TIDMOPHX
Octopus Phoenix VCT plc
Final Results
8 February 2010
Octopus Phoenix VCT plc, managed by Octopus Investments Limited, today announces
the final results for the year ended 31 October 2009.
These results were approved by the Board of Directors on 5 February 2010.
You may view the Annual Report in full at www.octopusinvestments.com
<http://www.octopusinvestments.com/> by navigating to Services, Investor
Services, Venture Capital Trusts, Octopus Phoenix VCT plc. All other statutory
information will also be found there.
About Octopus Phoenix VCT plc
Octopus Phoenix VCT plc ("Phoenix", "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
AIM-quoted companies.
The Investment Manager is Octopus Investments Limited ("Octopus" or "Manager").
The Company was launched in November 2002 and raised over GBP11.3 million ( GBP10.8
million net of expenses) through an offer for subscription.
Phoenix raised more funds in 2005 in the form of a 'C' share issue (i.e. the
issue for subscription of a new class of share referred to as 'C' shares). In
total, Phoenix raised GBP5.1 million ( GBP5.0 million net of expenses) by the closing
date of the offer on 30 June 2005. The 'C' shares were converted into Ordinary
shares in March 2009 resulting in one single share class.
Financial Summary
+-----------------------------------------------------+-----------------------+
|Ordinary shares | Ordinary shares*|
| |Year to 31 October 2009|
+-----------------------------------------------------+-----------------------+
+-----------------------------------------------------+-----------------------+
|Net assets ( GBP'000s) | 7,988|
+-----------------------------------------------------+-----------------------+
|Return on ordinary activities after tax ( GBP'000s) | 817|
+-----------------------------------------------------+-----------------------+
|Net asset value per share | 42.8p|
+-----------------------------------------------------+-----------------------+
|Dividend per share - in respect of the year | 1.0p|
+-----------------------------------------------------+-----------------------+
|Cumulative dividends since launch - paid and proposed| 34.0p|
+-----------------------------------------------------+-----------------------+
+-------------------------+----------------------+---------------------+-------+
| | Ordinary shares| C shares| Total|
| | Year to 31 October| Year to 31 October| |
| | 2008| 2008| |
+-------------------------+----------------------+---------------------+-------+
|Net assets ( GBP'000s) | 4,824| 3,141| 7,965|
+-------------------------+----------------------+---------------------+-------+
|Return on ordinary | | |(8,385)|
|activities after tax | | | |
|( GBP'000s) | (5,763)| (2,622)| |
+-------------------------+----------------------+---------------------+-------+
|Net asset value per share| 43.4p| 58.6p| -|
+-------------------------+----------------------+---------------------+-------+
|Dividend per share - in | | | |
|respect of the year | 10.0p| 5.0p| -|
+-------------------------+----------------------+---------------------+-------+
|Cumulative dividends | | | |
|since launch - paid and | | | -|
|proposed | 33.0p| 12.0p| |
+-------------------------+----------------------+---------------------+-------+
*No comparatives are shown for Ordinary shares given the conversion of C shares
to Ordinary shares on 2 March 2009 which prevents the comparability of data. C
shares were converted into Ordinary shares at a conversion ratio of 1.3508
Ordinary shares for every C share.
The table below shows the movement in net asset value (NAV) of the Ordinary
shares and lists the dividends that have been paid since the launch of the
Company:
+---------------+-------+-----------------------+--------------------------+
|Period ended | NAV|Dividend paid in period|NAV + cumulative dividends|
+---------------+-------+-----------------------+--------------------------+
|31 October 2003|1 00.7p| -| 100.7p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2004 | 111.7p| 0.15p| 111.9p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2004|11 0.9p| -| 111.1p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2005 | 118.2p| 2.50p| 120.9p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2005| 97.9p| 4.00p| 1 04.6p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2006 |1 04.6p| -| 111.3p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2006|1 03.8p| 1 .00p| 111 .5p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2007 |1 22.4p| 3.35p| 1 33.4p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2007|1 06.0p| 6.00p| 1 23.0p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2008 | 75.9p| 6.00p| 98.9p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2008| 43.4p| 5.00p| 71 .4p|
+---------------+-------+-----------------------+--------------------------+
|30 April 2009 | 41 .2p| 5.00p| 74.2p|
+---------------+-------+-----------------------+--------------------------+
|31 October 2009| 42.8p| 1 .00p| 76.8p|
+---------------+-------+-----------------------+--------------------------+
The table below shows the movement in NAV of the 'C' shares and lists the
dividends that have been paid since the launch of the Company (based on
pre-conversion share classes):
+------------------------+-------+---------------------+-----------------------+
|Period ended | NAV|Dividend paid in | NAV + cumulative|
| | |period | dividends|
+------------------------+-------+---------------------+-----------------------+
|30 April 2005 | 94.9p| -| 94.9p|
+------------------------+-------+---------------------+-----------------------+
|31 October 2005 | 94.2p| -| 94.2p|
+------------------------+-------+---------------------+-----------------------+
|30 April 2006 |100.1 p| -| 100.1p|
+------------------------+-------+---------------------+-----------------------+
|31 October 2006 |105.1 p| -| 105.1p|
+------------------------+-------+---------------------+-----------------------+
|30 April 2007 |1 22.6p| 1 .0p| 1 23.6p|
+------------------------+-------+---------------------+-----------------------+
|31 October 2007 |11 0.8p| 3.0p| 11 4.8p|
+------------------------+-------+---------------------+-----------------------+
|30 April 2008 | 89.0p| 3.0p| 96.0p|
+------------------------+-------+---------------------+-----------------------+
|31 October 2008 | 58.6p| 2.0p| 67.6p|
+------------------------+-------+---------------------+-----------------------+
|30 April 2009 | 55.7p*| 3.0p| 67.7p|
+------------------------+-------+---------------------+-----------------------+
|* Net asset value | | | |
|adjusted for the | | | |
|conversion factor | | | |
|explained above. | | | |
+------------------------+-------+---------------------+-----------------------+
Chairman's Statement
I am pleased to present the Company's Annual Report for the year to 31 October
2009.
Despite the rally in share prices during the last 12 months, it has been a tough
trading environment for the VCT's investee companies. At the interim stage we
reported that the process of attributing more measured valuations to small
companies had begun, and this process continued throughout the second half of
the year, however valuations for the smaller quoted companies remain well below
historic levels. Stock markets historically rally ahead of the economy and the
market is now waiting for evidence that the UK economy is in a position to
participate in the recovery, so a period of consolidation is inevitable.
Over the 12 months to 31 October 2009, the return per Ordinary share (being the
change in NAV plus dividends paid in the period) was 12.4%. In comparison, the
FTSE All-Share Index increased by 18.4% and the FTSE AIM All-Share increased by
46.0%. The performance of AIM is a result of the significant outperformance of
the dominant Mining and Oil & Gas sectors, which are areas of the market VCTs
are unable to get exposure to through qualifying investments, and currently
account for over 30% of AIM.
Trading activity on the portfolio has been limited by the available deal flow in
VCT qualifying investment opportunities, as reported at the time of the
Half-Yearly Report. This has changed in recent months, with a marked increase in
deal activity since the Company's year end to the time of publishing this
report. The Manager has sought to take advantage of market conditions by making
a number of non qualifying investments which have enhanced recent performance.
Further details of these acquisitions and disposals during the year are listed
in the Investment Manager's Report on page 6 of this report.
Merger
The Boards of Octopus AIM VCT plc ("Octopus AIM") and Phoenix are pleased to
announce that they are in preliminary discussions on terms for the merger of
Octopus AIM and Phoenix (the "Companies"). Each of the Companies is currently
managed by Octopus Investments Limited.
If the merger proceeds it is likely to be by way of a "scheme of reconstruction"
pursuant to s.110 of the Insolvency Act 1986 (the "Scheme"). Under the proposed
Scheme, the assets and liabilities of Phoenix would be transferred to Octopus
AIM on a relative net asset value basis to create one larger VCT and Phoenix
shareholders would be issued with shares in Octopus AIM. This should produce a
significant reduction in running costs as well as other benefits.
The proposed transaction which, if implemented, is expected to be completed
before 30 June 2010, would require the approval of shareholders of each of the
Companies. Further information will be circulated to shareholders in due course.
Dividend
The Board paid an interim dividend of 1.0 pence per Ordinary share in the year
to 31 October 2009. However, due to the possible merger, the timeframe of
approving and paying a final dividend before the corporate action is uncertain.
