Octopus Titan VCT plc : Half-year Report

Octopus Titan VCT plc ("Titan" and "the Company")

Unaudited half-yearly report for the six months ended 30 April 2018

Company number: 06397765

Today the Company announces the half-yearly results for the six month period to 30 April 2018 as below.

These results were approved by the Board of Directors on 20 June 2018.

You may view the Half-yearly Report in full at www.octopusinvestments.com shortly. All other statutory information will also be found there.

Octopus Titan VCT plc 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 predominantly unquoted companies. The Company is managed by Octopus Investments Limited ('Octopus' or 'Portfolio Manager') and Octopus AIF Management Limited (the 'Manager').

Financial Summary

	Six months to 30 April 2018	Six months to 30 April 2017	Year to 31 October 2017
Net assets (£'000s)	617,759	425,402	432,703
Profit after tax (£'000s)	6,603	1,876	16,181
NAV	94.3p	95.2p	96.4p
Cumulative dividends paid since launch	69.0p	64.0p	66.0p
Total Value	163.3p	159.2p	162.4p
Total Return *	0.9p	0.3p	3.5p
Total Return % **	0.9%	0.3%	3.6%
Dividends paid in the period	3.0p	3.0p	5.0p
Dividend declared ***	2.0p	2.0p	3.0p

^*Calculated as the change in NAV in the period plus dividends paid in the period.

**Calculated as total return/opening NAV.

*** The 2.0p interim dividend will be paid on 24 August 2018 to shareholders on the register as at 3 August 2018.

Chairman's Statement

I am pleased to present the unaudited half-yearly report for Octopus Titan VCT for the six months ended 30 April 2018.

We were delighted to have raised over £203 million before expenses in our fund raising which closed to new applications on 23 March 2018. Following this, we raised a further £5 million from the shares allotted through the dividend reinvestment scheme associated with the dividend paid on 27 April. With Titan's net assets now totalling some £620 million, we remain committed to investing in early stage technology companies which embody the overall objectives of the VCT scheme. We would like to take this opportunity to welcome all new shareholders and to thank all existing shareholders for their continued support.

As is to be expected following such a large fundraising, we now have un-invested cash, totalling over £240 million as at 30 April 2018 (compared to £130 million as at October 2017, excluding shareholders' funds awaiting allotment). This gives us confidence in our ability to continue to support our portfolio of high-growth businesses for the immediate future, many of which need further funding to achieve their ambitious plans. In the six-month period to 30 April 2018, we have deployed a total of £86 million comprising £55 million in new and follow-on investments, £20 million in dividends, £4 million in share buybacks and £7 million in running costs. Together, this therefore accounted for the deployment of 66% of the cash or cash equivalents we had available as at October 2017.

The increase in NAV in the period was 0.9p per share and the Total Value (NAV plus cumulative dividends paid per share since launch) at the end of the period is 163.3p, following the payment of a dividend in April of 3.0p per share. This return brings the tax-free annual compound return to original shareholders to 5.6% since Titan's launch.

The transactions within the portfolio are summarised in the Investment Portfolio Review below, but I would particularly like to highlight the acquisition of a majority stake in Tails.com (Tailsco Ltd) by Nestlé Purina PetCare in April. Launched in 2014, Tails.com brought tailored dog nutrition to consumers at competitive prices through digital technology. Having first invested in 2013, Titan realised its investment as part of the transaction, which saw total proceeds (including a future retention) of almost £9 million attributed to Titan (cost £1.5 million). Tails.com is a great example of a business Titan only gained access to due to Octopus' proprietary deal flow channels - the founding team included a founder of Graze.com, another highly successful Titan investee company. We are proud to be able to add this success to our history of profitable realisations.

Results
The Net Asset Value at 30 April 2018 was 94.3p, a net increase of 0.9p per share from 31 October 2017 after accounting for the dividend of 3.0p per share which was paid in April.

Investment Portfolio Review
I am pleased to report a net uplift in the value of the portfolio of £14 million during the period, excluding additions and disposals.

