Half-yearly report
Octopus Apollo VCT 3 plc
Half-Yearly Results
26 September 2011
Octopus Apollo VCT 3 plc, managed by Octopus Investments Limited, today
announces the Half-Yearly results for the six months ended 31 July 2011.
These results were approved by the Board of Directors on 26 September 2011.
You may shortly view the Half-Yearly Report in full at
www.octopusinvestments.com by navigating to Services, Investor Services, Venture
Capital Trusts, Octopus Apollo VCT 3. All other statutory information will also
be found there.
About Octopus Apollo VCT 3 plc
Octopus Apollo VCT 3 plc ("Apollo 3," "Company" or "Fund") is a venture capital
trust ("VCT") and is managed by Octopus Investments Limited ("Octopus").
The Fund was launched in July 2006 and raised over £27.1 million (£25.9 million
net of expenses) through an offer for subscription by the time it closed on 5
April 2008. The objective of the Fund is to invest in a diversified portfolio of
UK smaller companies in order to generate income and capital growth over the
long-term.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for private
individuals to invest in unlisted companies in the UK. Subsequent Finance Acts
have introduced changes to VCT legislation. The tax benefits currently available
to eligible new investors in VCTs include:
* upfront income tax relief of 30%
·                    exemption from income tax on dividends paid; and
·                    exemption from capital gains tax on disposals of shares in
VCTs
The Company has been approved as a VCT by HM Revenue & Customs. In order to
maintain its approval, the Company must comply with certain requirements on a
continuing basis. Above all, the Company is required at all times to hold at
least 70% of its investments (as defined in the legislation) in VCT qualifying
holdings, of which at least 30% must comprise eligible Ordinary shares. For
this purpose, a 'VCT qualifying holding' consists of up to £1 million invested
in any one year in new shares or securities of a UK unquoted company (which may
be quoted on AIM) which is carrying on a qualifying trade, and whose gross
assets at the time of investment do not exceed a prescribed limit. The
definition of 'qualifying trade' excludes certain activities such as property
investment and development, financial services and asset leasing. The Company
will continue to ensure its compliance with these qualification requirements.
Financial Summary
Six months to 31 Six months to 31 Year to
 July 2011 July 2010 31 January 2011
Net assets (£'000s) 24,418 24,015 24,332
Net profit/(loss) after
tax (£'000s) 514 (89) 677
Net asset value per share
("NAV") 90.0p 88.3p 89.6p
Cumulative dividends since
launch - paid and proposed 12.5p 9.0p 10.5p
Chairman's Statement
Introduction
I am pleased to present the half-yearly report of Octopus Apollo VCT 3 plc for
the period ended 31 July 2011.
Performance
Against a backdrop of uncertainty and low economic growth, the Fund has
performed very well in the first 6 months of the year, with the NAV increasing
from 89.6 pence per share to 90.0 pence per share and when adding back the 1.5
pence dividend that was paid in the period, this amounts to an increase of 2.1%
for the half year. This is testament to the success the Investment Manager has
had by following traditional wisdom in order to achieve the lower risk mandate
that was originally pursued by this Fund.
The NAV appreciation is partly due to an uplift in portfolio valuations of
£290,000, but also due to the increased levels of interest income that the Fund
now generates, over and above the running costs of the Fund.
Investment Portfolio
Follow on qualifying investments were made into Clifford Thames, CSL DualCom and
Autologic where in each case the Investment Manager has managed to negotiate a
higher yield as a result of the high level of support and resources the Manager
provides to the companies.
In the case of Autologic, the deal was structured whereby the Fund was able to
acquire equity at a discounted rate, allowing for an immediate gain in value to
be recognised. This has accounted for the majority of the uplift in portfolio
valuations recognised in the period.
New investments have been made into Aashman Power, Kala Power and Tonatiuh
Trading. These are all companies that construct solar power units to be
connected to the National Grid. These investments were made as your Board and
Investment Manager believe that solar represents a significant investment
opportunity as it is a well-established, reliable form of technology that offers
consistent and more predictable returns in exchange for minimal risk due to the
government administered Feed-in-tariff (FiT) scheme.
The UK government introduced a 25 year FiT in April 2010 to encourage greater
investment into renewable energy. FiT is a form of cashback, with guaranteed
payments (the rates of FiTs go up along with inflation) made to households,
organisations or companies that produce electricity from renewable sources,
either for themselves or to be exported back to the National Grid.