Consequently no final dividend has been proposed. In order to adhere to the
Board's policy of striving to maintain a regular dividend flow, the Board has
declared a dividend of 1.0 pence per Ordinary share. This dividend will be paid
on 12 March 2010 to shareholders on the register on 12 February 2010.
C share conversion into Ordinary shares
The C shares were converted into Ordinary shares on 2 March 2009 at a conversion
ratio of 1.3508 Ordinary shares for every C share; this ratio was based on the
audited NAV of each of the two share classes as at 31 October 2008. As a result,
your Company now has only one class of share. Now that the two portfolios have
combined, shareholders will benefit from being invested in a larger and more
diversified portfolio.
Change of name
During May 2009, shareholders voted in favour of changing the name of the
Company from Phoenix VCT plc to Octopus Phoenix VCT plc. With a wide range of
Octopus funds now under management, it was considered appropriate that the name
of the Company should reflect the name of Octopus so as to avoid confusion in
the market place. Shareholders should be reminded, however, that current
Directors will remain in office.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice
concerning ongoing compliance with HM Revenue & Customs rules ("HMRC") and
regulations concerning VCTs. The Board has been advised that Phoenix is in
compliance with the conditions laid down by HMRC for maintaining approval as a
VCT. This is discussed further in shareholder Information on page 12.
A key requirement is for 70% of the entire portfolio to be invested in
qualifying investments by the end of the third accounting period following that
in which new share capital was subscribed. As at 31 October 2009, over 91 % of
the Ordinary share investment portfolio was invested in VCT qualifying
investments. The Board does not anticipate any issues in maintaining the
required investment level.
Outlook
Stock markets generally have recovered some poise but confidence remains
fragile. A looming General Election and little sign of tangible measures being
taken to address the very high level of Government debt is adding to investor
uncertainty. Undoubtedly things will become clearer once the new Administration
is formed and we would then expect investor interest to pick up, especially in
our universe of small growth companies.
Should the merger with Octopus AIM go ahead I believe the combined entity will
be well placed to benefit from the emerging environment.
Stephen Hazell-Smith Chairman
5 February 2010
Investment Manager's Review
Personal Service
At Octopus, we focus on both managing your investments and keeping you informed
throughout the investment process. We are committed to providing our investors
with regular and open communication. Our updates are designed to keep you
informed about the progress of your investment. During this time of economic
upheaval, we consider it particularly important to be in regular contact with
our investors and are working hard to manage your money in the current climate.
Octopus 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 over GBP230m in the VCT sector. Octopus has over 100
employees and has been voted as 'Best VCT Provider of the Year' by the financial
adviser community for the last four years.
Investment Policy
The objective of the Company is to invest in a broad range of AIM-quoted
companies in order to generate income and capital growth over the long-term. The
Company's investment strategy is designed to deliver absolute returns on its
investments rather than a performance measured against the market indices. On an
ongoing basis, it is intended that approximately 80% of the Company will be
invested in qualifying holdings across a range of sectors, with the remainder
held in cash and money market securities and bonds.
The AIM Market
Activity across the portfolio remained low during the year. Unfavourable market
conditions resulted in only two investments being exited during the period and
the anticipated deal flow from companies attempting to strengthen balance sheets
failed to materialise as the banks were rather more accommodating than expected.
We expect this will change during 2010, backed up by a marked increase in micro
cap fund raisings during the last few months of 2009.
We exited two investments during the year; a loss was realised on the position
in Optimisa plc as reported in the interim results, and Concateno plc received a
bid from Inverness Medical Inc in July at a modest premium to the cost price.
Details of these transactions are displayed in the table on page 8.
In March we sought to take advantage of the depressed valuations amongst smaller
companies and invested a total of GBP549,275 in 7 non qualifying companies we had
known well for a number of years (Immunodiagnostic Systems plc, Silverdell plc,
Matchtech Group plc, Advanced Computer Software Holdings plc, Maxima Holdings
plc, System C Healthcare plc and Hargreaves Services plc). As at 31 October,
these investments were showing an increase in fair value of GBP389,925.
Looking forward to 2010, significant challenges remain for the UK economy, and
the uncertainty of a General Election is likely to occupy investors' minds
during the first half of the year. However we continue to see significant value
at the micro cap end of the market; the valuation discount to large companies
persists, earnings expectations have been cut right back leaving scope for
upgrades during 2010 and the welcome return of M&A activity is likely to
continue this year as appetite for risk increases.
Investment Portfolio
%
equity
held by
Fair all
Cost as value % funds
AIM-quoted at 31 Cumulative at 31 equity managed
qualifying October change in October Movement held by by
investments Sector 2009 fair value 2009 in year Phoenix Octopus
=-------------------------------------------------------------------------------
Aerospace &
Cohort plc Defence 475 66 541 (17) 0.9 3.8
Brooks
Macdonald Speciality &
plc Other Finance 156 378 534 282 1.1 4.3
Clarity
Commerce Software &
Solutions Computer
plc Services 610 (207) 403 261 2.8 8.6
Pressure
Technologies Engineering &
plc Machinery 271 117 388 (44) 1.6 10.7
Vertu Motors General
plc Retailers 600 (220) 380 190 0.5 3.9
Support
Melorio plc Services 275 96 371 215 0.7 6.2
Access
Intelligence Support
plc Services 650 (294) 356 225 4.7 8.3
Media &
Hasgrove plc Entertainment 600 (300) 300 (200) 2.1 9.7
Inditherm
plc Chemicals 500 (228) 272 153 6.7 6.7
Brulines
(Holdings) Support
plc Services 234 23 257 10 0.7 7.6
CBG Group Speciality &
plc Other Finance 600 (345) 255 (305) 2.7 17.6
AutoClenz Support
Holdings plc Services 594 (404) 190 138 4.6 12.6
Staffline
Recuitment Support
Group plc Services 301 (113) 188 38 1.8 12.9
Cello Group Media &
plc Entertainment 501 (316) 185 (15) 0.9 8.7
Connaught Support
plc Services 240 (55) 185 108 0.0 0.0
Food
Producers &
Zetar plc Processors 160 1 161 25 0.6 3.6
Software &
Bond Int. Computer
Software plc Services 61 54 115 39 0.5 6.0
Support
Augean plc Services 500 (386) 114 (82) 0.3 4.7
Northern Construction
Bear plc & Builiding 449 (347) 102 (65) 1.7 6.7
Strategic Software &
Thought Computer
Group plc Services 262 (164) 98 (7) 0.8 4.5
Hexagon
Human Support
Capital plc Services 472 (400) 72 (120) 1.3 13.7
InterQuest Support
Group plc Services 77 (8) 69 14 0.5 5.9
Tanfield Engineering &
Group plc Machinery 150 (85) 65 13 0.3 2.7
Jelf Group Speciality &
plc Other Finance 128 (64) 64 (44) 0.2 1.2
Relax Group Speciality &
plc Other Finance 600 (543) 57 (46) 1.9 2.1
Vitesse Media &
Media plc Entertainment 100 (56) 44 (28) 0.5 3.9
Invocas Speciality &
Group plc Other Finance 130 (101) 29 - 0.4 1.2
Baydonhill Speciality &
plc Other Finance 200 (177) 23 13 1.4 1.4
The Real Food
Good Food Producers &
Company plc Processors 500 (479) 21 14 0.6 0.6
Software &
Computer
Invu plc Services 200 (182) 18 (35) 0.6 0.6
Support
Synarbor plc Services 500 (483) 17 - 0.8 0.8
Bright
Futures Support
Group plc Services 125 (120) 5 5 0.9 0.9
Vision Media Media &
plc Entertainment 544 (539) 5 (6) 0.7 0.7
Top Ten Leisure &
Holdings plc Hotels 200 (200) - (5) 0.8 0.8
=-------------------------------------------------------------------------------
Total AIM-quoted
qualifying investments 11,965 (6,081) 5,884 724
Non-qualifying investments 850 401 1,251 391
=-------------------------------------------------------------------------------
Total
investments 12,815 (5,680) 7,135 1,115
Money market
deposits 769 - 769
Cash at bank 40 - 40
Net current
assets 44 - 44
=-------------------------------------------------------------------------------
Total net
assets 7,988
Review of Ordinary Share Portfolio
At 31 October 2009, the Ordinary share portfolio comprised investments in 34
AIM-quoted companies. During the year, two investments were disposed of in their
entirety. Optimisa plc was sold in February as reported in the Half-Yearly
Report and Concateno plc received a cash bid by Inverness Medical Inc in July
which was subsequently accepted.