We set out below the cost and valuation of the top ten holdings which account for over 52% of the value of the portfolio. In total the portfolio now consists of 64 companies, of which two have been added since 30 April representing a further investment of £6 million.

Investments	Investment cost at 30 April 2018* (£'000)	Valuation at 30 April 2018 (£'000)
Zenith Holding Company Limited**	8,963	45,908
Secret Escapes Limited	4,256	35,534
Amplience Limited	13,499	25,758
Sourceable Limited (trades as Swoon Editions)	6,957	18,018
Sofar Sounds Limited	7,705	13,837
MIRACL Limited	14,223	11,258
LHE Holdings Limited (trades as Property Partner)	10,402	10,866
Uniplaces Limited	7,621	10,194
Semafone Limited	3,594	9,816
Conversocial Limited	4,165	8,803
Total	81,385	189,992

^* Investment cost reflects the amount invested into each investee company from Titan's 1 - 5 before the 2014 merger and from Titan after the merger. This is different to the book cost which includes the holding gains and losses on assets which transferred from Titan's 1, 3, 4 & 5 to Titan 2 (now Titan) during the merger, as Titan purchased these assets at fair value.

** Zenith Holding Company holds shares in Calastone, graze and Secret Escapes inherited from Titans 1&2.

During the six months to 30 April 2018, the uplift in valuation has been driven by the strength of performance of a number of companies in the portfolio in aggregate. In particular, Secret Escapes, Amplience and Sofar Sounds have all achieved material increases in value. These three investee companies and 12 others together drove an uplift of £28 million. In contrast, while there have been no realised losses from the portfolio during this period, 18 companies saw a collective decrease in valuation of £14 million where performance has been more challenging, and the current valuations have been adjusted accordingly in line with the valuation policy. Octopus believes many of these businesses have the potential to overcome the issues they have faced and continues to work closely with them to secure a return to their high growth plans. Where appropriate, this may include providing further funding to ensure the business has sufficient capital to execute on its strategy. This can be seen in the cases of both MIRACL Limited and Uniplaces Limited, which Titan invested into further during the period despite the companies' prior investments being valued at less than the cost of that investment.

Turning to investments made during the previous six months, £32 million was invested into 10 new companies (listed below) and £23 million was invested into 13 follow-on investments as listed in the Investment Portfolio below. As anticipated by Octopus, given the volume of high quality investment opportunities available in the UK and Europe, this is a significant increase in investment rate compared to the six months to October 2017, during which a total of £7 million was invested into 3 new companies and £21 million was invested into 12 follow-on investments.

We have been pleased to welcome the following companies to the portfolio during the period:

·     Phoelex Ltd - new technology for components used to connect servers in large datacentres;

·     Katalyst Inc - offers premium boutique full body Electro Muscular Stimulation fitness;

·     PLU&M Limited (trading as The Plum Guide) - handpicks the world's most inspiring accommodation and hosts, using a mix of algorithms and visits by experts;

·     Rook Wealth Limited (trading as Multiply) - provides automated, personalised and holistic financial plans for those who historically have not had access to financial advice;

·     DePop Limited - a social marketplace for unique things;

·     Memrise Inc - a language learning platform;

·     Mush Limited - a local social network for new and expectant mums;

·     Picsoneye Segmentation Innovation Limited (trading as Pixoneye) - uses computer-understanding to analyse on-device user-data;

·     OpenSignal Inc - building a platform to become the global 'gold standard' for mobile network coverage mapping; and

·     GTN Ltd - technology used in the hunt for new drugs which combines and builds upon techniques from machine learning and quantum physics to simulate, filter and search for drug-like molecules, previously entirely hidden from view.

Furthermore, since 30 April 2018, 2 more new and 4 follow-on investments have been made, amounting to £17 million. The new investments were into Seatfrog UK Holdings limited, a company allowing travellers to upgrade from standard to first class travel through a live auction offered through a mobile app, and Patch Gardens Ltd, an ecommerce site aimed at urban dwellers, enabling them to discover appropriate plants for their space, purchase, and then help care for their plants during their lifetimes.

