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Octopus Eclipse VCT 2 plc (ECL2)

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Monday 18 May, 2009

Octopus Eclipse VCT 2 plc

Final Results





Octopus Eclipse VCT 2 plc
Final Results

18 May 2009

Octopus Eclipse 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 18 May 2009.

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

About Octopus Eclipse VCT 2 plc
Octopus Eclipse VCT 2 plc ("Eclipse 2", "Company" or "Fund") is a
venture capital trust ("VCT") which aims to provide shareholders with
attractive tax-free dividends and long-term capital growth, by
investing in a diverse portfolio of unquoted and AIM-quoted
companies.  The Company is managed by Octopus Investments Limited
("Octopus" or "Manager").

Eclipse 2 was launched in January 2005 and raised over £18.4 million
(£17.7 million net of expenses) through an offer for subscription.
The Company co-invests with other funds managed by Octopus. This
allows Eclipse 2 to invest in a wider range of opportunities and in
larger and more developed companies than are typically available to a
single VCT.

Financial Summary


+-------------------------------------------------------------------+
|                                     | Year to 31   | Year to 31   |
|                                     | January 2009 | January 2008 |
|-------------------------------------+--------------+--------------|
|                                     |              |              |
|-------------------------------------+--------------+--------------|
| Net assets (£'000s)                 | 13,444       | 20,928       |
|-------------------------------------+--------------+--------------|
| Net return/ (loss) after tax        |              |              |
| (£'000s)                            | (5,694)      | (248)        |
|-------------------------------------+--------------+--------------|
| Net asset value per share ("NAV")   | 72.9p        | 110.7p       |
|-------------------------------------+--------------+--------------|
| Proposed dividend per share         | 2.0p         | 5.0p         |
|-------------------------------------+--------------+--------------|
| Cumulative dividends since launch - |              |              |
| paid and proposed                   | 15.25p       | 10.25p       |
+-------------------------------------------------------------------+


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


+--------------------------------------------------------------+
|                 |        | Dividends paid | NAV + cumulative |
| Period Ended    | NAV    | in period      | dividends        |
|-----------------+--------+----------------+------------------|
| 31 July 2005    | 94.9p  | -              | 94.9p            |
|-----------------+--------+----------------+------------------|
| 31 January 2006 | 95.0p  | -              | 95.0p            |
|-----------------+--------+----------------+------------------|
| 31 July 2006    | 95.2p  | 1.25p          | 96.45p           |
|-----------------+--------+----------------+------------------|
| 31 January 2007 | 115.9p | -              | 117.15p          |
|-----------------+--------+----------------+------------------|
| 31 July 2007    | 121.9p | 1.00p          | 124.15p          |
|-----------------+--------+----------------+------------------|
| 31 January 2008 | 110.7p | 3.00p          | 115.95p          |
|-----------------+--------+----------------+------------------|
| 31 July 2008    | 93.8p  | 5.00p          | 104.05p          |
|-----------------+--------+----------------+------------------|
| 31 January 2009 | 72.9p  | 3.00p          | 86.15p           |
+--------------------------------------------------------------+

Chairman's Statement

Introduction
I am pleased to present the Company's annual report for the year
ended 31 January 2009.

Since my half-year report in September 2008, the overall environment
for small companies, both AIM-quoted and unquoted, has continued to
be challenging and is expected to remain so during 2009. Many of our
portfolio companies, notably in the consumer and leisure arena, have
already felt some impact from the credit crunch and economic
slowdown. Others, which have not yet seen an impact, remain cautious
about future prospects, given the level of uncertainty about the
direction of the economy. The harsh economic conditions are demanding
on smaller companies both in terms of management and financial
resources. Our focus will remain on supporting those companies that
have robust business models with strong management teams that can
manage through the present climate and capitalise on opportunities
which will arise. These businesses should create attractive
investment returns over the longer term.

Results Review
Over the year to 31 January 2009, the total return (being NAV plus
dividends paid) has fallen from 115.95p to 86.15p, a decline of
25.7%.  Although this decline is disappointing in absolute terms, it
reflects similar falls across the financial markets both domestically
and globally over the last 12 months or so.  By comparison, the FTSE
All-Share index fell 30.7% and the FTSE AIM All-Share index fell by
58.0%.  The portfolio has a broad sector spread, as detailed in the
Investment Manager's Review, but its larger exposures by valuation
include consumer products (12.0%) and media & marketing (23.0%) which
have inevitably felt the brunt of the current downturn.  By way of
note, 11.7p of the fall in total return over the year is attributable
to the decline in value of the Fund's AIM portfolio.

As it stands, the Fund is invested in 17 unquoted and 17 AIM-quoted
VCT qualifying companies and is almost fully invested. It is not
therefore envisaged that many new investments will be completed in
the foreseeable future, although the Manager continues to look out
for opportunities that present exceptional value in the current
market. The existing portfolio will continue to be supported where
appropriate. By value, 60.9% of the Company's net assets are in
unquoted investments, 14.3% in AIM-quoted investments and 23.5% of
the Company's net assets are currently in cash or near cash.

During the year one new investment was made together with a number of
follow-on investments into existing portfolio companies.   The Fund
invested £257,900 in the management buy-out of Hydrobolt Limited.  A
further £371,000 was invested in Promotion Space as part of a £2.75
million funding round to support the acquisition of competitor,
BrandSpace Limited.  Further investments were also made into The
History Press, First Sports Group, Adrenalin Design, Lilestone
Holdings, The Grill Group and SweetCred, in each case to support
ongoing working capital requirements. A small further investment was
also made in T4 through the capitalisation of accrued interest.