A summary of the realisations is shown below:
A summary of the realisations is shown below:
+-------------+---------------+---------------+---------------+----------------+
| | | Cost of | Proceeds of| Total|
| | Initial| investment | investment| gain/(loss)|
|Realisations |investment date| realised | ( GBP'000)| ( GBP'000)|
| | | ( GBP'000) | | |
+-------------+---------------+---------------+---------------+----------------+
|Optimisa plc | October 2007| 143| 16| (127)|
+-------------+---------------+---------------+---------------+----------------+
|Concateno plc| April 2005| 85| 118| 33|
+-------------+---------------+---------------+---------------+----------------+
|Total | | 228| 134| (94)|
+-------------+---------------+---------------+---------------+----------------+
Ten Largest Qualifying Portfolio Holdings
Quoted investments are valued in accordance with the accounting policy set out
on page 38 which takes account of the current industry guidelines for the
valuation of Venture Capital Portfolios and is compliant with International
Private Equity and Venture Capital Valuation guidelines and current financial
reporting statements.
Listed below are the ten largest qualifying investments by value as at 31
October 2009:
Cohort plc
Initial investment date: February 2006
Cost: GBP475,000
Valuation: GBP541 ,000
Equity held: 0.9%
Last audited accounts: April 2009
Profit before tax: GBP6.5 million
Net assets: GBP45.6 million
Cohort plc is a provider of independent defence technical services. The
company is focused on command, control, computing, communications and
intelligence systems and more recently has moved into crisis management for
non military customers.
Brooks Macdonald plc
Initial investment date: March 2005
Cost: GBP156,000
Valuation: GBP534,000
Equity held: 1.1%
Last audited accounts: June 2009
Profit before tax: GBP3.2 million
Net assets: GBP8.1 million
Brooks Macdonald plc is an integrated wealth management group with two
operating companies: Brooks Macdonald Asset Management is a specialist private
client fund manager and Brooks Macdonald Financial Consulting provides bespoke
financial planning. The group now has over GBP1.7 billion funds under
management.
Clarity Commerce Solutions plc
Initial investment date: April 2006
Cost: GBP610,000
Valuation: GBP403,000
Equity held: 2.8%
Last audited accounts: March 2009
Profit before tax: GBP1.1 million
Net assets: GBP5.9 million
Clarity Commerce Solutions plc provides technology solutions for the retail,
entertainment, hospitality and leisure sectors. These solutions span all
levels of consumer interaction from simple ticketing through to complicated
behaviour tracking and loyalty programmes.
Pressure Technologies plc
Initial investment date: June 2007
Cost: GBP271,000
Valuation: GBP388,000
Equity held: 1.6%
Last audited accounts: September 2009
Profit before tax: GBP5.1 million
Net assets: GBP14.1 million
Pressure Technologies plc is the holding company of Chesterfield Special
Cylinders ("CSC"). CSC designs, manufactures and offers testing and
refurbishment services for a range of speciality high pressure, seamless steel
gas cylinders for global energy and defence markets.
Vertu Motors plc
Initial investment date: December 2006
Cost: GBP600,000
Valuation: GBP380,000
Equity held: 0.5%
Last audited accounts: February 2009
Profit before tax: GBP0.1 million
Net assets: GBP57.2 million
Vertu Motors plc was formed in 2006 to consolidate the UK motor retail sector.
The management team has extensive experience in the sector having previously
held senior positions at Reg Vardy plc. The company has since made a number of
acquisitions and now operates 58 motor dealerships across the UK.
Melorio plc
Initial investment date: October 2007
Cost: GBP275,000
Valuation: GBP371,000
Equity held: 0.7%
Last audited accounts: March 2009
Profit before tax: GBP7.6 million
Net assets: GBP42.7 million
Melorio plc provides training, assessment and related services. The company
operates in three industry verticals; construction and infrastructure;
information and communication technology; and logistics and supply chain.
Access Intelligence plc
Initial investment date: December 2004
Cost: GBP650,000
Valuation: GBP356,000
Equity held: 4.7%
Last audited accounts: November 2008
Loss before tax: ( GBP4.4 million)
Net assets: GBP3.4 million
Access Intelligence plc is a software and computer services group of companies
providing business critical compliance and legislative driven services to both
public and private sectors on a recurring revenue basis.
Hasg rove plc
Initial investment date: November 2006
Cost: GBP600,000
Valuation: GBP300,000
Equity held: 2.1%
Last audited accounts: December 2008
Profit before tax: GBP4.2 million
Net assets: GBP26.1 million
Hasgrove plc is a pan European marketing and communications services group.
The group offers its clients consultancy and implementation solutions across a
range of disciplines including brand design, creative advertising, public
relations and public affairs.
Inditherm plc
Initial investment date: December 2003
Cost: GBP500,000
Valuation: GBP272,000
Equity held: 6.7%
Last audited accounts: December 2008
Loss before tax: ( GBP0.3 million)
Net assets: GBP3.5 million
Inditherm plc is engaged in the manufacture, installation and licensing of
specialised heating materials. Its patented low voltage, carbon based
conductive polymer technology provides a flexible heating material aimed at
the medical, industrial, construction and sports sectors.
Brulines (Holdings) plc
Initial investment date: October 2006
Cost: GBP234,000
Valuation: GBP257,000
Equity held: 0.7%
Last audited accounts: 31 March 2009
Profit before interest & tax: GBP5.0 million
Net assets: GBP5.8 million
Brulines (Holdings) plc designs and sells fluid monitoring systems to pubs and
bars. The company is the market leader in its field and manages information
from over 22,000 licences premises, over one in three pubs in the UK. The
system allows the landlord to reconcile the amount of beer being dispensed
against what is being delivered.
The following events occurred between the balance sheet date and the signing of
these financial statements:
* Disposal of Brooks Macdonald resulting in a GBP69,803 gain.
* Disposal of Brulines (Holdings) resulting in a GBP7,942 gain.
* Disposal of Matchtech Group resulting in a GBP24,428 gain.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.
Simon Rogerson
Chief Executive
Octopus Investments Limited
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each
financial year which give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company. Under that law the
Directors have elected to prepare financial statements in accordance with United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and 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
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.
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.
In so far as each of the Directors is aware:
* there is no relevant audit information of which the Company's auditor is
unaware
* the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that the
auditor is aware of that information
To the best of my knowledge:
* the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
* the management report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
On Behalf of the Board
Stephen Hazell-Smith Chairman
5 February 2010
Income Statement
Year to 31 October 2009
+------------------------------+-----+-----------------------------+-----------+
| | |Ordinary shares Revenue | |
| | |Capital | |
| |Notes| GBP'000 GBP'000|Total GBP'000|
+------------------------------+-----+------+----------------------+-----------+
|Gain on disposal of fixed | 10| -| 4| 4|
|asset investments | | | | |
+------------------------------+-----+------+----------------------+-----------+
|Gain on valuation of fixed | 10| -| | |
|asset investments | | | 1,115| 1,115|
+------------------------------+-----+------+----------------------+-----------+
|Income | 2| 96| -| 96|
+------------------------------+-----+------+----------------------+-----------+
|Investment management fees | 3| (43)| (129)| (172)|
+------------------------------+-----+------+----------------------+-----------+
|Other expenses | 4| (226)| -| (226)|
+------------------------------+-----+------+----------------------+-----------+
|Return on ordinary activities | | (173)| 990| 817|
|before tax | | | | |
+------------------------------+-----+------+----------------------+-----------+
|Taxation on ordinary | | -| -| -|
|activities | 6| | | |
+------------------------------+-----+------+----------------------+-----------+
|Return on ordinary activities | | (173)| 990| 817|
|after tax | | | | |
+------------------------------+-----+------+----------------------+-----------+
|Earnings per share - basic and| 8|(0.9)p| 5.3p| 4.4p|
|diluted | | | | |
+------------------------------+-----+------+----------------------+-----------+
* 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 accompanying notes are an integral part of the financial statements;
* 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.
