TIDMOVC2
Octopus VCT 2 plc
Final Results
16 April 2014
Octopus VCT 2 plc, managed by Octopus Investments Limited ("Octopus"),
today announces its final results for the year ended 31 December 2013.
These results were approved by the Board of Directors on 16 April 2014.
You may, in due course, view the Annual Report in full at
www.octopusinvestments.com.
Financial Summary
As at As at
31 December 2013 31 December 2012
Net assets (GBP'000s) 19,337 18,180
Return on ordinary activities after tax
(GBP'000s) 1,222 132
Net asset value (NAV) per share 100.6p 94.2p
Proposed final dividend per share 2.5p* -
*This dividend, if approved by shareholders at the AGM, will be paid on
4 July 2014 to shareholders on the register on 6 June 2014.
Key Dates
Annual General Meeting
17 June 2014 at 11.30 a.m.
at 20 Old Bailey, London EC4M 7AN
Final dividend paid 4 July 2014
Half-yearly results to 30 June 2014 published
August 2014
Annual results to 31 December 2014 announced April 2015
Annual Report and financial statements published April 2015
Chairman's Statement
Introduction
I am pleased to present the Annual Report of Octopus VCT 2 plc for the
year ended 31 December 2013.
Performance
During the year, the Net Asset Value (NAV) of the Company has increased
from 94.2 pence per share to 100.6 pence per share, an increase of 6.8%.
This increase is largely due to revaluations of a majority of the 2011
vintage solar companies which are now fully operational and receiving
revenues from both electricity generation and Feed in Tariff incentives.
Dividend
Given the performance of your Company, your Board has proposed a final
dividend of 2.5 pence per share in respect of the year ended 31 December
2013. This dividend, if approved by shareholders at the AGM, will be
paid on 4 July 2014 to shareholders on the register on 6 June 2014.
Investment Portfolio
No new investments were made in the year to 31 December 2013. However
Game Development and Management was fully disposed of on 31 July 2013
for proceeds of GBP832,500 resulting in a loss of GBP167,500.
On 8 July 2013, a partial loan repayment of GBP34,132, plus all accrued
interest to date, was received from Shakti Power.
The Helaku Power loan of GBP960,057 was fully repaid, along with all
accrued interest, on 30 December 2013. However the Company retains its
equity holding in Helaku.
Buy-backs
During the period, the Company repurchased 78,385 shares at a price of
84.0p per share, a 10% discount to the NAV. Further details can be found
in Note 11 of the accounts.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice concerning ongoing compliance with HMRC rules and
regulations concerning VCTs. The Board has been advised that the
Company is compliant with the conditions laid down by HMRC for
maintaining provisional approval as a VCT.
The requirement under the VCT rules to have 70% of the Company's assets
represented by qualifying holdings by 31 December 2013 was achieved in
good time. Such qualifying investments amounted to 77.2%, as measured
by HMRC rules, at the year end. Having now achieved this important
milestone, the focus of the Company will be to maintain this whilst
continuing to meet the Company's investment objective of capital
preservation.
Alternative Investment Fund Managers Directive ("AIFMD")
AIFMD was introduced under EU Legislation to bring consistency of
reporting across all fund types. In accordance with this legislation,
the Company has applied to the Financial Conduct Authority ("FCA") to
register as its own Alternative Investment Fund Manager (AIFM). I
expect this authority to be granted by 22 July 2014 after which the
Company will be required to submit a return to the FCA on an annual
basis setting out investments made, principal exposures, liquidity and
risk management.
Annual General Meeting
I look forward to meeting as many shareholders as possible at our Annual
General Meeting on 17 June 2014 to be held at the offices of Octopus
Investments Limited, 20 Old Bailey, London, EC4M 7AN. The AGM will start
at 11.30 a.m.
Outlook
The economy has shown signs of recovery, with confidence slowly being
restored. We are particularly pleased with the performance of our solar
investments, with many seeing significant increases in their value in
the year, contributing to a considerable increase in the NAV.
Whilst the focus of this Company will remain on capital preservation and
any new investments will be approached with caution, your Board and
Investment Manager believe we can continue to see further progress in
the Company.
Ian Pearson
Chairman
16 April 2014
Investment Manager's Review
Personal Service
At Octopus we have a dual 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. The Company is managed by the Specialist Finance team at
Octopus.
Octopus is an award winning investment manager, established in 2000,
that has over GBP3.5 billion under management. Octopus has over 250
employees and was voted 'Best VCT Provider of the Year' by the financial
adviser community in 2006 to 2010. We currently manage over GBP428
million across 13 VCTs, more than any other provider in the industry,
and are expert in investing in UK smaller companies across a range of
funds, tax structures and risk/return mandates.
Portfolio Performance
As at 31 December 2013, the NAV stood at 100.6 pence per share, an
increase of 6.8% from the 94.2 pence per share NAV as at 31 December
2013. This is largely due to revaluations of a majority of the 2011
vintage solar companies which are now fully operational and receiving
revenues from both electricity generation and Feed in Tariff subsidies.
Portfolio Review
Game Development and Management Limited was fully disposed of on 31 July
2013 for proceeds of GBP832,500 resulting in a loss of GBP167,500.