It is particularly disappointing to report the loss of our investment
in The Grill Group, owner of the Smollensky's chain of restaurants.
This investment was made in 2007 and had been struggling as sales
levels began to decline with the onset of the economic downturn.
Considerable efforts were made to reduce the number of units managed
and to turn around performance.  The Manager also tried to find
buyers for the whole business, which looked achievable until the
severe downturn experienced in September 2008.  Given the weak
economic outlook for consumer spending in 2009, the Manager decided
that further investment could not be justified and a sale of the
business occurred.  The price of the sale provided no recovery for
any of the Octopus funds and Eclipse 2 realised a loss of £1,092,000,
of which £374,000 had previously been provided against.  As reported
in the half-year report earlier in the year, we had also provided
against our investment in Adrenalin Design and this investment has
now been written off in full.  The cost of this investment was
£550,000.  The business again had suffered from falling sales and,
with the expectation of continuing market weakness, it was not
considered prudent to invest further funds.  Experience of previous
recessionary periods shows that further financial support for
existing investments has to be considered very carefully, and is
dependent on having a strong business model and exceptional
management team.  On a positive note, following the year end the Fund
received £280,000 as further proceeds following the sale in 2007 of
James Harvard International.  This payment was based on the
performance of the business following the acquisition by Hays Plc.

Overall, it is also worth noting that, whilst valuations across the
portfolio have been carefully evaluated, several investments have
made significant underlying progress during the period, including
Audio Visual Machines, CSL Dualcom, Promotion Space and Hydrobolt.

The Board's strategy is to maintain an appropriate level of liquidity
in the balance sheet to achieve four aims:

to support further investment in existing portfolio companies if
required;
to take advantage of new investment opportunities as they arise;
to assist liquidity in the shares through the buy back facility, and
to support a maintainable dividend flow

In the current credit and economic environment we have to be
conscious that the funding options for portfolio companies are more
restricted than usual. Whilst we aim to balance these strategic aims,
at the present time we are attaching greater weight to the need for
liquidity within the Fund to support further investment, where
appropriate. Your Board has proposed a final capital dividend of 2p
per share, in respect of the year ended 31 January 2009.  The
proposed final dividend will be paid on 25 June 2009 to shareholders
on the register on 29 May 2009, subject to shareholder approval at
the Company's AGM in June. Taking into account the 3p interim
dividend paid in October, this will take dividends for the year ended
31 January 2009 to 5p per share.

Change of Name
During November 2008, shareholders voted in favour of changing the
name of the Company from Eclipse VCT 2 plc to Octopus Eclipse VCT 2
plc. With a wide range of Octopus funds now under management, it was
considered appropriate that the name of the Company should reflect
the name of Octopus so as to avoid confusion in the market place.

Shareholders should be reminded, however, that current Directors will
remain in office and their independence from Octopus is in no way
affected.

VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice on the ongoing compliance with Her Majesty's Revenue &
Customs ("HMRC") rules and regulations concerning VCTs.  The Board
has been advised that Eclipse 2 is in compliance with the conditions
laid down by HMRC for maintaining approval as a VCT.

A key requirement is for 70% of the portfolio to be invested in
qualifying investments by the end of the third accounting period
following that in which new share capital was subscribed.  As at 31
January 2009, over 83% of the portfolio (as measured by HMRC rules)
was invested in VCT qualifying investments, in line with our
expectations at this stage of the Fund's life.  There is an ongoing
requirement to maintain the level of qualifying investments above the
70% threshold which will be supported by the continuing deal flow
from the Investment Manager.

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.  This
follows a European Court of Justice Judgement against the Government
in a case relating to VAT payable by investment trusts.  It is now
fully expected that a VAT repayment will be obtained for VAT paid on
management fees for at least the last three years.  However, the
extent and timing of the 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 £170,000.

Outlook
The general outlook remains uncertain. Significant steps have been
taken to stabilise the world financial system but it is difficult to
predict how long this will take to feed through to consumer and
business confidence. Whilst smaller companies can suffer from limited
options in these circumstances, tighter management structures mean
that they have the ability to respond quickly to changing economic
conditions. Portfolio companies have also benefited from the fact
that the Fund is fully invested, which has allowed the Manager to
focus its resource on helping them through this difficult period.
These companies were originally selected for their growth potential,
either through new products or increased market share. The current
economic conditions make this harder to achieve in the short-term and
the challenge is to ensure that they remain well positioned to
exploit the longer-term opportunities.

Marc Vlessing
Chairman
18 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 in regular
contact with our investors. We are working hard to manage your money
in the current climate.

Octopus Investments Limited was established in 2000 and has a strong
commitment to both smaller companies and to VCTs.  Currently it
manages 15 VCTs, including this Company, and manages over £200m in
the VCT sector.  Octopus has over 100 employees and has been voted as
"Best VCT Provider of the Year" by the financial adviser community
for the last three years.

Investment Policy
The focus of Eclipse 2 is on generating long term capital growth and
attractive tax free dividends. In order to achieve this goal, the
Fund will focus on providing development and expansion funding to
unquoted companies with a typical investment size of £0.25 million to
£1 million. Additionally, up to 20% of the Fund may be invested in
AIM-quoted companies.

