TIDMOVC2
FINAL RESULTS
Octopus VCT 2 plc is a venture capital trust which, whilst it will have the
ability to invest in a variety of sectors and technologies, the focus will be to
build a portfolio of investments in the renewable energy sector, with a
particular focus on solar energy where the Octopus team is confident that
investments can be structured with a higher level of capital preservation.
Financial Summary
As at
31 December 2011
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Net assets ( GBP'000s)
18,048
Return on ordinary activities after tax ( GBP'000s) (192)
Net asset value (NAV) per share 93.5p
Key Dates
Annual General Meeting Wednesday, 27 June
2012 (3.00 p.m. 20 Old Bailey, London EC4M 7AN)
Half Yearly Results to 30 June 2012 Announced August
2012
Chairman's Statement
Introduction
I am pleased to present the first Annual Report of Octopus VCT 2 plc (the
Company) for the period ended 31 December 2011.
I am also delighted to report that Martijn Kleibergen has agreed to join the
Board, effective from 11 November 2011. Martijn has extensive experience in
providing debt finance to unquoted companies and joined Octopus Investments six
months ago as their Portfolio Director responsible for overseeing the
performance of this type of investments. At the same time, Chris Hulatt has
decided to step down as Director to focus more on his principal job of CFO at
Octopus Investments. I should like to take this opportunity to thank Chris for
his dedication and advice to this Board since its inception.
Performance
During the period the Net Asset Value (NAV) of the Company has declined from
94.5 pence per share at inception to 93.5 pence per share, a negative return of
1.1%. This decline is due to the initial start up costs of the Company, together
with the standard running costs that outweigh any income or capital gains, as is
expected at this stage of the Company's life.
Going forward, the running costs should be covered by the income generated from
investments. Over the longer term, as the underlying portfolio of investments is
created, the Company's NAV will be linked increasingly to the value of the
investments in the portfolio companies.
Investment Portfolio
The Company made several investments in the period to 31 December 2011,
predominately into the Solar renewable energy sector. These investments are
discussed in more detail in the Investment Manager's Review on pages X to X. At
the period end, these investments remained held at cost as they were made within
twelve months of the period, and therefore cost is considered to be a reasonable
approximation to fair value at the balance sheet date.
Since the period end, we have added to the portfolio, investing in Borro
Limited, a secured asset loan provider. The Investment Manager is seeing a good
level of quality investment propositions and these will allow the portfolio to
continue to grow.
The Company's portfolio consists entirely of unquoted investments. The current
surplus cash of the Company is invested in a range of fixed term deposits and
bank current accounts to fit with the Board's policy of preserving the capital
of the Company before its deployment into Qualifying Investments.
Investment Policy
The Company will invest in a portfolio of predominately unquoted companies in a
variety of sectors and technologies where the Octopus team is confident that
investments can be structured with a higher level of capital security with the
objective of building a portfolio of investments that focus on capital
preservation.
Whilst the Company will have the ability to invest in a variety of sectors and
technologies, the focus will be to build a portfolio of investments in the
renewable energy sector, with a particular focus on solar energy.
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.
A key requirement is to achieve a 70% qualifying investment level prior to 31
December 2013. As at 31 December 2011, 52.8% of the portfolio, as measured by
HMRC rules, was invested in VCT qualifying investments. In view of the current
investment activity, the Board continues to be confident that the 70% target
will be met by the required date.
Annual General Meeting
I look forward to meeting as many shareholders as possible at our first Annual
General Meeting on Wednesday, 27 June 2012 to be held at the offices of Octopus
Investments Limited, 20 Old Bailey, London, EC4M 7AN. The AGM will start at
3.00 p.m.
Outlook
It has been well documented in the media that the Government's commitment to
feed-in-tariffs is being further reduced. However, before the Government's
changes came into effect, the company had already made significant investment in
the solar renewable energy sector and therefore your Board and investment
manager remain confident that the Company will achieve its investment
objectives.
There remains uncertainty in the UK about the sustainability of the
economic recovery, and the outlook for the public finances and inflation, while
the euro-zone and European markets also face some fundamental challenges. These
factors provide an uncertain environment for many businesses. The Board and
Investment Manager will conduct the investment activities with these factors in
mind.
Ian Pearson
Chairman
29 March 2012
Investment Manager's Review
Personal Service
At Octopus we have a dual focus, on 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 contact with our
investors. We are working hard to manage your money in the current climate.
Octopus was established in 2000 and has a strong commitment to both smaller
companies and to VCTs. We currently manage 19 VCTs, including this VCT, and
currently have over GBP2.7 billion of funds under management. Octopus has over
200 employees and has been voted 'Best VCT Provider of the Year' by the
financial adviser community every year since 2006.
Portfolio Performance
As at 31 December 2011 the NAV stood at 93.5 pence per share, compared to 94.5
pence per share at inception. This decrease is expected at the company's infancy
stage, as fixed running costs of the VCT exceed its income stream. As the
portfolio matures, investment income is expected to rise; in addition we expect
to attain capital appreciation which will further help to increase the NAV.
The majority of investments are either loan based on which a steady flow of
interest is received into the Fund or are invested in equity where there is no
prior ranking investment, for example in the case of our solar companies.
Portfolio Review
In-line with the Company's mandate, large investments have been made in
renewable energy companies that construct and operate solar sites that benefit
from the Government's feed-in-tariffs. Whilst the Government has reviewed its
feed-in-tariff rates and policy, the Company's portfolio of investments will
still have exposure to the higher rates that were originally on offer, due to
the dates at which these investments were completed.
In addition to loan and equity investments in the solar companies, the Company
has also invested GBP578,000 into Acquire Your Business Limited, a Company that
acquires existing Independent Financial Advisers' client bases. Since the period
end, the VCT has also invested GBP1million in Borro Limited, an online asset
secured loan provider.
There has been no change in the valuation of these investments made as they have
all been made within the last twelve months and there are no reasons that
indicate there should be any changes to their fair value at the balance sheet
date.
Outlook
We remain cautious about the year ahead and continue to be on the lookout for
potential difficulties in the portfolio to enable ourselves to be prepared and
plan appropriately. However, the majority of the investments made to date are
largely unaffected by the macroeconomic climate and we remain cautiously
optimistic that your Company's NAV will be able to make progress.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2349.
Stuart Nicol
Octopus Investments Limited
29 March 2012
Investment Portfolio
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
Further funding rounds are a good indicator of fair value and this measure is
used where appropriate. Subsequent adjustment to the fair value of unquoted
investments can be made using sector multiples based on information as at
relevant reporting dates, where applicable. In some cases the multiples can be
compared to equivalent companies, especially where a particular sector multiple
does not appear appropriate. It is currently industry norm to discount the
quoted earnings multiple to reflect the lack of liquidity in the investment,
there being no ready market for our holding. Typically the discount is 30% but
this can be increased where the relevant multiple appears too high. A lower
discount would also be possible if an investment was close to an exit event.
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
During the period, the Company made twenty investments amounting to GBP11.6
million, predominately in the solar renewable energy sector. In the case of
unquoted equity investments, these are investments in ordinary shares with full
voting rights.
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.
Top Ten Holdings
Helaku Power Limited
Helaku Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Trevemper, Cornwall.
Initial investment date: March
2011
Cost:
GBP1,825,000
Valuation:
GBP1,825,000
Voting rights held by Fund:
25.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited accounts:
31 December 2011
Turnover GBP169,000
Loss before tax: GBP48,000
Net assets:
GBP6,416,000
Shakti Power Limited
Shakti Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Dunsfold, Surrey.
Initial investment date: July
2011
Cost:
GBP650,000
Valuation:
GBP650,000
Voting rights held by Fund:
0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP91,000
Loss before tax: GBP156,000
Net assets:
GBP5,772,000
Howbery 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:
GBP600,000
Voting rights held by Fund:
31.6%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP132,000
Profit before tax: GBP15,000
Net assets:
GBP2,399,000
Acquire Your Business Limited
Acquire Your Business Limited is a company that acquires existing Independent
Financial Advisers' client bases.
Initial investment date:
December 2011
Cost:
GBP578,000
Valuation:
GBP578,000
Voting rights held by Fund:
32.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 March 2011
Turnover GBP3,000
Loss before tax: GBP19,000
Net assets:
GBP201,000
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:
GBP500,000
Voting rights held by Fund:
17.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP711,000
Loss before tax: GBP559,000
Net assets:
GBP15,043,000
Cyrah Power Limited
Cyrah Power Limited is currently seeking a suitable location to construct and
operate a solar renewable energy site.
Initial investment date: April
2011
Cost:
GBP500,000
Valuation:
GBP500,000
Voting rights held by Fund:
50.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP -
Profit before tax: GBP5,000
Net assets:
GBP975,000
Donoma Power Limited
Donoma Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Howton, Nottinghamshire.
Initial investment date: April
2011
Cost:
GBP500,000
Valuation:
GBP500,000
Voting rights held by Fund:
18.4%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP513,000
Loss before tax: GBP615,000
Net assets:
GBP13,951,000
Evaki Power Limited
Evaki Power Limited is currently seeking a suitable location to construct and
operate a solar renewable energy site.
Initial investment date: April
2011
Cost:
GBP500,000
Valuation:
GBP500,000
Voting rights held by Fund:
50.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP -
Profit before tax: GBP6,000
Net assets:
GBP976,000
Gnowee Power Limited
Helaku Power Limited constructed and operates a solar renewable energy site at a
carefully selected location in Spalding, Lincolnshire.
Initial investment date: April
2011
Cost:
GBP500,000
Valuation:
GBP500,000
Voting rights held by Fund:
25.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP136,000
Loss before tax: GBP44,000
Net assets:
GBP3,038,000
Grian Power Limited
Grian Power Limited is currently seeking a suitable location to construct and
operate a solar renewable energy site.
Initial investment date: March
2011
Cost:
GBP500,000
Valuation:
GBP500,000
Voting rights held by Fund:
25.0%
Equity held by all funds managed by Octopus: 100.0%
Last submitted unaudited group accounts: 31 December 2011
Turnover GBP -
Profit before tax: GBP17,000
Net assets:
GBP1,938,000
Shareholder Information and Contact Details
The Company was incorporated on 6 January 2011 with the first allotment of
equity taking place on 16 March 2011. The Offer for new subscriptions for shares
was open until 31 December 2011 by which time the Offer had raised a total
amount of GBP19.3 million ( GBP18.2 million net of upfront costs). The Company
invests primarily in unquoted UK smaller companies and aims to deliver a high
level of capital security.