In addition loan repayments were received in the year from Shakti Power
and Helaku Power, resulting in a total of GBP1,145,888 being repaid to
the Company, including the interest.
On 8 July 2013, a partial loan repayment of GBP34,132, plus all accrued
interest to date, was received from Shakti Power Limited.
The Helaku Power Limited loan of GBP960,057 was fully repaid, along will
all accrued interest, on 30 December 2013. However the Company retains
its equity holding in Helaku.
Outlook
We are delighted to have seen an improvement in the value of the
portfolio, particularly within the solar investments. This, combined
with the revenue profits of the Company, has led to a considerable
improvement in the NAV over the course of the year to 31 December 2013.
This in turn has enabled the Company to propose its first dividend.
Your Investment Manager is confident we can continue to see further
progress in the Company.
If you have any questions on any aspect of your investment, please call
one of the team on 0800 316 2295.
Benjamin Davis
Octopus Investments Limited
16 April 2014
Investment Portfolio
Movement % equity
Investment in fair Fair held by
cost as at value to value as all
31 31 at 31 % equity funds
December December December Movement held by managed
2013 2013 2013 in year the by
Investments Sector (GBP'000) (GBP'000) (GBP'000) (GBP'000) Company Octopus
Sula Power
Limited Solar 1,000 224 1,224 224 32.0% 100.0%
5AM Music
Limited Media 1,000 - 1,000 - 49.9% 100.0%
Borro Loan 2 Consumer
Limited * Finance 1,000 - 1,000 - 0.0% 0.0%
Ground
Superior Heat Source
Limited Heat 1,000 - 1,000 - 25.0% 100.0%
Winnipeg Heat Anaerobic
Limited Digestion 1,000 - 1,000 - 25.0% 100.0%
Howbery Solar
Park Limited Solar 600 76 676 76 32.0% 64.0%
Aashman Power
Limited Solar 500 113 613 113 17.0% 100.0%
Donoma Power
Limited Solar 500 113 613 113 25.0% 100.0%
Meri Power
Limited Solar 500 113 613 113 17.0% 100.0%
Kala Power
Limited Solar 500 112 612 112 18.0% 100.0%
Tonatiuh
Trading 1
Limited Solar 500 112 612 112 21.0% 100.0%
Helaku Power
Limited Solar 500 101 601 101 25.0% 100.0%
Gnowee Power
Limited Solar 500 90 590 90 18.0% 100.0%
Nima Power
Limited Solar 500 90 590 90 13.0% 100.0%
Palk Power
Limited Solar 500 90 590 90 19.0% 100.0%
Tuwale Power
Limited Solar 500 90 590 90 13.0% 100.0%
Acquire Your
Business Business
Limited Services 578 (57) 521 (57) 32.0% 100.0%
Cyrah Power
Limited Solar 500 - 500 - 17.0% 100.0%
Evaki Power
Limited Solar 500 - 500 - 17.0% 100.0%
Grian Power
Limited Solar 500 - 500 - 13.0% 100.0%
Intina Power
Limited Solar 500 - 500 - 13.0% 100.0%
Teruko Power
Limited Solar 500 - 500 - 18.0% 100.0%
Tonatiuh
Trading 2
Limited Solar 500 - 500 - 18.0% 100.0%
Yata Power
Limited Solar 500 - 500 - 17.0% 100.0%
Atlantic
Screen
International
Limited Media 400 23 423 23 20.0% 100.0%
Shakti Power
Limited * Solar 393 - 393 - 0.0% 100.0%
Total qualifying
investments 15,471 1,290 16,761 1,290
Cash at bank 2,567
Debtors less
creditors 9
Total net
assets 19,337
*These are 100% debt investments
Valuation Methodology
Initial measurement
Financial assets are measured at fair value. The initial best estimate
of fair value of a financial asset that is either quoted or not quoted
in an active market is the transaction price (i.e. cost).
Subsequent measurement
Subsequent adjustment to the fair value of unquoted investments has been
made using sector multiples where applicable, based on information as at
31 December 2013. In some cases the multiples have been compared to
equivalent companies where it is believed that this is more appropriate
than a sector multiple. In instances where an investment has
predictable future cash flows, discounted cash flow valuations are used
to support the fair value.
In accordance with the International Private Equity and Venture Capital
(IPEVC) valuation guidelines investments made within 12 months are
usually kept at cost unless performance indicates that fair value has
changed.
If you would like to find out more regarding the IPEVC valuation
guidelines, please visit their website at:
www.privateequityvaluation.com.
Review of Investments
Unquoted investments are valued in accordance with the accounting policy
set out on page X, which takes account of current industry guidelines
for the valuation of venture capital portfolios and is compliant with
IPEVC valuation guidelines and current financial reporting standards.
Listed below are the ten largest investments as at 31 December 2013:
Top Ten Holdings
Sula Power Limited
Sula Power Limited constructed and operates a solar renewable energy
site at a carefully selected location in Beccles, Suffolk.
Initial investment date: March 2011
Cost: GBP1,000,000
Valuation: GBP1,224,000
Voting rights held by Company: 32%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 31
December 2012
Turnover GBP468,000
Profit before tax: GBP38,000
Net assets: GBP2,914,000
5AM Music Limited
5AM Music Limited is managed by the Cutting Edge Group and commissions
and owns copyrights to music scores for films and television projects.
