TIDMOPV
Octopus Protected VCT 2 plc
Final Results
22 May 2009
Octopus Protected VCT 2 plc (the "Company"), managed by Octopus
Investments Limited, today announces the final results for the year
ended 31 January 2009.
These results were approved by the Board of Directors on 22 May 2009.
You may view the Annual Report in full at www.octopusinvestments.com
by navigating to VCT Meetings & Reports under the 'Services' section.
About Octopus Protected VCT 2 plc
Octopus Protected VCT 2 plc ("Protected 2," "Company" or "Fund") is a
venture capital trust ("VCT") and is managed by Octopus Investments
Limited ("Octopus" or "Manager").
Protected 2 was incorporated on 9 June 2008 with the first allotment
of equity occurring on 6 October 2008. Protected 2 opened for
subscription (the "Offer") on 17 July 2008 and, pursuant to the
supplementary prospectus dated 3 April 2009, was extended to close no
later than 30 June 2009 or such earlier date on which the Offer is
fully subscribed. The Company will invest primarily in unquoted UK
smaller companies and aims to deliver absolute returns on its
investments.
Financial Summary
As at 31 January 2009
GBP000
Net assets (GBP'000s) 2,087
Net loss after tax (GBP'000s) (84)
Net asset value per share 90.8p
Chairman's Statement
Introduction
I am pleased to present the first Annual Report of Octopus Protected
VCT 2 plc for the period ended 31 January 2009.
In the period to 31 January 2009, the Company had raised gross
proceeds of GBP2.3 million and a further GBP7.9 million has been raised
between 31 January 2009 and the signing of this report. The Offer
for new subscriptions for shares will close on 30 June 2009.
Investment Strategy
The Fund is being invested on the basis of taking lower risk than a
typical VCT. Typically the Fund will 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 will be predominately unquoted the Fund will receive a
return from an equity holding when a company is sold or restructured.
The Manager of the Fund aims to reduce risk by investing in well
managed and profitable businesses with strong recurring cash-flow.
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.
Performance
As at 31 January 2009 the Company's net asset value per share ("NAV")
has declined from the initial NAV of 94.5p to 90.8p at the period
end. This has been largely due to fixed costs being high relative to
the size of the Fund, and low interest rates providing insufficient
income on cash to cover the Company's expenses since its formation.
As the Fund has continued to be subscribed, these fixed costs are
spread over a greater number of assets and thus the NAV will rise
back towards the initial offer NAV. In time, as qualifying
investments are made, income should flow from the investment
portfolio allowing for the expenses to be covered. Over the longer
term as the underlying portfolio of investments is created, the
Company's NAV will be linked increasingly to the value of the
investments in the portfolio companies.
Investment Portfolio
No investments had been made in the period under review. However,
since the period end the Fund has made six new investments.
GBP250,000 has been invested into CSL Dualcom Limited and GBP350,000
into Diagnos Limited. As noted in the Investment Manager's Review,
the Fund also invested a further GBP2.4 million into four companies set
up to seek acquisitions across a range of sectors, bringing the total
amount invested in VCT qualifying companies to GBP3.0 million as of the
date of signing this report.
The investments held are valued in accordance with the International
Private Equity and Venture Capital valuation guidelines and Financial
Reporting Standards and are therefore subject to regular valuation
reviews.
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 Manager
does not foresee any issues with reaching the required investment
hurdle of 70% before the third anniversary of the end of the
financial period in which investors subscribed to the Fund.
Outlook
The general outlook remains uncertain. Significant steps have been
taken to stabilise the world's 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 in these
circumstances, tighter management structures mean that they have the
ability to respond quickly to changing economic conditions. Looking
forward, our anticipated portfolio companies will also benefit from
the Manager who will be fully involved and committed to supporting
them though these tough times. These companies will be selected for
their relatively high level of financial security, stable trading
history and predictable revenues. The current economic conditions
make these criteria harder to achieve in the short-term and thus the
challenge is to ensure that they remain well positioned to exploit
the longer-term opportunities.
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. The imperative is
to find lower risk investments and take advantage of current market
conditions whenever possible.