Investment Strategy
In response to events, we've shifted the portfolio weighting away
from consumer reliant businesses towards business services, as seen
in our most recent transactions such as Hydrobolt. We've also been
actively supporting successful portfolio companies through further
funding, in many cases making strategic acquisitions. We're
continuing to review selected opportunities and we'll invest funds to
support companies with strong prospects. To provide further
protection for investors, we also currently have approximately 23.5%
of the Fund invested in cash.

The investee companies are those that we believe have strong growth
potential but need some financial support to realise it. Each company
that we target is expected to have unique selling points and be
capable of growing to a size that will make it attractive for
acquisition by a larger company or will enable it to float on the
stock market.

Portfolio Review
Since the beginning of the year the overall performance of the
portfolio has been affected by the combined impact of the financial
crisis and economic downturn.  In addition, the quoted portfolio has
been affected by the widely reported weakness in the stock market
which has also adversely impacted valuations.

Unquoted
The one new investment made during the year into Hydrobolt and the
further investment of £371,000 into Promotion Space, were reported in
the half-yearly report.  We are pleased with the way both companies
have progressed in the period.  A further investment of £131,000 was
made into The History Press during the year, to support the working
capital needs of the company and new title production.  Further
working capital investments were made in the second half of the year
into First Sports Group (£225,000), Lilestone Holdings (£158,000) and
SweetCred (£76,000) to aid them through the tough trading conditions
being experienced in the retail market presently.  SweetCred has been
particularly impacted by the lack of available credit finance to fund
imports, even where customers have placed orders.  A small further
investment was also made into both The Grill Group and Adrenalin
Design but regrettably the trading position of both companies
continued to decline and it was decided that further investments
should not be made.  As noted in the Chairman's Statement these
companies were sold at a price that resulted in a total loss of our
investments. Additional information on the activity in the investment
portfolio is provided on pages 8 to 10.

Given the current economic environment we are spending a considerable
amount of time helping portfolio companies to meet the challenges
currently faced. In the vast majority of cases, a member of the
investment team sits as a director on the board of the investee
company and is involved in strategic matters, and in particular,
ensuring management teams respond quickly to changing conditions. In
some instances this involves weekly or even more frequent meetings.
Whilst a number of companies are now missing their growth targets, we
believe it is important to act as a supportive investor and ensure
that these companies are well placed to take advantage of the upturn,
when it comes, and any opportunities that may arise in the meantime.

Valuation write downs have been made on a number of unquoted
investments where performance is significantly behind plan.  The
approach taken to portfolio valuations is in compliance with
International Private Equity and Venture Capital valuation guidelines
and current financial reporting standards. We have been cautious in
the current environment about writing up investment values, even
where demonstrable progress has been made by the investee company.
These include CSL Dualcom (where the valuation has been uplifted),
Audio Visual Machines, Hydrobolt and Promotion Space, which have each
made significant progress. Octopus actively works with all investee
companies to ensure value will be added in due course.

Quoted
Over the last twelve months, the well publicised banking crisis and
the ensuing deteriorating economic outlook has had a severe impact on
the AIM market.  As is usual during periods of uncertainty, investors
shun small companies in favour of larger and more liquid
investments.  However, as you will be aware, these have fared little
better as the banking crisis has unfolded.

The AIM portfolio accounted for 14.3% of the investment portfolio by
valuation.  Price falls in smaller quoted companies have been severe,
and due to the illiquidity of some of the stocks, this has compounded
the problem resulting in a staggering fall of 58.4% in the FTSE AIM
All-Share over the year to 31 January 2009.  Price falls largely
reflect market de-ratings rather than stock specific issues.  Whilst
the economic outlook remains a concern, all bar one of the
investments in the Fund's AIM portfolio are established, profitable
companies which should not need to rely on access to further
funding.  Furthermore, many of the AIM investments are engaged in
business activities that have demonstrated robust pricing power and
will not be reliant on the ebb and flow of the wider economy.  For
example, Healthcare Locums plc, Pressure Technologies plc and Cohort
plc all announced profits in excess of market expectations during the
last twelve months and continue to trade well.  With this in mind, we
remain confident about the longer term prospects of the underlying
AIM holdings within the portfolio.

Review of Investments
At 31 January 2009, the Eclipse 2 portfolio comprised investments in
17 unquoted and 17 AIM-quoted companies.  The unquoted investments
are in ordinary shares with full voting rights as well as loan note
securities.  The AIM-quoted investments are in ordinary shares also
with full voting rights.

Ten Largest Holdings
Listed below are the ten largest investments by value as at 31
January 2009:

The History Press Limited
The History Press is the UK market leading publisher of distinctive
'local interest' history books.  It also has operations in France,
Germany, Ireland, Belgium and the U.S.A.  In December 2007 Eclipse 2
invested £1 million, as part of a £4 million investment by Octopus
funds, into a new vehicle, The History Press Limited, set up to
acquire NPI through a restructuring process. Octopus has spent a
considerable amount of time working with the company, and this has
included the recruitment of a new management team.  2008 has seen a
major restructuring within the UK business in particular, taking
considerable cost out of the business


Initial investment date:    December 2007
Cost:                       £1,158,000
Valuation:                  £1,158,000
Valuation basis:            Fair Value (being cost)
Equity held:                9.7%
Last audited accounts:      N/A


Luther Pendragon Limited
Luther Pendragon is a public relations agency focusing on issues and
crisis management. The company provides mission critical advice to a
wide range of public sector and blue chip private sector clients on
media relations, government relations and public affairs to help them
protect and enhance their reputation and business interests.  Luther
Pendragon also provides stand-alone services such as media training,
crisis simulation exercises and presentation skills training. Since
our original investment the company has repaid a significant
proportion of the acquisition debt. Sales growth was flat in 2008,
reflecting market conditions.  Combined with a substantial fall in
sector price earnings multiples, the valuation has fallen and the
investment is now held at cost.