Initial investment date: April 2012
Cost: GBP1,000,000
Valuation: GBP1,000,000
Voting rights held by Company: 49.9%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited accounts:
30 June 2012
Turnover GBPnil
Loss before tax: GBP133,000
Net assets: GBP1,865,000
Borro Loan 2 Limited
Borro Loan 2 Limited is a consumer finance company which provides short
term loans secured against high value assets.
Initial investment date: March 2011
Cost: GBP1,000,000
Valuation: GBP1,000,000
Voting rights held by Company: 0%*
Equity held by all funds managed by Octopus: 0%*
Last submitted audited accounts: 31
December 2012
Turnover GBP3,809,000*
Profit before tax: GBPnil*
Net assets: GBP1*
*Borro Loan 2 Limited is the loan book Company and 100% subsidiary of
'Borro Limited', a company registered in England and whose results are
publically available from Companies House.
Superior Heat Limited
Superior Heat Limited is a company which has constructed and operates
ground source heat pumps in two selected locations in Carlisle and East
Kilbride, Scotland.
Initial investment date: April 2012
Cost: GBP1,000,000
Valuation: GBP1,000,000
Voting rights held by Company: 25%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 28
February 2013
Turnover GBP95,000
Loss before tax: GBP149,000
Net assets: GBP450,915
Winnipeg Heat Limited
Winnipeg Heat Limited is in the process of constructing, and will
operate, an anaerobic digestion plant in Yorkshire.
Initial investment date: April 2012
Cost: GBP1,000,000
Valuation: GBP1,000,000
Voting rights held by Company: 25%
Equity held by all funds managed by Octopus: 100%
Last submitted unaudited accounts:
28 February 2013
Turnover GBP0
Profit before tax: GBP87
Net assets: GBP1,200,000
Howbery Solar Park Limited
Howbery Limited constructed and operates a solar renewable energy site
at a carefully selected location in Wallingford, Oxfordshire.
Initial investment date: April 2011
Cost: GBP600,000
Valuation: GBP676,000
Voting rights held by Company: 32%
Equity held by all funds managed by Octopus: 64%
Last submitted audited accounts: 31
December 2012
Turnover GBP302,000
Profit before tax: GBP147,000
Net assets: GBP2,016,000
Aashman Power Limited
Aashman Power Limited constructed and operates a solar renewable energy
site at a carefully selected location in Wilburton, Cambridgeshire.
Initial investment date: March 2011
Cost: GBP500,000
Valuation: GBP613,000
Voting rights held by Company: 17%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 31
December 2012
Turnover GBP1,795,000
Loss before tax: GBP536,000
Net assets: GBP1,527,000
Donoma Power Limited
Donoma Power Limited constructed and operates a solar renewable energy
site at a carefully selected location in Hawton, Nottinghamshire.
Initial investment date: April 2011
Cost: GBP500,000
Valuation: GBP613,000
Voting rights held by Company: 25%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 31
December 2012
Turnover GBP1,707,000
Loss before tax: GBP502,000
Net assets: GBP1,532,000
Meri Power Limited
Meri Power Limited constructed and operates a solar renewable energy
site at a carefully selected location in Bodmin, Cornwall.
Initial investment date: April 2012
Cost: GBP500,000
Valuation: GBP613,000
Voting rights held by Company: 17%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 31
December 2012
Turnover GBP552,000
Loss before tax: GBP183,000
Net assets: GBP2,474,000
Kala Power Limited
Kala Power Limited constructed and operates a solar renewable energy
site at a carefully selected location in Pillaton, Cornwall.
Initial investment date: March 2011
Cost: GBP500,000
Valuation: GBP612,000
Voting rights held by Company: 18%
Equity held by all funds managed by Octopus: 100%
Last submitted audited accounts: 31
December 2012
Turnover GBP1,768,000
Loss before tax: GBP500,000
Net assets: GBP1,490,000
Income Statement
Year to 31 December 2013
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
(Loss)/gain on disposal of current asset
investments 8 - (168) (168)
Fixed asset investment holding
gains/(losses) 8 - 1,290 1,290
Other income 2 388 - 388
Other expenses 3 (263) - (263)
Return on ordinary activities before tax 125 1,122 1,247
Taxation on return on ordinary activities 5 (25) - (25)
Return on ordinary activities after tax 100 1,122 1,222
Return per share - basic and diluted 6 0.5p 5.8p 6.3p
-- The 'Total' column of this statement is the profit and loss account of
the Company; the supplementary revenue return and capital return columns
have been prepared under guidance published by the Association of
Investment Companies
-- All revenue and capital items in the above statement derive from
continuing operations
-- The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds
The Company has no recognised gains or losses other than the results for
the year as set out above.
The accompanying notes form an integral part of the financial
statements.
Income Statement
Year to 31 December 2012
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
(Loss)/gain on disposal of current asset
investments 8 - - -
Fixed asset investment holding
gains/(losses) 8 - - -
Other income 2 365 - 365
Other expenses 3 (246) - (246)
Return on ordinary activities before tax 119 - 119
Taxation on return on ordinary activities 5 13 - 13
Return on ordinary activities after tax 132 - 132
Return per share - basic and diluted 6 0.7p - 0.7p
-- The 'Total' column of this statement is the profit or loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies
-- All revenue and capital items in the above statement derive from
continuing operations
-- The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds
The Company had no recognised gains or losses other than the results for
the period as set out above.
