Half-yearly report

Octopus IHT AIM VCT plc Half-Yearly Results 28 July 2010 Octopus IHT AIM VCT plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 31 May 2010. These results were approved by the Board of Directors on 27 July 2010. You will shortly be able to view the Half-Yearly Report in full at www.octopusinvestments.com by navigating to Services, Investor Services, Venture Capital Trusts, Octopus IHT AIM VCT. All other statutory information will also be found there. About Octopus IHT AIM VCT PLC Octopus IHT AIM VCT PLC (the "Company" or "Fund") is a venture capital trust ("VCT") which aims to provide shareholders with attractive tax-free dividends and long-term capital growth. The Investment Manager is Octopus Investments Limited ("Octopus" or "Manager"). The Company was launched as Close IHT AIM VCT PLC in March 2006 and raised Â£25 million through an offer for subscription. Financial Summary Six months to Six months to Year to Â 31 May 2010 31 May 2009 30 November 2009 Net assets (Â£'000s) 10,043 16,726 10,783 Net profit/(loss) after tax (Â£'000s) (538) 1,266 1,484 Net asset value per share ("NAV") 65.1p 68.4p 69.5p Dividend per share - paid in period 1.0p 1.0p 2.0p Cumulative dividends paid since launch 8.4p 6.4p 7.4p The table below lists the dividends that have been paid since the launch of the Company and adds the cumulative total of dividends paid to the NAV of the Company: Â A shares pence per share Total dividends paid during the period to 30 November 2006* 1.4p Total dividends paid during the period to 31 May 2007 1.0p Total dividends paid during the period to 30 November 2007 1.0p Total dividends paid during the period to 31 May 2008 1.0p Total dividends paid during the period to 30 November 2008 1.0p Total dividends paid during the period to 31 May 2009 1.0p Total dividends paid during the period to 30 November 2009 1.0p Total dividends paid during the period to 31 May 2010 1.0p -------------------------------------------------------------------------------- Total dividends 8.4p NAV at 31 May 2010 65.1p -------------------------------------------------------------------------------- NAV plus cumulative dividends paid as at 31 May 2010 73.5p * Investors subscribing by 17 January 2006 were entitled to this dividend. Investors subscribing thereafter were not entitled to this first dividend. Chairman's Statement Overview The six month period to 31 May 2010 has been a frustrating one for your Company.Â In the annual report I commented on the recovery in share prices from their lows in the middle of 2009 and expressed a hope that now that the news coming out of investee companies had improved, further growth in the NAV of your Company could be achieved. Yet despite clear signs that earnings have bottomed and that upgrades are now exceeding downgrades by a considerable margin, appetite for smaller company shares has still not returned, and the NAV has remained depressed, with shareholders still waiting for their patience to be rewarded. On a more encouraging note, there are signs that new issues are beginning to reappear now that the general election is out of the way, although the two investments made in the period were in existing AIM companies, there is a continuing source of deal-flow as the banks are still unwilling to lend.Â There is also increasing evidence of corporate takeover activity, suggesting that companies feel that profits have now bottomed, making takeover activity less risky, as well as supporting our view that there is value in current share prices. Performance Over the six months to 31 May 2010, adding back the 1p dividend paid in the period, the NAV decreased by 4.9%. In comparison, the FTSE Small Cap Index ex investment trusts decreased by 2.7% and the FTSE AIM All-Share Index increased by 5.0%.Â The performance of AIM was flattered by its high resource stock weighting, but it is nevertheless disappointing that smaller company share prices have been sluggish and that this has affected the performance of the NAV in the period. The changes in the portfolio over the period and since the period end have mostly come about as a result of bid activity, which has been gathering momentum as value among smaller companies has deepened.Â Research Now was bid for in December, and more recently Melorio and Innovision have been the subject of cash offers.