Income Statement
| |
| | Year to 31 October 2008
| |
| | | |
| | Ordinary shares | 'C' shares | Total
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| |Revenue|Capital| Total|Revenue|Capital| Total|Revenue|Capital| Total
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
|Notes| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Gain on | | | | | | | | | |
disposal of| | | | | | | | | |
fixed asset| | | | | | | | | |
investments| 10| -| 82| 82| -| 65| 65| -| 147| 147
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Gain on | | | | | | | | | |
disposal of| | | | | | | | | |
current | | | | | | | | | |
asset | | | | | | | | | |
investments| 11| -| 1| 1| -| -| -| -| 1| 1
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Loss on | | | | | | | | | |
valuation | | | | | | | | | |
of fixed | | | | | | | | | |
asset | | | | | | | | | |
investments| 10| -|(5,680)|(5,680)| -|(2,578)|(2,578)| -|(8,258)|(8,258)
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Income | 2| 174| -| 174| 101| -| 101| 275| -| 275
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Investment | | | | | | | | | |
management | | | | | | | | | |
fees | 3| (69)| (206)| (275)| (36)| (108)| (144)| (105)| (314)| (419)
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
VAT on| | | | | | | | | |
Management | | | | | | | | | |
Fee Rebate | | 27| 79| 106| 9| 27| 36| 36| 106| 142
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Other | | | | | | | | | |
expenses | 4| (171)| -| (171)| (102)| -| (102)| (273)| -| (273)
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Return on | | | | | | | | | |
ordinary | | | | | | | | | |
activities | | | | | | | | | |
before tax | | (39)|(5,724)|(5,763)| (28)|(2,594)|(2,622)| (67)|(8,318)|(8,385)
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Taxation on| | | | | | | | | |
return on | | | | | | | | | |
ordinary | | | | | | | | | |
activities | 6| -| -| -| -| -| -| -| -| -
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
| | | | | | | | | |
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Return on | | | | | | | | | |
ordinary | | | | | | | | | |
activities | | | | | | | | | |
after tax | | (39)|(5,724)|(5,763)| (28)|(2,594)|(2,622)| (67)|(8,318)|(8,385)
=-----------+-----+-------+-------+-------+-------+-------+-------+-------+-------+--------
Earnings | | | | | | | | | |
per share -| | | | | | | | | |
basic and | | | | | | | | | |
diluted | 8| (0.4)p|(51.3)p|(51.7)p| (0.5)p|(46.8)p|(47.3)p| (0.9p)|(98.1)p|(99.0)p
| | | | | | | | | |
* the 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies.
* all revenue and capital items in the above statement derive from continuing
operations
* the accompanying notes are an integral part of the financial statements
* 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.
Reconciliation of Movements in Shareholders' Funds
Year to 31 October 2009
+-----------------------------------------+-------+
| | GBP'000 |
+-----------------------------------------+-------+
| Shareholders' funds at 1 November 2008 | 7,965 |
+-----------------------------------------+-------+
| Return on ordinary activities after tax | 817 |
+-----------------------------------------+-------+
| Net proceeds of share issue | 171 |
+-----------------------------------------+-------+
| Cancellation of own shares | (61) |
+-----------------------------------------+-------+
| Dividends paid | (904) |
+-----------------------------------------+-------+
| Shareholders' funds at 31 October 2009 | 7,988 |
+-----------------------------------------+-------+
Year to 31 October 2008
+---------------------------------------+---------------+----------+-----------+
| |Ordinary shares|'C' shares| |
| | GBP'000| GBP'000|Total GBP'000|
+---------------------------------------+---------------+----------+-----------+
|Shareholders' funds at 1 November 2007 | 11,945| 6,183| 18,128|
+---------------------------------------+---------------+----------+-----------+
|Return on ordinary activities after tax| (5,763)| (2,622)| (8,385)|
+---------------------------------------+---------------+----------+-----------+
|Net proceeds of share issue | 20| -| 20|
+---------------------------------------+---------------+----------+-----------+
|Cancellation of own shares | (146)| (141)| (287)|
+---------------------------------------+---------------+----------+-----------+
|Dividends paid | (1,232)| (279)| (1,511)|
+---------------------------------------+---------------+----------+-----------+
|Shareholders' funds at 31 October 2008 | 4,824| 3,141| 7,965|
+---------------------------------------+---------------+----------+-----------+
Balance Sheet
As at 31 October 2009
+-------------------------------------------------------+-----+----------+-----+
| |Notes| GBP'000| GBP'000|
+-------------------------------------------------------+-----+----------+-----+
|Fixed asset investments* Current assets: | 10| |7,135|
|Money market securities* Debtors | 11| | |
|Cash at bank | 12|769 150 40| |
+-------------------------------------------------------+-----+----------+-----+
| | | 959| |
+-------------------------------------------------------+-----+----------+-----+
|Creditors: amounts falling due within one year | 13| (106)| |
+-------------------------------------------------------+-----+----------+-----+
|Net current assets | | | 853|
+-------------------------------------------------------+-----+----------+-----+
|Net assets | | |7,988|
+-------------------------------------------------------+-----+----------+-----+
|Called-up equity share capital | 14| 1,868| |
+-------------------------------------------------------+-----+----------+-----+
|Share premium account | 15| 140| |
+-------------------------------------------------------+-----+----------+-----+
|Special distributable reserve | 15| 13,852| |
+-------------------------------------------------------+-----+----------+-----+
|Capital redemption reserve | 15| 178| |
+-------------------------------------------------------+-----+----------+-----+
|Capital reserve - gains/(losses) on disposal | 15| (1,756)| |
+-------------------------------------------------------+-----+----------+-----+
|Capital reserve - holding gains/(losses) | 15| (5,680)| |
+-------------------------------------------------------+-----+----------+-----+
|Revenue reserve | 15| (614| |
+-------------------------------------------------------+-----+----------+-----+
|Total equity shareholders' funds | | |7,988|
+-------------------------------------------------------+-----+----------+-----+
|Net asset value per share | 9| |42.8p|
+-------------------------------------------------------+-----+----------+-----+
|* at fair value through profit & loss | | |
+-------------------------------------------------------+----------------+-----+
|The accompanying notes are an integral part of this | | |
|statement. | | |
+-------------------------------------------------------+----------------+-----+
The financial statements were approved by the Directors and authorised for issue
on 5 February 2010 and are signed on their behalf by:
Stephen Hazell-Smith Chairman
Company No: 4575572
Balance Sheet (continued)
As at 31 October 2008
+--------------------+-----------------+----------+--------+-------------+-----+
| | | | 'C'| | |
| |Ordinary shares | | shares| | |
| Notes| GBP'000 GBP'000 | GBP'000| GBP'000|Total GBP'000 | GBP'000|
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Fixed asset |10| | 3,411 | | 1,962| |5,373|
|investments |11| | | | | | |
|Current assets: |12| | | | | | |
|Money market | | | | | | | |
|securities | | | | | | | |
|Debtors | |1,280 138| | | | | |
|Cash at bank | | 36| |971 42 207| |2,251 180 243| |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
| | | 1,454| | 1,220| | 2,674| |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Creditors: | | | | | | | |
|amounts falling |13| (41)| | (41)| | (82)| |
|due within one | | | | | | | |
|year | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Net current | | | 1,413 | | 1,179| |2,592|
|assets | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Net assets | | | 4,824 | | 3,141| |7,965|
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Called-up equity | | | | | | | |
|share capital |14| 1,111| | 536| | 1,647| |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Share premium |15| 18| | -| | 18| |
|account | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Special | | | | | | | |
|distributable |15| 9,500| | 4,672| | 14,172| |
|reserve | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Capital | | | | | | | |
|redemption |15| 127| | 34| | 161| |
|reserve | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Capital reserve -| | | | | | | |
|gains/(losses) on|15| 710| | 124| | 834| |
|disposal | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Capital reserve -| | | | | | | |
|holding |15| (6,292)| | (2,134)| | (8,426)| |
|gains/(losses) | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Revenue reserve |15| (350)| | (91)| | (441)| |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Total equity | | | | | | | |
|shareholders' | | | 4,824 | | 3,141| |7,965|
|funds | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
|Net asset value | 9| | 43.4p | | 58.6p| | |
|per share | | | | | | | |
+-----------------+--+---------+-------+----------+--------+-------------+-----+
Cash Flow Statement
Year to 31 October 2009
+-----------------------------------------------------+-------+---------+
| | Notes | GBP'000 |
+-----------------------------------------------------+-------+---------+
| Net cash outflow from operating activities | | (248) |
+-----------------------------------------------------+-------+---------+
| Capital expenditure and financial investment: | | |
+-----------------------------------------------------+-------+---------+
| Purchase of fixed asset investments | 10 | (805) |
+-----------------------------------------------------+-------+---------+
| Sale of fixed asset investments | 10 | 162 |
+-----------------------------------------------------+-------+---------+
| Dividends paid | | (904) |
+-----------------------------------------------------+-------+---------+
| Management of liquid resources: | | |
+-----------------------------------------------------+-------+---------+
| Purchase of cash equivalent investments | 11 | (3,813) |
+-----------------------------------------------------+-------+---------+
| Sale of cash equivalent investments | 11 | 4,324 |