The accompanying notes form an integral part of the financial
statements.
Reconciliation of Movements in Shareholders' Funds
Year to 31
Year to 31 December 2013 December 2012
GBP'000 GBP'000
Shareholders' funds at start of year 18,180 18,048
Return on ordinary activities after
tax 1,222 132
Purchase of own shares (65) -
Shareholders' funds at end of year 19,337 18,180
The accompanying notes form an integral part of the financial
statements.
Balance Sheet
As at 31 December As at 31 December
2013 2012
Notes GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset investments* 8 16,761 17,465
Current assets:
Debtors 9 86 95
Cash at bank 2,567 687
2,653 782
Creditors: amounts falling due
within one year 10 (77) (67)
Net current assets 2,576 715
Net assets 19,337 18,180
Called up equity share capital 11 193 193
Special distributable reserve 12 17,981 18,047
Capital redemption reserve 12 1 -
Capital reserve - losses on
disposals 12 (168) -
-
holding
gains 12 1,290 -
Revenue reserve 12 40 (60)
Total shareholders' funds 19,337 18,180
Net asset value per share 7 100.6p 94.2p
*Held at fair value through profit or loss
The statements were approved by the Directors and authorised for issue
on 16 April 2014 and are signed on their behalf by:
Ian Pearson
Chairman
Company No: 07484406
The accompanying notes form an integral part of the financial
statements.
Cash Flow Statement
Year to 31 December Year to 31 December
2013 2012
GBP'000 GBP'000
Net cash
inflow/(outflow) from
operating activities 119 (194)
Financial investment:
Purchase of fixed asset
investments 8 - (6,450)
Sale of fixed asset
investments 8 1,826 638
Taxation - -
Financing:
Purchase of own shares 11 (65) -
Increase/(decrease) in
cash resources at bank 1,880 (6,006)
The accompanying notes form an integral part of the financial
statements.
Reconciliation of Return before Taxation to Cash Flow
from Operating Activities
Year to 31 December 2013 Year to 31 December 2012
GBP'000 GBP'000
Return on ordinary
activities before tax 1,247 119
Loss on disposal of fixed
asset investments 168 -
Gain on valuation of fixed
asset investments (1,290) -
Decrease in debtors (3) (29)
Increase in creditors (3) (284)
Inflow/(outflow) from
operating activities 119 (194)
Reconciliation of Net Cash Flow to Movement in Net
Funds
Year to 31 December 2013 Year to 31 December 2012
GBP'000 GBP'000
Increase/(decrease) in
cash resources at bank 1,880 (6,006)
Opening net funds 687 6,693
Net funds at 31 December 2,567 687
Net funds comprised:
Year to 31 December 2013 Year to 31 December 2012
GBP'000 GBP'000
Cash at bank 2,567 687
Net funds at 31 December 2,567 687
The accompanying notes form an integral part of the financial
statements.
Notes to the Financial Statements
1. Principal accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain
financial instruments, and in accordance with UK Generally Accepted
Accounting Practice (UK GAAP), and the Statement of Recommended Practice
(SORP) 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' (revised 2009). A summary of the principal accounting
policies is set out below.
The Company's business activities and the factors likely to affect its
future development, performance and position are set out in the
Chairman's Statement and Investment Manager's Review on pages X to X.
Further details on the management of financial risk may be found in note
13 to the Financial Statements.
The Board receives regular reports from the Investment Manager and the
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. The assets of the Company consist of cash which is readily
realisable (13.3% of net assets) and accordingly, the Company has
adequate financial resources to continue in operational existence for
the foreseeable future. Thus, as no material uncertainties leading to
significant doubt about going concern have been identified, it is
appropriate to continue to adopt the going concern basis in preparing
the financial statements.
The Company presents its income statement in a three column format to
give shareholders additional detail of the performance of the Company,
split between items of a revenue or capital nature.
The preparation of the financial statements requires management to make
judgements and estimates that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. Estimates
and assumptions mainly relate to the fair valuation of the fixed asset
investments particularly those that are unquoted investments. Estimates
are based on historical experience and other assumptions that are
considered reasonable under the circumstances. The estimates and the
assumptions are under continuous review with particular attention paid
to the carrying value of the investments.
Capital valuation policies are those that are most important to the
depiction of the Company's financial position and that require the
application of subjective and complex judgements, often as a result of
the need to make estimates about the effects of matters that are
inherently uncertain and may change in subsequent periods. The critical
accounting policies that are declared will not necessarily result in
material changes to the financial statements in any given period but
rather contain a potential for material change. The main accounting and
valuation policies used by the Company are disclosed below. Whilst not
all of the significant accounting policies require subjective or complex
judgements; the Company considers that the following accounting policies
should be considered critical.
The Company has designated all fixed asset investments as being held at
fair value through profit or loss; therefore all gains and losses
arising from investments held are attributable to financial assets held
at fair value through profit or loss. Accordingly, all interest income,
fee income, expenses and investment gains and losses are attributable to
assets designated as being at fair value through profit or loss.
Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Quoted investments are valued in accordance with
the bid-price on the relevant date, unquoted investments are valued in
accordance with current IPEVC valuation guidelines, although this does
rely on subjective estimates such as appropriate sector earnings
multiples, forecast results of investee companies, asset values of
subsidiary companies and liquidity or marketability of the investments
held.
Although the Company believes that the assumptions concerning the
business environment and estimate of future cash flows are appropriate,
changes in estimates and assumptions could require changes in the stated
values. This could lead to additional changes in fair value in the
future.
Fixed Asset Investments
Purchases and sales of investments are recognised in the financial
statements at the date of the transaction (trade date) at cost.
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 is provided internally on that basis to the
Board. Accordingly, as permitted by FRS 26, the investments are
designated as fair value through profit or loss (FVTPL) on the basis
that they qualify as a group of assets managed, and whose performance is
evaluated, on a fair value basis in accordance with a documented
investment strategy. The Company's investments are measured at
subsequent reporting dates at fair value, with the holding gains and
losses recorded in the income statement each year. In accordance with
the investment strategy, the investments are held with a view to
long-term capital growth and it is therefore possible that individual
holdings may increase in value to a point where they represent a
significantly higher proportion of total assets than the original cost.
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 the convention of
the exchange on which the investment is quoted. This is consistent with
the IPEVC valuation guidelines.
In the case of unquoted investments, fair value is established by using
measures of value such as the price of recent transactions, earnings
multiple and net assets. This is consistent with IPEVC valuation
guidelines.
Gains or losses arising from the changes in fair value of investments at
the period end are recognised as part of the capital return within the
income statement and allocated to the capital reserve - investment
holding gains/(losses).
In the preparation of the valuations of assets the Directors are
required to make judgements and estimates that are reasonable and
incorporate their knowledge of the performance of the investee
companies.
Other income
Investment income includes interest earned on bank balances and money
market funds and includes income tax withheld at source.
Fixed returns on debt and money market funds 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 is charged 25% to the revenue account and 75% to
the capital reserve to reflect, in the Directors' opinion, the expected
long-term split of returns in the form of income and capital gains
respectively from the investment portfolio.
The transaction costs incurred when purchasing or selling assets are
written off to the income statement in the period that they occur.
Revenue and capital
The revenue column of the income statement includes all income and
revenue expenses of the Company. The capital column includes gains and
losses on disposal of investments and on holding investments. Gains and
losses arising from changes in fair value of investments are recognised
as part of the capital return within the income statement.
Taxation
Corporation tax payable is applied to profits chargeable to corporation
tax, if any, at the current rate. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and
revenue return on the 'marginal' basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the balance
sheet date or where transactions or events have occurred at that date
that will result in an obligation to pay more, or a right to pay less
tax. This is with the exception that deferred tax assets are recognised
only to the extent that the Directors consider that it is more likely
than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in
hand and deposits repayable on demand, less overdrafts payable on
demand. Liquid resources are current asset investments which are
disposable without curtailing or disrupting the business and are either
readily convertible into known amounts of cash at or close to their
carrying values or traded in an active market. Liquid resources
comprise term deposits of less than one year (other than cash),
government securities, investment grade bonds and investments in money
market managed funds, as well as OEICs.
Loans and receivables
The Company's loans and receivables are initially recognised at fair
value and subsequently measured at amortised cost using the effective
interest method.
Financing strategy and capital structure
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.
The Company does not have any externally imposed capital requirements.
The value of the managed capital is indicated in note 12. The Board
considers the distributable reserves and the total return for the year
when recommending a dividend. In addition, the Board is authorised to
make market purchases up to a maximum of 5 per cent of the issued
ordinary share capital of the Company in accordance with Special
Resolution 10 in order to maintain sufficient liquidity in the Company.
Capital management is monitored and controlled using the internal
control procedures set out on page X of this report. The capital being
managed includes equity and fixed-interest investments, cash balances
and liquid resources including debtors and creditors.
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 for interim dividends when
they are paid, and for final dividends when they are approved by the
shareholders.
2. Other income
Year ended
Year ended 31 December 2013 31 December 2012
GBP'000 GBP'000
Interest receivable on bank
balances 5 12
Interest receivable on
investments 383 353
388 365
3. Other expenses
Year to
31
December Year ended
2013 31 December 2012
GBP'000 GBP'000
Directors' remuneration 50 50
Fees payable to the Company's auditor for the audit
of the financial statements 8 8
Fees payable to the Company's auditor for other services
- tax compliance 1 2
Accounting and administration services 55 54
Trail commission 82 81
UK Listing Fees 6 6
Other expenses 61 45
263 246
Total annual running costs are capped at 1.2% of net assets (excluding
irrecoverable VAT, rolled up management fees and IFA trail commission).
For the year to 31 December 2013 the running costs, as defined in the
prospectus, were 0.9% of net assets (0.8% for the year to 31 December
2012).
4. Directors' remuneration
Year to Year ended
31 December 2013 31 December 2012
GBP'000 GBP'000
Directors' emoluments
Ian Pearson (Chairman) 20 20
Richard Hodgson 15 15
Martijn Kleibergen (paid to Octopus
Investments Limited) 15 15
50 50
None of the Directors received any other remuneration or benefit from
the Company during the period. The Company has no employees other than
non-executive Directors. The average number of non-executive Directors
in the period was three (2012: three).
