Half-yearly report

Octopus AIM VCT plc Half-Yearly Results 27 October 2010 Originally published on 27 October 2010 at 6.26 p.m. UK time but technical difficulties between providers delayed visibility of this Statement Octopus AIM VCT plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 31 August 2010. These results were approved by the Board of Directors on 27 October 2010. You will shortly be able to view the Half-Yearly Report in full at www.octopusinvestments.com by navigating to the VCT Meetings & Reports under the 'Services' section. About Octopus AIM VCT PLC Octopus 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 through investing in AIM. The investment manager is Octopus Investments Limited ("Octopus" or "Manager"). The Company was launched as Close AIM VCT PLC in Spring of 1998 and raised £10.1 million from private investors through an issue of Ordinary Shares. Between October 2000 and March 2001 a further £20.0 million was raised through an issue of C Shares. Furthermore, between 16 March 2004 and final closing on 5 April 2004 the Company raised £3.3 million by way of a D Share issue. The C Shares were merged and converted into Ordinary Shares on 31 May 2004, with C shareholders receiving 1.0765 Ordinary Shares for each C Share held. A further £15.0m was raised between 6 January 2005 and 8 April 2005 through an issue of New D Shares. On 31 May 2008, the Ordinary Shares converted into D Shares at a conversion ratio of 0.5448 D Shares for each Ordinary Share. The two classes of shares were combined and renamed Ordinary Shares which is now the only class of share capital. On 11 August 2010 the Company acquired the net assets of Octopus Phoenix VCT plc ("Phoenix"), with previous shareholders of Phoenix obtaining 0.42972672 shares in Octopus AIM VCT plc for every 1 Phoenix share held. Financial Summary  Six months to  Six months to    Year to     31 August 2010  31 August 2009    28 February 2010  Net assets (£'000s)  30,928  22,737  23,644  Net profit after tax (£'000s)  452  4,371  6,551  Net asset value per share ("NAV")  83.7p  76.8p  82.0p The object of the table below is to show the return of each individual share class, assuming no subsequent corporate actions had occurred, so that the NAV plus cumulative dividends shown at the bottom of the table relates directly to the original investment.  There is now only one share class, that being Ordinary shares.  Dividends       Ordinary  Ordinary  C  D shares  Phoenix  Phoenix paid in the shares (post- shares shares Ordinary 'C' period ended April 2010) (pre- April shares shares 2010)  28 February 1999  -  1.88  -  29 February  -  3.13  - 2000  28 February  -  37.25  - 2001  28 February  -  6.50  2.55 2002  28 February  -  3.50  1.50 2003  29 February  -  0.50  0.50 2004  0.15  28 February  -  0.50  0.50  0.50 2005  6.50  28 February  -  2.15  2.31  2.25 2006  1.00  28 February  -  4.20  4.52  3.30 2007  3.35  1.00  31 August 2007  -  2.50  2.69  2.50  6.00  3.00  29 February  -  2.50  2.69  2.50 2008  6.00  3.00  31 August 2008  -  2.50  2.69  2.50  5.00  2.00  28 February  -  1.36*  1.47*  2.50* 2009  5.00  3.00  31 August 2009  -  1.36*  1.47*  2.50*  1.00  1.35*  28 February  -  1.36*  1.47*  2.50* 2010  1.00  1.35*  31 August 2010  -  -  -  -  2.00  2.70*  Cumulative  -  71.19  24.36  21.05  37.00  17.40 dividends paid  NAV as at 31  83.70  45.60  49.10  83.70  36.00  48.60 August 2010**  NAV plus cumulative  83.70  116.79  73.46  104.75  73.00  66.00 dividends*** An interim dividend of 2.5p will be paid on 19 November 2010 to shareholders on the register on 22 October 2010. *Notional dividends adjusting for conversion of Phoenix 'C' shares into Phoenix Ordinary shares, and relevant AIM VCT shares into AIM VCT Ordinary shares. ** NAV adjusted for conversion of relevant shares into AIM VCT Ordinary shares at the date of each conversion. Phoenix Ordinary shares adjusted as at the date of the merger. ** *NAV plus cumulative dividends based on NAV adjusting for conversion, showing the notional return to shareholders based on their original investment share class. Notes * The Ordinary Shares were first listed on 17 March 1998. * Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. * The D Shares were first listed on 17 March 2004. * The C Shares were converted into Ordinary Shares on 31 May 2004, in accordance with the conversion factor of 1.0765 Ordinary Shares for each C Share. * The Ordinary Shares were converted into D Shares on 31 May 2008, in accordance with the conversion factor of 0.5448 D Shares for each Ordinary Share. * New D Shares issued between 6 January 2005 and 8 April 2005, did not rank for the final dividend. * Phoenix 'C' shares converted into Phoenix