Information  X 
Enter a valid email address

Octopus Apollo VCT2 plc (APO2)

  Print   

Friday 22 May, 2009

Octopus Apollo VCT2 plc

Final Results





Octopus Apollo VCT 2 plc
Final Results

22 May 2009

Octopus Apollo VCT 2 plc (the "Company"), managed by Octopus
Investments Limited, today announces the final results for the year
ended 31 January 2009.

These results were approved by the Board of Directors on 22 May 2009.

You may view the Annual Report in full at www.octopusinvestments.com
by navigating to VCT Meetings & Reports under the 'Services' section

About Octopus Apollo VCT 2 plc

Octopus Apollo VCT 2 plc ("Apollo 2", "Company" or "Fund") is a
venture capital trust ("VCT") and is managed by Octopus Investments
Limited ("Octopus").

The Fund was launched in May 2006 together with Octopus Apollo VCT 1
plc.  Both companies have identical constitutions, boards of
directors and investment policies, and together launched an offer for
subscription comprising 25,000,000 ordinary shares each, or
50,000,000 in aggregate (the "Offer").  The Offer closed on 5 April
2007 having raised £17.6 million in aggregate (£16.8 million net of
expenses).  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.

Financial Summary


                                Year to 31 January Year to 31 January
                                              2009               2008

Net assets (£'000s)                          8,119              8,355
Net revenue  return  after  tax
(£'000s)                                       112                102
Net total  (loss)/return  after
tax (£'000s)                                 (106)                 52
Net  asset   value  per   share
("NAV")                                      92.3p              94.7p
Proposed dividend per share                  1.00p              0.75p


The table below  shows the movement  in NAV and  lists the  dividends
that have been paid and proposed since the launch of Apollo 2:


                       Dividends paid NAV + cumulative
Period Ended       NAV      in period        dividends
31 January 2007 93.40p              -           93.40p
31 July 2007    94.40p              -           94.40p
31 January 2008 94.70p              -           94.70p
31 July 2008    93.20p          0.75p           93.95p
31 January 2009 92.30p          0.50p           93.55p



Chairman's Statement

Introduction
I am pleased to present the third annual report of Octopus Apollo VCT
2 plc for the year ended 31 January 2009.

Change of Name
Shareholders will be aware that in the year to 31 January 2009, there
has been a change to the corporate identity of the Company.  With a
wide range of Octopus funds now under management, it is considered
appropriate that the name of the Company should reflect the name of
Octopus so as to avoid confusion in the marketplace.  On 10 November
2008, the company changed its name to Octopus Apollo VCT 2 plc
following the passing of a resolution by shareholders.

Shareholders' existing share certificates remain valid and have not
been replaced.  Shareholders should also note the Directors will
remain in office and the Board's independence from Octopus is in no
way affected.

Performance
At 31 January 2009 the total return (being NAV plus dividends paid)
of the Fund was 93.55p, which compares to 94.70p on 31 January 2008.
The performance of the Fund has been relatively stable because a
large proportion of its assets are held in cash and cash equivalent
securities, and because there have been minimal changes in the
valuations of the companies in its portfolio.  The investments held
are valued in accordance with the International Private Equity and
Venture Capital Valuation Guidelines and Financial Reporting
Standards and are subject to regular valuation reviews.

Given your Company's performance, and in line with HM Revenue &
Customs ("HMRC") requirements, your Board has proposed a final
revenue dividend of 1p per share in respect of the year ended 31
January 2009.  This dividend, if approved by shareholders at the AGM,
will be paid on 31 July 2009 to those shareholders on the register on
3 July 2009. In addition to the 0.5p interim dividend paid in
October, this will take dividends for the year ended 31 January 2009
to 1.5p.

Investment Portfolio
During the year the Fund made two new investments, totalling
£697,000, into Hydrobolt Limited and Vulcan Services II Limited.
Hydrobolt manufactures special fasteners and studbolts for the energy
industries (www.hydrobolt.co.uk).  Vulcan II is a company that has
been set up to find investments in the energy sector. Both of these
investments are discussed further in the Investment Manager's Review.
No disposals took place during the year. The Fund's portfolio
included investments in five companies with a total valuation of
£2.6m at the year end.  As noted in the Outlook section below, a
further six investments were made after the year end bringing the
total valuation of VCT qualifying companies to £4.9m as of the date
of signing this report.

The Company has engaged Goldman Sachs International to manage the
cash portion of the Fund in a range of money market securities
pending investment in VCT qualifying companies.  These securities
comprise money market cash funds, bonds and floating rate notes.  The
volatility of these instruments has, at times over the last six
months, been higher than one would usually expect.  However, your
Board has reviewed the management of the funds by Goldman Sachs and
has confirmed that the priority of the investment mandate is capital
preservation. The Board will continue to monitor closely the
performance of Goldman Sachs during these uncertain times.

Investment Strategy
The Fund is being invested on the  basis of taking lower risk than  a
typical VCT. The Fund aims to  receive its return from interest  paid
on secured loan  notes as well  as an  exposure to the  value of  the
shares  of  a  company.    The  investment  strategy  is  to   derive
sufficient return from the secured  loan notes to achieve the  Fund's
investment aims and to use any equity exposure to boost returns.   As
portfolio companies are unquoted the Fund will receive a return  from
an equity holding when a company is acquired.

The Manager of the Fund aims to reduce risk by investing in well
managed and profitable businesses with strong recurring cash-flows.
Furthermore with the majority of the investment being in the form of
a secured loan, in the unlikely event of the business failing, the
Fund will rank ahead of unsecured creditors and equity investors.

VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice on the ongoing compliance with HMRC rules and regulations
concerning VCTs.  As at 31 January 2009, over 31.8% of the portfolio
(as measured by HMRC rules) was invested in VCT qualifying
investments.  Although this is slightly behind the Investment
Manager's target investment percentage at this time, the Manager does
not foresee any issues with reaching the required investment hurdle
of 70% before the third anniversary of the end of the financial year
in which investors subscribed to the Fund.

VAT on Management Fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008 and
with retrospective application.  This follows a European Court of
Justice Judgement against the Government in a case relating to VAT
payable by investment trusts.  It is now expected that a repayment
will be obtained for VAT paid on management fees for the life of this
Fund.  However, timing of repayment is not yet known. A claim has
been submitted to HMRC by Octopus on behalf of the VCT.  For the
purposes of these accounts, and with guidance from our advisers at
Octopus, we have accrued an anticipated VAT rebate of £35,000.

Outlook
Your Board remains confident that the Fund will be able to meet its
investment objectives and produce good returns for shareholders.
However, the Board and the Manager remain cautious about investing
too readily in the current economic environment.  Significant steps
have been taken to stabilise the world financial system but it is
difficult to predict how long they will take to feed through to
consumer and business confidence.

The imperative is to find lower risk investments and take advantage
of current market conditions whenever possible.  After 31 January
2009 the Fund has made six such investments, an example of two of
these are the investments in CSL Dualcom Limited and Diagnos
Limited.  Both companies are profitable.  The Fund was able to take
the investment position historically taken by banks in that the Fund
has first security over the assets of the businesses.

This year Octopus has launched a further VCT, Octopus Protected VCT 2
plc.  This new VCT will invest alongside Apollo 2 and other VCTs
under the management of Octopus.  It is expected that co-investment
will allow Apollo 2 to invest in larger, safer companies and to
invest on more favorable terms.  Your Board monitors the development
of Octopus closely.  The growing resources of Octopus as well as its
day-to-day management of the Fund continue to give us confidence that
the company will perform well as Manager of the Fund.


Andrew Boyle
Chairman
22 May 2009

Investment Manager's Review

Personal Service
At Octopus, we have a dual focus on managing your investments and
keeping you informed throughout the investment process.  We are
committed to providing our investors with regular and open
communication. Our updates are designed to keep you informed about
the progress of your investment. During this time of economic
upheaval, we consider it particularly important to be regularly in
contact with our investors. We are working hard to manage your money
in the current climate.

Review of Investments
Given the tumultuous economic events we are broadly pleased with our
current portfolio. We are actively monitoring those businesses that
are under-performing. We are pleased with how management are
responding and the actions they are taking to both reduce costs and
improve trading.

As mentioned in the Chairman's Statement, two new investments
totalling £697,000 were made during the period into Hydrobolt Limited
and Vulcan Services II Limited.  Hydrobolt is one of the UK's leading
manufacturers and distributors of nuts and bolts for the oil, gas and
power generation markets and Vulcan Services II Limited has been set
up to seek lower risk investments in the energy sector.

Investment Portfolio
Funeral Services Partnership Limited
Funeral Services Partnership is an independent funeral services group
made up of funeral parlours and their associated services. It
currently owns 14 funeral parlours and a stonemason and is continuing
to grow via acquisition. Due to the nature of the company's business
it is not affected by the current economic environment.


Investment date:            October 2007
Cost:                       £875,000 (ordinary shares and loan notes)
Valuation:                  £875,000
Valuation basis:            Fair Value (being cost)
Equity held:                2.0% 'B shares' (6.8% 'B shares' held by
                            all funds managed by Octopus)
Last audited accounts:      March 2008
Loss before interest & tax: £0.4million
Net assets:                 £0.7million


Bruce Dunlop & Associates International Limited ('BDA')
BDA provides promotion and design services to broadcasters and
advertisers worldwide and also creates brand films and internal
communications for leading UK corporations, including Hallmark,
Barclays, Discovery and Sony. Due to the poor market conditions for
broadcasters and advertisers trading towards the end of 2008 and into
2009 have been below budget. Management are running the business to
counteract this position and we are monitoring the business closely.


Investment date:              December 2007
Cost:                         £500,000 (ordinary shares and loan
                              notes)
Valuation:                    £500,000
Valuation basis:              Fair Value (being cost)
Equity held:                  0.9% 'A shares' (33.3% 'A shares' held
                              by all funds managed by Octopus)
Last audited accounts:        June 2007
Profit before interest & tax: £1.1 million
Net assets:                   £2.8 million


Tristar Worldwide Limited
Tristar is one of the world's leading chauffeur companies, carrying
over 400,000 passengers for over 400 clients in 2008.  The market for
chauffeur services has been heavily affected in the current market.
Tristar has achieved a robust performance in the circumstances.  The
company's focus on a joined up international service is proving to be
an important selling feature for clients, with further opportunities
opening up in the Far East.  We continue to work closely with the
management team to contain overheads and manage cash flow in the
short to medium term.


Investment date:              January 2008
Cost:                         £500,000 (ordinary shares and loan
                              notes)
Valuation:                    £500,000
Valuation basis:              Fair Value (being cost)
Equity held:                  1.3% 'A shares' (35.0% 'A shares' held
                              by all funds managed by Octopus)
Last audited accounts:        31 May 2008
Revenues:                     £40.4 million
Profit before interest & tax: £1.8 million
Net assets:                   £5.0 million



Hydrobolt Limited
Hydrobolt manufactures and distributes specialty fasteners for use in
hostile environments such as oil & gas exploration and production as
well as power. To date the business has been unaffected by the
current economic environment. We are pleased with its trading.