5. Tax on ordinary activities
The corporation tax charge for the period was GBP25,000 (2012: GBPnil).
The current tax charge for the period differs from the small companies
rate of corporation tax in the UK of 20% (2012: 20.0%). The differences
are explained below.
Current tax reconciliation: 31 December 2013 31 December 2012
GBP'000 GBP'000
Return on ordinary activities before tax 125 119
Capital losses/(gains) - -
125 119
Current tax at 20.0% (2012: 20.0%) 25 (24)
Utilisation of tax losses (13) 24
Reversal of deferred tax asset 13 -
Deferred tax asset - (13)
Total current tax charge 25 (13)
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 achieve approval as a VCT, no current deferred tax has
been provided in respect of any capital gains or losses arising on the
revaluation or disposal of investments.
6. Earnings per Share
The total earnings per share is based on total gain after tax of
GBP1,222,000 (2012: GBP132,000) and 19,276,703 Ordinary shares (2012:
19,300,111), being the weighted average number of ordinary shares in
issue during the period.
The revenue earnings per share is based on the revenue gain after tax of
GBP100,000 (2012: GBP132,000) and 19,276,703 Ordinary shares (2012:
19,300,111), being the weighted average number of ordinary shares in
issue during the period.
The capital earnings per share is based on the capital gain after tax of
GBP1,122,000 (2012: GBPnil) and 19,276,703 Ordinary shares (2012:
19,300,111), being the weighted average number of ordinary shares in
issue during the period.
There are no potentially dilutive capital instruments in issue and,
therefore no diluted return per share figures are relevant. The basic
and diluted earnings per share are therefore identical.
7. Net asset value per share
The calculation of net asset value per share as at 31 December 2013 is
based on net assets of GBP19,337,000 and 19,221,726 Ordinary shares
(2012: GBP18,180,000 and 19,300,111) in issue at that date.
8. Fixed asset investments
Where financial instruments are measured in the balance sheet at fair
value; FRS 29 requires disclosure of the fair value measurements by
level based on the following fair vale investment hierarchy:
Level 1: quoted prices in active markets for identical assets and
liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and regularly
available, and those prices represent actual and regularly occurring
market transactions on an arm's length basis. The quoted market price
used for financial assets held is the current bid price. These
instruments are included in level 1 and comprise AIM-quoted investments
classified as held at fair value through profit or loss. The Company
held no such investments in the current period.
Level 2: the fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable data where it is
available and rely as little as possible on entity-specific estimates.
If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2. The Company held no
such investments in the current period.
Level 3: the fair value of financial instruments that are not traded in
an active market (for example investments in unquoted companies) is
determined by using valuation techniques such as earnings multiples. If
one or more of the significant inputs is not based on observable market
data, the instrument is included in level 3.
There have been no transfers between these classifications in the period
(2012: none). The change in fair value for the current period is
recognised through the income statement.
All items held at fair value through profit or loss were designated as
such upon initial recognition. Movements in investments at fair value
through profit or loss during the period to 31 December 2013 are
summarised below and in note 12.
Level 3: Level 3: Total
Unquoted equity investments Unquoted loan investments investments
31 December
31 December 2013 31 December 2013 2013
GBP'000 GBP'000 GBP'000
Valuation and net
book amount:
Book cost as at 1
January 2013 13,678 3,787 17,465
Valuation at 1
January 2013 13,678 3,787 17,465
Movement in the
year:
Disposal proceeds
(net of
expenses) (832) (994) (1,826)
Loss on
realisation of
investments (168) - (168)
Revaluation in
year 1,290 - 1,290
Valuation at 31
December 2013 13,968 2,793 16,761
Book cost at 31
December 2013: 12,678 2,793 15,471
Revaluation to 31
December 2013: 1,290 - 1,290
Valuation at 31
December 2013 13,968 2,793 16,761
The investment portfolio is managed with capital preservation as the
primary focus.
Further details in respect of the methods and assumptions applied in
determining the fair value of the investments are disclosed in the
Investment Manager's Review and within the principal accounting policies
in note 1.
At 31 December 2013, there were no commitments in respect of investments
not yet completed.
9. Debtors
31 December 2013 31 December 2012
GBP'000 GBP'000
Other debtors 3 13
Prepayments 9 3
Accrued income 74 79
86 95
10. Creditors: amounts falling due within one year
31 December 2013 31 December 2012
GBP'000 GBP'000
Accruals 62 67
Other creditors 15 -
77 67
11. Share capital
31 December 2013 31 December 2012
GBP'000 GBP'000
Allotted and fully paid up:
19,221,726 (2012: 19,300,111) ordinary
shares of 10p 193 193
The capital of the Company is managed in accordance with its investment
policy with a view to the achievement of its investment objective as set
on page X. The Company is not subject to any externally imposed capital
requirements.
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.
The Board considers the distributable reserves and the total return for
the year when recommending a dividend. In addition, the Board is
authorised to make market purchases up to a maximum of 5% of the issued
Ordinary share capital of the Company in accordance with Special
Resolution 10 in order to maintain sufficient liquidity in the Company.
