Octopus Eclipse VCT plc

Annual Report & Accounts for the year ended 30 September 2015

Final Results

27 January 2016

Octopus Eclipse VCT plc, managed by Octopus Investments Limited, today announces the final results for the year to 30 September 2015.

These results were approved by the Board of Directors on 27 January 2016.

You may shortly view the Annual Report in full at www.octopusinvestments.com. All other statutory information will also be found there.

Octopus Eclipse VCT plc is a venture capital trust 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. 

Financial Summary

	Year to 30 September 2015	Year to 30 September 2014*
Net assets (£'000s)	35,089	35,084
Profit after tax (£'000s)	66	5,889
Net asset value per share ('NAV')	34.7p	36.6p
Cumulative dividends paid since launch	77.7p	75.7p
Total Value (NAV plus cumulative dividends paid)	112.4p	112.3p
Total Return**	0.1p	6.2p
Total Return %***	0.3%	15.7%
Dividends paid in the year	2.0p	9.0p
Declared special dividend Proposed final dividend	1.0p 1.0p	7.0p 1.0p

* These figures have been restated as discussed fully in note 2 in the Annual Report.
** Calculated as the change in NAV in the year plus dividends paid in the year
*** Calculated as total return / opening NAV

KEY DATES

Special dividend payment date                                  26 February 2016

Annual General Meeting                                           17 March 2016 (3.00 p.m. at 33 Holborn, London EC1N 2HT)

Final dividend payment date                                     1 April 2016

Half-yearly results to 31 March 2016 published           May 2016

Annual results to 30 September 2016 announced        January 2017

Annual Report and financial statements published      February 2017

NAV AND DIVIDENDS

Period Ended	NAV	Dividends paid in period	NAV + cumulative dividends (total value)
30 November 2004	96.0p	-	96.0p
31 May 2005	96.8p	-	96.8p
30 November 2005	94.2p	1.45p	95.7p
31 May 2006	96.8p	-	98.3p
30 November 2006	113.5p	1.25p	116.2p
31 May 2007	126.1p	4.00p	132.8p
30 November 2007	118.9p	4.00p	129.6p
31 May 2008	104.8p	3.00p	118.5p
30 November 2008	83.7p	7.00p	104.4p
31 July 2009	80.7p	5.00p	106.4p
31 January 2010	77.9p	5.00p	108.6p
31 July 2010	76.5p	5.00p	112.2p
31 January 2011	71.8p	5.00p	112.5p
31 July 2011	66.2p	2.00p	108.9p
31 January 2012	56.8p	4.00p	103.5p
30 September 2012	49.2p	8.00p	103.9p
31 March 2013	38.7p	11.00p	104.4p
30 September 2013	39.4p	1.00p	106.1p
31 March 2014	46.1p	1.00p	113.8p
30 September 2014*	36.6p	8.00p	112.3p
31 March 2015	35.2p	1.00p	111.9p
30 September 2015	34.7p	1.00p	112.4p

A special dividend of 1.0p per share will be paid on 26 February 2016 to shareholders on the register on 29 January 2016.
The final dividend of 1.0p per share will be paid on 1 April 2016 to shareholders on the register on 4 March 2016.
* These figures have been restated as discussed fully in note 2 in the Annual Report.

Chairman's Statement

In the context of a generally unpredictable investment environment for much of 2015, your Company has had a satisfactory and relatively stable year, with a Total Return (change in NAV in the year plus dividends paid in the year) of 0.1p.  The sale of the Kendal Group Limited along with the several new investments made have greatly refreshed the portfolio. 

The Company continues with a distinct investment strategy that builds upon Eclipse's strengths in the development capital space, but also allows Eclipse shareholders to benefit from the Octopus deal flow.  We have a clearly-defined long term asset allocation model which is reviewed regularly in the light of financial and economic circumstances and we have continued to review a healthy pipeline of investment opportunities.  We were particularly pleased to be able to deploy £1.8 million of development capital into Oxifree Group Holding Limited as this evidences the Manager's continued ability to source later-stage transactions in well-established businesses.  Such investments form an important cornerstone of the distinctive Eclipse strategy.

Nonetheless, the Manager has been tasked to continue to build value within the existing portfolio and to achieve exits that exceed carrying values.  Your Board believes the Manager has achieved these objectives during the period under review and we will continue to monitor their progress over the next financial year.

As previously communicated, we were sad to lose the expertise of David Lambert from the Board as he had indicated his desire to step down from Eclipse duties after 10 years of service.  His advice and diligence, especially as Chair of the Audit Committee, has been invaluable but, in Lars McBride, his replacement, I believe we have identified someone more than able to fill David's shoes since he stepped down at the end of February 2014.