Â Telephonetics has been bid for by Netcall, and the Fund has subscribed for new qualifying Netcall shares to reinvest some of the cash being paid to shareholders as part of the takeover deal. News from existing investee companies has been mostly positive, with continued upgrades for Vertu Motors, which has now acquired a Scottish operation and still trades at a substantial discount to its net asset value, reflecting caution about consumer exposure.Â Animalcare has also been trading ahead of expectations, reflecting the strength of its veterinary drugs division and we have taken some profits to reduce the overall size of the holding. Profits have also been taken in Advanced Computer Software, Brulines and Pressure Technologies.Â The latter is suffering from a lack of orders from oil exploration companies, but has a strong balance sheet with net cash. Three new investments totalling Â£524,000 were made in the period. Two are VCT qualifying, Snacktime, a vending machine operator in commercial premises, and Access Intelligence, a small software company specialising in compliance software for the food manufacturing and financial sectors.Â The third investment, RWS Holdings, is a non qualifying holding in a specialist patent translation business.Â Since the period end the Fund has made two further investments in Netcall, a call centre software provider which is merging with Telephonetics and a new investment in EKF Diagnostics, a European manufacturer and distributor of point of care diagnostics devices. Proposed Merger with Octopus Second AIM VCT A circular was posted to all shareholders in July outlining a proposal to merge the Company and Octopus Second AIM VCT so as to create a single, larger VCT.Â In addition, the Company is proposing to raise up to Â£10m by way of an offer to provide funds for new investments at what the Directors believe is an advantageous point in the investment cycle.Â This merger is being carried out under section 110 of the Insolvency Act 1986, which means that Octopus Second AIM VCT will eventually be wound up. In the meantime this VCT takes on both the assets and liabilities of Second AIM VCT in return for issuing shares to former Second AIM VCT shareholders. Importantly, it also means that the merger will be conducted outside the provisions of The City Code on Takeovers and Mergers. Whilst writing I thought that I might reiterate a few points from the circular. The board has taken the opportunity to tidy up the name of the shares so that the single class of shares will be known as Ordinary shares.Â In addition I am sure that you have read that this VCT will change its name as the board think that reference to IHT in the present name is no longer relevant, and indeed unhelpful, now that the Distribution in Specie was completed over a year ago. All this means that you will receive a new share certificate in due course.Â If you hold your shares in CREST, then your holding will be automatically updated. Dividend Policy It is your Board's policy to strive to maintain a regular dividend flow where possible and this primarily relies on the level of profitable realisations and available cash reserves. Following the merger, the Board intends to continue the policy of making regular dividend distributions to shareholders from the income and capital gains generated by the portfolio and will have an objective of paying annual dividends of 5% of the average share price in each financial period. The Board will make a decision about a dividend following the merger. Strategy The Board's strategy is to maintain an appropriate level of liquidity in the balance sheet to achieve four aims: Â·Â Â Â Â Â Â Â Â Â Â to take advantage of new investment opportunities as they arise; Â·Â Â Â Â Â Â Â Â Â Â to support further investment in existing portfolio companies if required; Â·Â Â Â Â Â Â Â Â Â Â to assist liquidity in the shares through the buy-back facility; and Â·Â Â Â Â Â Â Â Â Â Â to support a consistent dividend flow. Principal Risks and Uncertainties The principal risks and uncertainties are set out in note 8 of the Notes to the Half-Yearly Report on page â—. Outlook After the initial bounce in equities on relief that the whole financial system did not implode in 2009, the tone of the market has become much more cautious in recent months. Attention has focused on sovereign debt levels and the possible waning strength of the US recovery and the Chinese economy at an international level, and in the UK, on the severity of Government spending cuts.Â Against this background, smaller companies, which are perceived as higher risk, have fallen out of favour again, and they are now trading at discounts to larger company shares.