Octopus VCT 2 PLC Octopus VCT 2 PLC : Half-yearly report
23 Agosto 2012 - 5:28PM
UK Regulatory
TIDMOVC2
Octopus VCT 2 plc
Half-Yearly Results
23 August 2012
Octopus VCT 2 plc, managed by Octopus Investments Limited, today announces the
Half-Yearly results for the six months ended 30 June 2012.
These results were approved by the Board of Directors on 23 August 2012.
You may shortly view the Half-Yearly Report in full at
www.octopusinvestments.com by navigating to Investor, Venture Capital Trusts,
VCT Reports, Octopus VCT 2. All other statutory information will also be found
there.
About Octopus VCT 2 plc
Octopus VCT 2 plc ('OVCT 2', 'Company' or 'Fund') is a venture capital trust
('VCT') which aims to provide shareholders with attractive tax-free dividends
and long-term capital growth, by investing in a diverse portfolio of
predominately unquoted companies. The Company is managed by Octopus Investments
Limited ('Octopus' or 'Investment Manager').
OVCT 2 was incorporated on 6 January 2011 with the first allotment of equity
being on 16 March 2011. The total amount raised by 30 June 2012 was GBP19.0
million. The Offer for new subscriptions for shares closed on that date. Whilst
OVCT 2 will have the ability to invest in a variety of sectors and technologies,
the focus will be in the renewable energy sector, and, in particular, on solar
energy.
Venture Capital Trusts (VCTs)
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.
OVCT 2 has been provisionally approved as a VCT by HM Revenue & Customs
('HMRC'). In order to maintain its approval the VCT must comply with certain
requirements on a continuing basis. By the end of its third accounting period
at least 70% of the VCT's investments must comprise 'qualifying holdings' of
which at least 30% must be in eligible Ordinary shares. A 'qualifying holding'
consists of up to GBP1 million invested in any one year in new shares or
securities in an unquoted company (or companies quoted 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. OVCT 2 will continue to ensure its compliance with these
qualification requirements.
Financial Summary
Six months to Six months to Year to
30 June 2012 30 June 2011* 31 December 2011
=------------------------------------------------------------------------------
Net assets ( GBP'000s) 18,097 18,133 18,048
Profit/(loss) after tax ( GBP'000s) 49 (107) (192)
Net asset value per share ("NAV") 93.8p 94.0p 93.5p
* Period covered by this report is from 6 January 2011 to 30 June 2011
Chairman's Statement
I am delighted to present to you the half-yearly report for Octopus VCT 2 plc
for the period ended 30 June 2012.
Performance
The Fund has performed as expected at this stage of its life with a slight
growth of the Net Asset Value ('NAV') from 93.5p as at 31 December 2011 to
93.8p as at 30 June 2012. The NAV appreciation is due to interest income on loan
investments the Fund now generates, over and above the running costs of the
Fund.
Investment Policy and Portfolio
Whilst Octopus VCT 2 has the ability to invest in a variety of sectors and
technologies, the focus has been on building a portfolio of lower-risk
investments in the renewable energy sector, with a particular focus on solar
energy. Solar represents a significant investment opportunity as it is a well-
established, reliable form of technology that offers consistent ongoing returns
that fit with this Fund's mandate of capital preservation.
To date, GBP11.8 million has been invested into twenty solar companies that have
either successfully constructed solar power units that have been connected to
the National Grid, or are seeking to do so. A further GBP2 million has been
invested into two companies, Caspian Heat and Superior Heat, that generate
financial returns by utilising ground source heat pumps.
In terms of non-renewable energy investments, GBP1 million was invested to finance
the loan book of Borro - an online consumer finance provider. Borro provides
relatively short term fixed loans on high value assets. The Fund's investment is
secured against these assets, which means the investment carries minimal risk
for the strong returns available.
VCT qualifying investments totalling GBP2 million were also made into 5AM Music
and Game Development and Management, both of which operate within the media
sector.