Venture Capital Trusts
VCTs were introduced in the Finance Act 1995 to provide a means for private
individuals to invest in unquoted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* up to 30% up-front income tax relief;
· exemption from income tax on dividends paid; and
· exemption from capital gains tax on disposals of shares in
VCTs.
The Company has been provisionally approved as a VCT by HMRC. In order to
achieve approval the Company must comply with certain requirements on a
continuing basis:
* at least 70% of the Company's investments must comprise 'qualifying
holdings'* (as defined in the legislation) by 31 October 2013;
* at least 30% of the 70% of qualifying holdings must be invested into
Ordinary shares with no preferential rights (from April 2011 this changed to
70% for new investments);
* no single investment made can exceed 15% of the total company value; and
* a minimum of 10% of each Qualifying Investment must be in Ordinary shares
with no preferential rights.
*A 'qualifying holding' consists of up to GBP1 million invested in any one year in
new shares or securities in an unquoted UK company (or companies listed on AIM)
which is carrying on a qualifying trade and whose gross assets do not exceed a
prescribed limit at the time of investment. The definition of a 'qualifying
trade' excludes certain activities such as property investment and development,
financial services and asset leasing.
Share Price
The Company's share price can be found on various financial websites including
www.londonstockexchange.com, with the following TIDM/EPIC code:
Ordinary shares
TIDM/EPIC code OV2
Latest share price (28 March 2012) 100p per share
Buying and Selling Shares
The Company's Ordinary shares can be bought and sold in the same way as any
other company quoted on the London Stock Exchange via a stockbroker. There may
be tax implications in respect of selling all or part of your holdings, so
shareholders should contact their independent financial adviser if they have any
queries.
The Company operates a policy of buying its own shares for cancellation as they
become available, and envisages that purchases will be made at a 10% discount to
the prevailing net asset value. The Company is, however, unable to buy back
shares directly from shareholders. If you are considering selling your shares or
trading in the secondary market, please contact the Company's corporate broker,
Matrix Corporate Capital ('Matrix').
Matrix is able to provide details of close periods (when the Company is
prohibited from buying in shares) and details of the price at which the Company
has bought in shares. Matrix can be contacted as follows:
Chris Lloyd 0203 206 7176 chris.lloyd@matrixgroup.co.uk
Paul Nolan 0203 206 7177 paul.nolan@matrixgroup.co.uk
Notification of Change of Address
Communications with shareholders are mailed to the registered address held on
the share register. In the event of a change of address or other amendment this
should be notified to the Company's registrar, Capita Registrars, as well as
Octopus under the signature of the registered holder. Their contact details are
provided on page X.
Other Information for Shareholders
Previously published documents are available for viewing on the Investment
Manager's website at www.octopusinvestments.com. All other statutory
information will also be found there.
Warning to Shareholders
Many companies are aware that their shareholders have received unsolicited phone
calls or correspondence concerning investment matters. These are typically from
overseas based 'brokers' who target UK shareholders offering to sell them what
often turn out to be worthless or high risk shares in US or UK investments. They
can be very persistent and extremely persuasive. Shareholders are therefore
advised to be very wary of any unsolicited advice, offer to buy shares at a
discount, or offer for free company reports.
Please note that it is very unlikely that either the Company or Octopus would
make unsolicited telephone calls to shareholders and that any such calls would
relate only to official documentation already circulated to shareholders and
never in respect of investment advice.
If you are in any doubt about the authenticity of an unsolicited phone call,
please call Octopus at the number provided at the back of this report.
Details of Directors
Ian Pearson (Non-Executive Chairman - Age 53)
Ian is currently engaged in strategy and business development as Senior Vice
President to Global Crossing UK. He is also senior adviser to Avanti
Communications, Maven Capital Partners and MCD Developments. Until standing down
before the general election in 2010, Ian had over nine years experience at a
senior level in government, including important roles as Minister for Climate
Change and the Environment, Minister for Trade, Minister for Science and
Innovation, and a Minister in Northern Ireland. More recently, as Economic
Secretary to the Treasury until May 2010, Ian was at the heart of the UK's
response to the global financial crisis. Amongst other things, he was
responsible for growth, enterprise and productivity issues, the EU Budget, where
he led negotiations for the UK, Public/Private Partnerships including Private
Finance Initiative, and Infrastructure UK. Prior to his governmental career, Ian
was joint chief executive of WMEB Group, providing venture and growth capital to
SMEs and consultancy to a range of public and private clients.
Richard Hodgson (Non-Executive Director - Age 43)
Richard is currently finance director at Green Compliance plc, an AIM traded
company. Prior to this, Richard held positions as chief financial officer at
Reconomy, a private equity backed waste management company that provided waste
management and recycling services across the UK, as chief financial officer for
Triplearc plc, an AIM traded print management company and as European finance
director for Iron Mountain Europe, an information and records management
company. Richard also spent several years in the music industry working as a
finance director for Universal Music International and Warner Music
International and prior to that Richard qualified as a chartered accountant
whilst working for the financial services group of Deloittes in London.
Martijn Kleibergen (Non-Executive Director - Age 39) Appointed 11 November 2011
Martijn was appointed a director on 11 November 2011. He joined Investment
Manager, Octopus in 2011. Prior to that Martijn spent 12 years at Fortis Bank
N.V. (renamed ABN AMRO Bank N.V. in 2010) both in the Netherlands and in the UK.
He held various positions over this period, most recently as Country Manager
for its UK operations. Other positions Martijn held within Fortis Bank
included: Executive Director in its UK Corporate Banking & Project Finance team
and Director in its Credit Restructuring / Portfolio Management Unit. Mr
Kleibergen holds a Master of Science Degree in Business Economics from Erasmus
University Rotterdam where he specialised in Financial Economics.
Chris Hulatt (Non-Executive Director - Age 35) Resigned 11 November 2011
Chris Hulatt is chief financial officer and co-founder of Octopus. He has
particular responsibility for finance, compliance and risk management. He
oversaw the transfer of three VCTs from Close Brothers to Octopus in August
2008 and is responsible for analysing acquisition opportunities. He sits on the
investment committees of a number of funds managed by Octopus and has been a
director of four other VCTs managed by Octopus. Chris has a first class MA in
Pharmacology from the University of Cambridge and is a Chartered Financial
Analyst.
Directors' Report
The Directors present their report and the audited financial statements for the
period ended 31 December 2011.
Principal Activity and Status
The principal activity of the Company is to invest in a diversified portfolio of
UK smaller companies with the focus on the renewable energy sector. The Company
has been granted provisional approval as a VCT by HMRC.
The Directors have managed the affairs of the Company with the intention of
achieving its status as a Venture Capital Trust.
In order to gain approved status, the Company must comply on a continuing basis
with the provisions of s280A of the Income Tax Act 2007; in particular, the
Company is required to hold at least 70% of its investments (as defined in the
legislation) in VCT 'qualifying holdings', of which at least 30% must comprise
eligible ordinary shares by the end of the third accounting period (i.e. 31
December 2013).
The Directors are required by the Articles of Association to propose an Ordinary
Resolution at the Company's Annual General Meeting in 2016 that the Company
should continue as a VCT for a further five year period and at each fifth
subsequent Annual General Meeting thereafter. If any such Resolution is not
passed, the Directors shall within nine months convene a general meeting to
consider the proposals for the reorganisation or winding-up of the Company.
Review of Business Activities
The Directors are required by section 417 of the Companies Act 2006, to include
a business review in their report to shareholders. The Business Review is set
out in the Chairman's Statement on pages X and X, and the Investment Manager's
Review on pages X and X and is included in this Directors' Report by reference.
The purpose of the review is to provide shareholders with a snapshot summary
setting out the business objectives of the Company, the Board's strategy to
achieve those objectives, the risks faced, the regulatory environment and the
key performance indicators used to measure performance.
Performance and Key Performance Indicators
As a VCT, the Company's objective is to provide shareholders with a high level
of capital security with the objective of building a portfolio of investments
that focus on capital preservation in both debt and equity instruments with the
focus on renewable energy.
The Board expects the Investment Manager to deliver a performance which aims to
meet the objective of returning 105p per Ordinary share to shareholders upon the
winding up of the Company. The key performance indicator (KPI) in meeting this
objective is the cumulative distributions paid to shareholders. Additional key
performance indicators reviewed by the Board include the discount of the share
price relative to the net asset value and the total expense as a proportion of
shareholders' funds. The total running costs in the period, as defined in the
prospectus, were 1.1% of the Company's net assets, below the annual limit of
1.2%.
A record of some of the indicators is detailed on the first page entitled
Financial Summary. Additional comments are provided in the Chairman's Statement
regarding the performance of the Company over the current period.
The Board regularly assesses the performance of the Investment Manager in
meeting the Company's objectives against the KPIs highlighted above.
Clearly, when making investments in unquoted companies at an early stage of
their development, some are likely to disappoint, but investing the funds raised
in high growth companies with the potential to become market leaders creates an
environment of improved return for shareholders. The growth of these companies
is largely dependent on continuing the existing levels of corporate spending.
The current volatile economic environment could adversely affect corporate
spending patterns, which would in turn have a negative impact on the development
of the investee companies.
Performance, measured by the change in NAV and total return per share, is also
measured against the FTSE Small-Cap index. This is shown in the graph on page X
in the Directors' Remuneration Report. This index has been adopted as an
informal benchmark. Investment performance, cash returned to shareholders and
share price are also measured against the Company's peer group of the other
generalist VCTs.
The Chairman's Statement, on pages X and X, includes a review of the Company's
activities and future prospects; further details are also provided within the
Investment Manager's Review on pages X and X.
Results and dividend Period ended
31 December 2011
GBP'000
=-----------------------------------------------------------
Net return attributable to shareholders (192)
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Objective and Investment Policy
The Objective and Investment Policy is defined on Page X of the Chairman's
Statement.
The Directors control the overall risk of the portfolio by ensuring that the
Company has exposure to a range of companies that focus on capital preservation.