Â This is at odds with the news flow which is coming from small companies.Â Upgrades to profit expectations are far exceeding downgrades and the emergence of bidders for companies points to increased confidence that the worst is past, as well as the value available.Â Banks are still unwilling to lend and this is expected to lead to opportunities to make investments at attractive valuations in the coming months, and regain the lost ground of the past two years. Keith Richard Mullins Chairman 27 July 2010 Investment Portfolio % Change in % Equity Cost of Unrealised Valuation valuation Equity held by Investments Sector investment profit/ as at 31 in the held by all as at 31 (loss) May 2010 period Octopus funds May 2010 (Â£'000) (Â£'000) (Â£'000) IHT AIM managed VCT by Octopus ------------------------------------------------------------------------------------------- Animalcare Pharmaceutical & Group plc Healthcare 241 239 480 79 2.2% 9.1% Advanced Software & Computer Computer Services Software plc 270 207 477 (55) 0.4% 2.3% IS Pharma plc Pharmaceuticals & Biotechnology 505 (46) 459 (134) 2.1% 7.4% Melorio plc Support Services 201 247 448 187 0.5% 3.2% Craneware plc Software & Computer Services 121 249 370 63 0.4% 1.5% Chime Media Communications plc 440 (102) 338 (36) 0.2% 0.5% Brulines plc Support Services 365 (29) 336 (59) 1.0% 4.6% Managed Maintenance Support Contractor Services plc 367 (57) 310 (24) 2.8% 11.3% Vertu Motors General Retaillers plc 502 (226) 276 (33) 0.4% 3.5% Pressure Industrial Technologies Engineering plc 208 53 261 (58) 1.2% 8.2% Preaespe plc Media 367 (110) 257 (37) 1.0% 4.7% Mount Industrial Engineering Engineering plc 360 (103) 257 (5) 2.2% 8.1% Clarity Software & Commerce Computer Services Solutions plc 310 (62) 248 (23) 2.0% 8.6% Hasgrove plc Media 436 (194) 242 34 2.0% 11.5% Idox plc Software & Computer Services 158 68 226 (5) 0.6% 3.0% Tasty plc Travel & Leisure 334 (111) 223 (89) 2.9% 4.4% Bond Intl Software & Software plc Computer Services 244 (24) 220 (24) 0.9% 3.9% Colliers CRE Real Estate plc Services 195 10 205 10 0.7% 3.2% CBG Group plc Financial Services 637 (435) 202 (64) 3.4% 17.1% Access Software & Intelligence Computer Services plc 230 (35) 195 (35) 1.8% 9.5% SnackTime plc Restaurants & Food 190 (21) 169 (21) 1.0% 11.0% Lombard Pharmaceutical & Medical Healthcare Technologies plc 384 (240) 144 (23) 0.7% 2.3% Omega Healthcare Diagnostics Equipment & plc Services 101 25 126 (46) 2.4% 17.9% Innovision Events Specialists Research & Technology plc 120 - 120 (20) 0.7% 7.0% Twenty plc Media 501 (395) 106 63 4.5% 15.2% Plastics Manufacturing Capital plc 357 (257) 100 (46) 1.3% 17.6% RWS Holdings Translation plc services 104 (4) 100 (4) 0.1% 3.8% Telephonetics Telecommunications plc 305 (206) 99 8 1.4% 7.2% Optare plc Manufacturing 568 (473) 95 (19) 0.7% 2.1% Work Group plc Support Services 473 (397) 76 12 2.1% 6.2% Adept Telecom Telecommunications plc 501 (430) 71 (7) 1.7% 4.4% Jelf Group plc Financial Services 122 (80) 42 (3) 0.1% 0.6% Clerkenwell Ventures plc Restaurants & Food 63 (30) 33 8 0.0% 0.0% Individual Restaurant Company plc Restaurants & Food 146 (128) 18 (1) 0.2% 1.1% Hexagon Human Support Services Capital plc 422 (422) - (56) 1.2% 13.7% FishWorks plc Restaurants & Food 184 (184) - - 2.7% 6.8% ------------------------------------------------------------------------------------------- AIM-quoted investments Â 11,032 (3,703) 7,329 (463) Money Market Funds Â 2,659 - 2,659 - ------------------------------------------------------------------------------------------- Total Investments Â 13,691 (3,703) 9,988 Cash at Bank Â Â Â 91 Debtors less creditors Â Â Â (36) ------------------------------------------------------------------------------------------- Total Assets Â Â Â 10,043 Responsibility Statement of the Directors in respect of the half-yearly report We confirm that to the best of our knowledge: Â·Â Â Â Â Â Â Â Â Â Â the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board; Â·Â Â Â Â Â Â Â Â Â Â the half-yearly report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules, being: oÂ Â Â Â Â Â 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; oÂ Â Â Â Â Â a description of the principal risks and uncertainties for the remaining six months of the year; and oÂ Â Â Â Â Â 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 Keith Richard Mullins Chairman 27 July 2010 Income Statement +----------------------+ | Six months to 31 May |Six months to 31 May Year to 