Initial investment date:            November 2005
Cost:                               £1,000,000
Valuation:                          £1,000,000
Valuation basis:                    Fair Value (being cost)
Equity held:                        17.5%
Last audited accounts:              31 December 2007
Revenues                            £5.4 million
Profit before interest & tax:       £1.1 million
Net assets:                         £1.8 million


CSL DualCom Limited
CSL DualCom 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. CSL Dualcom has steadily grown its market
share of new connections and its profitability since the initial
investment. There has been an uplift in the carrying value of this
investment, in recognition of this progress.


Initial investment date:            June 2006
Cost:                               £589,000
Valuation:                          £940,000
Valuation basis:                    Fair Value (Earnings multiple)
Equity held:                        7.3%
Last audited accounts:              31 March 2008
Revenues:                           £5.9 million
Profit before interest & tax:       £0.2 million
Net assets:                         £0.36 million


Promotion Space Limited
Promotion Space works directly with major brands who wish to access
consumers in shopping centres. It also works with shopping centres to
generate revenue by organising promotional activities. Octopus
provided £1.5 million of funds to develop a Retail Merchandising Unit
business within major shopping centres and also to follow an
acquisition strategy.  Octopus provided a further £600,000 in
November 2007 to facilitate the first acquisition, Fitting Exposure,
the UK market leader in changing room advertising media.  In April
2008 a further investment of £371,000 was made as part of a £2.75m
fund raising to support the acquisition of major competitor
Brandspace. Together with organic growth, this business has more than
trebled sales since our first investment and has achieved a
significant market position.


Initial Investment date:          April 2007
Cost:                             £655,000 (ordinary shares and loan
                                  notes)
Valuation:                        £655,000
Valuation basis:                  Fair Value (Earnings multiple)
Equity held:                      4.7%
Last audited accounts:            31 March 2008
Revenues:                         £2.1 million
Loss before interest & tax:       £0.72 million
Net assets:                       £4.3 million


First Sports Group Limited
First Sports Group is the largest sports retail service provider to
the UK Private Health and Fitness Club market. The Company
merchandises premier brands such as Nike, Adidas, O'Neill, Zoggs,
Wilson, Prince and PureLime. Sportswear and equipment is sold through
lockable, self-service display units called Cubes and through more
than 20 pro-shops. First has over 200 outlets nationwide and can be
found in most top health clubs such as Virgin Active, David Lloyd and
Esporta.  The business has progressed during the year with the
opening of a number of new Cubes, notably across the Nuffield Health
Fitness & Wellbeing sports clubs (formerly Canons), who are a new
client.


Initial Investment date:          June 2006
Cost:                             £1,210,000 (ordinary shares and
                                  loan notes)
Valuation:                        £625,000
Valuation basis:                  Fair Value
Equity held:                      18.5%
Last audited accounts:            31 March 2008
Revenues:                         £5.4 million
Loss before interest & tax:       £1.1 million
Net liabilities:                  £1.1 million


The Kendal Group Limited
The Kendal Group is a branded consumer goods company, owning the
Zoggs brand of swimwear, swim equipment and active wear.  The company
designs the product, has it manufactured in Europe and the Far East
and sells to retail outlets, on-line, leisure centres and through
distribution agreements overseas.  The company has offices in the UK
and Australia.  In the UK most sales are made through leisure centres
and the drive for 2007 and 2008 was to increase sales through retail
outlets, and distribution agreements were set up with Tesco, Early
Learning Centre, Toys R Us and others.   During 2008 the company sold
the brand Pure Lime, which had not performed well, back to the Danish
founder.  The Zoggs brand has continued to grow both in the UK and
internationally and we are pleased with performance to date.


Initial investment date:          November 2005
Cost:                             £576,000
Valuation:                        £576,000
Valuation basis:                  Fair Value (being cost)
Equity held:                      5.7%
Last audited accounts:            31 December 2007
Revenues:                         £13.7 million
Loss before interest & tax:       £0.6 million
Net assets:                       £0.7 million


Sweet Cred Limited
Sweet Cred sells a wide range of products which combine sweets with
toys that are themed around the five cartoon characters in the Sweet
Cred gang. The range is sold through distribution partners in Europe,
the US and the Middle East.  In the UK, distribution is through the
main wholesalers and the major multiple retailers, motorway service
stations and leading toyshop chains.  The business has made progress
since our original investment, but trading has suffered recently from
the weakness of sterling and the lack of sufficient working capital
facilities during the credit crunch. In December 2008, the Eclipse
Funds invested a further £550,000, including £76,000 from Eclipse 2,
to help fund the working capital requirement. A provision has been
made against the investment to recognise these current difficulties.