In order to limit the risk to the portfolio that is derived from any particular
investment, no more than 10% of the amount invested by shareholders in the
Company will be invested in any one unquoted company (including both Qualifying
and Non-Qualifying Investments). Further details of the Company's risk
management policies are provided in note 14 to the financial statements.
Non-Qualifying Investments
An active approach has been taken to manage the cash prior to investing in
qualifying companies. Specifically, the majority of the funds raised were
invested in a range of money market securities that place emphasis upon capital
preservation.
The Company may also make Non-Qualifying Investments where the Investment
Manager believes that the risk/return profile is consistent with the overall
objective of the Company, which may include, from time to time, making a small
number of investments or further investments in companies which meet the profile
of a Qualifying Investment but would otherwise not be a Qualifying Investment.
Qualifying Investments
The Company intends to have the following investment profile at the end of the
three year investment period:
* 75-85% Qualifying Investments, primarily in unquoted companies
* 15-25% in cash and money market securities
The Company will not borrow money for the purposes of making investments. The
investment decisions made must adhere to the HMRC qualification rules as stated
in the above section. The Directors will continually monitor the investment
process and ensure compliance with the investment policy.
A review of the investment portfolio and of market conditions during the period
is included in the Chairman's Statement and Investment Manager's Review.
No material changes may be made to the Company's investment policy described
above without the prior approval of shareholders by the passing of an Ordinary
Resolution.
VCT Regulation
Compliance with required rules and regulations is considered when all investment
decisions are made. The Company is further monitored on a continual basis to
ensure compliance. The main criteria to which the Company must adhere is
detailed on page X (Shareholder Information and Contact Details).
The Company will continue to ensure its compliance with the qualification
requirements.
Principal Risks, Risk Management and Regulatory Environment
The Board carries out a regular review of the risk environment in which the
Company operates. The main areas of risk identified by the Board are as
follows:
VCT qualifying status risk: from the end of the third accounting period onwards,
the Company is required at all times to observe the conditions laid down in the
Income Tax Act 2007 for the maintenance of approved VCT status. The loss of
such approval could lead to the Company losing its exemption from corporation
tax on capital gains, to investors being liable to pay income tax on dividends
received from the Company and, in certain circumstances, to investors being
required to repay the initial income tax relief on their investment.
The Investment Manager keeps the Company's VCT qualifying status under continual
review and reports to the Board regularly throughout the year. The Board has
also retained PricewaterhouseCoopers LLP to undertake an independent VCT status
monitoring role.
Investment risk: the majority of the Company's investments will be in small and
medium-sized companies which are VCT qualifying holdings, which by their nature
entail a higher level of risk and lower liquidity than investments in large
quoted companies.
The Directors and the Investment Manager aim to limit the risk attached to the
portfolio as a whole by careful selection and timely realisation of investments,
by carrying out due diligence procedures and by maintaining a wide spread of
holdings in terms of financing stage, industry sector and geographical
location. The Board reviews the investment portfolio with the Investment
Manager on a regular basis.
Financial risk: as most of the Company's investments involve medium to long-term
commitment and are relatively illiquid, the Directors consider that it is
inappropriate to finance the Company's activities through borrowing.
Accordingly, they seek to maintain a proportion of the Company's assets in cash
or cash equivalents in order to be in a position to take advantage of new
investment opportunities.
The Company has very little exposure to foreign currency risk and does not enter
into derivative transactions. The Company has cash deposits which are held on
the balance sheet of HSBC Bank plc and the Co-operative Bank plc. The risk of
loss to this cash is deemed to be low due to the historical credit ratings.
Inadequate controls might lead to misappropriation of assets. Inappropriate
accounting policies might lead to mis-posting or breaches of regulations.
Regulatory: the Company is required to comply with the Companies Act 2006, the
rules of the UK Listing Authority and United Kingdom Accounting Standards.
Breach of any of these might lead to suspension of the Company's Stock Exchange
listing, financial penalties or a qualified audit report.
Reputational: inadequate or failed controls might result in breaches of
regulation or loss of shareholder trust.
Internal control risk: the Board reviews annually the system of internal
controls, financial and non-financial, operated by the Company and the
Investment Manager. These include controls designed to ensure that the
Company's assets are safeguarded and that proper accounting records are
maintained.
Competitive Risk: retention of key personnel within Octopus is vital to the
success of the Company. Incentives to the Investment Manager's key staff are
continuously monitored.
Price risk: the risk that the value of a security or portfolio of securities
will decline in the future is mitigated by holding a diversified portfolio,
across a broad range of sectors.
Cash flow risk: the risk that the Company's available cash will not be
sufficient to meet its financial obligations is managed by frequent budgeting
and close monitoring of available cash resources.
Due to the nature of the Company, environmental, social and employee issues do
not apply and therefore no disclosures in respect of these have been included in
the Directors' Report.
The Board seeks to mitigate the internal risks by setting policy, regularly
reviewing performance, enforcing contractual obligations and monitoring progress
and compliance. In the mitigation and management of these risks, the Board
applies rigorously the principles detailed in the 'Turnbull' guidance. Details
of the Company's internal controls are contained in the Corporate Governance
section on pages X to X.
Further details of the Company's risk management policies are provided in note
15 to the financial statements.
Directors
The Directors of the Company during the period and their interests (in respect
of which transactions are notifiable under Disclosure and Transparency Rule
3.1.2R) in the issued ordinary shares of 1p are shown in the table below:
31 December 2011
=-------------------------------------------------------------------
Ian Pearson (Chairman) 10,550
Richard Hodgson 10,550
Chris Hulatt (resigned 11 November 2011) N/A
Martijn Kleibergen (appointed 11 November 2011) N/A
=-------------------------------------------------------------------
All of the Directors' shares were held beneficially. There have been no changes
in the Directors' share interests between 31 December 2011 and the date of this
report.
The following appointments were made during the accounting period:
* Chris Hulatt was appointed as a Director on 6 January 2011 and resigned on
11 November 2011
* Martijn Kleibergen was appointed as a Director on 11 November 2011
* Meaujo Incorporation Limited was appointed as a Corporate Director on 6
January 2011 and resigned on
17 January 2011
* Ian Pearson was appointed as a Director on 17 January 2011
* Richard Hodgson was appointed as a Director on 17 January 2011
Brief biographical notes on the Directors are given on page X.
All the Directors will retire at the Annual General Meeting and, being eligible,
will offer themselves for election. The Board has considered provision B.7.2 of
the UK Corporate Governance Code and believes that all the Directors are
effective and demonstrate commitment to their role, the Board and the Company.
Directors' and Officers' Liability Insurance
The Company has, as permitted by the Companies Act 2006, maintained insurance
cover on behalf of the Directors and Company Secretary indemnifying them against
certain liabilities which may be incurred by them in relation to the Company.
Whistleblowing
The Board has considered the arrangements implemented by the Investment Manager
in accordance with the UK Corporate Governance Code's recommendations, to
encourage staff of the Investment Manager or Company Secretary of the Company to
raise concerns, in confidence, within their organisation about possible
improprieties in matters of financial reporting or other matters. It is
satisfied that adequate arrangements are in place to allow an independent
investigation, and follow on action where necessary, to take place within the
organisation.
Management
Octopus acts as Investment Manager to the Company. The principal terms of the
Company's management agreement with Octopus is set out in note 17 to the
financial statements. The Investment Manager also provides secretarial,
administrative and custodian services to the Company.
The Company has in place an agreement with Octopus to act as Investment Manager
which is central to the ability of the Company to continue in business. There
are no other contracts which are deemed to be essential to the business of the
Company.
As required by the Listing Rules, the Directors confirm that, in their opinion,
the continuing appointment of Octopus as Investment Manager is in the best
interests of the shareholders as a whole. In reaching this conclusion the
Directors have taken into account the performance of the investment portfolio
and the ability of the Investment Manager to produce satisfactory investment
performance in the future. It also considered the length of the notice period of
the management agreement and fees payable to the Investment Manager together
with the standard of other services provided which include secretarial and
accounting services.
With the exception of Martijn Kleibergen (and Chris Hulatt until his resignation
on 11 November 2011) no Director has an interest in any contract to which the
Company is a party. Details of the fees paid to Octopus in respect of services
provided are detailed in note 17 to the financial statements.
It should be noted that there is no formal Management Engagement Committee as
matters of this nature are dealt with by the independent Non-Executive
Directors.
The Board has delegated the routine management decisions such as the payment of
standard running costs to the Investment Manager. However, investment decisions
are discussed and agreed with the Board.
Share Issues
A total of 19,300,111 ordinary shares with a nominal value of GBP193,001.11 were
issued during the period to 31 December 2011.
The 50,000 Redeemable Shares were redeemed upon Admission of the ordinary shares
in accordance with their terms of issue.
Share Buy Backs
There were no share buy backs during the period.
Share Capital & Rights Attaching to the Shares and Restrictions on Voting and
Transfer
The Company's ordinary share capital as at 31 December 2011 comprised
19,300,111 ordinary shares of 1p each.
Subject to any suspension or abrogation of rights pursuant to relevant law or
the Company's Articles of Association, the shares confer on their holders (other
than the Company in respect of any Treasury shares) the following principal
rights:
(a) the right to receive out of profits available for distribution such
dividends as may be agreed to be paid (in the case of a final dividend in an
amount not exceeding the amount recommended by the Board as approved by
shareholders in a general meeting or in the case of an interim dividend in an
amount determined by the Board). All dividends unclaimed for a period of 12
years after having become due for payment are forfeited automatically and cease
to remain owing by the Company;
(b) the right, on a return of assets on a liquidation, reduction of capital or
otherwise, to share in the surplus assets of the Company remaining after payment
of its liabilities pari passu with the other holders of Ordinary shares; and
(c) the right to receive notice of and to attend and speak and vote in person or
by proxy at any general meeting of the Company. On a show of hands, every member
present or represented and voting has one vote, and on a poll, every member
present or represented and voting has one vote for every share of which that
member is the holder. The appointment of a proxy must be received not less than
48 hours before the time of the holding of the relevant meeting or adjourned
meeting or, in the case of a poll taken otherwise than at or on the same day as
the relevant meeting or adjourned meeting, be received after the poll has been
demanded and not less than 24 hours before the time appointed for the taking of
the poll.