+-----------------------------------------------------+-------+---------+
| Transfer of money market securities from 'C' shares | 11 | 971 |
+-----------------------------------------------------+-------+---------+
| Financing: | | |
+-----------------------------------------------------+-------+---------+
| Issue of equity (net of expenses) | | 171 |
+-----------------------------------------------------+-------+---------+
| Repurchase of own shares | | (61) |
+-----------------------------------------------------+-------+---------+
| Decrease in cash resources | | (203) |
+-----------------------------------------------------+-------+---------+
As at 31 October 2008
+---------------------------------+-----+---------------+----------+-----------+
| | |Ordinary shares|'C' shares| |
| |Notes| GBP'000| GBP'000|Total GBP'000|
+---------------------------------+-----+---------------+----------+-----------+
|Net cash outflow from operating | | | | |
|activities | | (290)| (42)| (332)|
+---------------------------------+-----+---------------+----------+-----------+
|Capital expenditure and financial| | | | |
|investment: | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Purchase of fixed asset | 10| (364)| (343)| (707)|
|investments | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Sale of fixed asset investments | 10| 1,246| 367| 1,613|
+---------------------------------+-----+---------------+----------+-----------+
|Dividends paid | | (1,232)| (279)| (1,511)|
+---------------------------------+-----+---------------+----------+-----------+
|Management of liquid resources: | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Purchase of cash equivalent | 11| (2,774)| (1,780)| (4,554)|
|investments | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Sale of cash equivalent | 11| 3,091| 1,892| 4,983|
|investments | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Financing: | | | | |
+---------------------------------+-----+---------------+----------+-----------+
|Issue of equity (net of expenses)| | 23| -| 23|
+---------------------------------+-----+---------------+----------+-----------+
|Repurchase of own shares | | (146)| (141)| (287)|
+---------------------------------+-----+---------------+----------+-----------+
|Decrease in cash resources | | (446)| (326)| (772)|
+---------------------------------+-----+---------------+----------+-----------+
Reconciliation of Net Cash Flow to Movement in Cash Resources
Year to 31 October 2009
+---------------------------+-----------------++-------------------------------+
| | || GBP'000|
+---------------------------+-----------------++-------------------------------+
|Decrease in cash resources | || |
|Movement in liquid | ||(203) (1,482) 2,494 |
|resources Opening net cash | || |
|resources | || |
+---------------------------+-----------------++-------------------------------+
|Net funds at 31 October | || 809|
|2009 | || |
+---------------------------+-----------------++-------------------------------+
|Net funds at 31 October | |+-------------------------------+
|2009 comprised: | || GBP'000|
+---------------------------+-----------------++-------------------------------+
|Cash at Bank | ||40 769 |
|Money Market Funds | || |
+---------------------------+-----------------++-------------------------------+
|Net funds at 31 October | || 809|
|2009 | || |
+---------------------------+-----------------++-------------------------------+
|Year to 31 October 2008 | Ordinary shares| 'C' shares Total|
| | GBP'000| GBP'000 GBP'000|
+---------------------------+-----------------+--------------------------------+
|Decrease in cash resources | | (326) (772)|
|Movement in liquid |(446) (316) 2,078| (112) (428)|
|resources Opening net cash | | 1,616 3,694|
|resources | | |
+---------------------------+-----------------+--------------------------------+
|Net funds at 31 October | 1,316| 1,178 2,494|
|2008 | | |
+---------------------------+-----------------+--------------------------------+
|Net funds at 31 October | Ordinary shares|'C' shares Total|
|2008 comprised: | GBP'000| GBP'000 GBP'000|
+---------------------------+-----------------+--------------------------------+
|Cash at Bank |36 1 ,280 | 207 243|
|Money Market Funds | | 971 2,251|
+---------------------------+-----------------+--------------------------------+
|Net funds at 31 October | 1,316| 1,178 2,494|
|2008 | | |
+---------------------------+-----------------+--------------------------------+
Reconciliation of Profit/(Loss) before Taxation to Cash Flow from Operating
Activities
Year ended 31 October 2009
+---------------------------------------------+---------+
| | GBP'000 |
+---------------------------------------------+---------+
| Profit on ordinary activities before tax | 817 |
+---------------------------------------------+---------+
| Gain on disposal of fixed asset investments | (4) |
+---------------------------------------------+---------+
| Gain on valuation fixed asset investments | (1,115) |
+---------------------------------------------+---------+
| Decrease in debtors | 30 |
+---------------------------------------------+---------+
| Increase in creditors | 24 |
+---------------------------------------------+---------+
| Outflow from operating activities | (248) |
+---------------------------------------------+---------+
For the year ended 31 October 2008
+---------------------------------------+---------------+----------+-----------+
| |Ordinary shares|'C' shares|Total GBP'000|
| | GBP'000| GBP'000| |
+---------------------------------------+---------------+----------+-----------+
|Loss on ordinary activities before tax | (5,763)| (2,622)| (8,385)|
+---------------------------------------+---------------+----------+-----------+
|Gain on disposal of fixed asset | (82)| (65)| (147)|
|investments | | | |
+---------------------------------------+---------------+----------+-----------+
|Gain on disposal of current asset | (1)| -| (1)|
|investments | | | |
+---------------------------------------+---------------+----------+-----------+
|Loss on valuation fixed asset | 5,680| 2,578| 8,258|
|investments | | | |
+---------------------------------------+---------------+----------+-----------+
|(Increase)/decrease in debtors | (51)| 68| 17|
+---------------------------------------+---------------+----------+-----------+
|Decrease in creditors | (73)| (1)| (74)|
+---------------------------------------+---------------+----------+-----------+
|Outflow from operating activities | (290)| (42)| (332)|
+---------------------------------------+---------------+----------+-----------+
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" 2009.
The principal accounting policies have remained unchanged from those set out in
the Company's 2008 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.
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
impairment losses are attributable to assets designated as being at fair value
through profit and loss.
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 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.
Investments are regularly reviewed to ensure that the carrying values are
appropriately stated. Quoted investments are valued in accordance with the
bid-price on the relevant date, unquoted investments are valued in accordance
with the current International Private Equity and Venture Capital (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.
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 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 investments quoted on a recognised stock exchange, fair value is
established by reference to the closing bid price on the relevant date or the
last traded price, depending upon convention of the exchange on which the
investment is quoted. This is consistent with the IPEVC guidelines. For the
avoidance of doubt, Octopus Phoenix VCT plc does not hold any unquoted
investments.
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.
In 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 appropriate capital reserve.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the choice of the Company. The current
asset investments are held for trading, are actively managed and the performance
is evaluated on a fair value basis in accordance with a documented investment
strategy. Information about them has to be provided internally on that basis to
the Board.
Income
Investment income includes interest earned on bank balances and income from
money market securities. Dividend income is shown net of any related tax credit.
Dividends receivable are brought into accounts when the right to receipt is
established. Fixed returns on debt and money market securities are recognised on
a time apportionment basis so as to reflect the effective yield, 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 realised 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.
Revenue and capital
The revenue column in the Income Statement includes all income and revenue
expenses of the Company. The capital column includes realised and unrealised
gains and losses on investments. Gains and losses arising from changes in fair
value are considered to be realised only to the extent that they are readily
convertible to cash in full at the balance sheet date.
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
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, 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 difference 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 investments in money market managed funds.
Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to
financial instruments.
We define capital as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the business
with optimising the return on equity. The Company currently has no borrowings
nor does it anticipate that it will drawdown any borrowing facilities in the
future to fund the acquisition of investments.
Financial instruments
The Company's principal financial assets are its investments and the policies in
relation to those assets are set out above. Financial liabilities and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this is classed
as an equity instrument. Dividends and distributions relating to equity
instruments are debited direct to equity.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established. This
liability is established when the dividends proposed by the Board are approved
by the shareholders.