Initial investment date:          March 2007
Cost:                             £764,000
Valuation:                        £343,000
Valuation basis:                  Fair Value
Equity held:                      3.1%
Last audited accounts:            31 December 2007
Revenues:                         £2.4 million
Loss before interest & tax:       £0.85 million
Net liabilities:                  £1.93 million



Audio Visual Machines Limited
AVM carries out the full design, installation and support of complex
Video Conferencing and Audio Visual systems and is the UK's leading
VC & AV maintenance and support provider.  The company employs over
250 people and has sales offices throughout the UK.  Since our
initial investment in 2006, AVM has made three acquisitions,
including the recent acquisition of Matrix Display Systems Ltd, which
principally operates in the education sector. With this acquisition,
the combined AVM Group is now the largest audio visual systems
integrator in the UK, with proforma turnover of c£40m.


Initial Investment date:          September 2006
Cost:                             £455,000 (ordinary shares and loan
                                  notes)
Valuation:                        £455,000
Valuation basis:                  Fair Value (being cost)
Equity held:                      7.2%
Last audited accounts:            30 June 2008
Revenues:                         £17.2 million
Loss before interest & tax:       £0.04 million
Net assets:                       £0.38 million


Tristar Worldwide Limited
Tristar is one of the world's leading chauffeur companies, carrying
over 400,000 passengers for 400 clients in 2007 alone. The business
operates in 44 countries with its own vehicles in the UK and a
rapidly expanding service in the US. It has a blue chip customer base
which includes Virgin, Emirates, BP, Goldman Sachs and Bank of
America-Merrill Lynch.  The market for chauffeur services has been
heavily affected in the current economic environment.  Tristar has
achieved a robust performance in the circumstances where many of its
competitors are suffering worse.  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:                             £446,000 (ordinary shares and loan
                                  notes)
Valuation:                        £446,000
Valuation basis:                  Fair Value (being cost)
Equity held:                      4.5%
Last audited accounts:            31 May 2008
Revenues:                         £40.4 million
Profit before interest & tax:     £1.8 million

Net assets:                       £5.0 million



Perfect Pizza Limited
Perfect Pizza is a home delivery pizza franchisor. At the time of
investment the business had 114 franchisee stores across the UK.
Revenue is generated from selling food and drink to the franchisees
and from a royalty commission based on the overall level of sales.
The management team is attempting a turnaround in the performance of
the business, as under the previous owners (Papa Johns), it had
experienced declining sales and profitability over the previous three
years.  The business has not fulfilled its potential over the last
twelve months and we have recently made some changes to the
management team, which should result in an improvement in trading.


Initial investment date:    March 2006
Cost:                       £800,000
Valuation:                  £400,000
Valuation basis:            Fair Value
Equity held:                10.5%
Last audited accounts:      28 February 2007
Revenues:                   £8.2 million
Loss before interest & tax: £0.36 million
Net assets:                 £0.30 million



Outlook
Experience of previous recessions shows that further financial
support for existing investments has to be considered very carefully,
and is dependent on having a strong business model and exceptional
management team.
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 is able to do, 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 Limited

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 year.  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 the 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, and 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

Marc Vlessing
Chairman
18 May 2009



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

Loss  on disposal of fixed asset
investments                             10    -       (1,644) (1,644)
Gain on disposal of current asset
investments                             12    -       11      11

Loss on valuation of fixed asset
investments                             10    -       (3,868) (3,868)
Loss on valuation of current asset
investments                             12    -       (139)   (139)

Investment income                       2     537     -       537

Investment management fees              3     (119)   (359)   (478)
VAT management fee rebate               3     42      128     170

Other expenses                          4     (283)   -       (283)

Return/(loss) on ordinary activities
before tax                                    177     (5,871) (5,694)

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

Return/(loss) on ordinary activities
after tax                                     177     (5,871) (5,694)
Earnings/(loss) per share - basic and
diluted                                 8     0.9p    (31.0)p (30.1)p


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 to 31 January 2008
                                              Revenue Capital Total
                                        Notes £'000   £'000   £'000

Gain on disposal of fixed asset
investments                             10    -       1,334   1,334
Gain on disposal of current asset
investments                             12    -       5       5

Loss on valuation of fixed asset
investments                             10    -       (1,388) (1,388)
Gain on valuation of current asset
investments                             12    -       12      12

Investment income                       2     630     -       630

Investment management fees              3     (127)   (379)   (506)

Other expenses                          4     (335)   -       (335)

Return/(loss) on ordinary activities
before tax                                    168     (416)   (248)

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

Return/(loss) on ordinary activities
after tax                                     168     (416)   (248)
Earnings/(loss) per share - basic and
diluted                                 8     0.9p    (2.2)p  (1.3p)


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 to         Year to
                                      31 January 2009 31 January 2008
                                      £'000           £'000
Loss on ordinary activities before    (5,694)         (248)
taxation
Loss on valuation of investments      4,007           1,376
Realisation of prior years' net       273             2,824
unrealised gains on investment
Historical cost (loss)/return on      (1,414)         3,952
ordinary activities before
 taxation
Historical cost (loss)/return on      (1,414)         3,952
ordinary 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  20,928          21,537
Loss on ordinary activities after tax (5,694)         (248)
Net proceeds of share issue           487             417
Cancellation of own shares            (744)           (35)
Dividends paid                        (1,533)         (743)
Shareholders' funds at end of year    13,444          20,928