These rights can be suspended. If a member, or any other person appearing to be
interested in shares held by that member, has failed to comply within the time
limits specified in the Company's Articles of Association with a notice pursuant
to s793 of the Companies Act 2006 (notice by the Company requiring information
about interests in its shares), the Company can, until the default ceases,
suspend the right to attend and speak and vote at a general meeting. If the
shares represent at least 0.25% of their class the Company can also withhold any
dividend or other money payable in respect of the shares (without any obligation
to pay interest) and refuse to accept certain transfers of the relevant shares.
Shareholders, either alone or with other shareholders, have other rights as set
out in the Company's Articles of Association and in company law (principally the
Companies Act 2006).
A member may choose whether his shares are evidenced by share certificates
(certificated shares) or held in electronic (un-certificated) form in CREST (the
UK electronic settlement system). Any member may transfer all or any of his
shares, subject in the case of certificated shares to the rules set out in the
Company's Articles of Association or in the case of un-certificated shares to
the regulations governing the operation of CREST (which allow the Directors to
refuse to register a transfer as therein set out); the transferor remains the
holder of the shares until the name of the transferee is entered in the register
of members. The Directors may refuse to register a transfer of certificated
shares in favour of more than four persons jointly or where there is no adequate
evidence of ownership or the transfer is not duly stamped (if so required). The
Directors may also refuse to register a share transfer if it is in respect of a
certificated share which is not fully paid up or on which the Company has a lien
provided that, where the share transfer is in respect of any share admitted to
the Official List maintained by the UK Listing Authority, any such discretion
may not be exercised so as to prevent dealings taking place on an open and
proper basis, or if in the opinion of the Directors (and with the concurrence of
the UK Listing Authority) exceptional circumstances so warrant, provided that
the exercise of such power will not disturb the market in those shares. Whilst
there are no squeeze-out and sell out rules relating to the shares in the
Company's Articles of Association, shareholders are subject to the compulsory
acquisition provisions in s974 to s991 of the Companies Act 2006.
Directors' Authority to Allot Shares, to disapply Pre-emption Rights
The authority proposed under Resolution 7 is required so that the Directors may
offer existing shareholders the opportunity to add to their investment or to
offer potential shareholders an opportunity to invest in the Company in a tax-
efficient manner without the Company having to incur substantial costs. Any
consequent modest increase in the size of the Company will, in the opinion of
the Directors, be in the interests of shareholders generally. Any issue proceeds
will be available for investment in line with the Company's investment policy
and may be used, in part, to purchase ordinary shares in the market.
Resolution 7 renews the Directors' authority to allot ordinary shares. This
would enable the Directors until June 2013, to allot up to 1,930,011 ordinary
shares (representing approximately 10% of the Company's issued share capital as
at 31 December 2011).
Resolution 8 renews and extends the Directors' authority to allot equity
securities for cash without pre-emption rights applying in certain
circumstances. This Resolution would authorise the Directors, until the date
falling 15 months after the date of the passing of the Resolution or, if
earlier, the conclusion of the next Annual General Meeting of the Company, to
issue ordinary shares for cash without pre-emption rights applying by way of an
offer to existing shareholders, or re-issuing shares out of Treasury up to a
maximum of 1,930,011 ordinary shares (representing approximately 10% of the
Company's issued share capital as at 31 December 2011). This power will be
exercised only if, in the opinion of the Directors, it would be in the best
interests of shareholders, as a whole.
Directors' Authority to Make Market Purchase of its Own Shares
The authority proposed under Resolution 9 is required so that the Directors may
make purchases of up to approximately 10% of the Company's issued share capital
and seeks renewal of such authority until the next Annual General Meeting (or
the expiry of 15 months, if earlier). The price paid for shares will not be less
than the nominal value nor more than the maximum amount permitted to be paid in
accordance with the rules of the UK Listing Authority in force as at the date of
purchase. This power will be exercised only if, in the opinion of the Directors,
a repurchase would be in the best interests of shareholders as a whole. Any
shares repurchased under this authority will either be cancelled or held in
Treasury for future re-sale in appropriate market conditions.
International Financial Reporting Standards
As the Company is not part of a group it is not mandatory for it to comply with
International Financial Reporting Standards. The Company does not anticipate
that it will voluntarily adopt International Financial Reporting Standards, nor
would the current proposals issued by the ASB require that it does. If IFRS were
to be adopted, it is not expected to have a significant impact upon the balances
included in the financial statements, but would give rise to significant changes
in presentation of information and disclosures.
Creditor Payment Policy
The Company's payment policy for the forthcoming financial year is to agree
terms of payment before business is transacted and to settle accounts in
accordance with those terms. The Company does not follow any code or standard
with regard to creditor payment practice. At 31 December 2011 there were GBPnil
trade creditors.
Environmental Policy
The Company always makes full effort to conduct its business in a manner that is
responsible to the environment. This responsibility is maintained in investment
decisions where possible.
Going Concern
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 14 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, Money Market Funds and OEIC Investments, which are
readily realisable (37.1% 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.
Substantial Shareholdings
As at the date of this report, no disclosures of major shareholdings had been
made to the Company under Disclosure and Transparency Rule 5 (Vote Holder and
Issuer Notification Rules).
Annual General Meeting
The notice convening the 2012 Annual General Meeting of the Company and a form
of proxy in relation to the meeting can each be found at the end of this
document.
Independent Auditor
James Cowper LLP was appointed as auditor on 17 January 2011. A Resolution to
re-appoint James Cowper LLP and to authorise the directors to fix their
remuneration will be proposed at the forthcoming Annual General Meeting.
Amendment to the Company's Articles
A resolution to amend Articles of Association of the Company to bring them into
line with the Prospectus issued by the Company on 28 January 2011 will be
proposed at the forthcoming Annual General Meeting. This will provide that the
directors are required to put continuation proposals to the Company at its fifth
Annual General Meeting and, if passed, every five years thereafter.
Corporate Governance
The Board of the Company has considered the principles and recommendations of
the AIC Code of Corporate Governance (AIC Code) by reference to the Association
of Investment Companies Corporate Governance Guide for Investment Companies (AIC
Guide).
The AIC Code, as explained by the AIC Guide, addresses all the principles set
out in The UK Corporate Governance Code, as well as setting out additional
principles and recommendations on issues that are of specific relevance to the
Company. The Board considers that reporting against principles and
recommendations of the AIC Code, by reference to the AIC Guide (which
incorporates The UK Corporate Governance Code), will provide better information
to shareholders.
The Company is committed to maintaining high standards in corporate governance.
The Directors consider that the Company has, throughout the period under review,
complied with the provisions set out in The UK Corporate Governance Code with
the exceptions set out in the Compliance Statement on page X.
Performance Evaluation
In accordance with The UK Corporate Governance Code, a performance evaluation
must be completed by the Directors each year. No evaluation was carried out
during the period due to the early stage of the Company.
Appointment and Replacement of Directors
A person may be appointed as a Director of the Company by the shareholders in a
general meeting by Ordinary Resolution (requiring a simple majority of the
persons voting on the relevant resolution) or by the Directors. No person, other
than a Director retiring by rotation or otherwise, shall be appointed or
reappointed a Director at any general meeting unless he is recommended by the
Directors or, not less than seven nor more than 42 clear days before the date
appointed for the meeting, notice is given to the Company of the intention to
propose that person for appointment or re-appointment in the form and manner set
out in the Company's Articles of Association. Each Director who is appointed by
the Directors (and who has not been elected as a Director of the Company by the
members at a general meeting held in the interval since his appointment as a
Director of the Company) is to be subject to election as a Director of the
Company by the members at the first Annual General Meeting of the Company
following his or her appointment. At each Annual General Meeting of the Company
one third of the Directors for the time being, or if their number is not three
or an integral multiple of three the number nearest to but not exceeding one-
third, are to be subject to re-election. The Companies Act allows shareholders
in a general meeting by Ordinary Resolution (requiring a simple majority of the
persons voting on the relevant resolution) to remove any Director before the
expiration of his or her period of office, but without prejudice to any claim
for damages which the Director may have for breach of any contract of service
between him or her and the Company. A person also ceases to be a Director if he
or she resigns in writing, ceases to be a Director by virtue of any provision of
the Companies Act, becomes prohibited by law from being a Director, becomes
bankrupt or is the subject of a relevant insolvency procedure, or becomes of
unsound mind, or if the Board so decides following at least six months' absence
without leave or if he or she becomes subject to relevant procedures under the
mental health laws, as set out in the Company's Articles of Association.
Board of Directors
The Company has a Board of three non-executive Directors, two of whom are
considered to be independent. Martijn Kleibergen and, at the time of his
appointment, Chris Hulatt were not considered to be independent due to their
roles within Octopus Investments Limited. The Board meets regularly on a
quarterly basis, and on other occasions as required, to review the investment
performance and monitor compliance with the investment policy laid down by the
Board.
Subject to the provisions of the Companies Act, the Memorandum and Articles of
Association of the Company and any directions given by shareholders by Special
Resolution, the Articles of Association specify that the business of the Company
is to be managed by the Directors, who may exercise all the powers of the
Company, whether relating to the management of the business or not. In
particular the Directors may exercise on behalf of the Company its powers to
purchase its own shares to the extent permitted by shareholders.
The Board has a formal schedule of matters specifically reserved for its
decision which include:
* the consideration and approval of future developments or changes to the
investment policy, including risk and asset allocation;
* consideration of corporate strategy;
* approval of the appropriate dividend to be paid to the shareholders;
* the appointment, evaluation, removal and remuneration of the Investment
Manager;
* the performance of the Company, including monitoring of the discount of the
net asset value to the share price; and
* monitoring shareholder profiles and considering shareholder communications.
The Chairman leads the Board in the determination of its strategy and in the
achievement of its objectives. The Chairman is responsible for organising the
business of the Board, ensuring its effectiveness and setting its agenda, and
has no involvement in the day to day business of the Company. He facilitates
the effective contribution of the Directors and ensures that they receive
accurate, timely and clear information and that they communicate effectively
with shareholders.