Protected 2 invests alongside three other VCTs with the same
investment strategy under the management of Octopus. It is expected
that co-investment will allow Protected 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.
Murray Steele
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 in 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 GBP200m 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 investment approach of Protected 2 is to invest in a broad range
of unquoted UK smaller companies in order to generate income and
capital growth over the long-term. Investments will be made
selectively across a range of sectors in companies that have the
potential to grow and enhance their value. The portfolio will be
diversified by investing in a broad range of industry sectors and by
holding investments in companies at various stages of maturity in the
corporate development cycle, though it is not intended that
investments will be made in early stage unquoted companies which have
yet to achieve profitability and cash generation.
Investment Strategy
Our investment strategy centres on taking lower risk than a typical
VCT and provides development and expansion funding to unquoted
companies. These are companies we have identified that we believe
have great potential but need some financial support to realise it.
We will follow our strategy of investing in companies where there is
a relatively high level of financial security. Our selected companies
will be established and profitable, with a stable trading history,
and ideally have predictable revenues from financially sound
customers.
During the period to 31 January 2009, no investments were made. We
will be patient in finding the right opportunities for investment;
and for the time being, continue to hold your investment in cash or
near cash. In this environment there will be opportunities -
historically investment into small companies during a downturn brings
especially high returns in subsequent years. Prior to investment in
qualifying holdings, we will hold the Fund's cash in a number of low
risk, high liquidity cash funds. These will be Standard & Poor 'AAA'
rated funds, which is the highest credit rating available for such
products.
Recent Transactions
Since the end of the period under review, a number of investments
have been made. The Fund invested GBP250,000 in CSL Dualcom Limited and
GBP350,000 in Diagnos Limited. Furthermore, in April 2009, your VCT
invested a total of GBP2.4 million into four companies which are
actively seeking investments in the healthcare, environment, business
support and pub sectors.
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. CSL DualCom is a profitable business that
is growing sales in the current market. Our investment was made
alongside other VCTs managed by Octopus. We have taken the position
of the primary lender by replacing the company's original bank.
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.
Outlook
Experience of previous recessionary periods shows that financial
support for investments has to be considered very carefully and is
dependent on having a strong business model and an exceptional
management team. We will look to consider investments in sound
companies 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 Limited
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable laws and
regulations.
Company law requires the Directors to prepare financial statements
for each financial year which give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company. Under that law the Directors have elected to prepare
financial statements in accordance with United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice). In
preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them
consistently
* make judgments 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
* prepare the 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 adequate 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 2006. 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.
In so far as each of the Directors is aware:
* there is no relevant audit information of which the Company's
auditors are 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 auditors are aware of that information.
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 undertakings included in the consolidation
taken as a whole; and
* the management report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
On Behalf of the Board
Murray Steele
Chairman
22 May 2009
Income Statement
Period to 31 January 2009
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Investment management fees 2 (2) (7) (9)
Other expenses 3 (75) - (75)
Return on ordinary activities before
tax (77) (7) (84)
Taxation on return on ordinary
activities 5 - - -
Return on ordinary activities after
tax (77) (7) (84)
Loss per share - basic and diluted 6 (4.8)p (0.4)p (5.2)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 period as set out above.
Reconciliation of Movements in Shareholders' Funds
Period ended 31 January 2009
GBP'000
Shareholders' funds at incorporation -
Return on ordinary activities after tax (84)
Issue of equity (net of expenses) 2,171
Shareholders' funds at end of year 2,087
Balance Sheet
As at 31 January 2009
Notes GBP'000 GBP'000
Current assets:
Debtors 8 1
Investments 9 2,000
Cash at bank 240
2,241
Creditors: amounts falling due within one
year 10 (154)
Net current assets 2,087
Total assets less current liabilities 2,087
Called up equity share capital 11 230
Share premium 12 1,941
Capital reserve - realised 12 (7)
Revenue reserve 12 (77)
Total shareholders' funds 2,087
Net asset value per share 7 90.8p
The statements were approved by the Directors and authorised for
issue on 22 May 2009 and are signed on their behalf by:
Murray Steele
Chairman
The accompanying notes are an integral part of the financial
statements.