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

Fixed asset investments       10             10,117           14,226
Current assets:
Debtors                       11    187              875
Investments                   12    3,156            5,924
Cash at bank                        130              500
                                             3,473            7,299
Creditors: amounts falling
due within one year           13             (146)            (597)
Net current assets                           3,327            6,702
Net assets                                   13,444           20,928

Called up equity share
capital                       14    1,844            1,890
Share premium                 15    808              381
Special distributable reserve 15    13,112           15,773
Capital redemption reserve    15    92               5
Capital reserve - realised    15    1,436            3,215
Capital reserve - unrealised  15    (4,039)          (444)
Revenue reserve               15    191              108
Total shareholders' funds                    13,444           20,928
Net asset value per share     9              72.9p            110.7p



The statements were approved by the Directors and authorised for
issue on 18 May 2009 and are signed on their behalf by:

Marc Vlessing
Chairman
The accompanying notes are an integral part of the financial
statements.



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

Net cash inflow/(outflow) from
operating activities                        180          (638)

Financial investment:
Purchase of fixed asset investments   10    (1,411)      (7,667)
Sale of fixed asset investments             8            8,891
                                            (1,403)      1,224
Management of liquid funds:
Purchase of current asset investments 12    (3,136)      (16,559)
Sale of current asset investments     12    5,776        15,437
                                            2,640        (1,122)

Dividends                             7     (1,533)      (743)

Financing
Issue of own shares                         490          437
Received for shares to be issued                         487
Share issue expenses                        -            (22)
Purchase of own shares                      (744)        (35)
                                            (254)        867

Decrease in cash resources                  (370)        (412)



Reconciliation of Loss  before Taxation to Cash Flow from Operating
Activities
                                          Year to 31    Year to 31
                                          January 2009  January 2008
                                          £'000         £'000
Loss on ordinary activities before tax    (5,694)       (248)
Loss on valuation of  fixed asset
investments                               3,868         1,388
Realised loss/(gain) on fixed asset
investments                               1,644         (1,334)
Gain on disposal of current asset
investments                               (11)          (5)
Loss/(gain) on valuation of current
asset investment                          139           (12)
Decrease in debtors                       688           517
(Decrease)/increase in creditors          (454)         90
Inflow/(outflow) from operating
activities                                180           (638)



Reconciliation of Net Cash Flow to Movement in Net Funds
                                Year to 31 January Year to 31 January
                                2009               2008
                          Notes £'000              £'000
Decrease in cash
resources                       (370)              (412)
Movement in cash          12
equivalent securities           (2,768)            1,139
Opening net cash
resources                       6,424              5,697
Net funds at 31 January
2009                            3,286              6,424


Net funds at 31 January comprised:

                          As at 31 January 2009 As at 31 January 2008
                          £'000                 £'000
Cash at bank              130                   500
Bonds                     -                     1,263
Money market funds        3,156                 4,661
Net funds at 31 January
2009                      3,286                 6,424


Notes to the Financial Statements

1. Principal accounting policies

Basis of accounting
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 and 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 investments quoted on a recognised stock exchange,
fair value is established by reference to the closing bid price on
the relevant date or the last traded price, depending upon convention
of the exchange on which the investment is quoted.  This is
consistent with the International Private Equity and Venture Capital
(IPEVC) guidelines.

In the case of unquoted investments, fair value is established by
using measures of value such as the price of recent transactions,
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
(IPEVC) 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 money market funds and bonds 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 on the ex-dividend
date.  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 is 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 investments in money market managed funds.

Financing Strategy and Capital Structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures'
relating to financial instruments.

We define capital as shareholders' funds and our financial strategy
in the medium term is to manage a level of cash that balances the
risks of the business with optimising the return on equity.  The
Company currently has no borrowings nor does it anticipate that it
will drawdown any borrowing facilities in the future to fund the
acquisition of investments.

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 directly 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                         47              325
Dividends income                      269             16
Loan note interest                    221             289
                                      537             630


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 105     317     422   108     325     433
Irrecoverable VAT thereon 14      42      56    19      54      73
VAT rebate                (42)    (128)   (170) -       -       -
                          77      231     308   127     379     506


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 &
administration services to the Company under a management agreement
which runs for a period of five years with effect from 18 March 2005
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 a request has been submitted to HMRC for a
rebate for previous years.

4. Other expenses

                                      31 January 2009 31 January 2008
                                      £'000           £'000
Directors' remuneration               53              50
Fees payable to the Company's auditor
for the audit of the financial
statements                            17              14
Fees payable to the Company's auditor
for other services - tax compliance   11              2
Accounting and administration
services                              74              76
Other expenses                        128             193
                                      283             335


The total expense ratio for the Company for the year to 31 January
2009 was 3.1 per cent (2008: 3.5 per cent).  Total running costs are
capped at 3.5 per cent.

5. Directors' remuneration

                         31 January 2009 31 January 2008
                         £'000           £'000
Directors' emoluments
Mark Vlessing (Chairman) 21              20
David Lambert            16              15
Matt Cooper              16              15
                         53              50

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 three (2008: three).

The Company's policy is for the Directors to be remunerated in the
form of fees, payable quarterly in arrears. The fees are not
specifically related to the Directors' performance, either
individually or collectively. There are no service contracts,
long-term incentive schemes, share option schemes or pension schemes
in place.

