Octopus AIM VCT PLC : Half-yearly Report

Octopus AIM VCT Plc  

Half-Yearly Results

26 October 2017

Octopus AIM VCT plc, managed by Octopus Investments Limited, today announces the unaudited half-yearly results for the six months ended 31 August 2017.

These results were approved by the Board of Directors on 26 October 2017.

You may, in due course, view the Half-Yearly report in full at www.octopusinvestments.com. All other statutory information can also be found there.

Financial Summary

	Six months to 31 August 2017	Six months to 31 August 2016	Year to 28 February 2017
Net assets (£'000s)	115,856	91,832	99,915
Net profit after tax (£'000s)	6,355	6,915	15,123
Net asset value per share ("NAV") (p)	118.4	107.4	114.4
Ordinary Dividends paid in the period (p)	3.0	2.5	5.0
Total return* (%)	6.1	8.2	17.5
Interim Dividend proposed (p)**	2.5

^*The total return is calculated as the (movement in NAV + Dividends paid in the period) divided by the NAV at the beginning of the period.

^**An interim dividend of 2.5p will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.

Chairman's Statement

I am pleased to present the half-yearly results for Octopus AIM VCT plc. In the past my interim statement has incorporated information about, for example, performance and portfolio activity, but this has now been set out separately below in the Interim Management Report. However, it seems sensible to make a few overall remarks.

The six months to 31 August 2017 has seen smaller companies outperform larger companies, continuing the trend seen at the end of 2016 and the beginning of 2017. This was despite a considerable degree of political uncertainty around the mechanics of Brexit and the upset caused by the General Election result in June which has resulted in more volatile market movements over the summer months. Since then the Government has published a consultative document on the Patient Capital Review, the purpose of which is to review funding support for small businesses of which VCTs are an integral part. Your Manager has participated in this process and the final outcome is awaited.

Your Board has declared a dividend of 2.5p, which will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.

Your Managers have made a number of new investments in the six month period and these are more fully explained within the Interim Management Report. There also appears to be a healthy pipeline of potential new investments, so at this stage it is probable that there will be more new holdings made in the second half of the year.

Shareholders will be aware that your Board decided to launch a new public offer of shares in June and the first allotment took place on 4 August 2017. On the basis of current evidence it seems that there may be good investment opportunities for the new funds, despite the fact that the market will be more prone to bouts of uncertainty as the Brexit negotiations unfold. Nevertheless the broad economic background currently remains favourable and your Board therefore hopes that the NAV can continue to rise.

Roger Smith
Chairman
26 October 2017

Interim Management Report

Overview
The six months to 31 August 2017 saw the progress in the Net Asset Value per share that we reported on in the annual report continue. Smaller companies enjoyed a particularly strong start to 2017 after a period when they had underperformed the FTSE 100, which had benefitted from its high exposure to foreign earnings in the final quarter of 2016. The outperformance of smaller companies was supported by some very good results in the March reporting season and has continued despite a considerable degree of political uncertainty around the mechanics of Brexit, which was further complicated by the General Election result in June. Against this background the NAV enjoyed strong gains in April and May before giving some of these back in the month of June and finishing the period still below its peak.

Fundraisings on AIM got off to a slow start in the first quarter of 2017 although they picked up throughout the period and remain strong as this report goes to press with the result that the VCT invested more in qualifying holdings in the six months than in the whole of the previous year. Once again, further fundraisings for existing businesses exceeded those for new issues, demonstrating that AIM continues to support its existing members. We announced a top-up offer to raise £4.3 million which closed to new applications, fully subscribed, at the beginning of March, well before the end of the tax year. A subsequent combined offer with Octopus AIM VCT 2 plc to raise up to £30million, with an over allotment facility of £10 million for the 2017/18 and 2018/19 tax years was launched in June. Further details can be found on Page 8. The supply of new issues and fundraisings has carried on improving and we believe that the increased flow of opportunities that we have seen as market participants became more familiar with current VCT rules will continue.