Investment date:       April 2008
Cost:                  £196,868 (ordinary shares and loan notes)
Valuation:             £196,868
Valuation basis:       Fair Value (being cost)
Equity held:           0.9% 'A shares' (48.1% 'A shares' held by all
                       funds managed by Octopus)
Last audited accounts: N/A


Vulcan Services II Limited
Vulcan II has been established to seek the acquisition of businesses
engaged in any of the activities of design, manufacture, development,
marketing or sale of equipment and components for use in the oil and
gas sector.


Investment date:       November 2008
Cost:                  £500,000 (ordinary shares and loan notes)
Valuation:             £500,000
Valuation basis:       Fair Value (being cost)
Equity held:           12.5% 'A shares' (49% 'A shares' held by all
                       funds managed by Octopus)
Last audited accounts: N/A


Recent Transactions
Since the end of the period under review, six further investments
have been made. The fund invested £700,000 in CSL Dualcom Limited and
£800,000 in Diagnos Limited.

CSL DualCom Limited
CSL DualCom (www.csldual.com) is the UK's leading supplier of dual
path signalling devices, which link burglar alarms to the police or a
private security firm. The devices communicate using a telephone line
or broadband connection and a wireless link from Vodafone, which has
been a partner since 2000.

Diagnos Limited
Diagnos (www.autologic-diagnos.co.uk) develops and sells
sophisticated automotive diagnostic software and hardware (branded as
"Autologic") that enables independent mechanics, dealerships and
garages to service and repair vehicles. Mechanics require a
diagnostic tool to communicate with the in-car computer in order to
measure, monitor and, where necessary, fix the electronic process or
system.

Furthermore, in April 2009, your VCT invested a total of £800,000
into four companies which are actively seeking investments in the
healthcare, environment, business support and pub sectors.

Outlook
We will continue to consider investments in sound companies and to
support existing holdings that merit capital for sensible expansion
plans, including well priced acquisitions.  Taking a longer term
view, which a VCT affords, we expect economic conditions to improve,
enabling the portfolio to develop and generate successful exits that
will bring rewards for shareholders.

If you have any questions on any aspect of your investment, please
call one of the team on 0800 316 2347.

Simon Rogerson
Chief Executive
Octopus Investments

Directors' Responsibility Statement

The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and
regulations.

Company law requires the Directors to prepare financial statements
for each financial period.  Under that law the Directors have elected
to prepare financial statements in accordance with United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).

The financial statements are required by law to give a true and fair
view of the state of affairs of the Company and of the profit or loss
of the Company for that period.  In preparing these financial
statements, the Directors are required to:

  * select suitable accounting policies and then apply them
    consistently;
  * make judgements and estimates that are reasonable and prudent;
  * state whether applicable UK accounting standards have been
    followed, subject to any material departures disclosed and
    explained in the financial statements; and
  * prepare financial statements on a going concern basis unless it
    is inappropriate to presume that the Company will continue in
    business.


The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 1985.  They are also
responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.

Under applicable law and regulations, the Directors are responsible
for preparing a Directors' Report (including Business Review),
Directors' Remuneration Report and Corporate Governance Statement
which comply with that law and those regulations.

In so far as the Directors are aware:


  * there is no relevant audit information of which the Company's
    auditor is unaware; and
  * the Directors have taken all steps that they ought to have taken
    to make themselves aware of any relevant audit information and to
    establish that the auditor is aware of that information.

The Company's financial statements are published on the Octopus
Investments website.  The investment manager is responsible for the
maintenance and integrity of the corporate and financial information
set out on their website; this is not the responsibility of the
Company.  The work carried out by Grant Thornton UK LLP as
independent auditor of the Company does not involve consideration of
the maintenance and integrity of the website and accordingly they
accept no responsibility for any changes that have occurred to the
financial statements since they were initially presented on the
website.

Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation
in other jurisdictions.

To the best of my knowledge:


  * the financial statements, prepared in accordance with the
    applicable set of accounting standards, give a true and fair view
    of the assets, liabilities, financial position and profit or loss
    of the Company; and
  * the management report includes a fair review of the development
    and performance of the business and the position of the Company,
    together with a description of the principal risks and
    uncertainties that it faces.


On Behalf of the Board

Andrew Boyle
Chairman
22 May 2009



Income Statement
                                           Year ended 31 January 2009
                                             Revenue  Capital   Total
                                     Notes     £'000    £'000   £'000

Gain on disposal of current asset
investments                           12           -       19      19

Loss on valuation of current asset
investments                           12           -    (206)   (206)

Investment Income                      2         461        -     461

Investment management fees             3        (47)    (143)   (190)
VAT management fee rebate              3           9       26      35

Other expenses                         4       (225)        -   (225)

Return/(loss) on ordinary activities
before tax                                       198    (304)   (106)

Taxation on return/(loss) on
ordinary activities                    6        (86)       86       -

Return/(loss) on ordinary activities
after tax                                        112    (218)   (106)
Earnings/(loss) per share - basic
and diluted                            8        1.3p   (2.5p)  (1.2p)



  * 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 financial
    statements
  * 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


The Company has no recognised gains or losses other than the results
for the year as set out above.