The Company Secretary is responsible for advising the Board through the Chairman
on all governance matters. All of the Directors have access to the advice and
services of the Company Secretary, who has administrative responsibility for the
meetings of the Board and its committees. Directors may also take independent
professional advice at the Company's expense where necessary in the performance
of their duties. The Board does not consider it necessary for the size of the
Board or the Company to identify a member of the Board as the senior non-
executive director.
The Company's Articles of Association and the schedule of matters reserved to
the Board for decision provide that the appointment and removal of the Company
Secretary is a matter for the full Board.
During the period the following were held:
Full Board No. of Audit Committee Audit Committee
meetings held meetings meetings held meetings
attended attended
=-------------------------------------------------------------------------------
Ian Pearson 1 1 1 1
Richard Hodgson 1 1 1 1
Martijn
Kleibergen
(appointed 11
November 2011) - N/A - N/A
Chris Hulatt
(resigned 11
November 2011) 1 - - N/A
The Company's Articles of Association require that one third of Directors should
retire by rotation each year and seek re-election at the Annual General Meeting,
and that Directors appointed by the Board should seek re-appointment at the next
Annual General Meeting. All Directors are required to submit themselves for re-
election at least every three years.
Date of Original Appointment Due date for Re-election
=-----------------------------------------------------------------------------
Ian Pearson 17/01/2011 AGM 2012
Richard Hodgson 17/01/2011 AGM 2012
Martijn Kleibergen 11/11/2011 AGM 2012
Board Committees
The Board has appointed two committees to make recommendations to the Board in
specific areas:
Audit Committee:
Richard Hodgson
Ian Pearson
The Audit Committee, chaired by Richard Hodgson, consists of two independent
Directors. The Audit Committee believes Richard possesses appropriate and
relevant financial experience as per the requirements of the UK Corporate
Governance Code. The Board considers that the members of the Committee are
independent and have collectively the skills and experience required to
discharge their duties effectively.
The Audit Committee's terms of reference include the following roles and
responsibilities:
* reviewing and making recommendations to the Board in relation to the
Company's published financial statements and other formal announcements
relating to the Company's financial performance;
* reviewing and making recommendations to the Board in relation to the
Company's internal control (including internal financial control) and risk
management systems;
* periodically considering the need for an internal audit function;
* making recommendations to the Board in relation to the appointment, re-
appointment, removal and non-audit services of the external auditor,
consider any and approving the remuneration and terms of engagement of the
external auditor;
* reviewing and monitoring the external auditor's independence and objectivity
and the effectiveness of the audit process, taking into consideration
relevant UK professional regulatory requirements;
* monitoring the extent to which the external auditor is engaged to supply
non-audit services; and
* ensuring that the Investment Manager has arrangements in place for the
investigation and follow-up of any concerns raised confidentially by staff
in relation to propriety of financial reporting or other matters.
The Committee will review its terms of reference and its effectiveness annually
and will recommend to the Board any changes required as a result of the review.
The terms of reference are available on request from the Company Secretary. The
Committee will meet twice per year and has direct access to James Cowper LLP,
the Company's external auditor. The Audit Committee has reviewed the non-audit
services provided by the external auditor and does not believe they are
sufficient to influence their independence or objectivity, due to the fee being
an immaterial expense. When considering whether to recommend the re-appointment
of the external auditor, the committee take into account the tenure of the
current auditor in addition to comparing the fees charged to similar sized audit
firms.
The Company does not have an independent internal audit function as it is not
deemed appropriate given the size of the Company and the nature of the Company's
business. However, the Committee considers annually whether there is a need for
such a function and if so would recommend this to the Board.
Once the committee has made a recommendation to the Board, in relation to the
appointment of the external auditor, this is then ratified at the AGM through an
Ordinary Resolution.
During the period ended 31 December 2011, the Audit Committee discharged its
responsibilities by:
* reviewing and approving the external auditor's terms of engagement and
remuneration;
* reviewing the external auditor's plan for the audit of the Company's
financial statements, including identification of key risks and confirmation
of auditor independence;
* reviewing Octopus Investments Limited's statement of internal controls in
relation to the Company's business and assessing the effectiveness of those
controls in minimising the impact of key risks;
* reviewing periodic reports on the effectiveness of Octopus Investments
Limited's compliance procedures;
* reviewing the appropriateness of the Company's accounting policies;
* reviewing the Company's annual and interim financial results statement prior
to Board approval; and
* reviewing the external auditor's detailed reports to the Committee on the
annual financial statements.
Nomination Committee:
Ian Pearson
Richard Hodgson
The Nomination Committee considers the selection and appointment of Directors
considering the composition and selection of the Board, appointing members on
merit, measured against objective criteria with due regard for the benefits of
diversity. It also makes recommendations to the Board as to the level of
Directors' fees.
A person may be appointed as a Director of the Company by the shareholders in
general meeting by Ordinary Resolution or by the Directors; no person, other
than a Director retiring by rotation or otherwise, shall be appointed or
reappointed a Director at any general meeting unless he is recommended by the
Directors or notice is given to the Company of the intention to propose that
person for appointment or re-appointment in the form and manner set out in the
Company's Articles of Association.
Each Director who is appointed by the Directors (and who has not been elected as
a Director of the Company by the members at a general meeting held in the
interval since his appointment as a Director of the Company) is to be subject to
election as a Director of the Company by the members at the first Annual General
Meeting of the Company following his appointment. At each Annual General Meeting
of the Company one third of the Directors for the time being, or if their number
is not three or an integral multiple of three the number nearest to but not
exceeding one-third, are to be subject to re-election.
The Companies Act allows shareholders in a general meeting by Ordinary
Resolution to remove any Director before the expiration of his or her period of
office, but without prejudice to any claim for damages which the Director may
have for breach of any contract of service between him or her and the Company.
A person also ceases to be a Director if he or she resigns in writing, ceases to
be a Director by virtue of any provision of the Companies Act, becomes
prohibited by law from being a Director, becomes bankrupt or is the subject of a
relevant insolvency procedure, or becomes of unsound mind, or if the Board so
decides following at least six months' absence without leave or if he or she
becomes subject to relevant procedures under the mental health laws, as set out
in the Company's Articles of Association.
It has not yet been necessary for the Committee to meet and so terms of
reference will be agreed if and when appropriate. The Board does not have a
separate remuneration committee as the Company has no employees or executive
Directors. Detailed information relating to the remuneration of Directors is
given in the Directors' remuneration report.
Internal Control
The Directors have overall responsibility for keeping under review the
effectiveness of the Company's systems of internal controls. The purpose of
these controls is to ensure that proper accounting records are maintained, the
Company's assets are safeguarded and the financial information used within the
business and for publication is accurate and reliable; such a system can only
provide reasonable and not absolute assurance against material misstatement or
loss. The system of internal controls is designed to manage rather than
eliminate the risk of failure to achieve the business objectives. The Board
regularly reviews financial results and investment performance with its
Investment Manager.
Octopus identifies the investment opportunities for the consideration of the
Board who ultimately makes the decision whether to proceed with that
opportunity. Octopus monitors the portfolio of investments and makes
recommendations to the Board in terms of suggested disposals and further
acquisitions.
Octopus is engaged to carry out the accounting function and retains physical
custody of the documents of title relating to unquoted investments. Octopus
regularly reconciles the client asset register with the physical documents.
The Directors confirm that they have established a continuing process throughout
the period and up to the date of this report for identifying, evaluating and
managing the significant potential risks faced by the Company and have reviewed
the effectiveness of the internal control systems. As part of this process an
annual review of the internal control systems is carried out in accordance with
the Financial Reporting Council guidelines for internal control.
Internal control systems include the production and review of monthly bank
reconciliations and management accounts. All outflows made from the Company's
accounts require the authority of two signatories from Octopus. The Company is
subject to a full annual audit whereby the auditor is the same auditor as other
VCTs managed by the Investment Manager. Further to this, the Audit Partner has
open access to the Directors of the Company and the Investment Manager is
subject to regular review by the Octopus Compliance Department.
Financial Risk Management Objectives and Policies
The Company is exposed to the risks arising from its operational and investment
activities. Further details can be found in note 14 to the Financial Statements.
Relations with Shareholders
Shareholders have the opportunity to meet the Board at the Annual General
Meeting. In addition to the formal business of the Annual General Meeting, the
Board is available to answer any questions a shareholder may have.
The Board is also happy to respond to any written queries made by shareholders
during the course of the year and can be contacted at 20 Old Bailey, London,
EC4M 7AN. Alternatively, the team at Octopus is happy to answer any questions
you may have and can be contacted on 0800 316 2396.
Compliance Statement
The Listing Rules require the Board to report on compliance throughout the
accounting period with all relevant provisions set out in The UK Corporate
Governance Code. The preamble to The UK Corporate Governance Code does, however,
acknowledge that some provisions may have less relevance for investment
companies adding that the AIC Code and AIC Guide can assist in meeting the
obligations under The UK Corporate Governance Code. With the exception of the
limited items outlined below, the Company has complied throughout the accounting
period to 31 December 2011 with the provisions set out in The UK Corporate
Governance Code. The section references to The UK Corporate Governance Code are
shown in brackets.
1. The Company does not have a Chief Executive Officer or a senior independent
Director. The Board does not consider this necessary for the size of the
Company. [A.2.2 and A.4.1]
2. New Directors do not receive a full, formal and tailored induction on joining
the Board. Such matters are addressed on an individual basis as they arise.
[B.4.1]
3. The Company had two independent Directors, Ian Pearson and Richard Hodgson,
as defined by The UK Corporate Governance Code. Martijn Kleibergen and, at the
time of his appointment, Chris Hulatt were not considered to be independent due
to their roles with Octopus. The Board considers that all Directors have
sufficient experience to be able to exercise proper judgement within the meaning
of The UK Corporate Governance Code. [B.1.1]
4. No performance evaluation was carried out during the year due to the early
stage of the Company. [B.6.2.]