Investment Strategy
As is highlighted from the financial results, the Fund continues to be managed
in line with the mandate that was set out in the prospectus whereby investments
are made on the basis of taking less risk than a typical VCT. Generally the
Fund receives its return from interest paid on secured loan notes as well as an
exposure to the value of the shares of investee companies.  The investment
strategy is to derive sufficient return from the secured loan notes to achieve
the Fund's investment aims and to use the equity exposure to boost returns.
The Manager of the Fund has reduced risk by investing in well managed and
profitable businesses with strong recurring cash-flows. Furthermore with the
majority of the investment being made in the form of a secured loan, in the
event of a business failing, the Fund will rank ahead of unsecured creditors and
equity investors.
Dividend and Dividend Policy
Dividends paid out of a VCT are attractive as are received by shareholders free
of tax. It is for that reason your Board makes every effort to maintain a
consistent dividend flow when possible. Given the increased levels of interest
the Fund is now generating, your Board has decided to increase the dividend
distribution for the current half year and has declared a 2.0 pence per share
dividend (payable from revenue reserves) in respect of the half year end. This
will be paid on 18 November 2011 to shareholders on the register on 21 October
2011.
This follows the 1.5 pence dividend that was paid to shareholders on 15 July
2011 in relation to the year ended 31 January 2011.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice
concerning ongoing compliance with Her Majesty's Revenue & Customs (HMRC) rules
and regulations concerning VCTs. The Board is pleased to announce it has been
advised that Octopus Apollo VCT 3 plc is in compliance with the conditions laid
down by HMRC for maintaining approval as a VCT.
A key requirement is to maintain at least the 70% qualifying investment level.
As at 31 July 2011, 92.5% of the portfolio, as measured by HMRC rules, was
invested in VCT qualifying investments.
Principal Risks and Uncertainties
The principal risks and uncertainties are set out in note 6 of the Notes to the
Half-Yearly Report on page x.
Outlook
Uncertainty over the current economic climate continues both from a domestic and
international point of view which has had the effect of dissuading investors
from small unquoted companies. Despite this the general signs from our investee
companies remain positive, with all but Bruce Dunlop continuing to pay the
interest owed in full and on target trading results that have enabled the
valuation uplift.
Our interests remain aligned with that of the entrepreneurs' companies we have
invested into, being that of boosting growth and profitability, and we have
confidence that the Fund has been successful in adhering to the lower risk
mandate offered in the prospectus. We therefore expect the NAV to continue to
make progress.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.
Tony Morgan
Chairman
26 September 2011
Investment Portfolio
%
Movement equity
Cost of in % held by
investment valuation Fair value equity all
as at 31 as at 31 as at 31 held funds
July July July by managed
Qualifying 2011Â Â Â Â Â Â Â 2011 2011Â Â Â Â Â Apollo by
investments Sector (£'000) (£'000) (£'000) 3 Octopus
Salus Care homes 4,000 - 4,000 41.6% 100.0%
Services
Holdings 1
Limited
(formerly
PubCo
Services
Limited)
Clifford Automotive 3,000 314 3,314 3.0% 8.0%
Thames Group
Limited
CSL DualCom Environmental 3,225 25 3,250 0.0% 45.3%
Holdings
Limited
(formerly
GreenCo
Services)
BlueBell Telecommunications 2,000 220 2,220 4.4% 6.5%
Telecom
Services
Limited
Autologic Automotive 2,000 219 2,219 3.3% 10.0%
Diagnostics
Holdings
Limited
(formerly
Businessco
Services 2)
Resilient Business services 1,000 - 1,000 16.3% 49.0%
Corporate
Services
Limited
Ticketing Ticketing 1,000 - 1,000 49.4% 100.0%
Services 1
Limited
Ticketing Ticketing 1,000 - 1,000 49.4% 100.0%
Services 2
Limited
Project Chauffeur services 1,000 53 1,053 2.5% 35.0%