Dividends
As shareholders will know, our ambition is to pay an annual dividend of 5.0p per share. Following careful consideration, I am pleased to confirm that your Board has now decided to declare an interim dividend of 2.0p (2017 2.0p) per share in respect of the current financial year, which will be paid on 24 August 2018 to shareholders on the register as at 3 August 2018.

VCT Qualifying Status
PricewaterhouseCoopers LLP (PwC) provides both the Board and Octopus with advice concerning ongoing compliance with HMRC rules and regulations concerning VCTs. The Board has been advised that Titan continues to be in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.

As at 30 April 2018, over 95% of the portfolio (as measured by HMRC rules) was invested in VCT-qualifying investments as reviewed and confirmed by PwC, significantly above the 70% current VCT-qualifying threshold.

Change to the Directors of the Board
We recognise that ensuring the Board of your VCT remains independent and robust is of the utmost importance to our shareholders. To this end, your Board have decided to appoint an additional Non-Executive Director, and we expect to announce an appointment shortly once the selection process has been concluded.

As recently announced, as at 9 April 2018, Nicola Board resigned as Company Secretary and Parisha Kanani was subsequently appointed. The Board would like to thank Nicola for her hard work over the past three years, and welcome Parisha.

Auditor to the Fund
At the recent AGM, James Cowper Kreston, our Auditor for the last five years, was re-appointed. However, they have since informed us that they have taken the decision to withdraw from auditing certain Public Interest Entities including VCTs for the time being because of the increasing regulatory landscape and associated costs. Your Board has, therefore, carried out a tender process to appoint new Auditors and it has been decided to appoint BDO, pending their re-appointment at the next AGM. We would like to thank James Cowper Kreston for their excellent service over the last five years and we look forward to working with BDO in the future.

Principal Risks and Uncertainties
The Board continues to regularly review the risk environment in which Titan operates. There have been no significant changes to the key risks which were fully described on pages 8 and 9 of the Annual Report for the year ended 31 October 2017 and the Board does not anticipate there will be significant changes to these risks for the remaining six months of the financial year.

Outlook
The last six months have been a particularly busy period for Titan.

We are delighted by another very positive response to Titan's most recent fundraising efforts, and excited about the ability this gives us to continue to support both the most compelling opportunities within the portfolio, as well as the brightest new technology businesses and entrepreneurial teams emerging from the UK and Europe.

While the macro environment remains somewhat uncertain in the medium term, your Board also undertook a review of the non-qualifying portfolio with Octopus during the period. Following this, we have elected to make a number of adjustments with the aim of reducing the risk profile associated with this part of Titan's assets.

In the meantime, through Octopus, Titan continues to gain access to opportunities showing great promise as demonstrated by the investment rate over the past six months, and your Board remains positive about the prospects of the existing portfolio. We look forward to following the investee companies as they drive forward with their ambitious growth plans and hope this will crystallise into a number of profitable realisations in the coming years. However, this is expected to require some patience. Shareholders should bear in mind that the typical period from investment until realisation for early stage technology businesses is normally at least seven years, and as a result, we are still likely to see some businesses fall by the wayside prior to such successes. As noted earlier in my report, Titan is now paying targeted regular annual dividends of 5p. In the case of particularly profitable realisations from the portfolio, we also aim to pay special dividends, although it may not always be in the best interests of Titan to pay a special dividend after a profitable realisation.

Your Board believes there are many reasons to remain confident about the future for Titan, and, as a result, it is our intention to seek further funds to support our investee portfolio later in the year.

I would like to conclude by thanking Octopus, on behalf of all shareholders, for their hard work, without which our investment strategy would not achieve the success we are seeing.