5. The Directors are not subject to annual election by the shareholders as one
third of the Directors retire by rotation and are offered for re-election at the
Annual General Meeting in accordance with the Articles of Association of the
Company. At the first annual general meeting all the directors will offer
themselves for election. [B.7.1]
6. The Company conducts a formal review as to whether there is a need for an
internal audit function. However, the Directors do not consider that an internal
audit would be an appropriate control for a VCT. [C.3.2]
7. The Company does not have a Remuneration Committee as it does not have any
executive directors. [D.1.1 - 2.4]
8. The Company has no major shareholders therefore shareholders are not given
the opportunity to meet any Non-Executive Directors at a specific meeting other
than the Annual General Meeting. [E.1.1 & E.1.2]
By order of the Board
Tracey Spevack
Company Secretary
29 March 2012
Directors' Remuneration Report
Introduction
This report is submitted in accordance with chapter 6 of Part 15 of the
Companies Act 2006, in respect of the period ended 31 December 2011. An
Ordinary Resolution for the approval of this report will be put to the members
at the forthcoming Annual General Meeting.
The Company's auditor, James Cowper LLP, is required to give its opinion on
certain information included in this report; this comprises the Directors'
emoluments section below only. Their report on these and other matters is set
out on pages X and X.
Consideration by the Directors of Matters Relating to Directors' Remuneration
The Board as a whole considers Directors' remuneration and has not appointed a
separate committee in this respect. The Board has not sought advice or services
from any person in respect of its consideration of Directors' remuneration
during the period (although the Directors expect from time to time to review the
fees against those paid to the boards of directors of other VCTs).
Statement of the Company's policy on Directors' Remuneration
The Board consists entirely of non-executive Directors, who will meet at least
four times a year and on other occasions as necessary, to deal with the
important aspects of the Company's affairs. Directors are appointed with the
expectation that they will serve for, at least, a period of three years. All
Directors retire at the first general meeting after election and thereafter one
third of all Directors are subject to retirement by rotation at subsequent
Annual General Meetings. Re-election will be recommended by the Board but is
dependent upon shareholder vote.
Each Director received a letter of appointment which is subject to termination
by the Director or the Company on three months' notice in writing. None of the
Directors are entitled to compensation payable upon early termination of their
contract other than in respect of any unexpired notice period.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Board on the Company's affairs and the responsibilities
borne by the Directors. They should be sufficient to attract candidates of high
calibre to be recruited. The policy is for the Chairman of the Board to be paid
higher fees than the other Directors in recognition of his more onerous role.
The policy is to review these rates from time to time, although such review will
not necessarily result in any changes. Due to the nature of the Company, there
are no employees other than the Directors and therefore no such issues to
consider when determining the Directors' remuneration.
The Company's policy is for the Directors to be remunerated in the form of fees,
payable quarterly in arrears. The fees are not specifically related to the
Directors' performance, either individually or collectively. There are no long-
term incentive schemes, share option schemes or pension schemes in place. The
Board is also entitled to be repaid all reasonable travelling, subsistence and
other expenses incurred by them respectively whilst conducting their duties as
Directors; however no other remuneration or compensation was paid or payable by
the Company during the period to any of the current Directors.
The Board has not sought advice or services from any person in respect of its
consideration of Directors' remuneration during the period.
Company Performance
The Board is responsible for the Company's investment strategy and performance,
although the management of the Company's investment portfolio is delegated to
the Investment Manager through the investment management agreement.
The graph below compares the NAV total return and Share Price total return
(gross dividend re-invested) of The Company over the period from March 2011 to
December 2011, with the total return from a notional investment in the FTSE
Small-Cap index over the same period (all rebased to 100p). This index is
considered to be the most appropriate broad equity market index for comparative
purposes. The Directors wish to point out that VCTs are not able to make
qualifying investments in companies quoted on the Main Market in their
observance of the Company rules.
Directors' Emoluments (Information Subject to Audit)
Amount of each Director's emoluments:
Directors' fees Period ended
31 December 2011
GBP
=----------------------------------------------------------------------------
Ian Pearson 15,777
Richard Hodgson 11,942
Chris Hulatt (Paid to Octopus Investments Limited) 9,916
Martijn Kleibergen (Paid to Octopus Investments Limited) 2,029
=----------------------------------------------------------------------------
Total 39,664
=----------------------------------------------------------------------------
The Directors do not receive any other form of emoluments in addition to the
Directors' fees.
By Order of the Board
Tracey Spevack
Company Secretary
29 March 2012
Directors' Responsibilities 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 they must not approve unless they are satisfied that they
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company for that period. Under that law the Directors have
elected to prepare financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable laws).
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgments and accounting estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
In so far as each of the Directors is aware:
· there is no relevant audit information of which the Company's
auditor is unaware; and
· the Directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to establish that
the auditor is aware of that information.
To the best of my knowledge:
* the financial statements, prepared in accordance with 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.
The financial statements are published at www.octopusinvestments.com, a website
maintained by Octopus. The maintenance and integrity of the website is, so far
as it relates to the Company, the responsibility of Octopus. The work carried
out by the auditor does not involve considerations of the maintenance and
integrity of the website and, accordingly, the auditor accepts no responsibility
for any changes that have occurred to the accounts since they were originally
presented on the website. Visitors to the website need to be aware that
legislation in the United Kingdom governing the preparation and dissemination of
the accounts differ from legislation in other jurisdictions.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
On Behalf of the Board
Ian Pearson
Chairman
29 March 2012
Independent Auditor's Report to the Members of Octopus VCT 2 plc
Independent auditor's report to the members of Octopus VCT 2 Plc
We have audited the financial statements of Octopus VCT 2 Plc for the period
ended 31 December 2011 which comprise the income statement, balance sheet,
cashflow statement, accounting policies and related notes. We have also audited
the information set out in the Directors' Remuneration Report that is described
as having been audited. The financial reporting framework that has been applied
in their preparation is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of directors' responsibilities, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an Auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the APB's web-site at www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion the financial statements:
· give a true and fair view of the state of the Company's affairs as
at 31 December 2011 and of its loss for the period then ended;
· have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
· have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
* the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006;
* the information given in the Chairman's statement, Investment Manager's
Report and Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
* the information given in the Corporate Governance statement with respect to
internal control and risk management systems and about share capital
structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
* adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
* the financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns;
or
* certain disclosures of director's remuneration specified by law are not
made; or
* we have not received all the information and explanations we require for our
audit.
Under the listing rules we are required to review:
* the information given in the Report of the Directors in relation to going
concern; and
* the part of the Corporate Governance statement relating to the Company's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review.
Mr Alexander Peal (Senior Statutory Auditor)
For and on behalf of James Cowper LLP
Chartered Accountants and Statutory Auditors
Oxford
Income Statement
+------------------------------------------+
| Period from 6 January 2011 to 31 December|
| 2011|
=-----------------------------------+------------------------------------------+
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
=-----------------------------------+------------------------------------------+
| |
| |
Other income 2 | 87 - 87|
| |
| |
| |
| |
| |
Other expenses 3 | (279) - (279)|
| |
| |
=-----------------------------------+------------------------------------------+
Loss on ordinary activities | |
before tax | (192) - (192)|
| |
| |
| |
Taxation on return on ordinary | |
activities 5 | - - -|
| |
| |
=-----------------------------------+------------------------------------------+
Return on ordinary activities | |
after tax | (192) - (192)|
=-----------------------------------+------------------------------------------+
Earnings per share - basic and | |
diluted 6 | (1.3)p - (1.3)p|
+------------------------------------------+
* 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 has 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
+---------------------+
| Period from |
| 6 January 2011 |
| to 31 December 2011 |
| |
| GBP'000 |
=---------------------------------------+---------------------+
Shareholders' funds at start of period | - |
=---------------------------------------+---------------------+
Loss on ordinary activities after tax | (192) |
| |
Issue of equity (net of expenses) | 18,240 |
=---------------------------------------+---------------------+
Shareholders' funds at end of period | 18,048 |
=---------------------------------------+---------------------+
The accompanying notes form an integral part of the financial statements.
Balance Sheet
+--------------------+
| As at 31 December|
| 2011|
| |
Notes| GBP'000 GBP'000|
=---------------------------------------------------+--------------------+
Fixed asset investments* 8 | 11,653|
| |
| |
| |
Current assets: | |
| |
Debtors 9 | 53 |
| |
Cash at bank | 6,693 |
=---------------------------------------------------+--------------------+
| 6,746 |
| |
Creditors: amounts falling due within one year 11 | (351) |
=---------------------------------------------------+--------------------+
Net current assets | 6,395|
=---------------------------------------------------+--------------------+
Net assets | 18,048|
=---------------------------------------------------+--------------------+
| |
| |
Called up equity share capital 12 | 193 |
| |
Special Distributable Reserve 13 |18,047 |
| |
Revenue reserve 13 | (192) |
=---------------------------------------------------+--------------------+
Total shareholders' funds | 18,048|
=---------------------------------------------------+--------------------+
Net asset value per share 7 | 93.5p|
+--------------------+
*Held at fair value through profit or loss
The statements were approved by the Directors and authorised for issue on 29
March 2012 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 | |
+------------------------------------+
| Period from 6 January 2010 to 31 |
| December 2011|
| |
| GBP'000|
=-----------------------------------------+------------------------------------+
| |
| |
Net cash outflow from operating | |
activities | 106|
| |
| |
| |
Financial investment: | |
| |
Purchase of fixed asset investments 8 | (11,795)|
| |
Disposal of fixed asset investments 8 | 142|
| |
| |
| |
Management of liquid resources: | |
| |
Purchase of current asset investments 10| (3,000)|
| |
Sale of current asset investments 10| 3,000|
| |
| |
| |
Financing: | |
| |
Issue of shares | 19,350|
| |
Cost of shares issue | (1,060)|
| |
Redemption of shares | (50)|
=-----------------------------------------+------------------------------------+
Increase in cash resources at bank | 6,693|
=-----------------------------------------+------------------------------------+
The accompanying notes form an integral part of the financial statements.