Income Statement
                                           Year ended 31 January 2008
                                             Revenue   Capital  Total
                                     Notes     £'000     £'000  £'000

Gain on disposal of current asset
investments                           12           -        22     22

Gain on valuation of current asset
investments                           12           -        60     60

Investment Income                      2         305         -    305

Investment management fees             3        (44)     (132)  (176)

Other expenses                         4       (159)         -  (159)

Return/(loss) on ordinary activities
before tax                                       102      (50)     52

Taxation   on    return/(loss)    on
ordinary activities                    6           -         -      -

Return/(loss) on ordinary activities
after tax                                        102      (50)     52
Earnings/(loss) per  share  -  basic
and diluted                            8        1.3p    (0.6p)   0.7p



  * 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 financial
    statements
  * 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


The Company has no recognised gains or losses other than the results
for the year as set out above.



Note of Historical Cost Profits and Losses
                                           Year ended      Year ended
                                      31 January 2009 31 January 2008

(Loss)/return on ordinary activities
before taxation                                 (106)              52
Loss/(gain) on valuation of current
asset investments                                 206            (60)
Historical cost profit/(loss) on
ordinary activities after taxation                100             (8)




Reconciliation of Movements in Shareholders' Funds
                                           Year ended      Year ended
                                      31 January 2009 31 January 2008
                                                £'000           £'000
Shareholders' funds at start of year            8,355           2,889
(Loss)/return on ordinary activities
after tax                                       (106)              52
Net proceeds of share issue                         -           5,447
Cancellation of own shares                       (20)            (33)
Dividends paid                                  (110)               -
Shareholders' funds at end of year              8,119           8,355






Balance Sheet
                                    As at 31 January As at 31 January
                                                2009             2008
                              Notes    £'000   £'000    £'000   £'000

Fixed asset investments        10              2,572            1,875
Current assets:
Debtors                        11         86               96
Investments                    12      3,971            6,437
Cash at bank                           1,575                9
                                       5,632            6,542
Creditors: amounts falling
due within one year            13       (85)             (62)
Net current assets                             5,547            6,480
Net assets                                     8,119            8,355

Called up equity share
capital                        14        879              882
Capital redemption reserve     15          6                3
Special distributable reserve  15      7,429            7,451
Capital reserve - realised     15      (275)             (59)
            - unrealised       15          -                -
Revenue reserve                15         80               78
Total shareholders' funds                      8,119            8,355
Net asset value per share       9              92.3p            94.7p


The statements  were approved  by the  Directors and  authorised  for
issue on 22 May 2009 and are signed on their behalf by:

Andrew Boyle
Chairman
The accompanying notes are an integral part of the financial
statements.


Cash Flow Statement
                                                   Year to    Year to
                                                31 January 31 January
                                                      2009       2008
                                          Notes      £'000      £'000

Net cash inflow/ (outflow)  from
operating activities                                   114        (4)

Financial investment:
Purchase of fixed asset investments        10        (697)    (1,875)

Management of liquid resources:
Purchase of current asset investments      12      (3,431)   (19,618)
Sale of current asset investments          12        5,710     16,077
                                                     2,279      3,541

Dividends                                   7        (110)          -

Financing
Issue of own shares                                      -      5,734
Share issue expenses                                     -      (287)
Purchase of own shares                     15         (20)       (33)
                                                      (20)      5,414
Increase/(decrease) in cash                          1,566        (6)



Reconciliation of (Loss) / Return before Taxation to Cash Flow from
Operating Activities
                                            Year to 31     Year to 31
                                          January 2009   January 2008
                                                 £'000          £'000
(Loss)/return on ordinary activities
before tax                                       (106)             52
Decrease in debtors                                 10             10
Increase in creditors                               23             16
Gain on disposal of current asset
investments                                       (19)           (22)
Loss/(gain) on valuation of current
asset investments                                  206           (60)
Inflow/(outflow) from operating
activities                                         114            (4)




Reconciliation of Net Cash Flow to Movement in Net Funds
                                              Year to 31   Year to 31
                                            January 2009 January 2008
                                      Notes        £'000        £'000
Increase/(decrease) in cash resources              1,566          (6)
Movement in cash equivalent            12
securities                                       (2,466)        3,623
Opening net funds                                  6,446        2,829
Net funds at 31 January                            5,546        6,446


Net funds at 31 January comprised:

                        As at 31 January 2009 As at 31 January 2008
                                        £'000                 £'000
Cash at bank                            1,575                     9
Bonds                                   1,433                 4,326
Money market funds                      2,538                 2,111
Net funds at 31 January                 5,546                 6,446


Notes to the Financial Statements

1.         Principal accounting policies

The financial statements have been prepared under the historical cost
convention,  except  for   the  revaluation   of  certain   financial
instruments, and in accordance with UK Generally Accepted  Accounting
Practice (UK GAAP)., and the Statement of Recommended Practice (SORP)
"Financial  Statements  of  Investment  Trust  Companies",   (revised
December 2005).

The principal accounting policies have remained unchanged from those
set out in the Company's 2008 annual report and financial
statements.  A summary of the principal accounting policies is set
out below.

Investments
Purchases and sales of investments are recognised in the financial
statements at the date of the transaction (trade date).

These investments will be managed and their performance evaluated on
a fair value basis in accordance with a documented investment
strategy and information about them has to be provided internally on
that basis to the Board.  Accordingly as permitted by FRS 26, the
investments will be designated as fair value through profit or loss
("FVTPL") on the basis that they qualify as a group of assets
managed, and whose performance is evaluated, on a fair value basis in
accordance with a documented investment strategy.  The Company's
investments are measured at subsequent reporting dates at fair
value.

In the case  of unquoted  investments, fair value  is established  by
using measures of value such as price of recent transaction, earnings
multiple and  net  assets;  where  no  reliable  fair  value  can  be
estimated using such techniques, unquoted investments are carried  at
cost subject to  provision for  impairment where  necessary. This  is
consistent with  International  Private Equity  and  Venture  Capital
valuation guidelines.
.
Gains and losses arising from changes in fair value of investments
are recognised as part of the capital return within the income
statement and allocated to the capital reserve unrealised.

