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Octopus Apollo VCT2 plc (OAP2)

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Monday 24 May, 2010

Octopus Apollo VCT2 plc

Final Results






Octopus Apollo VCT 2 plc

Final Results


24 May 2010


Due to an administrative oversight the Final Results for the year ended 31
January 2009 were not announced by the deadline of 31 May 2009.The results of
which are hereby announced.


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
<

http://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 2009|Year to 31 January 2008|
+------------------------------+-----------------------+-----------------------+
+------------------------------+-----------------------+-----------------------+
|Net assets (£'000s)           |                  8,119|                  8,355|
+------------------------------+-----------------------+-----------------------+
|Net  revenue return  after tax|                    112|                    102|
|(£'000s)                      |                       |                       |
+------------------------------+-----------------------+-----------------------+
|Net  total (loss)/return after|                  (106)|                     52|
|tax (£'000s)                  |                       |                       |
+------------------------------+-----------------------+-----------------------+
|Net   asset  value  per  share|                  92.3p|                  94.7p|
|("NAV")                       |                       |                       |
+------------------------------+-----------------------+-----------------------+
|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 |                            |
| Period Ended    |    NAV |                | NAV + cumulative dividends |
|                 |        |      in period |                            |
+-----------------+--------+----------------+----------------------------+
| 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
<

http://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   |          (106)|             52|
|taxation                                      |               |               |
+----------------------------------------------+---------------+---------------+
|Loss/(gain) on valuation of current asset     |            206|           (60)|
|investments                                   |               |               |
+----------------------------------------------+---------------+---------------+
|Historical cost profit/(loss) on ordinary     |            100|            (8)|
|activities after taxation                     |               |               |
+----------------------------------------------+---------------+---------------+




+------------------------------------------------------------------------------+
|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  | 13  | (85)|             | (62)|             |
|within one year                 |     |     |             |     |             |
+--------------------------------+-----+-----+-------------+-----+-------------+
|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 2009|31 January 2008|
+----------------------------------------+-----+---------------+---------------+
|                                        |Notes|          £'000|          £'000|
+----------------------------------------+-----+---------------+---------------+
+----------------------------------------+-----+---------------+---------------+
|Net cash inflow/ (outflow) from         |     |            114|            (4)|
|operating activities                    |     |               |               |
+----------------------------------------+-----+---------------+---------------+
+----------------------------------------+-----+---------------+---------------+
|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 January|    Year to 31 January|
|                                |                  2009|                  2008|
+--------------------------------+----------------------+----------------------+
|                                |                 £'000|                 £'000|
+--------------------------------+----------------------+----------------------+
|(Loss)/return on ordinary       |                 (106)|                    52|
|activities before tax           |                      |                      |
+--------------------------------+----------------------+----------------------+
|Decrease in debtors             |                    10|                    10|
+--------------------------------+----------------------+----------------------+
|Increase in creditors           |                    23|                    16|
+--------------------------------+----------------------+----------------------+
|Gain on disposal of current     |                  (19)|                  (22)|
|asset investments               |                      |                      |
+--------------------------------+----------------------+----------------------+
|Loss/(gain) on valuation of     |                   206|                  (60)|
|current asset investments       |                      |                      |
+--------------------------------+----------------------+----------------------+
|Inflow/(outflow) from operating |                   114|                   (4)|
|activities                      |                      |                      |
+--------------------------------+----------------------+----------------------+



+------------------------------------------------------------------------------+
|Reconciliation of Net Cash Flow to Movement in Net Funds                      |
+--------------------------------+-----+-------------------+-------------------+
|                                |     | Year to 31 January| Year to 31 January|
|                                |     |               2009|               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 |              9|              9|
|audit of the financial statements             |               |               |
+----------------------------------------------+---------------+---------------+
|Fees  payable  to  the  Company's  auditor for|              5|              2|
|other services - tax compliance               |               |               |
+----------------------------------------------+---------------+---------------+
|Accounting and administration services        |             30|             26|
+----------------------------------------------+---------------+---------------+
|Legal and professional expenses               |              6|             51|
+----------------------------------------------+---------------+---------------+
|Other expenses                                |            142|             42|
+----------------------------------------------+---------------+---------------+
|                                              |            225|            159|
+----------------------------------------------+---------------+---------------+


5. Directors' remuneration

+----------------------------+-----------------+-----------------+
|                            |                 | 31 January 2008 |
|                            | 31 January 2009 |                 |
+----------------------------+-----------------+-----------------+
|                            |           £'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 before|               |             52|
|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:|             44|              -|
|0p per share)                                 |               |               |
+----------------------------------------------+---------------+---------------+
|Final  dividend 1.00p per  share (2008: 0.75p |             88|             66|
|per share)                                    |               |               |
+----------------------------------------------+---------------+---------------+
|                                              |            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|  Revenue|
|               |  distributable|  redemption|   reserve|     reserve|  reserve|
|               |        reserve|     reserve|  realised|  unrealised|         |
+---------------+---------------+------------+----------+------------+---------+
|               |          £'000|       £'000|     £'000|       £'000|    £'000|
+---------------+---------------+------------+----------+------------+---------+
|      As at 31 |          7,451|           3|      (59)|           -|       78|
|   January 2008|               |            |          |            |         |
+---------------+---------------+------------+----------+------------+---------+
|  Repurchase of|               |            |          |            |         |
|   own shares -|           (20)|           3|         -|           -|        -|
|   cancellation|               |            |          |            |         |
+---------------+---------------+------------+----------+------------+---------+
|  Profit/(loss)|               |            |          |            |         |
|    on ordinary|              -|           -|     (218)|           -|      112|
|     activities|               |            |          |            |         |
|      after tax|               |            |          |            |         |
+---------------+---------------+------------+----------+------------+---------+
|    Movement in|            (2)|           -|         2|           -|        -|
|       Reserves|               |            |          |            |         |
+---------------+---------------+------------+----------+------------+---------+
| Dividends paid|              -|           -|         -|           -|    (110)|
+---------------+---------------+------------+----------+------------+---------+
|  Balance as at|          7,429|           6|     (275)|           -|       80|
|31 January 2009|               |            |          |            |         |
+---------------+---------------+------------+----------+------------+---------+


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 rate| Weighted|  average|fixed rate| Weighted|  average|
|                | portfolio|  average| time for| portfolio|  average| time for|
|                |        by| interest|    which|        by| interest|    which|
|                |          |   rate %|  rate is|          |   rate %|  rate is|
|                |     value|         | fixed in|     value|         | fixed in|
|                |     £'000|         |    years|     £'000|         |    years|
+----------------+----------+---------+---------+----------+---------+---------+
+----------------+----------+---------+---------+----------+---------+---------+
|Unquoted        |          |         |         |          |         |         |
|fixed-interest  |     1,451|   12.75%|      4.0|     1,313|   12.59%|      4.7|
|investments     |          |         |         |          |         |         |
+----------------+----------+---------+---------+----------+---------+---------+
|Listed          |          |         |         |          |         |         |
|fixed-interest  |     1,433|    4.68%|      0.5|     3,727|    4.27%|      0.8|
|investments     |          |         |         |          |         |         |
+----------------+----------+---------+---------+----------+---------+---------+


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.




[HUG#1418283]







  



                                                                                                                                                                            

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