Tristar
Limited
Bruce Dunlop Media 1,018 (48) 970 1.7% 30.0%
& Associates
International
Limited
Aashman Power Solar 950 - 950 32.2% 100.0%
Limited
Hydrobolt Manufacturing 606 98 704 2.8% 43.5%
Limited
Kala Power Solar 425 - 425 15.0% 100.0%
Limited
Tonatiuh Solar 420 - 420 17.4% 100.0%
Trading 1
Limited
British Restaurants & bars 100 (30) 70 1.3% 1.3%
Country Inns
plc
Total
unquoted
qualifying
investments  21,744 851 22,595
Non-
qualifying
investments  403 - 403
Total fixed
asset
investments  22,147 851 22,998
Money market
funds    545
Cash at bank    586
Debtors less
creditors    289
Total net
assets    24,418
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
Tony Morgan
Chairman
26 September 2011
Income Statement
+---------------------+
|Six months to 31 July|Six months to 31 July Year to 31 January
 | 2011 | 2010 2011
| |
 |Revenue Capital Total|Revenue Capital Total Revenue Capital Total
| |
 | £'000 £'000 £'000| £'000 £'000 £'000 £'000 £'000 £'000
| |
 |   |
| |
Loss on | |
disposal of | |
fixed asset | |
investments | - - -| - - - - (25) (25)
| |
Gain on | |
disposal of | |
current asset| |
investments | - 15 15| - - - - 19 19
| |
 |    |
| |
Fixed asset | |
investment | |
holding gains| - 290 290| - - - - 576 576
| |
Current asset| |
investment | |
holding gains| - - -| - 38 38 - 37 37
| |
 |    |
| |
Income | 607 - 607| 324 - 324 917 - 917
| |
 |    |
| |
Investment | |
management | |
fees | (61) (182) (243)| (67) (202) (269) (127) (379) (506)
| |
 |    |
| |
Other | |
expenses | (155) - (155)| (182) - (182) (341) - (341)
| |
 |    |
| |
Profit/(loss)| |
on ordinary | |
activities | |
before tax | 391 123 514| 75 (164) (89) 449 228 677
| |
 |    |
| |
Taxation on | |
profit/(loss)| |
on ordinary | |
activities | - - -| - - - - - -
| |
 |    |
| |
Profit/(loss)| |
on ordinary | |
activities | |
after tax | 391 123 514| 75 (164) (89) 449 228 677
| |
Earnings per | |
share - basic| |
and diluted | 1.4p 0.5p 1.9p| 0.3 (0.6)p (0.3)p 1.7p 0.8p 2.5p
+---------------------+
* 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 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 July 2011| 31 July 2010 31 January 2011
| |
 | £'000| £'000 £'000
| |
Shareholders' funds at start | |
of period | 24,332| 24,552 24,552
| |
(Loss)/profit on ordinary | |
activities after tax | 514| (89) 677
| |
Cancellation of own shares | (21)| (39) (81)
| |
Dividends paid | (407)| (409) (816)
| |
Shareholders' funds at end of | |
period | 24,418| 24,015 24,332
+----------------+
Balance Sheet
+----------------+
| As at 31 July| As at 31 July As at 31 January
 | 2011| 2010 2011
| |
 |£'000 £'000|£'000 £'000 £'000 £'000
| |
 |  |
| |
Fixed asset investments* | Â 22,998| Â 19,058 Â 19,634
| |
Current assets: | Â Â |
| |
Investments* | 545 Â |4,849 Â 4,274
| |
Debtors | 335 Â | 10 Â 274
| |
Cash at bank | 586 Â | 149 Â 207
| |
 |1,466  |5,008  4,755
| |
Creditors: amounts falling | |
due within one year | (46) Â | (51) Â (57)
| |
Net current assets | Â 1,420| Â 4,957 Â 4,698
| |
Net assets | Â 24,418| Â 24,015 Â 24,332
| |
 |   |
| |
Called up equity share | |
capital | Â 2,713| Â 2,721 Â 2,715
| |
Special distributable | |
reserve | Â 21,319| Â 22,987 Â 21,747
| |
Capital redemption reserve | Â 25| Â 18 Â 23
| |
Capital reserve - gains & | |
losses on disposal | Â (1,347)| Â (1,435) Â (1,165)
| |
                        - | |
holding gains & losses | Â 813| Â (405) Â 508
| |
Revenue reserve | Â 895| Â 129 Â 504
| |
Total equity shareholders' | |
funds | Â 24,418| Â 24,015 Â 24,332
| |
Net asset value per share |  90.0p|  88.3p  89.6p
+----------------+
*Held at fair value through profit and loss
The statements were approved by the Directors and authorised for issue on 26
September 2011 and are signed on their behalf by:
Tony Morgan
Chairman
Company Number: 05840377
Cash Flow Statement
+-------------+
|Six months to|Six months to Year to
 | 31 July 2011| 31 July 2010 31 January 2011
| |
 | £'000| £'000 £'000
| |
 |  |
| |
Net cash inflow from operating | |
activities | 137| 79 18
| |
 |  |
| |
Taxation | -| - -
| |
 |  |
| |