Performance
Adding back the 3.0p paid out in dividends in the period, the Net Asset Value has increased by 6.1% in the six months to 31 August 2017. This compares with a 9.1% rise in the Smaller Companies Index (ex Investment Trusts), a 5.3% increase in the FTSE All Share Index and a 12.2% rise in AIM, all on a total return basis. Smaller companies outperformed as they narrowed the valuation discount to the FTSE 100 that had widened in the aftermath of the Brexit vote and weaker sterling. Performance remained stock specific and heavily influenced by the announcement of news with the market remaining wary of early stage companies not yet making a profit, of which we hold a number in the portfolio, particularly in the pharmaceutical, medical device and technology sectors. This was a contributor to the fund lagging both AIM and the Smaller Companies Index in the period. It remained the case that most of the gains in the portfolio relied on progress being made by companies originally invested in at an early stage, and some of those have struggled to make that transformation with many taking longer than originally expected.

Many companies in the portfolio announced good results in March and were subsequently rewarded with share price gains, including several of the larger holdings which contributed the most to the rise in the NAV in the period. Breedon shares continued their outperformance following the acquisition of Hope Cement in 2016 which had doubled the size of the business and increased the geographical reach to cover most of the UK. Quixant's shares also had another good six months, helped by further reports of strong trading which led to further upgrades in forecasts. It has since reported a very strong set of interim results although the shares have now paused for breath to await the outcome for the year. We have taken some profit in the latter holding since the period end. Gear4music's shares were exceptionally strong performers as they reported profits and revenue growth ahead of expectations with rapid expansion of the European leg of the business demonstrating the potential for a much larger international business. GB Group's shares recovered from an earlier setback as investors focused on the size of the opportunity for international identity verification in an increasingly global world. Learning Technologies also made a significant acquisition which extends the company's geographical reach and increases the proportion of recurring revenues, in addition to announcing strong growth in its core business.

Notable detractors from performance in the period were Tasty, where rising food and staff costs resulted in significant downgrades to short term profit expectations and caused it to re-evaluate its new opening pipeline, and DP Poland which operates the Dominos Pizza franchise in Poland. The latter is better placed and starting to show the effective roll-out of its model with 50 owned and franchised stores. It had a successful placing to accelerate its opening programme towards profitability. We believe that the shares will recover once it shows that it has achieved critical mass. Vertu Motors continued to see its share price suffer bouts of pressure from fears around Brexit. Elsewhere, most of the drag on performance came from the earlier stage companies in the portfolio, particularly those that had setbacks or showed themselves in need of further cash to reach profitability. Oxford Pharmascience, Futura Medical, Midatech Pharma, Sphere, Tyratech and Microsaic all fall into this category with several of them publicly highlighting a need for further cash investment in order to achieve the necessary momentum in their businesses. Sphere Medical found that it was unable to raise sufficient funds on AIM and so announced the decision to de-list, causing us to sell our shares at a loss as the proposed structure would have led to the fund holding a private company which would cease to form part of the qualifying portfolio. Some others in this list have announced strategic reviews and will be presenting shareholders with action plans over the coming months.

However, there were also some earlier stage companies which performed well in the period, with good initial contributions from Faron and Maxcyte as well as an upturn in fortunes at MyCelx on the back of a more stable oil price and initial signs that the marketing agreement with Schlumberger could lead to significant future growth. The shares are now well above their low point although they have yet to regain their float price. WANdisco shares also performed well as the market started to appreciate the benefits of the IBM re-seller agreement and the progress towards breakeven.