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 20.8% (2008: 19%).
The differences are explained below.


Current tax reconciliation:           31 January 2009 31 January 2008
                                      £'000           £'000
Loss on ordinary activities before                    (248)
tax                                   (5,694)
Current tax at 20.8% (2008: 19%)      (1,184)         47
Income not liable to tax              (56)            -
Excess management charges             1,195           (47)
Expenses not deductible for tax                       -
purposes                              67
Total current tax charge              -               --


The Company has excess management charges of approximately £460,000
(2008: £nil) to carry forward to offset against future taxable
profits.

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        956             186
Current year's interim dividend       577             557
                                      1,533           743



                                      31 January 2009 31 January 2008
                                      £'000           £'000
Proposed and paid in respect of the
year
Interim dividend paid - 3p per share
(2008: 3p per share)                  577             557
Final dividend 2p per share (2008: 5p
per share)                            369             956
                                      946             1,513


8. (Loss)/Earnings per share
The earnings per share is based on (loss)/return after tax of
£(5,694,000) (2008: £248,000 loss) and on 18,932,260 (2008:
18,657,430) shares, being the weighted average number of shares in
issue during the year.

There are no potentially dilutive capital instruments in issue and,
therefore, no diluted return per share figures are relevant. The
basic and diluted earnings per share are therefore identical.

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 £13,444,000 (31 January 2008: £20,928,000)
divided by the 18,442,669 (31 January 2008: 18,902,301) ordinary
shares in issue at that date.

10. Fixed asset investments

                                  Unquoted    AIM-quoted  Total
                                  investments investments investments

                                  £'000       £'000       £'000
Valuation and net book amount:
Book cost as at 31January 2008
  -Ordinary Shares                2,317       4,083       6,400
  -Loan Notes/other securities    8,270       -           8,270
Revaluation to 31 January 2008
  -Ordinary Shares                (28)        107         79
  -Loan Notes/other securities    (523)       -           (523)
Valuation at 1 February 2008      10,036      4,190       14,226
Movement in the year:
Purchases at cost                 1,404       7           1,411
Disposal proceeds                 (8)         -           (8)
Profit/ (loss) on realisation of
investments - current year        (1,530)     (114)       (1,644)
Revaluation in year               (1,714)     (2,155)     (3,694)
Valuation at 31 January 2009      8,189       1,928       10,117

Book cost at 31 January 2009:
  -Ordinary Shares                2,289       3,840       6,129
  -Loan Notes/other securities    8,027       -           8,027

Revaluation to 31 January 2009:
  -Ordinary Shares                (692)       (1,912)     (2,604)
  -Loan Notes/other securities    (1,435)     -           (1,435)

Valuation at 31 January 2009      8,189       1,928       10,117

 Further details of the fixed asset investments held by the Company
are shown within the Investment Manager's Review on pages 7 to 14.

11. Debtors

                               31 January 2009 31 January 2008
                               £'000           £'000
Prepayments and accrued income 187             875


12. Current asset investments
Current asset investments at 31 January 2009 comprised money market
funds (31 January 2008:  Money market funds and bonds)

                                                    £'000   £'000
Cost at 31 January 2008:
Bonds                                               1,279
Money market funds                                  4,650
                                                            5,929
Revaluation to 31 January 2008:
Bonds                                               (16)
Money market funds                                  11
                                                            (5)
Valuation as at 1 February 2008                             5,924
Movement in the year:
Purchases at cost:  Bonds                           -
                                 Money market funds 3,136
                                                            3,136
Disposal proceeds:
Bonds                                               (1,272)
Money market funds                                  (4,504)
                                                            (5,776)
Profit in year on realisation of investments:
Bonds                                               10
Money market funds                                  1
                                                            11
Revaluation in year:
Bonds                                               -
Money market funds                                  (139)
                                                            (139)
Valuation as at 31 January 2009                             3,156
Cost at 31 January 2009:
Money market funds                                  3,295
                                                            3,295
Revaluation to 31 January 2009:
Money market funds                                  (139)
                                                            (139)
Valuation as at 31 January 2009                             3,156


All investments are designated as fair value through profit and 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        67              54
Other creditors 79              543
                146             597


14. Share capital

                                      31 January 2009 31 January 2008
                                      £'000           £'000
Authorised:
50,000,000 ordinary shares of 10p     5,000           5,000
Allotted and fully paid up
18,442,669 ordinary shares of 10p     1,844           1,890
(2008: 18,902,301)


During the year, the Company issued 407,684 shares at a price of
120.9p per share (2008: 353,647 shares issued at a price of 123.9p).
Share issue costs totalling £19,000 (2008: £22,000) have been offset
against the share premium account.

The Company repurchased the following shares for cancellation:

30 May 2008: 276,571 shares at a price of 100p per share
17 June 2008: 30,650 shares at a price of 99p per share
31 July 2008: 95,938 shares at a price of 85p per share
30 September 2008: 151,750 shares at a price of 83p per share
1 October 2008: 39,175 shares at a price of 80p per share
17 October 2008: 128,855 shares at a price of 76p per share
14 November 2008: 6,500 shares at a price of 73p per share
18 November 2008: 20,000 shares at a price of 73p per share
28 November 2008: 10,000 shares at a price of 73p per share
3 December 2008: 30,150 shares at a price of 73p per share
9 January 2009: 31,902 shares at a price of 71.3p per share
30 January 2009: 45,825 shares at a price of 66.7p per share

The total nominal value of the shares repurchased was £86,732
representing 4.5% of the issued share capital.