Capital management is monitored and controlled using the internal
control procedures set out on page X of this report. The capital being
managed includes equity and fixed-interest investments, cash balances
and liquid resources including debtors and creditors.
The Company did not issue any shares during the year (2012: nil).
The Company repurchased 78,385 Ordinary shares for cancellation during
the year at a price of 84.0p per share (2012: nil).
12. Reserves
Share Capital Special distributable reserve Capital reserve - realised Capital reserve - unrealised Capital redemption reserve Revenue reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as
at 1
January
2013 193 18,047 - - - (60) 18,180
Return on
ordinary
activities
after tax - - - - - 100 100
Purchase of
own
shares - (66) - - 1 - (65)
Current
year loss
on
disposal -
Fixed
assets - - (168) - - - (168)
Current
period
holding
gains -
Fixed
assets - - - 1,290 - - 1,290
Balance as
at 31
December
2013 193 17,981 (168) 1,290 1 40 19,337
When the Company revalues its investments during the period, any gains
or losses arising are credited/ charged to the income statement.
Holding gains/losses are then transferred to the 'capital reserve -
holding gains/(losses)'. When an investment is sold, any balance held
on the 'capital reserve - holding gains/(losses)' is transferred to the
'capital reserve - gains/(losses) on disposal' as a movement in
reserves.
Reserves available for potential distribution by way of a dividend are
GBP17,853,000 (2012: GBP17,987,000). This is the maximum value of
reserves available for potential distribution, which will be impacted by
the future ability to realise, in cash, gains and losses included in the
'capital reserve - holding gains/(losses)'.
The purpose of the special distributable reserve is 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.
In the event that the revenue reserve and capital reserve gains/(losses)
on disposal do not have sufficient funds to pay dividends, these may be
paid from the special distributable reserve.
13. Financial instruments and risk management
The Company's financial instruments comprise equity and fixed interest
investments and cash balances and liquid resources including debtors and
creditors. The Company intends to hold financial assets in accordance
with its investment policy of investing mainly in a portfolio of VCT
qualifying unquoted securities whilst holding a proportion of its assets
in cash or near-cash investments in order to provide a reserve of
liquidity.
Classification of financial instruments
The Company held the following categories of financial instruments, all
of which are included in the balance sheet at fair value, at 31 December
2013.
31 December 2013 31 December 2012
GBP'000 GBP'000
Assets at fair value through profit or
loss
Fixed asset investments 16,761 17,465
Total 16,761 17,465
Cash and receivables
Cash at bank 2,567 687
Other debtors 12 16
Accrued income 74 79
Total 2,653 782
Liabilities at amortised cost
Accruals (62) (67)
Other creditors (15) -
Total 19,337 18,180
Fixed asset investments (see note 8) are carried at fair value. Unquoted
investments are carried at fair value as determined by the directors in
accordance with current venture capital industry guidelines. The fair
value of all other financial assets and liabilities is represented by
their carrying value in the balance sheet. The Directors believe that
the fair value of the assets held at the period end is equal to their
book value.
In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are price risk, interest rate risk, credit risk
and liquidity risk. The Company's approach to managing these risks is
set out below together with a description of the nature and amount of
the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined with
regard to the Company's investment objective, as outlined on page X. The
management of market risk is part of the investment management process
and is a central feature of venture capital investment. The Company's
portfolio is managed with regard to the possible effects of adverse
price movements and, 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 pages X and X. An analysis of investments is given in
note 8.
86.6% (2012: 96.1%) by value of the Company's net assets comprises
investments in unquoted companies held at fair value. The valuation
methods used by the Company include the application of a price/earnings
ratio derived from listed companies with similar characteristics, and
consequently the value of the unquoted element of the portfolio can be
indirectly affected by price movements on the London Stock Exchange. A
10% overall increase in the valuation of the unquoted investments at 31
December 2013 would have increased net assets and the total return for
the period by GBP1,676,100 (2012: GBP1,746,500). An equivalent change in
the opposite direction would have reduced net assets and the total
return for the period by the same amount.
The Investment Manager considers that the majority of the investment
valuations are based on earnings multiples which are ascertained with
reference to the individual sector multiple or similarly listed
entities. It is considered that due to the diversity of the sectors, the
10% sensitivity discussed above provides the most meaningful potential
impact of average multiple changes across the portfolio.
Interest rate risk
Some of the Company's financial assets are interest-bearing, some of
which are at variable rates. As a result, the Company is exposed to
fair value interest rate risk due to fluctuations in the prevailing
levels of market interest rates.
Floating rate
The Company's floating rate investments comprise cash held on
interest-bearing deposit accounts. The benchmark rate which determines
the rate of interest receivable on such investments is the bank base
rate, which was 0.5% at 31 December 2013. The amounts held in floating
rate investments at the balance sheet date were as follows:
31 December 2013 31 December 2012
GBP'000 GBP'000
Cash on deposit 2,567 687
A 1% increase in the base rate would increase income receivable from
these investments and the total return for the period by GBP25,670
(2012: GBP6,870).
Credit risk
There were no significant concentrations of credit risk to
counterparties at 31 December 2013. By cost, no individual investment
exceeded 5.2% of the Company's net assets at 31 December 2013 (2012:
8.0%).