Portfolio Activity
In the period under review, the Company made seven new qualifying investments totalling £5.32million in companies exposed to a wide range of industries. This represented a significant increase on the previous year when £3.4million was invested in the twelve months to February. The majority were loss-making at the time of investment although we expect several of them to reach profitability in the near to medium term. The new investments were Escape Hunt, Faron Pharmaceuticals, Maxcyte Group, Velocity Composites, DP Poland, Appscatter Group and FairFX Group. Three of these investments (Escape Hunt, Velocity and Appscatter) were new issues, three (Faron, FairFX and Maxcyte) were new investments for the VCT into existing AIM companies and DP Poland was a follow-on investment for the fund. Escape Hunt is a leisure company operating live escape games in premises around the world both through its own outlets and franchisees. Faron Pharmaceuticals is a drug development company with a drug in phase III trials to treat the often lethal Acute Respiratory Distress Syndrome suffered by trauma victims in A&E. Maxcyte is a pharmaceutical services company with particular technological expertise in the discovery, development, manufacture and commercialisation of cell-based medicines. Velocity Composites manages the supply of raw composite materials in prepared form to the production lines of Tier 1 aircraft component manufacturers. FairFX Group is a foreign exchange provider to both private individuals and corporations. Appscatter manages apps for corporate customers and app developers so that they are registered and distributed to over 50 global app stores which are all monitored for brand and piracy infringements and updated as necessary.

Your Managers continued to use non-qualifying investments to manage liquidity while awaiting new qualifying investment opportunities. Existing holdings for this purpose include some AIM non-qualifying stocks but we have added three holdings in UP Global Sourcing, Medica and Alfa Financial Software which are fully listed stocks and therefore allowed under the new regulations. In the period we also invested a further £7.2 million of the cash balances into Octopus managed portfolios of mixed equity and bond funds and £1.05 million into the FP Octopus UK Micro-Cap Fund, with the objective of obtaining a better return on our cash awaiting investment.

A number of disposals were made, which were a mixture of profit-taking from existing holdings such as Netcall and Restore, and outright sales as in the case of Work Group which had been suspended and changed its business so that it no longer qualified and Sphere which decided to raise funds as a private company as well as Ideagen. The result has been a net loss of £263,000. Since the period end we have taken profits in Quixant and Restore.

Transactions with Manager
Details of amounts paid to the Manager are disclosed in note 8 to the Financial Statements.

Share Buybacks
In the six months to 31 August 2017, the Company bought back 929,542 Ordinary shares for total consideration of £1,048,000. It is evident from the conversations which your Managers have that this facility remains an important consideration to investors. The Company remains committed to maintaining its policy of buying back shares at a 5% discount to NAV.

Share Issues and Fundraising
Your Board announced the intention to launch a new prospectus offer on 16 May 2017 to raise up to £30 million with a possible £10million over allotment facility in combination with Octopus AIM VCT 2 plc. This represents a fundraising of up to £24 million for this VCT. The offer launched on 16 June 2017 and two allotments have taken place with the issue of 10,986,600 shares and funds raised of £13.0 million, net of costs. The Board confirmed the use of the £10 million over allotment facility on 6 October 2017.

In addition 289,872 new ordinary shares were issued in August to shareholders who participated in the dividend reinvestment scheme (DRIS).

Dividend
On 4 August 2017, the Company paid a dividend of 3p per share, being the final dividend for the year ended 28 February 2017.

For the period to 31 August 2017, the Board has declared an interim dividend of 2.5p. This will be paid on 19 January 2018 to shareholders on the register on 22 December 2017.

It remains the Board's intention to maintain a minimum annual dividend payment of 5.0p per share or a 5% yield based on the period end share price, whichever is the greater. This will usually be paid in two instalments during each year.

Risks and Uncertainties
The principal risks and uncertainties are set out in Note 7.

Outlook
Politics continues to dominate the news and a minority Government post the general election is not obviously helpful to negotiating our way successfully out of the European Union. All of this has made the market more volatile since June and the NAV has given back some of its strong rise in the first three months of the period. Although it is only to be expected that the market will be more prone to bouts of uncertainty as the Brexit negotiations unfold, it remains the case that the economic Armageddon predicted by many in the immediate aftermath of the vote a year ago has not materialised and any effects of Brexit itself will be felt much further into the future than 2018.

In the first six months of the year we have seen some good results and a number of encouraging trading statements from companies in the portfolio which is mostly being reinforced in the Autumn interim results season. The portfolio now contains 74 holdings across a range of sectors with the balance weighted towards profitable companies which are continuing to pursue growth. The current fundraising will make cash available for new investments giving the VCT the chance to take advantage of any lowering of valuations in the new issue market that may arise as a result of market uncertainty. With the VCT 90% invested in qualifying companies for HMRC purposes your Manager can afford to be selective about new investments.