15. Reserves

                                                                                       Profit
                      Special       Capital    Capital  Capital                        and
              Share   distributable redemption reserve  reserve    Revaluation Revenue loss
              premium reserve       reserve    realised unrealised reserve     reserve account
              £'000   £'000         £'000      £'000    £'000      £'000       £'000   £'000
As at 31
January 2008  381     15,773        5          -        -          (449)       -       3,328
Adjustment to
reflect
SORP          -       -             -          3,215    (444)      (449)       108     (3,328)
Restated at 1
February
2008          381     15,773        5          3,215    (444)      -           108     -
Cancellation
of own
shares        -       (744)         87         -        -          -           -       -
Issue of              -             -          -        -          -           -       -
equity        427
Profit/(loss)
on ordinary   -       -             -          (2,003)  (3,868)    -           177     -
activities
after tax
Prior period
gains/losses  -       -             -          (273)    273        -           -       -
Transfers     -       (1,917)       -          1,936    -          -           -       -
Dividends
paid          -       -             -          (1,439)  -          -           (94)    -
Balance as at
31 January
2009          808     13,112        92         1,417    (4,039)    -           191     -


16. Financial instruments and risk management

The Company's financial instruments comprise equity and fixed
interest investments, 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 and AIM-quoted securities whilst
holding a proportion of its assets in cash or near-cash investments
in order to provide a reserve of liquidity.

Fixed asset investments (see note 10 and 12) are valued at fair
value. For quoted investments this is either bid price or the latest
traded price, depending on the convention of the exchange on which
the investment is quoted. Unquoted investments are carried at fair
value as determined by the Directors in accordance with current
venture capital industry guidelines. The fair value of all other
financial assets and liabilities is represented by their carrying
value in the balance sheet.

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 20. 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 29 to 33, having regard to the possible effects of
adverse price movements, with the objective of maximising overall
returns to shareholders. Investments in unquoted companies, by their
nature, usually involve a higher degree of risk than investments in
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 pages 8 and 9.

14.3% (31 January 2008: 20.0%) by value of the Company's net assets
comprises equity securities quoted on AIM. A 10% increase in the bid
price of these securities as at 31 January 2009 would have increased
net assets and the total return for the year by £193,000 (31 January
2008 £209,000); a corresponding fall would have reduced net assets
and the total return for the year by the same amount.

60.9% (31 January 2008:48.0%) 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 £836,000 (31 January
2008: £502,000); 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, of which
some are at fixed rates and some variable.  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:


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

Listed
fixed-interest
investments    -         -        -        633       4.9      0.7
Fixed-rate
investments in
unquoted
companies      3,291     6.8      3.5      7,747     7.7      2.9
               3,291                       8,380


Due to the relatively short period to maturity of the fixed rate
investments held within the portfolio, it is considered than an
increase or decrease of 100 basis points in interest rates as at the
reporting date would not have had a significant effect on the
Company's net assets or total return for the year.

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

Money market securities 3,156           5,036
Cash on deposit         130             30
                        3,286           5,066


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 £32,860 (31 January 2008: £50,660)

Credit risk
Credit risk is the risk that 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 fixed interest
instruments                           3,291           8,380
Investments in floating rate
instruments                           3,156           5,036
Investments in other instruments      3,301           -
Cash on deposit                       130             30
Balances due from sale of investments -               847
Accrued dividends and interest
receivable                            170             14
                                      10,048          14,307


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 companies and 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 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 HSBC deteriorate significantly the Investment
Manager will move the cash holdings to another bank.

No individual investment exceeded 17.4% by value of the Company's net
assets at 31 January 2009 (31 January 2008: 4.9%).

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. They also include investments in
AIM-quoted companies, which by their nature; involve a higher degree
of risk than investments on the main market.  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.
At 31 January 2009 these investments were valued at £3,286,000 (31
January 2008 £6,424,000).

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

26 February 2009 - Eclipse 2 invested a further £35,000 into The
History Press Limited, in the form of loan notes.
3 April 2009 - 69,928 Ordinary Shares of 10 pence each were issued
and allotted to 7 subscribers at a price of 78.0p for cash.

18. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as
at 31 January 2009 (2007: £nil).

19. Related party transactions
Matt Cooper, a non-executive Director of Eclipse 2, is a Director of
Octopus.  Eclipse 2 has employed Octopus throughout the year as
Investment Manager.  The Company has paid Octopus £478,441 in the
year 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 also 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.  During the year £74,476 was paid to
Octopus and there is £nil outstanding at the balance sheet date, for
the accounting and administrative services.

In addition, Octopus is entitled to an annual performance related
incentive fee in the event that performance criteria in relation to
the increase in net assets, after adding back distributions, are
exceeded.  Commencing no earlier than the close of the 2007/08
financial year and in the event that distributions per share have
reached 40p in aggregate, subsequently increased to 45p following
approval of the Coinvestment Agreement approved at the EGM in 2006,
and the performance value at that date exceeds 130p per share, then
Octopus will be entitled to an incentive fee equal to 20% of the
excess of such performance value over 100p per share. Due to the
inherent uncertainties surrounding the timing of and amount of any
one payment, the fair value of any such fee is deemed to be nil at 31
January 2009 (2008: £nil).

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