2. Income
31 October 2009
GBP'000
Interest receivable on money market securities and bank
balances 25
Dividends received 71
96
Ordinary shares 'C' shares Total
31 October 2008 31 October 2008 31 October 2008
GBP'000 GBP'000 GBP'000
Interest receivable on money
market securities and bank
balances 9 28 37
Dividends received 165 73 238
174 101 275
3. Management fees
+---------------------------+---------------------------+---+
+---------------------------+---------------------------+---+
| | 31 October 2009 | |
+---------------------------+---------+---------+-------+---+
| | Revenue | Capital | Total | |
+---------------------------+---------+---------+-------+---+
| | GBP'000 | GBP'000 | GBP'000 | |
+---------------------------+---------+---------+-------+---+
| Investment management fee | 43 | 129 | 172 | |
+---------------------------+---------+---------+-------+---+
| Irrecoverable VAT thereon | - | - | - | |
+---------------------------+---------+---------+-------+---+
| | 43 | 129 | 172 | |
+---------------------------+---------+---------+-------+---+
For the purposes of the revenue and capital columns in the income statement, the
management fee (including VAT) 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, accounting, administration and
secretarial services to the Company under a management agreement which runs for
a period of five years with effect from 24 March 2005 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 basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.
In his budget statement on 12 March 2008, the Chancellor of the Exchequer
announced that the Finance Bill 2008 would contain draft legislation exempting
VCTs from VAT on management fees with effect from 1 October 2008. This
legislation was passed in July 2008 and, as such, all VCTs are now exempt from
paying VAT on management fees from this date. Therefore, VAT has not been
included on management fees since 1 November 2008 and a request has been
submitted to HMRC for a rebate for previous years.
.
4. Other expenses
31 October 2009
GBP'000
Accounting and administration services 59
Directors' remuneration 53
Fees payable to the Company's auditor for the audit of the
financial statements 15
Fees payable to the Company's auditor for other services - tax
compliance 3
Legal and professional expenses 3
Other expenses 93
226
31 October 2008 31 October 2008 31 October 2008
GBP'000 GBP'000 GBP'000
Accounting and administration
services 34 32 66
Directors' remuneration 33 17 50
Fees payable to the Company's
auditor for the audit of the
financial statements 10 5 15
Fees payable to the Company's
auditor for other services -
tax compliance 2 1 3
Other expenses 92 47 139
171 102 273
+------------------------------+---------------+---------------+---------------+
| | | | |
| | | | |
| | | | |
+------------------------------+---------------+---------------+---------------+
| | | | |
+------------------------------+---------------+---------------+---------------+
| | | | |
+------------------------------+---------------+---------------+---------------+
|5. Directors' remuneration | | |31 October 2009|
| | | | GBP'000|
+------------------------------+---------------+---------------+---------------+
|Directors' emoluments | | | |
|Mr S Hazell-Smith (Chairman) | | | |
|Mr M Cooper | | | 21|
|Mr T Morgan | | | 16 16|
+------------------------------+---------------+---------------+---------------+
| | | | 53|
+------------------------------+---------------+---------------+---------------+
| |Ordinary shares| 'C' shares| Total|
| |31 October 2008|31 October 2008|31 October 2008|
| | GBP'000| GBP'000| GBP'000|
+------------------------------+---------------+---------------+---------------+
+------------------------------+----+----+----+
| Directors' emoluments | | | |
+------------------------------+----+----+----+
| Mr S Hazell-Smith (Chairman) | 13 | 7 | 20 |
+------------------------------+----+----+----+
| Mr M Cooper | 10 | 5 | 15 |
+------------------------------+----+----+----+
| Mr T Morgan | 10 | 5 | 15 |
+------------------------------+----+----+----+
| | 33 | 17 | 50 |
+------------------------------+----+----+----+
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
(2008: three).
Tax on return on ordinary activities
The corporation tax charge for the year was GBPnil (2008: GBPnil).
Factors affecting the tax charge for the current year:
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 28% (2008: 29%). The differences are explained
below.
+------------------------------------------+++-----------------+
+------------------------------------------+++-----------------+
| ||| 31 October 2009 |
+------------------------------------------+++-----------------+
| Current tax reconciliation: ||| GBP'000 |
+------------------------------------------+++-----------------+
| Return on ordinary activities before tax ||| 817 |
+------------------------------------------+++-----------------+
| Current tax at 28% ||| 229 |
+------------------------------------------+++-----------------+
| Income not taxable for tax purposes ||| (332) |
+------------------------------------------+++-----------------+
| Unrelieved tax losses ||| 103 |
+------------------------------------------+++-----------------+
| Total current tax charge ||| - |
+------------------------------------------+++-----------------+
+------------------------------+---------------+---------------+---------------+
| |Ordinary shares| 'C' shares| Total|
+------------------------------+---------------+---------------+---------------+
| |31 October 2008|31 October 2008|31 October 2008|
+------------------------------+---------------+---------------+---------------+
|Current tax reconciliation: | GBP'000| GBP'000| GBP'000|
+------------------------------+---------------+---------------+---------------+
|Return on ordinary activities| | | |
|before tax | (5,763)| (2,622)| (8,385)|
+------------------------------+---------------+---------------+---------------+
|Current tax at 29% | (1,671)| (760)| (2,431)|
+------------------------------+---------------+---------------+---------------+
|Income not liable to tax | 1,595| 726| 2,321|
+------------------------------+---------------+---------------+---------------+
|Excess management charges | 76| 34| 110|
+------------------------------+---------------+---------------+---------------+
|Total current tax charge | -| -| -|
+------------------------------+---------------+---------------+---------------+
Excess management charges of GBP2,039,000 (2008: GBP1,671,000) have been carried
forward at 31 October 2009 and are available for offset against future taxable
income subject to agreement with HMRC. The Company has not recognised the
deferred tax asset of GBP571,000 (2008: GBP485,000) in respect of these excess
management charges.
Approved VCTs are exempt from tax on capital gains within the Company. Since the
Directors intend that the Company will continue to conduct its affairs so as to
maintain its approval as a VCT, no current deferred tax has been provided in
respect of any capital gains or losses arising on the valuation or disposal of
investments.
6. Dividends
31 October 2009
GBP'000
Interim dividend per share - (Ord share: 1.0p) 188
Ordinary shares 'C' shares Total
31 October 2008 31 October 2008 31 October 2008
GBP'000 GBP'000 GBP'000
Interim dividend per share 556 112 668
- (Ord share: 5.0p, 'C'
share: 2.0p)
Final proposed dividend - 556 161 717
(Ord share: 5.0p, 'C'
share: 3.0p)
8. Earnings per share
The total earnings per share is based on 18,677,965 (2008: 11,151,594 Ordinary
and 5,547,722 C) shares, being the weighted average number of shares in issue
during the year.
The revenue and capital earnings per share are based on 18,677,965 (2008:
11,151,594 Ordinary and 5,547,722 C) shares, being the weighted average number
of shares in issue during the year, and a revenue return for the year totalling
GBP(1 73,000) (31 October 2008: GBP(39,000) and GBP(28,000) for the Ordinary and C
shares respectively) and a capital return for the year totalling GBP990,000 (31
October 2008: GBP(5,724,000) and GBP(2,594,000) respectively).
There are no potentially dilutive capital instruments in issue and, therefore,
no diluted returns per share figures are relevant. The basic and diluted
earnings per share are therefore identical.
8. Net asset value per share
The calculation of net asset value per share as at 31 October 2009 is based on
18,677,616 Ordinary (2008: 11,111,439 Ordinary and 5,356,429 C) shares in issue
at that date.
10. Fixed asset investments
+--------------------------------------------------------------+---------------+
| |31 October 2009|
| | GBP'000|
+--------------------------------------------------------------+---------------+
|Valuation and net book amount: Book cost as at 1 November | |
|2008 Revaluation as at 1 November 2008 |13,795 (8,422) |
+--------------------------------------------------------------+---------------+
|Valuation at 1 November 2008 | 5,373|
+--------------------------------------------------------------+---------------+
|Movement in the year: | |
+--------------------------------------------------------------+---------------+
|Purchases at cost | 805|
+--------------------------------------------------------------+---------------+
|Disposal proceeds | (162)|
+--------------------------------------------------------------+---------------+
|Profit on disposal of investments - current year | 4|
+--------------------------------------------------------------+---------------+
|Re-valuation in year | 1,115|
+--------------------------------------------------------------+---------------+
|Valuation at 31 October 2009 | 7,135|
+--------------------------------------------------------------+---------------+
|Book cost at 31 October 2009 | 12,815|
+--------------------------------------------------------------+---------------+
|Revaluation to 31 October 2009 | (5,680)|
+--------------------------------------------------------------+---------------+
|Valuation at 31 October 2009 | 7,135|
+--------------------------------------------------------------+---------------+
Further details of the fixed asset investments held by the Company are shown
within the Investment Manager's Review on pages 6 to 11.