Ordinary shares. * On 12 August 2010, Octopus Phoenix VCT plc shares were converted into Octopus AIM VCT plc shares at a ratio of 0.42972672, upon the merger of the two VCTs. * All dividends paid by the Company are free of income tax. It is an HM Revenue & Customs requirement that dividend vouchers indicate the tax element should dividends have been subject to income tax. Investors should ignore this figure on their dividend voucher and need not disclose any income they receive from a VCT on their tax return. * The net asset value of the Company is not its share price as quoted on the official list of the London Stock Exchange. The share price of the Company can be found in the Investment Companies section of the Financial Times on a daily basis. Investors are reminded that it is common for shares in VCTs to trade at a discount to their net asset value, primarily as a result of the initial tax relief which is non-transferable. * The above table excludes the tax benefits investors received upon subscription. Chairman's Statement I am glad to be able to report that in the period under review the merger of your Company and Octopus Phoenix VCT plc ('Phoenix') was accomplished. Your Board also announced an offer to raise an additional £10m through an offer for subscription of up to 11,500,000 shares. On 4 August 2010 at an Extraordinary General Meeting of the Company, shareholders voted in favour of the proposed merger with Phoenix and then on 12 August 2010 shareholders in Phoenix also approved the scheme for merging the two companies whereby the assets and liabilities of Phoenix were transferred to your Company, completing the merger. 7,935,637 shares in your Company were issued to Phoenix shareholders representing 21% of the enlarged capital. I would like to take this opportunity of welcoming our new shareholders. All shareholders will have received new share certificates, with former Phoenix shareholders receiving one new share in Octopus AIM VCT plc for every 0.42972672 Phoenix shares held. The merger was completed on a relative Net Asset Value (NAV) basis and the benefits shared by both sets of shareholders, with the costs being split proportionately based on the merger NAV. The offer to raise £10m will provide shareholders and other investors with the opportunity to invest in the Company and benefit from the tax reliefs available to qualifying investors in VCTs. These shares will be issued at a price equal to the most recently published NAV per share, divided by 0.945 to take into account the offer costs of 5.5%. The offer will close on or before 30 April 2011. It is expected that allocations will be done monthly. Performance As at 31 August 2010 the total net assets of your Company amounted to £30.9m of which 29% was in cash or liquid resources. In the six month period under review the NAV of your shares increased by 2.1% to 83.7p per share. This compares with a rise in the AIM Index over the period of 2.2% and a fall in the Smaller Companies Index ex Investment Trusts of 1.6%.  The six month period to the end of August was slightly frustrating for smaller company investors as domestically orientated shares were overshadowed by fears about the extent of forthcoming Government cuts.  The portfolio's performance was fairly solid against this background, helped by bid activity.  The NAV per share has increased since the period end and stood at 91.5p at 18 October 2010. Portfolio Excluding the acquisitions of the Phoenix holdings, £2.3m of new investments were made over the period. The principal new investments being EKF Diagnostics, Marwyn Materials (now renamed Breedon) and Netcall.  Some of the Netcall holding was acquired as a result of the takeover of Telephonetics although the Fund also participated in a Netcall fundraising to finance the acquisition.  The holdings in Strategic Thought and Tasty were also added to. Disposals totalled £4.7m, mostly as a result of bid activity. The Fund benefited from bids for Portrait Software, Innovision Research and Technology, Win and Melorio where profits of £628,000 were achieved.  Profits were taken in Advanced Computer Software, Immunodiagnostics and Brooks Macdonald and the holding in Pressure Technologies was sold. The Fund received 35.5p per share in cash as Clerkenwell was wound up, and a further 5.5p per share has been received since the period end. During the six months under review, the market for VCT qualifying issues continued to be slow with new issues remaining a rarity. 