Reconciliation of Return before Taxation to Cash Flow from Operating Activities
+---------------------------------------+
| Period from 6 January 2011 to 31 |
| December 2011|
| |
| GBP'000|
=-------------------------------------+---------------------------------------+
Loss on ordinary activities before tax| (192)|
| |
Increase in debtors | (53)|
| |
Increase in creditors | 351|
=-------------------------------------+---------------------------------------+
Inflow from operating activities | 106|
+---------------------------------------+
Reconciliation of Net Cash Flow to Movement in Net Funds
+-----------------------------------------+
|Period from 6 January 2011 to 31 December|
| 2011|
| |
| GBP'000|
=-----------------------------------+-----------------------------------------+
Increase in cash resources at bank | 6,693|
=-----------------------------------+-----------------------------------------+
Net funds at 31 December 2011 | 6,693|
+-----------------------------------------+
Net Funds at 31 December comprised:
+----------------------------------------------+
|Period from 6 January 2011 to 31 December 2011|
| |
| GBP'000|
=----------------------------+----------------------------------------------+
Cash at bank | 6,693|
=----------------------------+----------------------------------------------+
Net Funds at 31 December 2011| 6,693|
=----------------------------+----------------------------------------------+
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' (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 14 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 are readily realisable (37% 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
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
impairment losses are attributable to assets designated as being at fair value
through profit or loss.
Current asset investments comprising money market funds and deposits are held at
fair value through profit or loss. Cash and short term deposits are held at
amortised cost.
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 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 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 the 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 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.
Current asset investments
Gains and losses arising from changes in fair value of current asset investments
are recognised as part of the capital return within the Income Statement and
allocated to the capital reserve - investment gains/(losses) on disposal.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the 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.
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, if
payable, is to be 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.
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% of the issued Ordinary share capital of the Company in accordance
with Special Resolution 9 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. For the avoidance of
doubt, no dividend has been proposed for the period ended 31 December 2011.
2. Other income
Period ended
31 December 2011
GBP'000
=--------------------------------------------------------
Interest receivable on bank balances 38
Interest receivable on investments 49
=--------------------------------------------------------
87
=--------------------------------------------------------
3. Other expenses
Period ended
31 December 2011
GBP'000
=-------------------------------------------------------------------------------
Directors' remuneration 40
Fees payable to the Company's auditor for the audit of the
financial statements 8
Fees payable to the Company's auditor for other services - tax
compliance 2
Accounting and administration services 41
UK Listing Fees 47
Trail commission 74
Other expenses 67
=-------------------------------------------------------------------------------
279
=-------------------------------------------------------------------------------
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
period to 31 December 2011 the running costs, as defined in the prospectus, were
1.1% of net assets.
4. Directors' remuneration
Period ended
31 December 2011
GBP'000
=-------------------------------------------------------------------------------
Directors' emoluments
Ian Pearson (Chairman) 16
Richard Hodgson 12
Chris Hulatt (paid to Octopus Investments Limited) to 11 10
November 2011
Martijn Kleibergen (paid to Octopus Investments Limited) from 2
12 November 2011
=-------------------------------------------------------------------------------
40
=-------------------------------------------------------------------------------
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.
5. Tax on ordinary activities
The corporation tax charge for the period was GBPnil.
The current rate of tax is the small companies' rate of corporation tax at
20.25%
Current tax reconciliation: 31 December 2011
GBP'000
=----------------------------------------------------------
Loss on ordinary activities before tax (192)
Current tax at 20.25% (39)
Unrecognised tax losses 39
=----------------------------------------------------------
Total current tax charge -
=----------------------------------------------------------
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, revenue and capital earnings per share is based on 14,677,386
Ordinary shares, 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 2011 is based on
net assets of GBP18,048,000 and 19,300,111 Ordinary shares in issue at that date.
8. Fixed asset investments
The Company has adopted the amendment to FRS 29 regarding financial instruments
that are measured in the balance sheet at fair value; this requires disclosure
of fair value measurements by level of the following fair value measurement
hierarchy:
Level 1: quoted prices in active markets for identical assets and liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available, and those prices represent
actual and regularly occurring market transactions on an arm's length basis. The
quoted market price used for financial assets held is the current bid price.
These instruments are included in level 1 and comprise AIM-listed investments
classified as held at fair value through profit or loss. The Company held no
such investment 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 investment 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. 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 2011 are summarised below and in note 10.
Level 3:
Unquoted investments Total investments
31 December 2011 31 December 2011
GBP'000 GBP'000
=-------------------------------------------------------------------------------
Purchases at cost 11,795 11,795
Disposals (142) (142)
Profit/(loss) on realisation of
investments - current period - -
Revaluation in period - -
=-------------------------------------------------------------------------------
Valuation at 31 December 2011 11,653 11,653
=-------------------------------------------------------------------------------
Book cost at 31 December 2011: 11,653 11.653
Revaluation to 31 December 2011: - -
=-------------------------------------------------------------------------------
Valuation at 31 December 2011 11,653 11,653
=-------------------------------------------------------------------------------
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 2011, there were no commitments in respect of investments not yet
completed.
9. Debtors
31 December 2011
GBP'000
=----------------------------------
Prepayments 4
Accrued income 49
=----------------------------------
53
=----------------------------------
10. Current Asset Investments
Current asset investments at 31 December 2011 comprised fixed term deposits.
GBP'000 GBP'000
=-----------------------------------------------------
Purchase at cost:
- Fixed term deposits 3,000
=-----------------------------------------------------
3,000
Disposal proceeds
- Fixed term deposits (3,000)
=-----------------------------------------------------
(3,000)
=-----------------------------------------------------
Valuation as at 31 December 2011 -
=-----------------------------------------------------
All current asset investments held at the period end sit with the level 1
hierarchy for the purposes of FRS 29.
Level 1 money market funds: Level 1 valuations are based on quoted prices
(unadjusted) in active markets for identical assets or liabilities. The
valuation of money market funds at 31 December 2011 was GBPnil.
11. Creditors: amounts falling due within one year
31 December 2011
GBP'000
=-----------------------------------
Accruals 121
Other creditors 230
=-----------------------------------
351
=-----------------------------------
12. Share capital
31 December 2011
GBP'000
=------------------------------------------------------
Allotted and fully paid up:
19,300,111 ordinary shares of 1.0p 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 8 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 issued 19,300,109 Ordinary shares during the period at a price of
100p per share and 2 Ordinary shares at a price of 1p per share on
incorporation. The share premium arising on these shares totalled GBP18,047,022
after the company incurred total share issue costs of GBP1,060,086. The Company
did not repurchase any Ordinary shares for cancellation during the period.
On 17 January 2011, the company made an allotment of 50,000 redeemable
preference shares of GBP1 each. These shares were allotted at par and fully paid
up. These were subsequently redeemed on 28 March 2011 out of the proceeds of a
further share issue.
13. Reserves
Special
Distributable Revenue
Share Capital Share premium Reserves reserve
GBP'000 GBP'000 GBP'000 GBP'000
=-------------------------------------------------------------------------------
As at date of - - -
incorporation -
Issue of equity 193 19,107 - -
Cost of shares - (1,060) -
issue -
Loss on ordinary - - - (192)
activities after
tax
Cancellation of - (18,047) 18,047 -
share premium
account
=-------------------------------------------------------------------------------
Balance as at 31 193 - 18,047*
December 2011 (192)*
=-------------------------------------------------------------------------------
*Reserves considered when calculating potential distribution by way of a
dividend.
When the Company re-values its investments during the period, any gains or
losses arising are credited/ charged to the income statement. Changes in fair
value of investments held 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.
Following the company's petition which was heard on 2 November 2011, the
Companies Court ordered that the
special resolution passed by the shareholders on 17 January 2011 to effect the
cancellation of the share premium
account be confirmed. The Order relating to the same was duly registered by the
Registrar of Companies on 2 November 2011. The purpose of the cancellation was
to create a reserve which will be capable of being used by
the Company 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 Ordinary Shares trade to net asset value.
14. 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 2011.
31 December 2011
GBP000
Assets at fair value through profit or loss
Fixed asset investments 11,653
=---------------------------------------------------------------
Total 11,653
Loans and receivables
Cash at bank 6,693
Other debtors 4
Accrued income 49
=---------------------------------------------------------------
Total 6,746
Liabilities at amortised cost
Accruals and other creditors (351)
=---------------------------------------------------------------
Total 18,048
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.
64.6% by value of the Company's net assets comprises investments in unquoted
companies held at fair value. A 10% overall increase in the valuation of the
unquoted investments at 31 December 2011 would have increased net assets and the
total return for the period by GBP1,165,000. An equivalent change in the opposite
direction would have reduced net assets and the total return for the period by
the same amount.
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 and, where appropriate, within interest bearing money market
funds. The benchmark rate which determines the rate of interest receivable on
such investments is the bank base rate, which was 0.5% at 31 December 2011. The
amounts held in floating rate investments at the balance sheet date were as
follows:
31 December 2011
GBP'000
=-----------------------------------
Cash on deposit 6,693
=-----------------------------------
A 1% increase in the base rate would increase income receivable from these
investments and the total return for the period by GBP66,930.
Credit risk
There were no significant concentrations of credit risk to counterparties at 31
December 2011. By cost, no individual investment exceeded 15.7% of the
Company's net assets at 31 December 2011.
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 2011 the Company's financial assets exposed to credit risk
comprised the following:
31 December 2011
GBP000
=-----------------------------------
Cash on deposit 6,693
=-----------------------------------
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. Credit risk relating to loans to and preference
shares in unquoted companies is considered to be part of market risk.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians (The Co-operative bank in
the case of fixed term deposits and Capita Financial in the case of 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
HSBC Bank plc and The Co-operative bank.
Liquidity risk
The Company's fixed term deposits 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 2011
these investments were valued at GBP6,693,000.
15. Post balance sheet events
The following events occurred between the balance sheet date and the signing of
these financial statements:
* On 20 January 2012 an equity investment of GBP400,000 was made into Atlantic
Screen International, a media company.
* On 3 February 2012 a debt investment of GBP1,000,000 was made into Borro
Limited, an asset secured loan provider.
16. 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 GBP74,000 was accrued during the period and there was GBPnil
outstanding at the period end.
There were no contingencies, guarantees or financial commitments as at 31
December 2011.
17. Related party transactions
Chris Hulatt, a non-executive director of Octopus VCT 2 plc during the period
ended 31 December 2011, who resigned on 11 November 2011, is a Director of
Octopus Investments Limited. Following Chris Hulatt's resignation, Martijn
Kleibergen, an employee of Octopus Investments Limited, was appointed as a non-
executive director of Octopus VCT 2 plc on 11 November 2011.
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 GBP41,000 was paid to Octopus Investments and there was GBPnil outstanding at
the balance sheet date, for the accounting and administrative services.