30 November Â | 2010 | 2009 2009 | | Â |Revenue Capital Total| Revenue Capital Total Revenue Capital Total | | Â Â Â Â Â Â Â Â | Â£'000 Â£'000 Â£'000| Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 | | Â Â Â Â Â Â Â Â |Â Â Â | | | Gain on | | disposal of | | fixed asset | | investments | - 69 69| - 215 215 - 903 903 | | Gain on | | disposal of | | current asset| | investments | - 10 10| - 21 21 - 68 Â 68 | | Â | Â Â Â | | | (Loss)/gain | | on valuation | | of fixed | | asset | | investments | - (463) (463)| - 1,162 1,162 - 642 642 | | Gain/(loss) | | on valuation | | of current | | asset | | investments | - - -| - 94 94 - 111 111 | | Â | Â Â Â | | | Income | 41 - 41| 95 - 95 195 - 195 | | Â | Â Â Â | | | Investment | | management | | fees | (27) (80) (107)| (40) (119) (159) (65) (196) (261) | | VAT | | management | | fee rebate | - - -| - - - 12 37 49 | | Â | Â Â Â | | | Other | | expenses | (88) - (88)| (162) - (162) (218) - (218) | | Â | Â Â Â | | | (Loss)/profit| | on ordinary | | activities | | before tax | (74) (464) (538)| (107) 1,373 1,266 (76) 1,565 1,489 | | Â | Â Â Â | | | Taxation on | | (loss)/profit| | on ordinary | | activities | - - -| Â Â Â Â Â Â Â - - - (5) - (5) | | Â | Â Â Â | | | (Loss)/profit| | on ordinary | | activities | | after tax | (74) (464) (538)|Â Â Â Â Â Â Â (107) 1,373 1,266 (81) 1,565 1,484 | | Return per | | share - basic| | and diluted | (0.5)p (3.0)p (3.5)p| (0.4)p 5.6p 5.1p (0.4)p 7.8p 7.4p +----------------------+ Â·Â Â Â Â Â Â Â Â Â Â 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. Â·Â Â Â Â Â Â Â Â Â Â All revenue and capital items in the above statement derive from continuing operations Â·Â Â Â Â Â Â Â Â Â Â The accompanying notes are an integral part of the half-yearly report Â·Â Â Â Â Â Â Â Â Â Â The Company has no recognised gains or losses other than those disclosed in the income statement. Reconciliation of Movements in Shareholders' Funds +-----------------+ |Six months to 31 |Six months to 31 Year to 30 November Â | May 2010| May 2009 2009 | | Â Â Â Â Â Â Â Â Â | Â£'000| Â£'000 Â£'000 | | Shareholders' funds at | | start of period | 10,783| 16,049 16,049 | | Profit/(loss) on | | ordinary activities | | after tax | (538)| 1,266 1,484 | | Distribution in Specie | -| - (5,644) | | Purchase of own shares | (49)| (343) (703) | | Dividends paid | (153)| (246) (403 | | Shareholders' funds at | | end of period | 10,043| 16,726 10,783 +-----------------+ Balance Sheet +---------------+ | As at 31 May | As at 31 May As at 30 November Â | 2010 | 2009 2009 | | | Â£'000 Â£'000| Â£'000 Â£'000 Â£'000 Â£'000 | | |Â Â | | | Fixed asset investments | Â 7,329| Â 12,748 Â 8,632 | | Current assets: | Â Â | | | Money market securities | 2,659 Â | 3,725 Â 1,838 | | Debtors | 9 Â | 297 Â 249 | | Cash at bank | 91 Â | 97 Â 186 | | Â | 2,759 Â | 4,119 Â 2,273 | | Creditors: amounts falling | | due within one year | (45) Â | (141) Â (122) | | Net current assets | Â 2,714| Â 3,978 Â 2,151 | | Â | Â Â | | | Net assets | Â 10,043| Â 16,726 Â 10,783 | | Â | Â Â | | | Called up equity share | | capital | 2 Â | 2 Â 2 | | Special distributable | | reserve |14,313 Â | 23,300 Â 14, 364 | | Capital redemption reserve | - Â | - Â - | | Own shares held in treasury| (467) Â | (110) Â (467) | | Capital reserve - Realised | (32) Â |(1,834) Â (305) | | Â Â Â Â Â Â Â Â Â Â Â Â Â - Unrealised |(3704) Â |(4,613) Â (2,814) | | Revenue reserve | (69) Â | (19) Â 3 | | Total equity shareholders' | | funds | Â 10,043| Â 16,726 Â 10,783 | | Net asset value per share | Â 65.1p| Â 68.4p Â 69.5p +---------------+ Cash Flow Statement +----------------+ | Six months to| Six months to Year to 30 Â | 31 May 2010| 31 May 2009 November 2009 | | Â Â Â Â Â Â Â Â Â | Â£'000| Â£'000 Â£'000 | | Â | Â | | | Net Cash (outflow)/inflow | | from operating activities | 9| (149) (125) | | Â | Â | | | Taxation: UK Corporation tax| | paid | -| - (9) | | Â Â Â Â Â Â Â Â Â | Â | | | Financial investment | Â | | | Purchase of fixed asset | | investments | (530)| (1,796) (2,865) | | Disposal of fixed asset | | investments | 1,438| 2,544 1,846 | | Â | Â | | | Management of liquid | | resources | Â | | | Purchase of current asset | | investments | (3,103)| (340) (2,340) | | Disposal of current asset | | investments | 2,293| - 4,607 | | Â | Â | | | Equity dividends paid | Â | | | Dividends paid | (153)| (246) (403) | | Distribution in Specie | -| - (249) | | Â | Â | | | Financing | Â | | | Purchase of own shares | (49)| (343) (703) | | Â | Â | ----------------------------+----------------+---------------------------------- (Decrease)/increase in cash | | at bank | (95)| (330) (241) +----------------+ Reconciliation of Net Cash Flow to Movement in Net Cash Resources +---------------+ | Six months to| Six months to Year to 30 Â | 31 May 2010| 31 May 2009 November 2009 | | Â | Â£'000| Â£'000 Â£'000 | | (Decrease)/increase in cash | | at bank | (95)| (330) (241) | | Decrease in cash equivalents | 821| (1,324) (3,211) | | Opening net cash resources | 2,024| 5,476 5,476 | | Net cash resources at end of | | period | 2,750| 3,822 2,024 +---------------+ Reconciliation of Operating Profit before Taxation to Cash Flow from Operating Activities +---------------+ | | Six months | Six months to| to 31 May Â | 31 May 2010| 2009 Year to 30 November 2009 | | Â | Â£'000| Â£'000 Â£'000 | | (Loss)/ gain on | | ordinary activities | | before tax | (538)| 1,266 1,330 | | Gain on disposal of| | fixed asset investments| Â Â Â Â Â Â Â (69)| (215) Â Â Â Â Â Â Â (1,565) | | Gain on disposal of| | current asset| | investments | Â Â Â Â Â Â Â (10)| (21) Â Â Â Â Â Â Â - | | Loss/(gain) on | | valuation of fixed | | asset investments | Â Â Â Â Â Â Â 463| (1,162) Â Â Â Â Â Â Â - | | Gain on valuation of | | current asset | | investments | Â Â Â Â Â Â Â -| (94) Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â - | | Decrease/(Increase) in | | debtors | 240| (4) 44 | | (Decrease)/increase in | | creditors | (77)| 81 66 | | Net cash | | inflow/(outflow) from | | operating activities | 9| (149) (125) +---------------+ Notes to the Half-Yearly Report 1.Â Â Â Â Basis of preparation The unaudited half-yearly results which cover the six months to 31 May 2010 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 30 November 2009, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in January 2010. 2.Â Â Â Â Publication of non-statutory accounts The unaudited half-yearly results for the six months ended 31 May 2010 do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 30 November 2009 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 under Section 235 of the Companies Act 1985 was unqualified. This half-yearly report has not been reviewed by the Company's auditor. 3.Â Â Â Â Earnings per share The earnings per share at 31 May 2010 are calculated on the basis of 15,382,920 (30 November 2009: 20,051,665 and 31 May 2009: 24,637,783) being the weighted average number of A (& B) 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. 4.Â Â Â Â Net asset value per share The net asset value per share is based on net assets as at 31 May 2010 divided by 15,426,098 A (30 November 2009: 15,508,642 A and 31 May 2009: 24,233,398 A & B) Ordinary shares in issue at that date. 5.Â Â Â Â Dividends Following the merger, the Board intends to continue the policy of making regular dividend distributions to shareholders from the income and capital gains generated by the portfolio and will have an objective of paying annual dividends of 5% of the average share price in each financial period. A final dividend, for the year ending 30 November 2009, of 1 pence per A Ordinary share was paid on 7 May 2010 to shareholders who were on the register on 16 April 2010. 6. Â Â Â Â Buybacks During the six months ended 31 May 2010 the Company repurchased the following shares: Â·Â Â Â Â Â Â Â Â Â Â 65,125 A Ordinary shares to be held in Treasury, at a price of 61.0p Â·Â Â Â Â Â Â Â Â Â Â 17,419 A Ordinary shares to be cancelled, at a price of 59.5p On 25 May 2010 the 840,019 A Ordinary shares held in Treasury were cancelled. No shares were issued during the period. 8. Â Â Â Â Principal risks and uncertainties The Company's assets consist of equity and floating-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 30 November 2009. The Company's principal risks and uncertainties have not changed materially since the date of that report. 9. Â Â Â Â 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 Â£106,000 (30 November 2009: Â£260,000 and 31 May 2009: Â£159,000). At the period end there was Â£nil (30 November 2009: Â£54,000 and 31 May 2009: Nil) outstanding to Octopus. 10.Â Â Â Â Copies of this statement are being sent to all shareholders. Copies are also available from the registered office of the Company at 8 Angel Court, London, EC2R 7HP, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com. [HUG#1434404] 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 IHT AIM VCT PLC via Thomson Reuters ONE

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