limited for
GBP268,000 and on the same day invested a further GBP68,181 into the company.
* 13 March 2011 - the Company invested GBP124,000 into Evaki Power Limited
* 13 March 2011 - the Company invested GBP142,000 into Kala Power Limited.
18. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as at 31
January 2011 (2010: GBPnil).
19. Related party transactions
Matt Cooper, a non-executive Director of Octopus Apollo VCT 1 plc, is the
Chairman of Octopus Investments Limited. Octopus Apollo VCT 1 plc has employed
Octopus Investments throughout the year as Investment Manager. Apollo 1 has
paid Octopus GBP167,000 (2010: GBP160,000) in the year as a management fee and there
is GBPnil outstanding at the balance sheet date. The management fee is payable
quarterly in advance and is based on 2.0% of the net asset value calculated at
annual intervals as at 31 January. Octopus provides accounting and
administrative services to the Company, payable quarterly in advance for a fee
of 0.3% of the net asset value calculated at annual intervals as at 31 January.
In addition, Octopus also provides company secretarial services for an
additional fee of GBP7,500 per annum.
During the year GBP24,500 (2010: GBP23,500) was paid to Octopus Investments and
there is GBPnil outstanding at the balance sheet date, for the accounting and
administrative services.
No performance related incentive fee will be payable over the first five years.
Thereafter, Octopus will be entitled to an annual performance related incentive
fee. This performance fee is equal to 20% of the amount by which the NAV from
the start of the sixth accounting and subsequent accounting period exceeds
simple interest of the HSBC Bank plc base rate for the same period. The NAV at
the start of the sixth accounting period must be at least 100p. Any
distributions paid out by the Fund will be added back when calculating this
performance fee. The Board considers that the liability becomes due at the
point that the performance criteria are met; this has not been achieved and
therefore no liability has been recognised.
During the year to 31 January 2011, the Directors received the following
dividends from the Company:
Dividend received
Andrew Boyle (Chairman) GBP1,055
Matt Cooper GBP200
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 Apollo VCT1 plc via Thomson Reuters ONE
[HUG#1516437]
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