Financial investment : | Â |
| |
Purchase of fixed asset investments | (3,282)| (1,350) (1,735)
| |
Sale of fixed asset investments | 208| - 360
| |
 |  |
| |
Management of liquid resources: | Â |
| |
Purchase of current asset | |
investments | (6,230)| (2,669) (9,068)
| |
Sale of current asset investments | 9,974| 4,163 11,155
| |
 |  |
| |
Dividends paid | (407)| (409) (816)
| |
 |  |
| |
Financing: | Â |
| |
Cancellation of own shares | (21)| (39) (81)
| |
Decrease in cash at bank | 379| (225) (167)
+-------------+
Reconciliation of profit before taxation to cash flow from operating activities
+-------------+
|Six months to|Six months to Year to 31 January
 | 31 July 2011| 31 July 2010 20011
| |
 | £'000| £'000 £'000
| |
Profit/(loss) on ordinary | |
activities before tax | 514| (89) 677
| |
Loss on disposal of fixed asset| |
investments | -| - 25
| |
Gain on disposal of current| |
asset investments | (15)| - (19)
| |
Holding gain on fixed asset | |
investments | (290)| - (576)
| |
Holding gain on current asset | |
investments | -| (38) (37)
| |
(Increase)/decrease in debtors | (61)| 233 (31)
| |
Decrease in creditors | (11)| (27) (21)
| |
Net cash inflow from operating | |
activities | 137| 79 18
+-------------+
Reconciliation of net cash flow to movement in net funds
+-------------+
|Six months to|Six months to 31 Year to 31
 | 31 July 2011| July 2010 January 2011
| |
 | £'000| £'000 £'000
| |
Increase/(decrease) in cash at| |
bank | 379| (225) (167)
| |
Decrease in cash equivalents | (3,729)| (1,456) (2,031)
| |
Opening net cash resources | 4,481| 6,679 6,679
| |
Net cash resources at end of | |
period | 1,131| 4,998 4,481
+-------------+
Notes to the Half-Yearly Report
1.        Basis of preparation
The unaudited half-yearly results which cover the six months to 31 July 2011
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 31 January 2011, 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 2009.
2.        Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 July 2011 do not
constitute statutory accounts within the meaning of s.415 of the Companies Act
2006. The comparative figures for the year ended 31 January 2011 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 July 2011 is calculated on the basis of 27,126,984
(31 July 2010: 27,244,887 and 31 January 2011: 27,215,442) 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 earnings per share figures are relevant. The basic and diluted
earnings per share are therefore identical.
4.        Net asset value per share
The net asset value per share is based on net assets as at 31 July 2011 divided
by 27,126,984 (31 July 2010: 27,207,202 and 31 January 2011: 27,153,642) shares
in issue at that date.
5.        Dividends
The interim dividend of 2.0 pence per share for the six months ending 31 July
2011 will be paid on 18 November 2011, to those shareholders on the register on
21 October 2011. This will be paid from revenue reserves.
A final dividend, for the year ending 31 January 2011, of 1.5 pence per share
was paid on 15 July 2011 to shareholders on the register on 17 June 2011. This
was paid from revenue reserves.
6. Â Â Â Â Â Â Â 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 31 January 2011. The Company's principal risks and
uncertainties have not changed materially since the date of that report.
7. Â Â Â 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 £234,000 (31 July 2010: £269,000 and 31
January 2011: £506,000) payable to Octopus. At the period end there was £nil (31
January 2011: £nil and 31 July 2010: £nil) outstanding to Octopus. Furthermore,
Octopus provides administration and company secretarial services to the
Company. Octopus receives a fee of 0.3 per cent per annum of net assets of the
Company for administration services and £10,000 per annum for company
secretarial services.
8.        A version of this statement will be made available 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.
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 Apollo VCT 3 plc via Thomson Reuters ONE
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