In preparation of the valuations of assets the directors are required
to make judgements and estimates that are reasonable and incorporate
their knowledge of the performance of the investee companies.

Current asset investments
Current asset investments comprise Bonds and Money Market Funds and
are designated as FVTPL.  Gains and losses arising from changes in
fair value of investments are recognised as part of the capital
return within the income Statement and allocated to the capital
reserve - realised.

The current asset investments are all invested with the Company's
cash manager and are readily convertible into cash at the choice of
the Company.  The current asset investments are held for trading, are
actively managed and the performance is evaluated on a fair value
basis in accordance with a documented investment strategy.
Information about them has to be provided internally on that basis to
the Board.

Income
Investment income includes interest earned on bank balances and money
market securities and includes income tax withheld at source.
Dividend income is shown net of any related tax credit.

Dividends receivable are brought into account when the Company's
right to receive payment is established and there is no reasonable
doubt that payment will be received.  Fixed returns on debt and money
market securities are recognised on a time apportionment basis so as
to reflect the effective interest rate, provided there is no
reasonable doubt that payment will be received in due course.

Expenses
All expenses are accounted for on an accruals basis.  Expenses are
charged wholly to revenue with the exception of the investment
management fee, which has been charged 25% to the revenue account and
75% to the realised capital reserve to reflect, in the Directors'
opinion, the expected long term split of returns in the form of
income and capital gains respectively from the investment portfolio.

Revenue and capital
The revenue column of the Income Statement includes all income and
revenue expenses of the Company.  The capital column includes
realised and unrealised gains and losses on investments.  Gains and
losses arising from changes in fair value are considered to be
realised only to the extent that they are readily convertible to cash
in full at the balance sheet date.

Taxation
Corporation tax payable is applied to profits chargeable to
corporation tax, if any, at the current rate. The tax effect of
different items of income/gain and expenditure/loss is allocated
between capital and revenue return on the "marginal" basis as
recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the
balance sheet date where transactions or events have occurred at that
date that will result in an obligation to pay more, or a right to pay
less tax, with the exception that deferred tax assets are recognised
only to the extent that the directors consider that it is more likely
than not that there will be suitable taxable profits from which the
future reversal of the underlying timing can be deducted.

Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in
hand and deposits repayable on demand, less overdrafts payable on
demand.  Liquid resources are current asset investments which are
disposable without curtailing or disrupting the business and are
either readily convertible into known amounts of cash at or close to
their carrying values or traded in an active market.  Liquid
resources comprise term deposits of less than one year (other than
cash), government securities, investment grade bonds and investments
in money market managed funds.

Financial instruments
The Company's principal financial assets are its investments and the
policies in relation to those assets are set out above.  Financial
liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the
assets of the entity after deducting all of its financial
liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this
is classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.

Dividends
Dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been
established.  This liability is established when the dividends
proposed by the Board are approved by the shareholders.

2.         Income

                                      31 January 2009 31 January 2008
                                                £'000           £'000
Income on money market securities and
bank balances                                     359             305
Loan note interest receivable                     102               -
                                                  461             305


3.         Investment management fees

                                31 January 2009       31 January 2008
                          Revenue Capital Total Revenue Capital Total
                            £'000   £'000 £'000   £'000   £'000 £'000
Investment management fee      41     127   168      37     112   149
Irrecoverable VAT thereon       6      16    22       7      20    27
VAT rebate                    (9)    (26)  (35)       -       -     -
                               38     117   155      44     132   176


For the purposes of the revenue and capital columns in the income
statement, the management fee (including VAT) has been allocated 25%
to revenue and 75% to capital, in line with the Board's expected long
term return in the form of income and capital gains respectively from
the Company's investment portfolio.

Octopus provides investment management and accounting and
administration services to the Company under a management agreement
which runs for a period of five years with effect from 16 October
2006 and may be terminated at any time thereafter by not less than
twelve months' notice given by either party.  No compensation is
payable in the event of terminating the agreement by either party, if
the required notice period is given.  The fee payable, should
insufficient notice be given, will be equal to the fee that would
have been paid should continuous service be provided, or the required
notice period was given.  The basis upon which the management fee is
calculated is disclosed within note 19 to the financial statements.

The Chancellor of the Exchequer announced in his budget statement on
12 March 2008 that the Finance Act 2008 would contain draft
legislation exempting VCTs from VAT on management fees with effect
from 1 October 2008. This legislation was passed in July 2008 and as
such all VCTs are now exempt from paying VAT on management fees from
this date.  Therefore VAT has not been included on management fees
since 1 November 2008 and has been rebated for previous years.

4.         Other expenses

                                      31 January 2009 31 January 2008
                                                £'000           £'000
Directors' remuneration                            33              29
Fees payable to the Company's auditor
for the audit of the financial
statements                                          9               9
Fees payable to the Company's auditor
for other services - tax compliance                 5               2
Accounting     and     administration
services                                           30              26
Legal and professional expenses                     6              51
Other expenses                                    142              42
                                                  225             159


5.         Directors' remuneration


                           31 January 2009 31 January 2008
                                     £'000           £'000
Directors' emoluments
Mr Andrew Boyle (Chairman)               9               8
Mr Roger Penlington                      7               7
Mr Stuart Brocklehurst                   8               7
Mr Matt Cooper                           8               7
                                        32              29


None of the Directors received any other remuneration or benefit from
the Company during the year.  The Company has no employees other than
non-executive Directors.  The average number of non-executive
Directors in the year was four (2008: four).