Cash and Liquid Resources
Cash not yet invested is deposited in banks and money market funds which are
carefully chosen with capital preservation being the main priority.
Principal Risks and Uncertainties
Risks faced by OVCT 2 include economic, investment and strategic, regulatory,
reputational, operational and financial risks. These risks, and the ways in
which they are managed, are described in more detail in the VCT's Annual Report
and Accounts for the period ended 31 December 2011.
VCT Legislation
The Chancellor announced in his Budget on 23 March 2011 that the Government
intended to make several changes to VCTs. These proposed changes have now
received Royal Assent. The changes are good news for both entrepreneurs and
private investors seeking to invest in small companies with high growth
potential and should widen the scope for investment by VCTs. The key points are
that VCT qualifying company limits have increased, effective from May 2012, as
follows:
* maximum number of employees has increased from 50 to 250 employees;
* pre-investment gross assets limit has increased from GBP7m to GBP15m.
We are encouraged by these reforms as it indicates that the government
recognises VCTs play an important part in the UK economy and the changes should
lead to a more flexible platform from which to invest the remaining cash in the
VCT.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Octopus with advice on the
ongoing compliance with HMRC rules and regulations concerning VCTs. Octopus
does not foresee any issues with reaching the required investment hurdle of 70%
before the third anniversary of the end of the financial period in which
investors subscribed to the VCT, indeed, the VCT has already reached this
target, with qualifying investments representing 83.3% as at 30 June 2012.
Outlook
There remains continued uncertainty about the sustainability of the economic
recovery, inflationary pressures and public finances, factors which provide
testing and challenging times for many businesses.
The renewable energy investments the Fund has made are largely sheltered from
these risks as costs and returns are largely fixed and known. These investments
are suitable for the mandate originally pursued by this Fund, being one that
focuses on capital preservation.
The non-renewable energy investments made are also deemed to be within the
correct risk profile, and in the case of Borro, secured against borrower's
assets. These investments provide strong income streams from which the Fund can
operate.
Your Board and the Investment Manager believe these factors provide a good
background against which the Fund's NAV can continue to make progress, realising
a satisfactory return for shareholders.
I shall be writing to you again at the year end to provide a more detailed
review of the portfolio.
Ian Pearson
Chairman
23 August 2012
Investment Portfolio
*These are 100% debt investments
Responsibility Statement of the Directors in respect of the half-yearly report
We confirm that to the best of our knowledge:
* the half-yearly financial statements have been prepared in accordance with
the statement 'Half-Yearly Financial Reports' issued by the UK Accounting
Standards Board;
* the half-yearly report includes a fair review of the information required by
the Financial Services Authority Disclosure and Transparency Rules, being:
* an indication of the important events that have occurred during the first
six months of the financial year and their impact on the condensed set of
financial statements;
* a description of the principal risks and uncertainties for the remaining six
months of the year; and
* a description of related party transactions that have taken place in the
first six months of the current financial year, that may have materially
affected the financial position or performance of the Company during that
period and any changes in the related party transactions described in the
last annual report that could do so.
On behalf of the Board
Ian Pearson
Chairman
23 August 2012
Income Statement
+---------------------+
|Six months to 30 June| Year to 31 December
| 2012 |Six months to 30 June 2011 2011
| |
|Revenue Capital Total|Revenue Capital Total Revenue Capital Total
| |
| GBP\'000 GBP'000 GBP'000| GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=-------------+---------------------+--------------------------------------------------
| |
| |
Income | 163 - 163| 11 - 11 87 - 87
| |
| |
Investment | |
management | |
fees | - - -| - - - - - -
| |
| |
| |
Other | |
expenses | (114) - (114)| (118) - (118) (279) - (279)
| |
| |
=-------------+---------------------+--------------------------------------------------
Profit/(loss)| |
on ordinary | |
activities | |
before tax | 49 - 49| (107) - (107) (192) - (192)
| |
| |
| |
Taxation on | |
profit/(loss)| |
on ordinary | |
activities | - - -| - - - - - -
| |
| |
=-------------+---------------------+--------------------------------------------------
Profit/(loss)| |
on ordinary | |
activities | |
after tax | 49 - 49| (107) - (107) (192) - (192)
=-------------+---------------------+--------------------------------------------------
Profit/(loss)| |
per share - | |
basic and | |
diluted | 0.3p - 0.3p| (1.1)p - (1.1)p (1.3)p - (1.3)p
=-------------+---------------------+--------------------------------------------------
| |
+---------------------+
* The 'Total' column of this statement is the profit and loss account of the
Company; the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of Investment
Companies.