All 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 unrealised.
At 31 October 2009 and 31 October 2008 there were no commitments in respect of
investments approved by the Manager but not yet completed.
When the Company re-values its fixed and current asset investments, any gains or
losses are credited/charged to the capital reserve - holding gains/(losses); any
gains or losses crystallised on disposal of investments are allocated to the
capital reserve - gains/(losses).
When an investment is sold, any balance held on the capital reserve - unrealised
is transferred to the capital reserve - realised as a movement in reserves.
11. Current asset investments
Current asset investments at 31 October 2009 comprised money market funds and at
31 October 2008 comprised bonds and money market funds.
+---------------------------+--------------------------------------+-----------+
| | 31 October 2008| |
| | 31 October 2009 Ordinary shares 'C'| |
| | shares| |
| | Ordinary shares GBP'000 GBP'000|Total GBP'000|
+---------------------------+-------+-------+----------------------+-----------+
|Money market securities at | | | | |
|cost at 1 November: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Bonds | -| 402| 782| 1,184|
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds | 1,280| 1,188| 344| 1,532|
+---------------------------+-------+-------+----------------------+-----------+
|Revaluation as at 1 | | | | |
|November: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Bonds | -| 2| (43)| (41)|
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds | -| 4| -| 4|
+---------------------------+-------+-------+----------------------+-----------+
|Valuation as at 1 November | 1,280| 1,596| 1,083| 2,679|
+---------------------------+-------+-------+----------------------+-----------+
|Movement in the year: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Purchases at Cost: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds | 3,813| 2,774| 1,780| 4,554|
+---------------------------+-------+-------+----------------------+-----------+
|Disposal proceeds: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Bonds | -| (405)| (739)| (1,144)|
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds |(4,324)|(2,686)| (1,153)| (3,839)|
+---------------------------+-------+-------+----------------------+-----------+
|Gain in year on realisation| | | | |
|of investments: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Bonds | -| 1| -| 1|
+---------------------------+-------+-------+----------------------+-----------+
|Valuation as at 31 October | 769| 1,280| 971| 2,251|
+---------------------------+-------+-------+----------------------+-----------+
|Cost at 31 October: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds | 769| 1,280| 971| 2,251|
+---------------------------+-------+-------+----------------------+-----------+
|Revaluation to 31 October: | | | | |
+---------------------------+-------+-------+----------------------+-----------+
|Money Market Funds | -| -| -| -|
+---------------------------+-------+-------+----------------------+-----------+
|Valuation as at 31 October | 769| 1,280| 971| 2,251|
+---------------------------+-------+-------+----------------------+-----------+
+------------------------------+-----------------------------------------------+
| 12. Debtors | 31 October 2009|
| | GBP'000|
+------------------------------+---------------+---------------+---------------+
|Prepayments and accrued income| | | 150|
+------------------------------+---------------+---------------+---------------+
| |Ordinary shares| 'C' shares| Total|
| |31 October 2008|31 October 2008|31 October 2008|
| | GBP'000| GBP'000| GBP'000|
+------------------------------+---------------+---------------+---------------+
|Prepayments and accrued income|119 19 |42 - |161 19 |
|Other debtors | | | |
+------------------------------+---------------+---------------+---------------+
| | 138| 42| 180|
+------------------------------+---------------+---------------+---------------+
| 12. Creditors: amounts | | | |
| falling due within one | | |31 October 2009|
| year | | | GBP'000|
+------------------------------+---------------+---------------+---------------+
|Accruals | | |43 63 |
|Other creditors | | | |
+------------------------------+---------------+---------------+---------------+
| | | | 106|
+------------------------------+---------------+---------------+---------------+
| |Ordinary shares| 'C' shares| Total|
| |31 October 2008|31 October 2008|31 October 2008|
| | GBP'000| GBP'000| GBP'000|
+------------------------------+---------------+---------------+---------------+
+-----------------------------------------+----+---------------+---------------+
|Accruals |41 -| 22 19| 63 19|
|Other creditors | | | |
+-----------------------------------------+----+---------------+---------------+
| | 41| 41| 82|
+-----------------------------------------+----+---------------+---------------+
|14. Share capital | | | |
+-----------------------------------------+----+---------------+---------------+
| | |31 October 2009|31 October 2008|
+-----------------------------------------+----+---------------+---------------+
| | | GBP'000| GBP'000|
+-----------------------------------------+----+---------------+---------------+
|Allotted and fully paid up: | | | |
+-----------------------------------------+----+---------------+---------------+
|18,677,965 (2008: 11,111,439) Ordinary | | 1,868| 1,111|
|shares of 1 0p | | | |
+-----------------------------------------+----+---------------+---------------+
|nil (2008: 5,356,429) 'C' shares of 10p | | -| 536|
+-----------------------------------------+----+---------------+---------------+
| | | 1,868| 1,647|
+-----------------------------------------+----+---------------+---------------+
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 6. The
Company is not subject to any externally imposed capital requirements.
The Company has issued 493,876 Ordinary shares at a weighted average price of
36.5p per share. During the period the total nominal value of the shares issued
was GBP49,388 representing 1.6% of the issued share capital. The Company also
issued 7,235,216 Ordinary shares to previous C shareholders. The C shares were
converted at a rate of 1.3508 Ordinary shares for every C share on 3 March 2009.
The Company has purchased 162,915 Ordinary shares for cancellation at a weighted
average price of 37.4p. During the period the total cost of purchasing the
shares was GBP60,935, representing 0.1 % of the issued share capital.
15. Reserves
+---------------+--------+-------------+----------+---------+---------+--------+
| | | | | Capital| Capital| |
| | | | |reserve -|reserve -| |
| | | | | gains/| holding/| |
| | | Special| Capital| (losses)| gains/| |
| |Share |distributable|redemption| on| (losses)|Revenue |
| |premium | reserve| reserve| disposal| |reserve |
+---------------+--------+-------------+----------+---------+---------+--------+
|Ordinary shares| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000|
+---------------+--------+-------------+----------+---------+---------+--------+
|As at 31 | 18| 14,172| 161| 834| (8,426)| (441)|
|October 2008 | | | | | | |
+---------------+--------+-------------+----------+---------+---------+--------+
|C share | -| (189)| -| -| -| -|
|conversion | | | | | | |
+---------------+--------+-------------+----------+---------+---------+--------+
|Cancellation of| -| (61)| 17| -| -| -|
|own shares | | | | | | |
+---------------+--------+-------------+----------+---------+---------+--------+
|Issue of shares| 122| -| -| -| -| -|
|(net of costs) | | | | | | |
+---------------+--------+-------------+----------+---------+---------+--------+
|Return on | | | | | | |
|ordinary | | | | | | |
|activities | | | | | | |
|after tax | -| -| -| -| -| 817|
+---------------+--------+-------------+----------+---------+---------+--------+
|Management fees| | | | | | |
|allocated as | | | | | | |
|capital | | | | | | |
|expenditure | -| -| -| (129)| -| 129|
+---------------+--------+-------------+----------+---------+---------+--------+
|Prior period | | | | | | |
|gains/losses on| | | | | | |
|disposal | -| -| -| (1,631)| 1,631| -|
+---------------+--------+-------------+----------+---------+---------+--------+
|Current period | | | | | | |
|gains/losses on| | | | | | |
|disposal | -| -| -| 4| -| (4)|
+---------------+--------+-------------+----------+---------+---------+--------+
|Holding | | | | | | |
|gains/(losses) | | | | | | |
|on revaluation | -| -| -| -| 1,115| (1,115)|
+---------------+--------+-------------+----------+---------+---------+--------+
|Dividends paid | -| (70)| -| (834)| -| |
+---------------+--------+-------------+----------+---------+---------+--------+
|Balance at 31 | 140| 13,852| 178| (1,756)| (5,680)| (614)|
|October 2009 | | | | | | |
+---------------+--------+-------------+----------+---------+---------+--------+
When the Company revalues its investments during the period, any gains or losses
arising are credited/charged to the income statement. Gains/(losses) on
investments still held are then transferred to the capital reserve - holding
gains/(losses). When an investment is sold any balance held is transferred to
the capital reserve - gains/(losses) on disposal.