The AIM Team
Octopus Investments
26 October 2017

Investment Portfolio

Investee Company	Sector	Cost as at 31 August 2017 (£'000)	Cumulative change in fair value (£'000)			Fair Value at 31 August 2017 (£'000)	Movement in period ('£000)	% equity held by Octopus AIM VCT plc	% equity held by all funds managed by Octopus
Breedon Group plc	Construction & Building	859	5,545			6,404	1,163	0.49%	2.47%
Quixant plc	Technology Hardware	697	5,661			6,358	1,090	2.30%	5.98%
GB Group plc	Support Services	715	3,765			4,480	1,041	1.32%	14.15%
Staffline Recruitment Group plc	Support Services	334	4,105			4,439	422	0.76%	9.73%
Mattioli Woods plc	Finance	529	2,778			3,307	277	1.13%	11.70%
Brooks Macdonald Group plc	Finance	746	2,470			3,216	112	1.15%	2.92%
Gear4music Holdings plc	Media	557	2,611			3,168	542	1.92%	5.48%
IDOX plc	Software	353	2,497			2,850	(551)	1.53%	2.17%
Learning Technologies Group plc	Support Services	1,319	1,424			2,743	292	1.03%	1.83%
RWS Holdings plc	Support Services	367	2,222			2,589	523	0.27%	7.18%
Animalcare Group plc	Pharmaceuticals & Biotech	306	1,774			2,080	72	0.92%	2.57%
DP Poland plc	Leisure & Hotels	1,016	913			1,929	(580)	2.07%	3.59%
Craneware plc	Software	183	1,562			1,745	104	2.20%	7.37%
Yu Group plc	Utilities	705	1,029			1,734	591	0.51%	1.79%
Clinigen Group plc	Pharmaceuticals & Biotech	935	794			1,729	445	3.17%	6.65%
Ergomed plc	Pharmaceuticals & Biotech	1,440	164			1,604	(276)	2.71%	9.53%
Restore plc	Support Services	427	1,154			1,581	411	0.13%	4.37%
Gooch & Housego plc	Electronic & Electrical	490	1,089			1,579	152	0.29%	10.25%
Netcall plc	Telecommunication Services	308	1,246			1,554	(340)	0.49%	15.25%
Cello Group plc	Media	895	606			1,501	109	1.17%	3.94%
Advanced Medical Solutions Group plc	Pharmaceuticals & Biotech	757	730			1,487	488	0.22%	9.26%
Next Fifteen Communications Group plc	Media	687	679			1,366	89	0.45%	10.99%
EKF Diagnostics Holdings plc	Health	931	370			1,301	305	1.19%	2.15%
Adept Telecom plc	Telecommunication Services	601	686			1,287	(43)	1.81%	3.89%
appScatter Group plc	Software	1,257	-			1,257	-	3.06%	5.36%
FairFX Group plc	Software	948	245			1,193	245	1.05%	1.95%
Escher Group Holdings plc	Software	1,003	176			1,179	295	3.13%	5.48%
Cambridge Cognition Holdings plc	Health	601	566			1,167	506	4.19%	13.70%
Vertu Motors plc	General Retailers	1,265	(105)			1,160	(100)	0.68%	4.81%
Escape Hunt plc	Leisure & Hotels	988	66			1,054	65	3.61%	6.02%
Brady plc	Software	947	65			1,012	(149)	1.79%	3.01%
Abcam plc	Pharmaceuticals & Biotech	537	421			958	182	0.04%	2.58%
Judges Scientific plc	Electronic & Electrical	314	619			933	108	0.82%	1.37%
Nasstar plc	Software	481	408			889	72	1.67%	4.61%
CityFibre plc	Telecommunication Services	1,025	(152)			873	148	0.26%	0.67%
LoopUp Group plc	Software	480	374			854	144	1.17%	3.90%
Omega Diagnostics Group plc	Health	465	377			842	134	3.01%	5.27%
Gamma Communications plc	Telecommunication Services	488	320			808	177	0.14%	9.33%
Velocity Composites plc	Industrial	799	-			799	-	2.63%	4.93%
SQS Software Quality Systems AG	Software	291	474			765	(65)	0.42%	15.25%