6.         Tax on ordinary activities
The corporation tax charge for the year was £nil (2008: £nil).

The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 20% (2008: 19%).  The differences are
explained below.


Current tax reconciliation:           31 January 2009 31 January 2008
                                                £'000           £'000
(Loss)/return on ordinary  activities                              52
before tax                                      (106)
Current tax at 20% (2008: 19%)                   (21)              10
Income not liable to tax                            -            (10)
Utilisation of tax  losses and  other                               -
deductions                                        (8)
Expenses  not   deductible  for   tax                               -
purposes                                           29
Total current tax charge                            -               -


Approved venture capital trusts are exempt from tax on capital gains
within the Company.  Since the directors intend that the Company will
continue to conduct its affairs so as to maintain its approval as a
venture capital trust, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or
disposal of investments.

7.         Dividends

                                      31 January 2009 31 January 2008
                                                £'000           £'000
Recognised as  distributions  in  the
financial statements for the year
Previous year's final dividend                     66               -
Current year's interim dividend                    44               -
                                                  110               -



                                      31 January 2009 31 January 2008
                                                £'000           £'000
Proposed in respect of the year
Interim dividend  paid  -  0.50p  per
share (2008: 0p per share)                         44               -
Final dividend 1.00p per share (2008:
0.75p per share)                                   88              66
                                                  132              66


The final dividend of 1.00p per share for the year ended 31 January
2009, subject to shareholder approval at the Annual General Meeting,
will be paid on 25 June 2009 to those shareholders on the register on
29 May 2009.

8.         (Loss)/earnings per share
The revenue per share is based on the revenue return after tax of
£112,000 (2008: £102,000) and on 8,813,950 (2008: 8,000,407) shares,
being the weighted average number of shares in issue during the year.

The total (loss)/earnings per share is based on total loss after tax
of £(106,000) (2008: £52,000 return) and on 8,813,950 (2008:
8,000,407) shares, being the weighted average number of shares in
issue during the year.

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

9.        Net asset value per share

The calculation of net asset value per share as at 31 January 2009 is
based on net assets of £8,119,000
(2008: £8,355,000) divided by the 8,793,986 (2008: 8,818,986)  shares
in issue at that date.

10.               Fixed asset investments

                                      Unquoted investments
                                         Year to         Year to
                                 31 January 2009 31 January 2008
                                           £'000           £'000
Opening valuation at 01 February           1,875               -
Purchases at cost                            697           1,875
Closing valuation at 31 January            2,572           1,875

Book cost at 31 January:
- Ordinary shares                            771             562
- Loan notes/other securities              1,801           1,313

Revaluation to 31 January 2009:
  -Ordinary Shares                         (150)               -
  -Loan Notes/other securities               150               -
Valuation at 31 January                    2,572           1,875


Further details of the fixed asset investments held by the Company
are shown within the Investment Manager's Review on pages 6 to 11.

All investments are designated as fair value through profit or loss
from the time of acquisition, and all capital gains or losses on
investments so designated.  Given the nature of the Company's venture
capital investments, the changes in fair value of such investments
recognised in these financial statements are not considered to be
readily convertible to cash in full at the balance sheet date and
accordingly these gains are treated as unrealised.

At 31 January 2009 and 31 January 2008 there were no commitments in
respect of investments approved by the manager but not yet completed.

11.       Debtors

                               31 January 2009 31 January 2008
                                         £'000           £'000
Other debtors                                -              91
Prepayments and accrued income              86               5
                                            86              96


12.       Current asset investments
Current asset investments at 31 January 2009 comprised Bonds,
Floating Rate Notes and Money Market Funds.


                                                £'000           £'000
Book cost at 31 January 2008/2007:
Bonds                                           3,687               -
Floating rate notes                               601               -
Money market funds                              2,089           2,814
Revaluation at 01 February:
Bonds                                              39               -
Floating rate notes                               (1)               -
Money market funds                                 22               -
Valuation as at 31 January:                     6,437           2,814

                                              Year to         Year to
                                      31 January 2009 31 January 2008
                                                £'000           £'000

Opening valuation at 01 February:               6,437           2,814

Purchases at Cost:
Bonds                                               -           4,264
Floating rate notes                                 -           1,337
Money market funds                              3,431          14,017
                                                3,431          19,618
Disposal proceeds:
Bonds                                         (2,315)           (580)
Floating rate notes                             (600)           (735)
Money market funds                            (2,795)        (14,762)
                                              (5,710)        (16,077)
Gain/(loss) in year on realisation of
investments:
Bonds                                              16               3
Floating rate notes                                 -             (1)
Money market funds                                  3              20
                                                   19              22
Revaluation in year:
Bonds                                               6              39
Floating rate notes                                 -             (1)
Money market funds                              (212)              22
                                                (206)              60
Closing valuation as at 31 January              3,971           6,437

Book cost at 31 January:
Bonds                                           1,427           3,687
Floating rate notes                                 -             601
Money market funds                              2,750           2,089
                                                4,177           6,377
Revaluation to 31 January:
Bonds                                               6              39
Floating rate notes                                 -             (1)
Money market funds                              (212)              22
                                                (206)              60
Closing valuation as at 31 January              3,971           6,437


All investments are designated as  fair value through profit or  loss
at the  time of  acquisition  and all  capital  gains and  losses  on
investments so designated. Given the  nature of the investments,  the
change  in  fair  value  of  such  investments  recognised  in  these
financial statements are considered to be readily convertible to cash
in full at  the balance sheet  date and accordingly  these gains  and
losses are treated as realised.