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 at which the Company's shares trade to net asset value.
15. Financial instruments and risk management
The Company's financial instruments comprise equity, 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 AIM-quoted securities whilst holding a proportion of its assets in
cash or near-cash investments in order to provide a reserve of liquidity.
Fixed and current asset investments (see notes 10 and 11) are valued at fair
value. For quoted investments this is either bid price or the latest traded
price, depending on the convention of the exchange on which the investment is
quoted. For the avoidance of doubt, the Company only invests in AIM quoted
investments. 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. Due to the nature of the assets held the Company does not face currency
risk.
Financial instruments and risk management
The Company's financial instruments comprise equity, 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 AIM-quoted securities whilst holding a proportion of its assets in
cash or near-cash investments in order to provide a reserve of liquidity.
Fixed and current asset investments (see notes 10 and 11) are valued at fair
value. For quoted investments this is either bid price or the latest traded
price, depending on the convention of the exchange on which the investment is
quoted. For the avoidance of doubt, the Company only invests in AIM quoted
investments. 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. Due to the nature of the assets held the Company does not face currency
risk.
Market risk
The Company's strategy for managing investment risk is determined with regard to
the Company's investment objective, as outlined on page 6. 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 22 to 25, having regard to the possible effects of
adverse price movements, with the objective of maximising overall returns to
shareholders. Investments in unquoted companies, by their nature, usually
involve a higher degree of risk than investments in companies quoted on a
recognised stock exchange, though the risk can be mitigated to a certain extent
by diversifying the portfolio across business sectors and asset classes. The
overall disposition of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance sheet date are set
out on page 7. An analysis of investments between debt and equity instruments is
given in note 10.
89% of Ordinary shares (31 October 2008: Ordinary shares 71% and C shares 63%)
by value of the Company's net assets comprises equity securities quoted on AIM.
A 5% increase in the bid price of these securities as at 31 October 2009 would
have increased net assets and the total return for the year by GBP357,000 (31
October 2008: Ordinary shares GBP171,000 and C shares GBP100,000); a corresponding
fall would have reduced net assets and the total return for the year by the same
amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates.
Floating rate
The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts and, where appropriate, within interest bearing money market
securities. The benchmark rate which determines the rate of interest receivable
on such investments is the bank base rate, which was 0.5% at 31 October 2009 (31
October 2008: 4.5%). The amounts held in floating rate investments at the
balance sheet date were as follows:
+--------------------------------------++-----------------+
| || Ordinary shares |
| || GBP000 |
| 31 October 2009 || |
+--------------------------------------++-----------------+
+--------------------------------------++-----------------+
| Cash on deposit & money market funds || 809 |
+--------------------------------------++-----------------+
| || 809 |
+--------------------------------------++-----------------+
++--------------------------------------+-----------------+----------+
|| | Ordinary shares | C shares |
|| 31 October 2008 | GBP000 | GBP000 |
++--------------------------------------+-----------------+----------+
|| | | |
++--------------------------------------+-----------------+----------+
|| Cash on deposit & money market funds | 1,316 | 1,178 |
++--------------------------------------+-----------------+----------+
|| | 1,136 | 1,178 |
+++-------------------------------------++----------------++---------+
+-+--------------------------------------+-----------------+---------+
A 1% increase in the base rate would increase income receivable on Ordinary
shares from these investments and the total return for the year by GBP8,000 (31
October 2008: GBP13,000)
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
credit risk. The carrying values of financial assets represent the maximum
credit risk exposure at the balance sheet date.
At 31 October 2009 the Company's financial assets exposed to credit risk
comprised the following:
+--------------------------------------++-----------------+
| 31 October 2009 || Ordinary shares |
+--------------------------------------++-----------------+
+--------------------------------------++-----------------+
| Cash on deposit & money market funds || 809 |
+--------------------------------------++-----------------+
| || 809 |
+--------------------------------------++-----------------+
+------------------------------------+---------------+--------+-----+
|31 October 2008 |Ordinary shares|C shares|Total|
+------------------------------------+---------------+--------+-----+
+------------------------------------+---------------+--------+-----+
|Cash on deposit & money market funds| 1,316| 1,178|2,494|
+------------------------------------+---------------+--------+-----+
| | 1,316| 1,178|2,494|
+------------------------------------+---------------+--------+-----+
Credit risk relating to listed money market securities is mitigated by investing
in a portfolio of investment instruments of high credit quality, comprising
securities issued by the UK Government and major UK companies and institutions.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians (Goldman Sachs
International in the case of listed money market securities and Charles Stanley
Limited in the case of AIM quoted equity securities). Bankruptcy or insolvency
of a custodian could cause the Company's rights with respect to securities held
by the custodian to be delayed or limited.
Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.
The Company's interest-bearing deposit and current accounts are maintained with
Goldman Sachs International and HSBC PLC.
There were no significant concentrations of credit risk to counterparties at 31
October 2009 or 31 October 2008. By cost, no individual investment exceeded
8.1% of the Company's net assets at 31 October 2009 (31 October 2008: Ordinary
shares 10.3% and C shares 10.8%).
Liquidity risk
The Company's financial assets include investments in AIM-quoted companies,
which by their nature; involve a higher degree of risk than investments on the
main market. As a result, the Company may not be able to realise some of its
investments in these instruments quickly at an amount close to their fair value
in order to meet its liquidity requirements, or to respond to specific events
such as deterioration in the creditworthiness of any particular issuer.
The Company's listed money market securities are considered to be readily
realisable as they are of high credit quality as outlined above.
The Company's liquidity risk is managed on a continuing basis by the Investment
Manager in accordance with policies and procedures laid down by the Board. The
Company's overall liquidity risks are monitored on a quarterly basis by the
Board.
The funds raised since incorporation are currently used to fund the Company's
primary objective of investing in venture capital opportunities which accord
with its investment strategy. As at 31 October 2009, some 92% (2008: Ordinary
shares 92% and C shares 81%) of the Ordinary share funds raised have been
utilised in this investment process. The remaining funds were primarily
represented by cash, money market securities and bonds shown as current asset
investments in the balance sheet.
The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses. At 31 October 2009
these investments were valued at GBP809,000 for Ordinary shares (31 October 2008:
Ordinary shares GBP1,316,000 and C shares GBP1,177,000).
17. Post balance sheet events
The following events occurred between the balance sheet date and the signing of
these financial statements:
Disposal of Brooks Macdonald resulting in a GBP69,803 gain.
Disposal of Brulines (Holdings) resulting in a GBP7,942 gain.
Disposal of Matchtech Group resulting in a GBP24,428 gain.
A dividend of 1 .0p per Ordinary share has been declared.
18. Contingencies, guarantees and financial commitments
A claim for the repayment of VAT suffered on management fees has been submitted
and a refund of GBPnil (2008: GBP142,000) has been recognised. There were no further
contingencies, guarantees or financial commitments as at 31 October 2009 (2008:
GBPnil).
19. Related party transactions
Matt Cooper, a non-executive Director of Octopus Phoenix VCT plc, is Chairman of
Octopus. Octopus Phoenix VCT plc has employed Octopus throughout the year as
Investment Manager. Octopus Phoenix VCT plc has paid Octopus GBP172,000 (2008:
GBP275,000) in the year as a management fee and there is GBPnil outstanding at the
balance sheet date. The management fee is payable quarterly in advance and is
based on 2.0% of the net asset value calculated at annual intervals as at 31
October. Octopus also provides accounting, administrative and secretarial
services to the Company, payable quarterly in advance for a fee of GBP50,000
(2008: Ordinary shares GBP25,000 and C shares GBP25,000). There was GBPnil outstanding
at the balance sheet date for the accounting and administrative services.
In addition, Octopus is entitled to an annual performance related incentive fee
which is equal to 20% of the amount by which the increase in the net asset value
attributable of the Fund in any accounting period and all prior accounting
periods, after adding back distributions made by the Fund, exceeds an amount
equal to simple interest on the gross proceeds raised by the Fund at a rate of
HSBC base rate plus 3%, less the amount of any performance fee paid in respect
of prior accounting periods. No performance fee was payable as at 31 October
2009 since the performance criteria has not been met. Furthermore, the Directors
do not consider it likely that the criteria will be met in the short to medium
term and therefore no accrual has been made in respect of these performance
fees.
For further information please contact:
Celia Whitten, Company Secretary
020 7710 2849
[HUG#1381722]
Oct Phoenix (LSE:OPHX)
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