Summary of the year

As communicated at the time of the merger of the four Eclipse VCTs in 2012, the Board set the Investment Manager the objectives set out below.  These objectives were established to ensure the KPIs continue to be met:

• Stabilise performance
• Complete on exits where appropriate
• Pay dividends and facilitate share buybacks
• Make new investments that drive the portfolio mix towards the long-term asset allocation target

During 2015, the Company continued to execute on the objectives stated above. Last year the Company made disposals and generated sufficient liquidity to pay dividends and meet buyback demands.

Your Investment Manager has added to the portfolio by making seven new investments and four follow-on investments in unquoted companies totalling £6,993,000, which has further diversified the portfolio.

Fund Raising

I am delighted to inform you that the Company filled the offer for subscription to raise up to 10% of its issued share capital, (subject to a maximum of €5 million). The offer closed in December having raised £3.5 million into the Company in the 2014/2015 and 2015/2016 tax years.

Performance

Eclipse reported an increase in Total Value (being net asset value (NAV) plus cumulative dividends paid) of 0.1p to 112.4p per share during the year representing a 0.3% increase on the opening NAV.

The Company's objective has been met as the portfolio is invested in a broad range of mainly smaller unquoted UK companies and AIM-quoted companies traded on the London Stock Exchange (LSE).  The disposals made during the year along with the new additions have helped diversify the portfolio and create a more balanced position.

Portfolio

As at 30 September 2015, the Company had investments in 20 unquoted and eight AIM-quoted companies (including one unquoted investment held in the portfolio in liquidation).  

Investment Portfolio

The combined quoted and unquoted portfolio saw an overall uplift in fair value of £515,000 during the year (excluding additions and disposals).

The two largest valuation uplifts were in Reading Room, which was sold shortly after the year end, and Touchtype (Swiftkey), which had a combined positive impact of £788,000 on the portfolio.

The 11 investments made in the year are in a broad range of sectors and we are confident that these additions to the portfolio will bring capital growth over the mid-term.

In addition to the overall unrealised gain is the total realised gain of £293,000 made in the year. As previously mentioned Kendal Group was the largest contributor to this gain creating a profit of £183,000 in the year and an overall return in excess of three times the original investment. The total realised gain comprised £380,000 of gains and one £88,000 loss.

As one might anticipate, some investments have fallen short of expectations and have been reduced in value. The History Press has seen a further reduction in value in the period.  Despite the successful sale of its US division, resulting in a return of £1,000,000 to Eclipse at the start of the year, the publishing market continues to be challenging and this has been reflected in the valuation.  The valuation of Luther Pendragon has also been reduced in the period.  We continue to believe in the team and the potential of this investment, however the environment is such that further significant growth is challenging.

Additional details about the portfolio, including further investments and realisations, can be found in the Investment Manager's Review.

Dividends and Dividend Policy

It remains your Board's policy, as set out in the prospectus dated 28 September 2012, to maintain a regular dividend flow where possible in order to take advantage of the tax-free distributions a VCT is able to provide.  The target is an annual 5% of NAV dividend yield plus further special distributions when realisations permit.  Your Board, however, is also conscious of maintaining an appropriate level of liquidity within the VCT. 

An interim dividend of 1.0p per share was paid on 10 July 2015 making the cumulative dividends paid by the Company since inception of 77.7p per share.  The dividend payments for the year to 30 September 2015 of 2p per share represent a dividend return of 5.5% in the period.  

A final dividend of 1.0p will be paid on 1 April 2016 to those shareholders on the register on 4 March 2016.  Additionally, a special dividend of 1.0p will be paid on 26 February 2016 to shareholders on the register on 29 January 2016.  This special dividend has arisen from the profitable realisations made during the course of the year, most notably The Kendal Group and Reading Room (exited shortly after year end). 

Buyback of shares

During the period, the Company repurchased 2,208,000 shares.

VCT qualification

A key requirement is for 70% of the Company's portfolio to remain invested in qualifying investments.  As at 30 September 2015, over 75% of the portfolio (as measured by HMRC rules) was invested in VCT qualifying investments.  The requirement to maintain the level of qualifying investments above the 70% threshold will be supported by the deal flow from the Investment Manager. This will increase further as new investments are made.

The Finance Bill was published on 15 July, following the second 2015 Budget, which included a number of proposed changes to the VCT rules designed to bring the legislation into line with the EU State Aid Risk Finance Guidelines which were revised in 2014. The changes are due to come into effect soon after the Royal Assent which occurred in November 2015.

All investments made since the 2012 merger would qualify under the new rules. Eclipse, as a growth and development capital fund, will not be significantly impacted by the new rules owing to its mandate to invest into businesses at the early stages of growth and to not partake in management buyouts.