* All revenue and capital items in the above statement derive from continuing
operations.
* The 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 are an integral part of the half-yearly report.
Reconciliation of Movements in Shareholders' Funds
+----------------+----------------+-----------------+
|Six months ended|Six months ended| Year to|
| 30 June 2012| 30 June 2011| 31 December 2011|
| | | |
| GBP'000| GBP'000| GBP'000|
=------------------------+----------------+----------------+-----------------+
Shareholders' funds at | | | |
start of period | 18,048| -| -|
| | | |
Profit/(loss) on | | | |
ordinary activities | | | |
after tax | 49| (107)| (192)|
| | | |
Issue of equity (net of | | | |
expenses) | -| 18,240| 18,240|
=------------------------+----------------+----------------+-----------------+
Shareholders' funds at | | | |
end of period | 18,097| 18,133| 18,048|
+----------------+----------------+-----------------+
Balance Sheet
+----------------+
| As at 30 June| As at 30 June As at 31 December
| 2012| 2011 2011
| |
| GBP'000 GBP'000| GBP'000 GBP'000 GBP'000 GBP'000
=-----------------------+----------------+-------------------------------------
| |
| |
Fixed asset | |
investments* | 17,778| 9,100 11,653
| |
Current assets: | |
| |
Debtors | 157 | 13 53
| |
Cash at bank | 324 |9,157 6,693
=-----------------------+----------------+-------------------------------------
| 481 |9,170 6,746
| |
Creditors: amounts | |
falling due within one | |
year |(162) |(137) (351)
=-----------------------+----------------+-------------------------------------
Net current assets | 319| 9,033 6,395
=-----------------------+----------------+-------------------------------------
Net assets | 18,097| 18,133 18,048
=-----------------------+----------------+-------------------------------------
| |
| |
Called up equity share | |
capital | 193| 193 193
| |
Share premium | -| 18,047 -
| |
Special distributable | |
reserve | 18,047| - 18,047
| |
Revenue reserve | (143)| (107) (192)
=-----------------------+----------------+-------------------------------------
Total equity | |
shareholders' funds | 18,097| 18,133 18,048
=-----------------------+----------------+-------------------------------------
Net asset value per | |
share | 93.8p| 94.0p 93.5p
+----------------+
*Held at fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 23
August 2012 and are signed on their behalf by:
Ian Pearson
Chairman
Company Number: 07484406
Cash flow statement
+-------------+-------------+----------------+
|Six months to|Six months to| Year to|
| 30 June 2012| 30 June 2011|31 December 2011|
| | | |
| GBP'000| GBP'000| GBP'000|
=---------------------------------+-------------+-------------+----------------+
| | | |
| | | |
Net cash (outflow)/inflow from | | | |
operating activities | (244)| 17| 106|
| | | |
| | | |
| | | |
Financial investment: | | | |
| | | |
Purchase of fixed asset | | | |
investments | (6,400)| (9,100)| (11,795)|
| | | |
Sale of fixed asset investments | 275| -| 142|
| | | |
| | | |
| | | |
Management of liquid resources: | | | |
| | | |
Purchase of current asset | | | |
investments | -| -| (3,000)|
| | | |
Sale of current asset investments| -| -| 3,000|
| | | |
| | | |
| | | |
Financing: | | | |
| | | |
Issue of equity | -| 19,047| 19,350|
| | | |
Share issue expenses | -| (807)| (1,060)|
| | | |
Redemption of shares | -| -| (50)|
=---------------------------------+-------------+-------------+----------------+
(Decrease)/increase in cash | | | |
resources at bank | (6,369)| 9,157| 6,693|
+-------------+-------------+----------------+
Reconciliation of return before taxation to cash flow from
operating activities
+-------------+-------------+--------------+
| | | Year to|
|Six months to|Six months to| 31 December|
| 30 June 2012| 30 June 2011| 2011|
| | | |
| GBP'000| GBP'000| GBP'000|