MyCelx Technologies Corporation	Oil Equipment	1,470	(737)			733	446	4.34%	9.19%
Faron Pharmaceuticals Oy	Pharmaceuticals & Biotech	344	335			679	335	0.35%	0.72%
Osirium Technologies plc	Electronic & Electrical	750	(77)			673	144	4.63%	15.36%
TLA Worldwide plc	Media	807	(141)			666	(545)	2.81%	4.69%
Vectura Group plc	Pharmaceuticals & Biotech	498	159			657	(212)	0.09%	0.15%
Haydale Graphene Industries plc	Chemicals	598	45			643	-	1.91%	6.99%
WANdisco plc	Software	145	441			586	276	0.22%	0.36%
Tasty plc	Leisure & Hotels	622	(56)			566	(997)	2.49%	4.36%
Scientific Digital Imaging plc	Electronic & Electrical	179	357			536	89	2.49%	9.55%
Futura Medical plc	Pharmaceuticals & Biotech	968	(433)			535	(331)	1.41%	7.88%
Mears Group plc	Support Services	139	387			526	(80)	0.12%	0.14%
Iomart Group plc	Software	268	205			473	41	0.14%	11.07%
Sinclair IS Pharma plc	Pharmaceuticals & Biotech	765	(305)			460	(40)	0.32%	0.54%
Maxcyte Inc	Pharmaceuticals & Biotech	511	(65)			446	(65)	2.55%	7.16%
UP Global Sourcing Holdings plc	Household Goods & Textiles	273	171			444	171	0.26%	0.60%
Plastics Capital plc	Engineering & Machinery	400	36			436	(80)	1.03%	7.68%
TP Group plc	Engineering & Machinery	648	(315)			333	(80)	0.70%	2.92%
Access Intelligence plc	Software	375	(75)			300	(19)	2.35%	4.65%
FreeAgent Holdings plc	Media	277	13			290	(112)	0.81%	3.38%
Oxford Pharmascience Group plc	Pharmaceuticals & Biotech	1,350	(1,148)			202	(162)	1.12%	3.31%
Midatech Pharma plc	Pharmaceuticals & Biotech	600	(402)			198	(76)	0.46%	2.40%
Enteq Upstream plc	Oil Services	1,032	(836)			196	-	1.67%	2.78%
Tyratech Inc	Chemicals	600	(420)			180	(120)	5.46%	19.87%
Microsaic Systems plc	Engineering & Machinery	1,084	(921)			163	(136)	5.99%	11.79%
Nektan Limited	Software	845	(699)			146	51	1.75%	10.58%
Fusionex International plc	Software	282	(164)			118	(157)	0.34%	0.57%
ReNeuron Group plc	Pharmaceuticals & Biotech	324	(211)			113	(36)	0.20%	1.17%
Dods Group plc	Media	203	(98)			105	(4)	0.24%	0.24%
Genedrive Plc	Pharmaceuticals & Biotech	210	(127)			83	(16)	1.40%	2.34%
1Spatial plc	Software	300	(270)			30	15	0.12%	0.21%
Proxama plc	Software	763	(755)			8	(98)	0.22%	0.70%
Bond International Software plc	Software	8	-			8	-	n/a	n/a
Total Quoted Investments		45,684	43,622			89,306	6,402
Unquoted Investments
Hasgrove plc	Media	88	132			220	70	0.74%	4.38%
Rated People Limited	Software	354	(268)			86	-	0.51%	1.49%
Total Unquoted Investments		442	(136)			306	70
Loan Note Investments
Nektan Limited	Software	500		-		500	-
Access Intelligence plc	Software	120		-		120	-
Total Loan Notes		620		-		620	-
Total Fixed Asset Investments		46,746		43,486		90,232	6,472
Current Asset Investments
Octopus Portfolio Manager - Conservative Capital Growth		7,450			427	7,877	124
Octopus Portfolio Manager - Defensive Capital Growth		7,450			304	7,754	105
Octopus UK Micro Cap Growth Fund		2,250			518	2,768	352
Total Current Asset Investments		17,150			1,249	18,399	581
Total fixed and current asset investments						108,631
Money Market Funds						4,295
Cash at bank						10,179
Debtors less creditors						(7,249)
Total net assets						115,856