Annual General Meeting

The Board look forward to meeting shareholders at our Annual General Meeting on 17 March 2016 to be held at the offices of Octopus Investments Limited, 33 Holborn, London, EC1N 2HT.  At the start of the meeting, the investment management team will give a presentation on key aspects of the portfolio.

Outlook

Notwithstanding recent market turbulence, the economy is generally growing in confidence and technology advances continue to generate opportunities for entrepreneurs who are willing to move quickly.  As previously discussed, the portfolio has stabilised over the last two years resulting in an improved Total Value. We are pleased to have been able to realise some of the more mature investments at values that exceed our expectations and paid special dividends where appropriate whilst at the same time investing in new companies to continue to build and refresh the portfolio.

We are working hard alongside the Investment Manager to ensure the objectives established at the time of the merger and discussed above are met and sustained.  It is our intention to continue to build on these during the coming year with further profitable realisations and new investments in appropriate companies.

I would like to thank all shareholders for your continued support.  It was encouraging to see the level of backing given to the modest fundraising that was completed in the year. The Board is now evaluating future fundraising plans. 

Alex Hambro
Chairman
27 January 2016

Investment Manager's Review

Personal Service

At Octopus we focus on both 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.

Octopus was established in 2000 and has a strong commitment to both smaller companies and to VCTs.  At the time of writing we manage seven VCTs, including this VCT, and manage over £500 million in the VCT sector.  Octopus has over 450 employees. 

Portfolio Review

The focus this year has been to make new investments and diversify the portfolio after a number of disposals were made last year. We are pleased to report that this year the Company has made seven new unquoted additions and four follow-on investments taking the number of portfolio companies to 28 (including one unquoted company in liquidation). We have also continued to make disposals where appropriate.

Unquoted investments

The performance of the unquoted portfolio has been mostly positive in the year with realised profits of £317,000 (including two amounts from companies in post-sale liquidation) and upward revaluations of £488,000 in the remaining portfolio companies.

The contributors to the unquoted realised gains are:

• The Kendal Group was sold resulting in a profit in the year of £183,000 and an overall profit of £1,143,000.
• Convivial London Pubs liquidators returned £55,000 in excess of what had been accrued for, and
• First Sports Group liquidators returned £79,000 in excess of what had been accrued for at the start of the year.

Post year end we are pleased to report a further realisation from the disposal of Reading Room Limited.  This resulted in a realised profit of £538,000, equating to a 2x money multiple.

New investments were made in the year into Dyscova, Oxifree, Touchtype, Ecrebo, Currency Fair, Trafi and Behaviosec, and a short summary is below:

• Oxifree - reduces the cost of protecting metal assets with a durable anti-corrosion coating that requires minimal surface preparation.
• TouchType - trading as SwiftKey, is a leader in the development of Natural Language Processing (NLP) based language inference technologies providing innovative mobile software solutions for handset manufactures and consumers.
• Ecrebo - develops a software solution for merchants to deliver personalised offers at tills to customers, in a way which increases spend and drives loyalty.
• CurrencyFair - an online currency exchange and money transfer service.
• Trafi - a free mobile application (available on both iOS and Android) and website that allows people to get directions to go from A to B in urban areas using public transport.
• Behaviosec - develops software to verify the unique identity of online and mobile users by analysing the behaviour of users through how they enter data and the way they interact with devices and applications.
• Dyscova - an acquisition vehicle which has been set up to back entrepreneurs known to Octopus to seek suitable investment opportunities.

As expected some investments have endured downward movements in fair value, most notably History Press and Luther Pendragon.  These are discussed in more detail under the Ten Largest Holdings section.

AIM-quoted investments

Realised losses totalling £24,000 were taken in the period arising from a reduction in our holding in Plastics Capital and also full disposals of InterQuest and Cohort. The remaining AIM-quoted element of the portfolio has seen an uplift in fair value of £27,000 in the year to 30 September 2015.  Five of the eight quoted investments had an uplift in value over the year with Vertu Motors and Ergomed being the largest contributors with increases in value of £173,000 and £61,000 respectively.

Outlook and future investments

The main focus since the merger has been to stabilise the performance of the portfolio, make disposals and new investments where appropriate. We are pleased that we have met these three objectives but are working hard to continue to deliver on these and bring future success to the Company.  

We have a solid pipeline with lots of new opportunities being sought and as shown this year, we are adding to the portfolio.  These companies are very exciting and are already showing positive signs.  

Valuation Methodology

Initial measurement

Financial assets are measured at fair value.  The initial best estimate of fair value of a financial asset that is either quoted or not quoted in an active market is the transaction price (i.e. cost).