Credit risk is the risk that counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into
with the Company. The Investment Manager and the Board carry out a
regular review of counterparty risk. The carrying values of financial
assets represent the maximum credit risk exposure at the balance sheet
date.
At 31 December 2013 the Company's financial assets exposed to credit
risk comprised the following:
31 December 2013 31 December 2012
GBP'000 GBP'000
Cash on deposit 2,567 687
Investments in fixed rate investments 2,793 3,787
Accrued dividends and interest receivable 74 79
5,434 4,553
Credit risk relating to listed money market funds is mitigated by
investing in a portfolio of investment instruments of high credit
quality, comprising securities issued by the UK Government and major UK
companies and institutions. Credit risk relating to loans to and
preference shares in unquoted companies is considered to be part of
market risk.
Credit risk arising on the sale of investments is considered to be small
due to the short settlement and the contracted agreements in place with
the settlement lawyers.
The Company's interest-bearing deposit and current accounts are
maintained with HSBC Bank plc. The Investment Manager has in place a
monitoring procedure in respect of counterparty risk which is reviewed
on an ongoing basis. Should the credit quality or the financial position
of HSBC deteriorate significantly, the Investment Manager will move the
cash holdings to another bank.
Liquidity risk
The Company's financial assets include investments in unquoted equity
securities which are not traded on a recognised stock exchange and which
generally may be illiquid. As a result, the Company may not be able to
realise some of its investments in these instruments quickly at an
amount close to their fair value in order to meet its liquidity
requirements, or to respond to specific events such as deterioration in
the creditworthiness of any particular issuer.
The Company's listed money market funds are considered to be readily
realisable as they are of high credit quality as outlined above.
The Company's liquidity risk is managed on a continuing basis by the
Investment Manager in accordance with policies and procedures laid down
by the Board. The Company's overall liquidity risks are monitored on a
quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses. At
31 December 2013 these investments were valued at GBP2,567,000 (2012:
GBP687,000).
14. Post balance sheet events
No significant events occurred between the balance sheet date and the
signing of these financial statements.
15. Contingencies, guarantees and financial commitments
Provided that an intermediary continues to act for a shareholder and the
shareholder continues to be the beneficial owner of the shares,
intermediaries will be paid an annual trail commission of 0.5% of the
initial net asset value. Trail commission of GBP82,000 (2012: GBP81,000)
was paid during the period and there was GBPnil (2012: GBPnil)
outstanding at the period end.
Octopus is entitled to an annual management fee of 2.0% of net assets.
In order to ensure the alignment of interests between Octopus and
Shareholders, the annual management fee will be rolled up (without
interest) and will only be paid to Octopus once shareholders have
received dividends during the life of the Company and distributions
totalling or exceeding 105p per share. As at 31 December 2013, the
contingent liability for the annual management fee is GBP387,000 (2012:
GBP363,000). Further details of this are provided below.
There were no other contingencies, guarantees or financial commitments
as at 31 December 2013 or 31 December 2012.
16. Transactions with Manager
Octopus provides investment management and administration & accounting
services to the Company under a management agreement which runs for a
period of five years with effect from 6 January 2011 and may be
terminated at any time thereafter by not less than twelve months' notice
given by either party. No compensation is payable in the event of
terminating the agreement by either party if the required notice period
is given. The fee payable, should insufficient notice be given, will be
equal to the fee that would have been paid should continuous service be
provided, or the required notice period was given. The administration
and accounting fee is payable quarterly in arrears for a fee of 0.3% of
the NAV calculated at annual intervals as at 31 December. During the
year GBP55,000 (2012: GBP54,000) was paid to Octopus and there was
GBPnil (2012: GBPnil) outstanding at the balance sheet date, for the
accounting and administrative services.
In addition, Octopus also provides secretarial services for an
additional fee of GBP15,000 per annum. During the year GBP15,000 (2012:
GBP15,000) was due to Octopus and there was GBPnil (2012: GBPnil)
outstanding at the balance sheet date.
Octopus is entitled to an annual management fee of 2.0% of net assets.
In order to ensure the alignment of interests between Octopus and
Shareholders, the annual management fee will be rolled up (without
interest) and will only be paid to Octopus once shareholders have
received dividends during the life of the Company and distributions
totaling or exceeding 105p per share. Octopus will only be entitled to
receive an annual management fee for the period from the date on which
shares are first allotted under the Offer until the date on which the
general meeting is held (expected to be in August 2016) at which
shareholders will be asked to approve a motion regarding the future of
the Company.
In view of the early stage of the investment process, the Directors do
not currently believe there is sufficient certainty that any management
fee will be paid, and have therefore made no accrual in respect of any
fee potentially payable. In relation to management fees, there was a
contingent liability of GBP-- as at 31 December 2013 (2012: GBP363,000).
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Octopus VCT 2 PLC via Globenewswire
HUG#1777946
http://www.octopusinvestments.com/
Octopus Vct 2 (LSE:OVC2)
過去 株価チャート
から 5 2024 まで 6 2024
Octopus Vct 2 (LSE:OVC2)
過去 株価チャート
から 6 2023 まで 6 2024