85% of your Fund is currently invested in qualifying holdings, comfortably above the H M Revenue and customs ('HMRC') requirement  of 70%. Your Fund also has liquid funds of over £9m giving plenty of scope for participating in suitable opportunities which we do expect to materialise sooner rather than later. Encouragingly, two of the new investments were made in August, and the Fund has made another in Managed Support Services since the period end. Principle Risks and uncertainties The principal risks and uncertainties are set out in Note 6 to the Half Yearly Report on the last page. Dividend It is your Board's policy to strive to maintain an annual dividend of at least 5p per share.  Your Board declared its intention of paying a 2.5p dividend in the annual accounts and this has now been declared and approved by HMRC. This will be paid to all shareholders who were on the register on 22 October 2010. This dividend was delayed because of an issue with reserves which has now been resolved. Another interim dividend of 2.5p has been declared. This is expected to be paid early 2011 once HMRC approval is obtained. Shares issued and repurchased. It is the Board's policy to try and maintain a discount to net asset value at which the Company shares stand in the market at not more than 10%. During the period 78,648 shares were purchased in the market. Furthermore 2,957,576 shares that were previously held in Treasury were cancelled. This action was taken as it now appeared unlikely that they could be reissued and confer the same tax benefits as when they were initially issued. 205,838 shares were issued during the period under the Top-Up Scheme. Outlook Since the period end, sentiment has begun to improve towards smaller companies despite ongoing caution in the press about the likely effects that Government spending cuts will have on the economy.  This has been driven by much better trading statements from companies in the recent results season and a spate of upgrades to forecasts which have left smaller companies looking relatively cheap.  The steady stream of takeover bids now in evidence also reinforces this view, and as a result of both of these factors the NAV had a good September and October. Indeed at the time of writing the NAV of your shares has increased by 12.3% since 28 February 2010. It remains to be seen whether the market can sustain this better sentiment, and whether the smaller companies discount can narrow further.  Banks are still not keen to lend, and your Manager expects this to result in more investment opportunities as ambitious management teams use equity to grow their businesses. Michael Reeve Chairman 27 October 2010 Investment Portfolio The 10 largest qualifying holdings by value in the New Ordinary share portfolio as at 31 August 2010 are shown below:  %  Movement equity  Cost of in  Fair held by investment valuation value as  % all as at 31 as at 31 at 31 equity funds August August August held managed  Quoted equity 2010 2010 2010 by AIM by investments  Sector (£'000) (£'000) (£'000) VCT Octopus  Brooks Macdonald  Financial Group Plc consultants  873  1,443  2,316  2.5%  3.4%  EKF Diagnostics Holdings Plc  Healthcare  931  301  1,232  3.9%  10.5%  Breedon Aggregates Ltd  Construction  900  150  1,050  5.0%  9.8%  Advanced Computer Software Plc  Software  596  346  942  0.9%  2.3%  Immunodiagnostic Systems Plc  Healthcare  528  392  920  50.0%  2.7%  Mattioli Woods  Financial Plc consultants  523  298  821  2.3%  2.6%  General  Vertu Motors Plc retailers  1,265  (598)  667  1.3%  3.4%  Mears Group Plc  Maintenance  155  471  626  30.0%  0.3%  Clarity Commerce Solutions Plc  Software  767  (206)  561  3.9%  8.3%  Food  Zetar Plc producers  587  (35)  552  2.2%  3.6%  Total     7,125  2,562  9,687  Other equity investments     19,042  (7,371)  11,671 --------------------------------------------------------------------------------  Total equity investments           21,358  Money market securities     8,939  -  8,939  Cash at bank           91 --------------------------------------------------------------------------------  Total investments           30,388  Debtors less creditors           540 --------------------------------------------------------------------------------  Total net assets           30,928 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 Michael Reeve Chairman 27 October 2010 +------------------------------------------+   |  Six months to 31 August 2010 |  Six months to 31 August 2009 | |   |  Revenue  Capital  Total|  Revenue  Capital  Total | |           |         £'000         £'000         £'000|         £'000         £'000         £'000 | |           |                             | | |  Realised | | gain on | | disposal of| | fixed asset| | investments|         -         1,338         1,338|  -  507  507 | |  Realised | | gain on | | disposal of| | current | | asset | | investment |         -         -         -|     37  37 | |    |                              | | |  Investment| | holding | | gains |         -         (453)         (453)|  -  4,016  4,016 | |    |                              | | |  Income |         112         -         112|         108         -         108 | |    |                              | | |  Investment| | management | | fees |         (62)         (188)         (250)|         (52)         (155)         (207) | |  VAT | | management | | fee rebate |         -         -         -|         -         -         - | |    |                              | | |  Other | | expenses |         (295)         -         (295)|         (90)         -  (90) | |    |                              | | |  Profit on | | ordinary | | activities | | before tax |         (245)         697         452|         (34)         4,405         4,371 | |    |                              | | |  Taxation | | on profit | | on ordinary| | activities |         -         -         -|         -         -         - | |    |                              | | |  Profit on | | ordinary | | activities | | after tax |         (245)         697         452|         (34)         4,405         4,371 | |  Earnings | | per share -| | basic and | | diluted |        (0.8p)         2.3p         1.5p|        (0.1p)         14.7p         14.6p +------------------------------------------+     Year to 28 February 2010     Revenue  Capital  Total                   £'000         £'000         £'000  Realised gain on disposal of fixed asset investments  -  1,852  1,852  Realised gain on disposal of current asset investment  -  37  37  Investment holding gains  -  4,326  4,326  Income  389  -  389  Investment management fees  (112)  (338)  (450)  VAT management fee rebate  145  435  580  Other expenses  (183)  -  (183)  Profit on ordinary activities before tax  239  6,312  6,551  Taxation on profit on ordinary activities  -  -  -  Profit on ordinary activities after tax  239  6,312  6,551  Earnings per share - basic and diluted  0.8p  21.3p  22.1p * 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 accompanying notes are an integral part of the half-yearly report * The Company has no recognised gains or losses other than those disclosed in the income statement.  Reconciliation of Movements in Shareholders' Funds +-----------------+ | Six months ended| Six months ended  Year to    |  31 August 2010|  31 August 2009  28 February 2010 | |            |  £'000|  £'000  £'000 | |  Shareholders' funds at | | start of period |  23,644|  19,443  19,443 | |  Profit on ordinary | | activities after tax |  452|  4,371  6,551 | |  Net assets of Phoenix | | from merger |  6,716|  -  - | |  Shares purchased and held| | in Treasury |  -|  (342)  (811) | |  Shares purchased and | | cancelled |  (58)|  -  (54) | |  Issue of equity |  174|  -  - | |  Dividends paid |  -|  (735)  (1,485) | |  Shareholders' funds at | | end of period |  30,928|  22,737  23,644 +-----------------+  Balance Sheet +-------------------+ |  As at 31 August|  As at 31 August    As at 28 February     | 2010| 2009 2010 | |     |   £'000   £'000|   £'000   £'000   £'000   £'000 | |     |        | | |   Fixed asset | | investments* |       21,358|       16,820       16,944 | |   Current assets:|        | | |   Money market | | securities* |   8,939    |   5,580       6,732 | |   Debtors |   727    |   369       27 | |   Cash at bank |   91    |   110       153 | |     |   9,757    |   6,059       6,912 | |   Creditors: | | amounts falling | | due within one | | year |   (187)    |   (142)       (212) | |   Net current | | assets |       9,570|       5,917       6,700 | |     |        | | |   Net assets |       30,928|       22,737       23,644 | |     |        | | |   Called up | | equity share | | capital |   370    |   15,965       15,928 | |   Share premium | | account |   8,197    |   8,209       1,490 | |   Capital | | redemption | | reserve |   24,746    |   3,727       10,483 | |   Special | | distributable | | reserve |   15,331    |   16,412       16,358 | |   Capital reserve| | gains/(losses) on| | disposal |  (12,939)    |  (12,115)       (13,478) | |   Capital reserve| | holding | | gains/(losses) |   (4,850)    |   (7,520)       (5,007) | |   Own shares held| | in treasury |   -    |   (1,978)       (2,447) | |   Revenue reserve|   73    |   37       317 | |   Total equity | | shareholders' | | funds |       30,928|       22,737       23,644 | |   Net asset value| | per share |       83.7p|       76.8p       82.0p +-------------------+ *Held at fair value through profit & loss The accompanying notes form an integral part of the financial statements. Company No: 03477519  Cash Flow Statement +-----------------+ |       Six months|       Six months | to| to   Year to |       31 August|       31 August   28 February    | 2010| 2009 2010 | |            |  £'000|  £'000  £'000 | |            |   | | |          Net cash | | (outflow)/inflow from | | operating activities |  (1,158)|  (124)  813 | |            |   | | |          Financial | | investment : |   | | |          Purchase of fixed | | asset investments |  (2,275)|  (1,704)  (2,784) | |          Disposal of fixed | | asset investments |  4,711|  2,228  4,839 | |            |   | | |          Management of cash| | equivalent resources: |   | | |          Purchase of | | current asset investment |  (4,447)|  (5,580)  (9,797) | |  Disposal of current asset | | investment |  2,240|  6,200  9,265 | |            |   | | |          Dividends paid |  -|  (735)  (1,485) | |          Cash received on | | merger |  751|  -  - | |            |   | | |          Financing: |   | | |          Issue of equity |  174|  -  - | |          Shares re- | | purchased |  (58)|  (342)  (865) +-----------------+  Decrease in cash at bank |  (62)|  (57)  (14) +-----------------+   Reconciliation of Net Cash Flow to Movement in Net Funds +--------------+ |       Six| | months to|        Six |       31| months to 31             Year to    | August 2010| August 2009 28 February 2010 | |    |  £'000|  £'000  £'000 | |   Decrease in cash at bank |  (62)|  (57)  (14) | |   Increase/(decrease) in | | cash equivalents |  2,207|  (583)  569 | |   Opening net liquid | | resources |  6,885|  6,330  6,330 | |   Net cash resources at end| | of period |  9,030|  5,690  6,885 +--------------+   Reconciliation of Profit before Taxation to Cash Flow from Operating Activities +-------------------+ | |       Six |      Six months to| months to |       31 August|       31             Year to    | 2010| August 2009 28 February 2010 | |    |  £'000|  £'000  £'000 | |  Profit on ordinary | | activities before tax |  452|  4,371  6,551 | |  Profit on realisation of| | investments |         (1,338)|  (544)  (37) | |  Loss/profit) on | | valuation of investments |         453|  (4,016)  (1889) | |  (Increase)/decrease in | | debtors |  (700)|  116  458 | |  (Decrease)/increase in | | creditors |  (25)|  (51)  19 +-------------------+  Net cash outflow from | | operating activities |  (1,158)|  (124)  813 +-------------------+ Notes to the Half-Yearly Report 1.    Basis of preparation The unaudited interim results which cover the six months to 31 August 2010 have been prepared in accordance with applicable accounting standards and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 28 February 2009. 2. Publication of non-statutory accounts The unaudited interim results for the six months ended 31 August 2010 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 2010 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 2010 is calculated on the basis of 29,862,107 (28 February 2010: 29,646,204 and 31 August 2009: 29,963,634) 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 The calculation of net asset value per share is based on the net assets at 31 August 2010 and on 36,961,280 (28 February 2010: 28,824,452 and 31 August 2009: 29,615,480) shares being the number of shares in issue, excluding shares held in Treasury, at the same date. The merger was completed on a relative net asset value basis using the unaudited net assets as at close of business on 11 August 2010 (the day immediately preceding the Effective Date) and the benefits shared by both sets of shareholders, with the costs being split proportionately based on the merger NAVs. Shares of AIM VCT were issued to shareholders of Phoenix using a ratio of 0.42972672 AIM shares for every 1 share held in Phoenix. 5.  Dividends The interim dividend declared of 2.5 pence per Ordinary share will be paid on 19 November 2010 to those shareholders on the register on 22 October 2010. 6. 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 2010. The Company's principal risks and uncertainties have not changed materially since the date of that report. 7. 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 £250,000 (28 February 2010: £450,000 and 31 August 2009: £207,000) payable to Octopus. At the period end there was £Nil (28 February 2010: £Nil and 31 August 2009: £Nil) outstanding to Octopus. 9. Copies of this statement are being sent to all shareholders. Copies are also available from the registered office of the Company at 20 Old Bailey, London, EC4M 7AN, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com. [HUG#1457391] 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 AIM VCT PLC via Thomson Reuters ONE

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