John Hustler
Chairman
20 June 2018

Investment Portfolio

Investments	Sector	Investment cost at 30 April 2018* (£'000)	Amount invested in the six months ending 30 April 2018 (£'000)
MIRACL Limited	Security	14,223	2,045
Amplience Limited	Business Software	13,499	2,513
LHE Holdings Limited (trades as Property Partner)	Property	10,402	3,492
Zenith Holding Company Limited **	Other	8,963	-
UltraSoC Technologies Limited	Hardware	8,361	-
Zynstra Limited	Business Software	8,317	-
Oxcis Aviation Limited (trades as Stratajet)	Leisure & Consumer	7,817	-
Sofar Sounds Limited	Leisure & Consumer	7,705	-
Uniplaces Limited	Property	7,621	-
CurrencyFair Limited	Financial Services	7,551	805
Sourceable Limited (trades as Swoon Editions)	Ecommerce	6,957	-
Origami Energy Limited	Hardware	5,533	3,500
Artesian Solutions Limited	Business Software	5,481	-
Iovox Limited	Business Software	5,272	2,000
Antidote Technologies Ltd	Health & Medical	5,096	2,107
DePop Limited	Ecommerce	5,000	5,000
OpenSignal Inc	Business software	4,862	4,862
Katalyst Inc	Health & Medical	4,820	4,820
Chiaro Technology Limited	Health & Medical	4,739	1,969
Michelson Diagnostics Limited	Health & Medical	4,702	158
Token, Inc	Financial Services	4,398	-
Memrise Inc	Leisure & Consumer	4,375	4,375
Secret Escapes Limited	Leisure & Consumer	4,256	-
Digital Shadows Inc.	Security	4,225	-
Picsoneye Segmentation Innovation Limited	Business software	4,200	4,200
Conversocial Limited	Business Software	4,165	-
Appear Here Limited	Property	3,814	-
Wave Optics Limited	Hardware	3,774	-
Smartkem Limited	Hardware	3,714	-
Semafone Limited	Business Software	3,594	-
PLU&M limited (trades as Plum Guide)	Ecommerce	3,500	3,500
Behaviometrics AB	Security	3,336	2,735
Big Health Limited	Health & Medical	3,276	-
Chronext AG	Ecommerce	3,164	-
Mi-Pay Group plc	Financial services	3,011	-
The Faction Collective SA	Ecommerce	2,968	-
BridgeU Inc.	Business Software	2,935	-
Ecrebo Limited	Business Software	2,857	-
Bought By Many Limited	Financial Services	2,780	-
Medisafe Project Limited	Health & Medical	2,713	-
Metrasens Limited	Hardware	2,688	-
Affectv Limited	Business Software	2,627	-
e-Therapeutics plc	Health & Medical	2,415	-
Eve Sleep Plc	Ecommerce	2,394	-
Bowman Power Limited	Hardware	2,305	-
Trafi Limited	Leisure & Consumer	2,288	-
Impatients N.V. (trades as myTomorrows)	Health & Medical	2,090	-
Elliptic Enterprise Limited	Security	2,084	423
Surrey NanoSystems Limited	Hardware	1,993	-
Streethub Limited	Ecommerce	1,980	-
Permutive Inc.	Business Software	1,863	1,473
Phoelex Ltd	Hardware	1,525	1,525
Mush Limited	Leisure & Consumer	1,500	1,500
Pop Global Limited	Business Software	1,500	-
Segura Systems Limited	Business Software	1,470	-
Fluidly Limited	Business Software	1,400	-
Rook Wealth Limited (trades as Multiply)	Financial Services	1,000	1,000
Streetbees.com Limited	Business Software	890	-
GTN Ltd	Health & Medical	800	800
Time Out Group PLC	Leisure & Consumer	349	-
Excession Technologies Limited	Business Software	298	90
Phasor Inc.	Hardware	250	-
Total		253,685	54,892

^*Investment cost reflects the amount invested into each investee company from Titan's 1 - 5 before the 2014 merger and from Titan after the merger. This is different to the book cost which includes the holding gains and losses on assets which transferred from Titan's 1, 3, 4 & 5 to Titan 2 (now Titan) during the merger, as Titan purchased these assets at fair value.

^**Owns stakes in Nature Delivered Limited (trades as graze), Secret Escapes Limited and Calastone Limited.