=-----------------------------------+-------------+-------------+--------------+
Profit/(loss) on ordinary | | | (192)|
activities before tax | 49| (107)| |
| | | |
Increase in debtors | (104)| (13)| (53)|
| | | |
(Decrease)/increase in creditors | (189)| 137| 351|
=-----------------------------------+-------------+-------------+--------------+
(Outflow)/inflow from operating | | | 106|
activities | (244)| 17| |
+-------------+-------------+--------------+
Reconciliation of net cash flow to movement in net funds
+-------------+-------------+--------------+
| | | Year to|
|Six months to|Six months to| 31 December|
| 30 June 2012| 30 June 2011| 2011|
| | | |
| GBP'000| GBP'000| GBP'000|
=-----------------------------------+-------------+-------------+--------------+
(Decrease)/increase in cash | | | (192)|
resources at bank | (6,369)| 9,157| |
| | | |
Movement in cash equivalents | -| -| (53)|
| | | |
Opening net cash resources | 6,693| -| 351|
=-----------------------------------+-------------+-------------+--------------+
Net funds at period end | 324| 9,157| 106|
+-------------+-------------+--------------+
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the period to 30 June 2012 have
been prepared in accordance with the Accounting Standards Board's (ASB)
statement on half-yearly financial reports (July 2007).
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 30 June 2012 do not
constitute statutory accounts within the meaning of Section 415 of the Companies
Act 2006.
3. Earnings per share
The earnings per share is based on 19,300,111 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 returns per share figures are relevant. The basic and diluted earnings
per share are therefore identical.
4. Net asset value per share
The calculation of NAV per share as at 30 June 2012 is based on 19,300,111
Ordinary shares in issue at that date.
5. Related Party Transactions
Octopus provides investment management and administration & accounting services
to the Company under a management agreement which runs for a period of six years
with effect from 16 March 2011 and may be terminated at any time thereafter by
not less than twelve months' notice given by either party.
Under the agreement, the Investment Manager will receive an annual management
fee of an amount equivalent to 2.0% of the net assets of the VCT (plus VAT, if
any, at the applicable rate). In order to ensure alignment of interests between
Octopus and shareholders, the annual management fees will be rolled up (interest
free) and will only be paid to Octopus once shareholders have received back a
minimum of 105p per Ordinary share (in the form of dividends and other
distributions), after taking account of, on a winding-up, the accrued management
fees.
In addition, Octopus will only be entitled to receive an annual management fee
for the period up to the date on which the Annual General Meeting in 2016 is
held (expected to be in June 2016) if shareholders approve the winding-up of the
VCT and return capital to shareholders.
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
period GBP27,200 (31 December 2011: GBP41,000 and 30 June 2011: GBP13,500) was due to
Octopus Investments and there was GBP13,600 (31 December 2011: GBPnil and 30 June
2011: GBP13,500) outstanding at the balance sheet date.
In addition, Octopus also provides secretarial services for an additional fee of
GBP15,000 per annum. During the period GBP7,500 was due to Octopus Investments
Limited and there was GBP3,750 (31 December 2011: GBPnil and 30 June 2011: GBP4,000)
outstanding at the balance sheet date.
6. Copies of this report are available from the registered office of the
Company at 20 Old Bailey, London, EC4M 7AN.
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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