13.       Creditors: amounts falling due within one year

                31 January 2009 31 January 2008
                          £'000           £'000
Accruals                     84              49
Other creditors               1              13
                             85              62


14.       Share capital

                                      31 January 2009 31 January 2008
                                                £'000           £'000
Authorised:
25,000,000 Ordinary shares of 10p               2,500           2,500


Allotted and fully paid up:
8,793,986 Ordinary shares of 10p
(2008: 8,818,986)                                 879             882


The capital of the Company is managed in accordance with its
investment policy with a view to the achievement of its investment
objective as set on page 17.  The Company is not subject to any
externally imposed capital requirements.

The Company did not issue any shares in the year (2008: 5,761,913).

On 14 November 2008, the Company repurchased for cancellation 25,000
Ordinary shares at a price of 83.4p per share

The total nominal value of the shares repurchased was £2,500
representing 0.28% of the issued share capital.

15.       Reserves

                       Special    Capital  Capital    Capital
                 distributable redemption  reserve    reserve Revenue
                       reserve    reserve realised unrealised reserve
                         £'000      £'000    £'000      £'000   £'000
        As at 31
   January  2008         7,451          3     (59)          -      78
   Repurchase of
    own shares -
    cancellation          (20)          3        -          -       -
Profit/(loss) on
        ordinary
activities after
             tax             -          -    (218)          -     112
     Movement in
        Reserves           (2)          -        2          -       -
  Dividends paid             -          -        -          -   (110)
Balance as at 31
   January  2009         7,429          6    (275)          -      80


When the Company revalues its investments during the period, any
gains or losses arising are credited / charged to the income
statement.  Unrealised gains/losses on fixed assets are then
transferred to the capital reserve - unrealised.  When an investment
is sold any balance held on the capital reserve-unrealised is
transferred to the capital reserve - realised as a movement in
reserves.

The purpose of the special distributable reserve was to create a
reserve which will be capable of being used by the Company to pay
dividends and for the purpose of making repurchases of its own shares
in the market with a view to narrowing the discount at which the
Company's shares trade to net asset value.

16.       Financial instruments and risk management
The Company's financial instruments comprise equity investments,
bonds, cash balances and liquid resources including debtors and
creditors. The Company holds financial assets in accordance with its
investment policy of investing mainly in a portfolio of VCT
qualifying unquoted securities whilst holding a proportion of its
assets in cash or near-cash investments in order to provide a reserve
of liquidity.

Fixed and current asset investments (see note 10 and 12) are valued
at fair value. The fair value of all other financial assets and
liabilities is represented by their carrying value in the balance
sheet.  The Directors believe that the fair value of the assets held
at the year end is equal to their book value.

For fixed asset investments made this year, in accordance with
International Private Equity and Venture Capital valuation
guidelines, these are held at cost for the first year of investment
as this is considered to be the best approximation to fair value as
there have been no significant changes in circumstances since the
time of investment.

In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are price risk, interest rate risk, credit
risk and liquidity risk. The Company's approach to managing these
risks is set out below together with a description of the nature and
amount of the financial instruments held at the balance sheet date.

Market risk
The Company's strategy for managing investment risk is determined
with regard to the Company's investment objective, as outlined on
page 17. The management of market risk is part of the investment
management process and is a central feature of venture capital
investment. The Company's portfolio is managed in accordance with the
policies and procedures described in the Corporate Governance
statement on pages 27 to 31, having regard to the possible effects of
adverse price movements, with the objective of maximising overall
returns to shareholders. Investments in smaller companies, by their
nature, usually involve a higher degree of risk than investments in
larger companies quoted on a recognised stock exchange, though the
risk can be mitigated to a certain extent by diversifying the
portfolio across business sectors and asset classes. The overall
disposition of the Company's assets is regularly monitored by the
Board.

Details of the Company's investment portfolio at the balance sheet
date are set out on page 8.

31.7% (31 January 2008: 22.4%) by value of the Company's net assets
comprises investments in unquoted companies held at fair value.  The
valuation methods used by the Company include the application of a
price/earnings ratio derived from listed companies with similar
characteristics, and consequently the value of the unquoted element
of the portfolio can be indirectly affected by price movements on the
London Stock Exchange. A 10% overall increase in the valuation of the
unquoted investments at 31 January 2009 would have increased net
assets and the total return for the year by £257,000 (31 January
2008: £188,000) an equivalent change in the opposite direction would
have reduced net assets and the total return for the year by the same
amount.

48.9% (31 January 2008: 77.0%) by value of the Company's net assets
comprises of money market securities held at fair value.  A 10%
overall increase in the valuation of the Money Market Securities at
31 January 2009 would have increased net assets and the total return
for the year by £397,000 (31 January 2008: £644,000)  an equivalent
change in the opposite direction would have reduced net assets and
the total return for the year by the same amount.

Interest rate risk
Some of the Company's financial assets are interest-bearing.  As a
result, the Company is exposed to fair value interest rate risk due
to fluctuations in the prevailing levels of market interest rates.