Cash Flow Statement
Period to 31 January
2009
Notes GBP'000
Net cash inflow from operating
activities 69
Management of liquid resources
Purchase of current asset investments 11 (2,000)
Financing :
Issue of shares 2,249
Share issue expenses (78)
Increase in cash 240
Reconciliation of Net Cash Flow to Movement in Net Funds
Period to 31 January 2009
GBP'000
Increase in cash at bank 240
Movement in cash equivalent securities 2,000
Opening net funds -
Net funds at 31 January 2,240
Net Funds at 31 January comprised:
Period to 31 January 2009
GBP'000
Cash at bank 240
Money market funds 2,000
Net funds at 31 January 2,240
Reconciliation of Loss before Taxation to Cash Flow from Operating
Activities
Period to 31 January 2009
GBP'000
Loss on ordinary activities before tax (84)
Increase in debtors (1)
Increase in creditors 154
Inflow from operating activities 69
Notes to the Financial Statements
1. Principal accounting policies
The financial statements have been prepared under the historical cost
convention, 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).
Current asset investments
Current asset investments comprise money market funds. 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.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of
the sale of the investment.
Income
Investment income includes interest earned on bank balances and money
market securities and includes income tax withheld at source.
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. Investment management fees
31 January 2009
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Investment management fee 2 7 9
2 7 9
As mentioned in the principal accounting policies, for the purposes
of the revenue and capital columns in the Income Statement, the
management fee has been allocated 25 per cent to revenue and 75 per
cent 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 five years with effect from 16 July 2008 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 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 was given.
The basis upon which the management fee is calculated is disclosed
within note 16 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.
3. Other expenses
31 January 2009
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Accounting and administration services 2 - 2
Directors' remuneration 30 - 30
Fees payable to the Company's auditor for the
audit of the financial statements 6 - 6
Fees payable to the Company's auditor for other
services - tax compliance 1 - 1
Other expenses 36 - 36
75 - 75
Total annual running costs are capped at 3.2% of net assets. For the
period to 31 January 2009 the running costs were 2.1% of net assets.
4. Directors' remuneration
31 January 2009
GBP'000
Directors' emoluments
Murray Steele 11
Chris Powles 9
Chris Hulatt (paid to Octopus Investment) 10
30
None of the Directors received any other remuneration from the
Company during the period however they did receive a small number of
additional shares upon application, resulting from a discount of the
Offer charges. The Company has no employees other than non-executive
Directors. The average number of non-executive Directors in the
period was three.
5. Tax on ordinary activities
The corporation tax charge for the period was GBPnil.
The current tax charge for the period differs from the standard rate
of corporation tax in the UK of 28.0%. The differences are explained
below.
Current tax reconciliation: 31 January 2009
GBP'000
Loss on ordinary activities before tax (84)
Current tax at 28.0% (24)
Unrelieved tax losses 24
Total current tax charge -
The Company has excess management charges of GBP50,000 available 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.
6. Loss per share
The loss per share is based on loss after tax of GBP(84,000) and on
1,609,161 shares, being the weighted average number of shares in
issue during the period.
There are no potentially dilutive capital instruments in issue and
therefore no diluted returns per share figures are relevant. The
basic and diluted earnings per share are therefore identical.
7. Net asset value per share
The calculation of net asset value per share as at 31 January 2009 is
based on net assets of GBP2,087,000 divided by 2,297,666 ordinary
shares in issue at that date.
8. Debtors
31 January 2009
GBP'000
Prepayments and accrued income 1
9. Current asset investments
Current asset investments at 31 January 2009 comprised money market
funds.
31 January 2009
GBP'000
Movement in the period:
Purchases at cost 2,000
Valuation as at 31 January 2009 2,000
Book cost at 31 January 2009:
- Money market funds 2,000
Valuation as at 31 January 2009 2,000
When the Company revalues its fixed asset investments, any gains or
losses arising are credited / charged to the Capital reserve -
unrealised unless any diminution in value is considered to be
permanent, in which case it is charged to the Capital reserve -
realised.