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

·      the half-yearly financial statements have been prepared in accordance with Financial Reporting Standard 104 Interim Financial Reporting issued by the Financial Reporting Council;

·      the half-yearly report includes a fair review of the information required by the Financial Conduct Authority's 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

Roger Smith
Chairman
26 October 2017

Income Statement

	Unaudited			Unaudited			Audited
	Six months to 31 August 2017			Six months to 31 August 2016			Year to 28 February 2017
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Loss)/gain on disposal of fixed asset investments	-	(25)	(25)	-	78	78	-	1,178	1,178
Gain on valuation of fixed asset investment	-	6,472	6,472	-	7,252	7,252	-	14,258	14,258
Gain on valuation of current asset investment	-	581	581	-	-	-	-	668	668
Investment income	442	-	442	432	-	432	858	-	858
Investment management fees	(192)	(575)	(767)	(148)	(445)	(593)	(353)	(1,059)	(1,412)
Other expenses	(348)	-	(348)	(254)	-	(254)	(427)	-	(427)
Profit/(loss) on ordinary activities before tax	(98)	6,453	6,355	30	6,885	6,915	78	15,045	15,123
Taxation on profit/(loss) on ordinary activities	-	-	-	-	-	-	-	-	-
Profit/(loss) on ordinary activities after tax	(98)	6,453	6,355	30	6,885	6,915	78	15,045	15,123
Earnings per share - basic and diluted	(0.1)p	7.0p	6.9p	0.1p	8.3p	8.4p	0.1p	17.7p	17.8p

·      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 no recognised gains or losses other than those disclosed in the income statement.

·      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, as well as OEIC funds.

·      The accompanying notes are an integral part of the half-yearly report.

Balance Sheet

	Unaudited		Unaudited		Audited
	As at 31 August 2017		As at 31 August 2016		As at 28 February 2017
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments		90,232		73,210		79,919
Current assets:
Current asset investments	18,399		6,622		9,568
Money market securities	4,295		5,281		5,290
Debtors	87		34		332
Cash at bank	10,179		8,610		13,679
	32,960		20,547		28,869
Creditors: amounts falling due within one year	(7,336)		(1,925)		(8,873)
Net current assets		25,624		18,622		19,996
Net assets		115,856		91,832		99,915
Called up equity share capital		978		855		873
Share premium		48,650		32,620		35,422
Capital redemption reserve		54		37		45
Special distributable reserve		49,961		56,670		53,717
Capital reserve realised		(28,858)		(27,406)		(28,020)
Capital reserve unrealised		44,736		28,671		37,445
Revenue reserve		335		385		433
Total equity shareholders' funds		115,856		91,832		99,915
Net asset value per share		118.4p		107.4p		114.4p

The accompanying notes form an integral part of the financial statements.

The statements were approved by the Directors and authorised for issue on 26 October 2017 and are signed on their behalf by:

Roger Smith
Chairman
Company No: 03477519

Statement of Changes in Equity

	Share Capital £'000	Share Premium £'000	Capital redemption reserve £'000	Special distributable reserves £'000	Capital reserve realised £'000	Capital reserve unrealised £'000	Revenue reserve £'000	Total £'000
As at 1 March 2017	873	35,422	45	53,717	(28,020)	37,445	433	99,915
Management fee allocated as capital expenditure	-	-	-	-	(575)	-	-	(575)
Current period loss on disposal	-	-	-	-	(25)	-	-	(25)
Current period gains on fair value of investments	-	-	-	-	-	7,053	-	7,053
Prior periods' holding losses now realised	-	-	-	-	(238)	238	-	-
Loss on ordinary activities after tax	-	-	-	-	-	-	(98)	(98)
Total comprehensive income for the period	-	-	-	-	(838)	7,291	(98)	6,355
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	(9)	-	9	(1,047)	-	-	-	(1,047)
Issue of shares	114	14,037	-	-	-	-	-	14,151
Share issue costs	-	(809)	-	-	-	-	-	(809)
Dividends paid	-	-	-	(2,709)	-	-	-	(2,709)
Balance as at 31 August 2017	978	48,650	54	49,961	(28,858)	44,736	335	115,856
As at 1 March 2016	760	21,643	24	60,062	(26,158)	20,898	355	77,224
Management fee allocated as capital expenditure	-	-	-	-	(445)	-	-	(445)
Current period gain on disposal	-	-	-	-	78	-	-	78
Current period gain on fair value of investments	-	-	-	-	-	7,252	-	7,252
Prior periods' holding losses now realised	-	-	-	-	(521)	521	-	-
Profit on ordinary activities after tax	-	-	-	-	-	-	30	30
Total comprehensive income for the period	-	-	-	-	(888)	7,773	30	6,915
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	(13)	-	13	(1,281)	-	-	-	(1,281)
Issue of shares	108	11,440	-	-	-	-	-	11,548
Share issue costs	-	(463)	-	-	-	-	-	(463)
Dividends paid	-	-	-	(2,111)	-	-	-	(2,111)
Balance as at 31 August 2016	855	32,620	37	56,670	(27,406)	28,671	385	91,832
As at 1 March 2016	760	21,643	24	60,062	(26,518)	20,898	355	77,224
Management fee allocated as capital expenditure	-	-	-	-	(1,059)	-	-	(1,059)
Current period gains on disposal	-	-	-	-	1,178	-	-	1,178
Current period gain on fair value of investments	-	-	-	-	-	14,926	-	14,926
Prior periods' holding losses now realised	-	-	-	-	(1,621)	1,621	-	-
Profit on ordinary activities after tax	-	-	-	-	-	-	78	78
Total comprehensive income for the period	-	-	-	-	(1,502)	16,547	78	15,123
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	(21)	-	21	(2,054)	-	-	-	(2,054)
Issue of shares	134	14,413	-	-	-	-	-	14,547
Share issue costs	-	(634)	-	-	-	-	-	(634)
Dividends paid	-	-	-	(4,291)	-	-	-	(4,291)
Balance as at 28 February 2017	873	35,422	45	53,717	(28,020)	37,445	433	99,915

Cash Flow Statement

	Unaudited Six months to 31 August 2017 £'000	Unaudited Six months to 31 August 2016 £'000	Audited Year to 28 February 2017 £'000
Cash flows from operating activities
Return on ordinary activities before tax	6,355	6,915	15,123
Adjustments for:
Decrease/(increase) in debtors	245	14	(284)
(Decrease)/increase in creditors	(1,537)	(497)	6,451
(Loss)/gain on disposal of fixed assets	25	(78)	(1,178)
Gain on valuation of fixed asset investments	(6,472)	(6,930)	(14,258)
Gain on valuation of current asset investments	(581)	(322)	(668)
Net cash generated from operating activities	(1,965)	(898)	5,186
Cash flows from investing activities
Purchase of fixed asset investments	(5,807)	(2,145)	(3,391)
Purchase of current asset investments	(8,250)	(6,300)	(8,900)
Sale of fixed asset investments	1,941	521	3,486
Net cash flows from investing activities	(12,116)	(7,924)	(8,805)
Cash flows from financing activities
Purchase of own shares	(1,047)	(1,281)	(2,054)
Share issues	13,342	11,085	13,913
Dividends paid	(2,709)	(2,111)	(4,291)
Net cash flows from financing activities	9,586	7,693	7,568
(Decrease)/increase in cash and cash equivalents	(4,495)	(1,129)	3,949
Opening cash and cash equivalents	18,969	15,020	15,020
Closing cash and cash equivalents	14,474	13,891	18,969
Cash and cash equivalents comprise
Cash at Bank	10,179	8,610	13,679
Money Market Funds	4,295	5,281	5,290
	14,474	13,891	18,969

Notes to the Half-Yearly Report

1.     Basis of preparation
       The unaudited half-yearly results which cover the six months to 31 August 2017 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in January 2017.