Income Statement

	Unaudited Six months to 30 April 2018			Unaudited Six months to 30 April 2017
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on disposal of portfolio investments	-	2,945	2,945	-	511	511
Gains on disposal of OEIC investments	-	3,739	3,739	-	-	-
Portfolio investment holding gains	-	14.300	14,300	-	3,906	3,906
OEIC investment holding losses/(gains)	-	(6,058)	(6,058)	-	2,861	2,861
Investment income	190	-	190	107	-	107
Investment management fees	(1,201)	(3,604)	(4,805)	(870)	(2,609)	(3,479)
Performance fee	-	(1,592)	(1,592)	-	(259)	(259)
Other expenses	(1,850)	-	(1,850)	(1,268)	-	(1,268)
FX translation	-	(266)	(266)	-	(503)	(503)
Profit/(loss) before tax	(2,861)	9,464	6,603	(2,031)	3,907	1,876
Taxation	-	-	-	-	-	-
Profit/(loss) after tax	(2,861)	9,464	6,603	(2,031)	3,907	1,876
Earnings per share - basic and diluted	(0.5)p	1.7p	1.2p	(0.5)p	1.0p	0.5p

·     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.

Titan has no other comprehensive income for the period.

Balance Sheet

	Unaudited Six months to 30 April 2018		Audited Year to 31 October 2017
	£'000	£'000	£'000	£'000
Portfolio investments		364,442		301,791
Current assets:
OEICs	72,466		104,484
Cash at bank	93,202		23,290
Applications cash*	300		39,272
Debtors	16,122		5,821
Money market securities	76,269		2,453
	258,359		175,320
Current liabilities	(5,042)		(44,408)
Net current assets		253,317		130,912
Net assets		617,759		432,703
Called up equity share capital		65,479		44,899
Share premium		295,277		114,404
Special distributable reserve		186,106		211,122
Capital redemption reserve		1,495		1,071
Capital reserve - gains on disposals		9,405		2,284
Capital reserve - holding gains		74,869		70,668
Revenue reserve		(14,724)		(11,863)
Translation reserve		(148)		118
Total equity shareholders' funds		617,759		432,703
Net asset value per share		94.3p		96.4p

^*Cash held but not yet allotted.

The statements were approved by the Directors and authorised for issue on 20 June 2018 and are signed on their behalf by:

John Hustler
Chairman

Statement of Changes in Equity

	Unaudited Six months to 30 April 2018 £'000	Audited Year ended 31 October 2017 £'000	Unaudited Six months to 30 April 2017 £'000
Shareholders' funds at start of year	432,703	315,976	315,976
Profit after tax	6,603	16,181	1,876
Issue of equity (net of expenses)	201,877	125,744	122,571
Purchase of own shares	(3,905)	(2,926)	(1,694)
Dividends paid	(19,519)	(22,272)	(13,327)
Shareholders' funds at end of period	617,759	432,703	425,402

Cash Flow Statement

	Unaudited Six months to 30 April 2018 £'000	Unaudited Six months to 30 April 2017 £'000
Reconciliation of profit to cash flows from operating activities
Profit before tax	6,603	1,876
(Increase)/decrease in debtors	(10,301)	8,844
Decrease in creditors	(39,366)	(20,405)
Gains on disposal of fixed asset investments	(2,945)	(511)
Gains on valuation of fixed asset investments	(14,300)	(3,906)
Surplus funds received from fixed asset investments	-	513
Outflow from operating activities	(60,309)	(13,589)
Cash flows from investing activities
Purchase of fixed asset investments	(54,892)	(31,867)
Sale of fixed asset investments	9,486	110
Zenith distribution	-	9,182
Outflow from investing activities	(45,406)	(22,575)
Cash flows from financing activities
Dividends paid	(19,519)	(13,327)
Purchase of own shares	(3,905)	(1,694)
Issue of equity (net of expenses)	201,877	122,571
Inflow from financing activities	178,453	107,550
Increase in cash and cash equivalents	72,738	71,386
Opening cash and cash equivalents	169,499	100,644
Closing cash and cash equivalents	242,237	172,030

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Source: Octopus Titan VCT plc via Globenewswire