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.
10. Creditors: amounts falling due within one year
31 January 2009
GBP'000
Accruals 59
Other creditors 95
154
11. Share capital
31 January 2009
GBP'000
Authorised:
50,000,000 Ordinary shares of 10p 5,000
Allotted and fully paid up:
2,297,666 Ordinary shares of 10p 230
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 13. The Company is not subject to any
externally imposed capital requirements.
The Company issued 2,297,666 shares during the period at a price of
100 per share. In addition, the Company issued 50,000 redeemable
preference shares of GBP1 each on 24 June 2008, of which 25p per share
was paid. On 26 January 2009, these shares were redeemed by the
Company and were immediately re-designated as Ordinary shares of 10p
each.
12. Reserves
Capital reserve Revenue
Share premium realised reserve
GBP'000 GBP'000 GBP'000
As at date of incorporation - - -
Loss on ordinary activities
after tax - (7) (77)
Issue of equity 1,941 - -
Balance as at 31 January 2009 1,941 (7) (77)
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.
13. Financial instruments and risk management
The Company's financial instruments comprise variable 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 securities whilst holding a proportion of its
assets in cash or near-cash investments in order to provide a reserve
of liquidity.
The fair value of all 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.
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 13. 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 23 to 27, 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.
Interest rate risk
At the period end, all of the Company's financial assets are
interest-bearing, all of which are at variable rates. As a result,
the Company is exposed to fair value interest rate risk due to
fluctuations in the prevailing levels of market interest rates.
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. The amounts held
in floating rate investments at the balance sheet date were as
follows:
31 January 2009
GBP000
Cash on deposit & money market funds 2,240
A 1% increase in the base rate would increase income receivable from
these investments and the total return by GBP22,400, on an annualised
basis. However, due to the timing of cash receipts as the accounts
which this was held during the period, movements in the base rate
have not impacted on the results.
Credit risk
There were no significant concentrations of credit risk to
counterparties at 31 January 2009.
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
GBP000
Cash on deposit & money market funds 2,240
2,240
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.
Those assets of the Company which are traded on recognised stock
exchanges are held on the Company's behalf by third party custodians
(Barclays Global Investors Limited in the case of listed money market
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 plc.
Liquidity risk
The Company's holdings in money market funds 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 GBP2,240,084.
14. 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 GBP250,000 in CSL Dualcom
Limited, acquiring 2,500,000 ordinary shares and GBP225,000 in loan
notes.
* On 19 February 2009, the Fund invested GBP350,000 in Diagnos
Limited, acquiring 35,000 ordinary shares and GBP315,000 in loan
notes.
* On 2 April 2009, the Fund invested GBP600,000 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.
The following shares were allotted between the balance sheet date and
the signing of these financial statements:
* 8,168,322 Ordinary Shares of 10 pence each were issued and
allotted to subscribers at a price of 100p under the Offer for
subscription
15. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as
at 31 January 2009.
16. Related party transactions
Chris Hulatt, a non-executive director of Octopus Protected VCT 2
plc, is a director of Octopus Investments Limited. Octopus
Protected VCT 2 plc has employed Octopus throughout the period as
Investment Manager. Octopus Protected VCT 2 plc has paid Octopus
GBP9,473 in the period as a management fee all of which is 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 Investments Limited
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 secretarial services for an additional fee of
GBP10,000 per annum. During the period GBP2,326 was paid to Octopus
Investments Limited all of which is outstanding at the balance sheet
date, for the accounting and administrative services.
Some GBP93,369 is also outstanding to Octopus Investments for costs
relating to share issues.
No performance related incentive fee will be payable over the first
five years. Thereafter, Octopus will be entitled to an annual
performance related incentive fee. This performance fee is equal to
20% of the amount by which the NAV from the start of the sixth
accounting and subsequent accounting period exceeds simple interest
of the HSBC Bank plc base rate for the same period. The NAV at the
start of the sixth accounting period must be at least 100p. Any
distributions paid out by the Fund will be added back when
calculating this performance fee.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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