2.     Publication of non-statutory accounts
       The unaudited interim results for the six months ended 31 August 2017 do not constitute statutory accounts within the meaning of s.415 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 28 February 2017 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements, in accordance with chapter 3 of part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company's auditor.

3.     Earnings per share
       The earnings per share at 31 August 2017 is calculated on the basis of 91,508,456 (28 February 2017: 84,880,191 and 31 August 2016: 82,606,763) shares, being the weighted average number of 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.

4.     Net asset value per share

	31 August 2017 £'000	31 August 2016 £'000	28 February 2017 £'000
Net assets	115,856	91,832	99,915
Shares in Issue	97,829,766	85,498,913	87,366,893
Net Asset Value per share	118.4p	107.4p	114.4p

       There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical.

5.     Dividends
       The interim dividend declared of 2.5 pence per Ordinary share will be paid on 19 January 2018 to those shareholders on the register on 22 December 2017.

6.     Buybacks share issues
       During the six months ended 31 August 2017 the Company repurchased the following shares.

Date	No of shares	Price (p)
3 March 2017	174,092	109.3
13 April 2017	259,620	111.0
22 May 2017	232,278	116.0
29 June 2017	63,545	114.0
11 August 2017	200,007	113.5
Total	929,542

  The weighted average price of all buybacks during the period was 112.7 pence per share.

  During the six months ended 31 August 2017 the Company issued the following shares.

Date	No of shares	Price (p)
3 March 2017	3,454,226	121.1
13 April 2017	195,145	123.0
4 August 2017	7,432,367	125.9
4 August 2017(DRIS)	289,872	118.9
15 August 2017	20,805	118.9
Total	11,392,415

       The weighted average allotment price of all shares issued during the period was 124.2 pence per share.

7. Principal risks and uncertainties
       The Company's assets consist of equity and fixed-rate interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 28 February 2017. Since the publication of those Accounts the Government has published a consultative document on the Patient Capital Review, the purpose of which is to review funding support for small businesses of which VCTs are an integral part. The final outcome of this Review is awaited. Subject to this matter, the Company's principal risks and uncertainties have not changed materially since the date of the Company's Annual Report and Accounts for the year ended 28 February 2017

8. Related Party Transactions
       Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services. During the period, the Company incurred management fees of £767,000 payable to Octopus (28 February 2017: £1,412,000 and 31 August 2016: £593,000). At the period end there was £404,000 outstanding to Octopus (28 February 2017: £399,000 and 31 August 2016: £326,000).

       The Company has invested £8.3 million into Octopus managed funds, being the Octopus Portfolio Manager funds. To ensure that there is no duplication of management fees on investments, the Company receives a reduction in the management fee as a percentage of the value of these investments.

9. Post Balance Sheet Events
       The following events occurred between the Balance sheet date and the signing of this half-yearly report.

· Disposal of 65,400 shares in Restore plc for total consideration of £367,000.

· Disposal of 120,000 shares in Quixant plc for total consideration of £527,000.

· Disposal of 213,281 shares in UP GLobal Sourcing for total consideration of £175,000.

· Addition of 54,000 shares in Faron Pharmaceuticals for total consideration of £432,000.

· The Company issued 3,554,233 shares at a price of 125.0p per share on 8 September 2017.

· The Company repurchased 335,557 shares at a weighted average price of 113.3p per share.

10. Other Information
       This statement will be made available to all shareholders. Copies are also available from the registered office of the Company at 33 Holborn, London, EC1N 2HT, and will also be available to view on the Octopus website at www.octopusinvestments.com.

---

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus AIM VCT PLC via Globenewswire