Fixed rate
The table below summarises weighted average effective interest rates
for the fixed interest-bearing financial instruments:

                  As at 31 January 2009       As at 31 January 2008
                   Total          Weighted     Total          Weighted
                   fixed           average     fixed           average
                    rate          time for      rate          time for
               portfolio Weighted    which portfolio Weighted    which
                      by  average  rate is        by  average  rate is
                   value interest fixed in     value interest fixed in
                   £'000   rate %    years     £'000   rate %    years

Unquoted
fixed-interest
investments        1,451   12.75%      4.0     1,313   12.59%      4.7
Listed
fixed-interest
investments        1,433    4.68%      0.5     3,727    4.27%      0.8


Floating rate
The Company's floating rate investments comprise cash held on
interest-bearing deposit accounts and, where appropriate, within
interest bearing money market securities.  The benchmark rate which
determines the rate of interest receivable on such investments is the
bank base rate, which was 1.5% at 31 January 2009 (31 January 2008:
5.5%).  The amounts held in floating rate investments at the balance
sheet date were as follows:


                             31 January 2009 31 January 2008
                                        £000            £000
Unquoted floating rate notes             350               -
Listed floating rate notes                 -             600
Cash on deposit                        4,112           2,120
                                       4,462           2,720


Every 1% increase or decrease in the base rate would increase or
decrease income receivable from these investments and the total
return for the year by £44,620 (31 January 2008: £27,200)

Credit risk
Credit risk is the risk that a counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has
entered into with the Company. The Investment Manager and the Board
carry out a regular review of counterparty risk. The carrying values
of financial assets represent the maximum credit risk exposure at the
balance sheet date.

At 31 January 2009 the Company's financial assets exposed to credit
risk comprised the following:


                                      31 January 2009 31 January 2008
                                                 £000            £000
Investments in floating rate
instruments                                       350             600
Investments in fixed rate instruments           2,884           5,040
Cash on deposit                                 4,112           2,120
Accrued dividends and interest
receivable                                         80              91
                                                7,426           7,851


Credit risk relating to listed money market securities is mitigated
by investing in a portfolio of investment instruments of high credit
quality, comprising securities issued by the UK Government and major
UK institutions. Credit risk relating to loans to and preference
shares in unquoted companies is considered to be part of market
risk.

Those assets of the Company which are traded on recognised stock
exchanges are held on the Company's behalf by third party custodians
(Goldman Sachs International in the case of listed money market
securities and Charles Stanley Limited in the case of quoted equity
securities).  Bankruptcy or insolvency of a custodian could cause the
Company's rights with respect to securities held by the custodian to
be delayed or limited.

Credit risk arising on the sale of investments is considered to be
small due to the short settlement and the contracted agreements in
place with the settlement lawyers.

The Company's interest-bearing deposit and current accounts are
maintained with Goldman Sachs International and HSBC Bank plc. The
Investment Manager has in place a monitoring procedure in respect of
counterparty risk which is reviewed on an ongoing basis. Should the
credit quality or the financial position of either entity deteriorate
significantly the Investment Manager will move the cash holdings to
another bank.

Other than cash or liquid money market funds, there were no
significant concentrations of credit risk to counterparties at 31
January 2009 or 31 January 2008.

Liquidity risk
The Company's financial assets include investments in unquoted equity
securities which are not traded on a recognised stock exchange and
which generally may be illiquid.  As a result, the Company may not be
able to realise some of its investments in these instruments quickly
at an amount close to their fair value in order to meet its liquidity
requirements, or to respond to specific events such as deterioration
in the creditworthiness of any particular issuer.

The Company's listed money market securities are considered to be
readily realisable as they are of high credit quality as outlined
above.

The Company's liquidity risk is managed on a continuing basis by the
Investment Manager in accordance with policies and procedures laid
down by the Board. The Company's overall liquidity risks are
monitored on a quarterly basis by the Board.

The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.

17.       Post balance sheet events
The following events occurred between the balance sheet date and the
signing of these financial statements:

  * On 5 February 2009 the Fund invested £700,000 in CSL Dualcom
    Limited, acquiring 7,000,000 ordinary shares and £630,000 in loan
    notes
  * On 19 February 2009 the Fund invested £800,000 in Diagnos
    Limited, acquiring 200,000 ordinary shares in the company and
    £600,000 in loan notes
  * On 2 April 2009 the Fund invested £200,000 into each of Salus
    Services I Limited, PubCo Services Limited, GreenCo Services
    Limited and BusinessCo Services Limited. These are companies
    which have been established to seek suitable qualifying
    investments across a range of sectors.


18.       Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as
at 31 January 2009 (2008: £nil).

19.       Related party transactions
Matt Cooper, a non-executive director of Octopus Apollo VCT 2 plc, is
a director of Octopus Investments Limited.  Octopus Apollo VCT 2 plc
has employed Octopus throughout the period as investment manager.
Apollo 2 has paid Octopus £190,000 (2008: £149,227) in the period as
a management fee and there is £nil outstanding at the balance sheet
date.  The management fee is payable quarterly in advance and is
based on 2.0% of the net asset value calculated at annual intervals
as at 31 January.  Octopus provides accounting and administrative
services to the Company, payable quarterly in advance for a fee of
0.3% of the net asset value calculated at annual intervals as at 31
January.  In addition, Octopus also provides company secretarial
services for an additional fee of £5,000 per annum.  During the
period £30,000 (2008: £22,384) (including irrecoverable VAT at the
applicable rate) was paid to Octopus and there is £nil outstanding at
the balance sheet date, for the accounting and administrative
services.

No performance related incentive fee will be payable over the first
five years.  Thereafter, Octopus will be entitled to an annual
performance related incentive fee.  This performance fee is equal to
20% of the amount by which the NAV from the start of the sixth
accounting and subsequent accounting period exceeds simple interest
of the HSBC Bank plc base rate for the same period.  The NAV at the
start of the sixth accounting period must be at least 100p.  Any
distributions paid out by the Fund will be added back when
calculating this performance fee.

---END OF MESSAGE---




This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement.




                                                                                                                                                                                         

a d v e r t i s e m e n t