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 Fund
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 notion regarding the future of the Company.
In addition, Octopus also provides secretarial services for an additional fee of
GBP15,000 per annum. During the year GBP12,000 was due to Octopus Investments
Limited and there was GBPnil outstanding at the balance sheet date.
Octopus will also be entitled to receive a performance related incentive fee of
20% on returns to shareholders
in excess of 105p per share. The calculation of this fee is based wholly on the
payment of cash proceeds to
shareholders and will, therefore, not be paid until after the general meeting in
2016.
Directors and Advisers
Board of Directors
Ian Pearson (Chairman) Independent Auditor and Taxation Adviser
Richard Hodgson James Cowper LLP
Martijn Kleibergen 3 Wesley Gate
Queen's Road
Company Number Reading
Registered in England No. 07484406 Berkshire
RG1 4AP
Secretary and Registered office
Tracey Spevack ACIS VCT Status Adviser
20 Old Bailey PricewaterhouseCoopers LLP
London 1 Embankment Place
EC4M 7AN London
WC2N 6RH
Investment and Administration Manager
Octopus Investments Limited Bankers
20 Old Bailey HSBC Bank plc
London 31 Holborn
EC4M 7AN London
Tel: 0800 316 2349 EC1N 2HR
www.octopusinvestments.com
Registrars
Corporate Broker Capita Registrars Limited
Matrix Corporate Capital LLP The Registry
1 Vine Street 34 Beckenham Road
London Beckenham
W1J 0AH Kent
Tel: 0203 206 7176 BR3 4TU
Tel: 0871 664 0300
(Calls cost 10p per minute plus network
extras. Lines are open Monday - Friday
8.30am - 5.30pm)
www.capitaregistrars.com
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Octopus VCT 2 plc will
be held at 20 Old Bailey, London, EC4M 7AN on Wednesday, 27 June 2012 at 3.00
p.m. for the for the purposes of considering and if thought fit, passing the
following resolutions of which Resolutions 1 to 7 will be proposed as Ordinary
Resolutions and Resolutions 8, 9 and 10 will be proposed as Special Resolutions:
ORDINARY BUSINESS
1. To receive and adopt the financial statements for the period to 31 December
2011 and the Directors' and Auditor's Reports thereon.
2. To approve the Directors' Remuneration Report.
3. To elect Ian Pearson as a Director.
4. To elect Richard Hodgson as a Director.
5. To elect Martijn Kleibergen as a Director.
6. To re-appoint James Cowper LLP as auditor of the Company and to authorise
the Directors to agree their remuneration.
SPECIAL BUSINESS
To consider and if thought fit, pass Resolution 7 as an Ordinary Resolution and
Resolutions 8, 9 and 10 as Special Resolutions:
7. AUTHORITY TO ALLOT RELEVANT SECURITIES
THAT the Directors be and are generally and unconditionally authorised in
accordance with s551 of the Companies Act 2006 to exercise all the powers of the
Company to allot shares in the Company up to a maximum nominal amount of GBP19,300
(representing approximately 10% of the ordinary share capital in issue at
today's date) such authority to expire at the later of the conclusion of the
Company's next Annual General Meeting following the passing of this Resolution
and the expiry of 15 months from the passing of the relevant Resolution (unless
previously revoked, varied or extended by the Company in a general meeting but
so that such authority allows the Company to make offers or agreements before
the expiry thereof, which would or might require relevant securities to be
allotted after the expiry of such authority).
8. EMPOWERMENT TO MAKE ALLOTMENTS OF EQUITY SECURITIES
TO empower the Directors pursuant to s571 of the Companies Act 2006 to allot or
make offers or agreements to allot equity securities (as defined in s560(1) of
the said Act) for cash pursuant to the authority referred to in Resolution 7 as
if s561 (1) of the said Act did not apply to any such allotments and so that:
a. reference to allotment in this Resolution shall be construed in accordance
with s560(2) of the said Act; and
a. the power conferred by this Resolution shall enable the Company to make
any offer or agreement before the expiry of the said power which would
or might require equity securities to be allotted after the expiry of
the said power and the Directors may allot equity securities in
pursuance of such offer or agreement notwithstanding the expiry of such
power.
And this power, unless previously varied, revoked or renewed, shall come to an
end at the conclusion of the next Annual General Meeting of the Company
following the passing of this Resolution or, if earlier, on the expiry of 15
months from the passing of this Resolution.
9. AUTHORITY TO MAKE MARKET PURCHASES
THAT the Company be and is hereby generally and unconditionally authorised to
make market purchases (within the meaning of s693(4) of the Companies Act 2006
of ordinary shares of 10p each in the Company ("Ordinary shares") provided that:
a. the maximum number of ordinary shares so authorised to be purchased shall
not exceed 5% of the present issued ordinary share capital of the Company;
(b) the minimum price which may be paid for an ordinary share shall be 10p;
a. the maximum price, exclusive of expenses, which may be paid for an ordinary
share is an amount equal to 105 per cent of the average of the middle market
quotations for an ordinary share taken from the London Stock Exchange Daily
Official List for the five business days immediately preceding the day on
which the ordinary share is contracted to be purchased;
(d) the authority conferred comes to an end at the conclusion of the next
Annual General Meeting of the
Company or upon the expiry of 15 months from the passing of this
Resolution, whichever is the later; and
(e) the Company may enter into a contract to purchase its ordinary shares
under this authority prior to the expiry of this authority which would or might
be completed wholly or partly after the expiry of this authority.
10. TO AMEND THE ARTICLES OF ASSOCIATION
THAT Article 165.1 of the Company's Articles of Association be amended by
deleting the word "tenth" and substituting the word "fifth" therefor.
By Order of the Board 20 Old Bailey
London
EC4M 7AN
Tracey Spevack (ACIS)
Company Secretary
29 March 2012
Notice of Annual General Meeting (continued)
NOTES:
a. A member entitled to attend and vote at the Annual General Meeting may
appoint one or more proxies to attend and vote on his or her behalf. A proxy
need not be a member.
b. A form of proxy is enclosed which, to be effective, must be completed and
delivered to the registrars of the Company, Capita Registrars, PXS, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by
no later than 48 hours before the time the Annual General Meeting is
scheduled to begin. The completion and return of the form of proxy will not
affect the right of a member to attend and vote at the Annual General
Meeting.
c. As an alternative to returning a hard-copy proxy form by post, you can
appoint a proxy by sending it by fax to Octopus Investments Limited on
020 7657 3338. For the proxy appointment to be valid, your appointment must
be received by Octopus Investments Limited in such time as it can be
transmitted to the registrars of the Company so as to be received no later
than 48 hours before the time appointed for the meeting or any adjourned
meeting, or in the case of a poll taken subsequent to the date of the
meeting or adjourned meeting, so as to be received no later than 24 hours
before the time appointed for taking the poll. Capita Registrars will not be
liable for any proxy forms rendered illegible by means of fax transmission.
d. Any person receiving a copy of the Notice as a person nominated by a member
to enjoy information rights under section 146 of the Companies Act 2006 (a
'Nominated Person') should note that the provisions in Notes (a) and (b)
above concerning the appointment of a proxy or proxies to attend the meeting
in place of a member, do not apply to a Nominated Person as only
Shareholders have the right to appoint a proxy. However, a Nominated Person
may have a right under an agreement between the Nominated Person and the
member by whom he or she was nominated to be appointed, or to have someone
else appointed, as a proxy for the meeting. If a Nominated Person has no
such proxy appointment right or does not wish to exercise it, he/she may
have a right under such an agreement to give instructions to the member as
to the exercise of voting rights at the meeting.
e. Section 319A of the Companies Act 2006 requires the Directors to answer any
question raised at the AGM which relates to the business of the meeting
although no answer need be given (a) if to do so would interfere unduly with
the preparation of the meeting or involve disclosure of confidential
information; (b) if the answer has already been given on the Company's
website; or (c) if it is undesirable in the best interests of the Company or
the good order of the meeting.
f. Members satisfying the thresholds in section 527 of the Companies Act 2006
can require the Company to publish a statement on its website setting out
any matter relating to (a) the audit of the Company's accounts (including
the auditor's report and the conduct of the audit) that are to be laid
before the Annual General Meeting; or (b) any circumstances connected with
an auditor of the Company ceasing to hold office since the last Annual
General Meeting, that the members propose to raise at the meeting. The
Company cannot require the members requesting the publication to pay its
expenses. Any statement required to be placed on the website must also be
sent to the Company's auditors no later than the time it makes its statement
available on the website. The business which may be dealt with at the
meeting includes any statement that the Company has been required to publish
on its website.
g. Under sections 338 and 338A Companies Act 2006, members meeting the
threshold requirements in those sections have the right to require the
Company:
i. To give, to members of the Company entitled to receive notice of the
meeting, notice of a resolution which may properly be moved and is
intended to be moved at the meeting, and/or
ii. To include the business to be dealt with at the meeting any matters
(other than a proposed resolution) which may be properly included in
the business.
A resolution may properly be moved or a matter may properly be included in the
business unless:
i. (in the case of a resolution only) it would, if passed, be ineffective
(whether by reason of inconsistency with any enactment or the company's
constitution or otherwise);
ii. It is defamatory of any person; or
iii. It is frivolous or vexatious.
Such a request may be in hard copy form or in electronic form, and must identify
the resolution of which notice is to be given or the matter to be included in
the business, must be authorised by the person or persons making it, must be
received by the Company not later than six weeks before the meeting, and (in the
case of a matter to be included in the business only) must be accompanied by a
statement setting out the grounds for the request.
a. A copy of the Notice of Annual General Meeting and the information required
by Section 311A Companies Act 2006 is included on the Company's website,
www.octopusinvestments.com under Products/Venture Capital Trusts.
b. Copies of the Directors' Letters of Appointment, the Register of Directors'
Interests in the Ordinary shares of the Company kept in accordance with the
Listing Rules and a copy of the Memorandum and Articles of Association of
the Company will be available for inspection at the registered office of the
Company during usual business hours on any weekday from the date of this
notice until the Annual General Meeting, and at the place of that meeting
for at least 15 minutes prior to the commencement of the meeting until its
conclusion.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Octopus VCT 2 PLC via Thomson Reuters ONE
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