Subsequent measurement

Subsequent adjustment to the fair value of unquoted investments has been made using sector multiples where applicable, based on information as at 30 September 2015.  In some cases the multiples have been compared to equivalent companies where it is believed that this is more appropriate than a sector multiple.  It is currently industry norm to discount the quoted earnings multiple applied to private companies to reflect the lack of liquidity in the investment, with there being no ready market for our holdings.  The discount is specific to each investment but in some cases we have increased the discount, where there are specific circumstances that warrant it.  A lower discount would also be possible if an investment was close to an exit event.

In accordance with our interpretation of the IPEVC valuation guidelines, investments made within 12 months are usually kept at cost, unless performance indicates that fair value has changed.

Quoted investments are valued at market bid price.  No discounts are applied.

If you would like to find out more regarding the IPEVC valuation guidelines, please visit their website at: www.privateequityvaluation.com.

The table below shows a summary of the Company's investment portfolio:

Unquoted investments	Sector	Investment cost at 30.09.2015 (£'000)	Unrealised profit/(loss) (£'000)	Carrying value at 30.09.2015 (£'000)	Unrealised profit/(loss) in period (£'000)	% equity held by the Company	% equity managed by Octopus
Tristar Worldwide Limited	Transport	4,106	1,334	5,440	218	28.0%	35.3%
Dyscova Limited	Investment Company	2,500	-	2,500	-	49.9%	99.8%
Luther Pendragon Limited	Media & Marketing Services	2,380	(36)	2,344	(383)	29.5%	29.5%
Spiralite Holdings Limited	Manufacturing	2,200	-	2,200	-	36.1%	70.0%
Oxifree Group Holding Limited	Manufacturing	1,774	-	1,774	-	42.1%	42.1%
History Press Limited	Publishing	4,219	(2,810)	1,409	(418)	45.3%	49.0%
Reading Room Limited	Publishing	833	538	1,371	428	24.8%	24.8%
Artesian Solutions Limited	Technology & Communications	1,010	321	1,331	-	4.9%	33.3%
TouchType Limited	Technology & Communications	765	360	1,125	360	0.7%	23.3%
Secret Escapes Limited	Consumer Products	542	448	990	201	0.4%	26.9%
Other*	Various	3,073	(1,000)	2,073	82
Total unquoted investments		23,402	(845)	22,557	488
AIM-quoted investments
Plastics Capital plc	Engineering	2,388	553	2,941	(173)	8.2%	11.7%
Vertu Motors plc	Transport	685	322	1,007	173	0.4%	5.9%
Ergomed plc	Pharmaceuticals & Biotech	750	37	787	61	1.6%	10.7%
Cello Group plc	Media & Marketing Services	362	(73)	289	(36)	0.4%	5.8%
Vianet Group plc	Consumer Products	294	(23)	271	48	1.0%	4.7%
Mi-Pay Group plc	Support Services	449	(277)	172	(64)	1.9%	3.8%
Augean plc	Support Services	500	(358)	142	8	0.3%	1.7%
Tanfield Group plc	Engineering	290	(197)	93	10	0.4%	0.6%
Total AIM-quoted investments		5,718	(16)	5,702	27
Total investments		29,120	(861)	28,259	515
Money market securities		2,042	-	2,042
Cash at bank		4,853	-	4,853
Total investments and cash at bank		36,015	(861)	35,154
Debtors less creditors				(65)
Total net assets				35,089

*Comprises 10 investments

Three investments were fully disposed of during the period realising a gain of £156,000 for the year. Additionally loan notes were repaid from Tristar, CSL Dualcom (in full) and The History Press totalling £2,991,000.

£255,000 was also received from liquidators in respect of the liquidations of Convivial London Pubs plc and First Sports Group Limited, which was in excess of what had been accrued at the start of the year by £134,000 . These are businesses where the assets were successfully disposed of in previous years and the liquidators appointed to wind up the Holding Company.

The tables below summarises the disposals:

Full Disposals:

	Cost at 01/10/14 £'000	Value at 01/10/14 £'000	Disposal proceeds £'000	Profit/(loss) realised in year £'000	Overall realised gain/(loss) £'000
Dualcom Holdings Limited	1,183	1,183	1,183	-	-
The Kendal Group Limited	938	1,898	2,081	183	1,143
Cohort plc	320	520	581	61	261
InterQuest plc	165	360	272	(88)	107
Subtotal			4,117	156	1,511

Part Disposals:

	Cost at 01/10/14 £'000	Value at 01/10/14 £'000	Disposal proceeds £'000	Profit/(loss) realised in year £'000	Overall realised gain/(loss) £'000
Tristar Worldwide Limited	500	500	500	-	-
History Press Limited	1,308	1,308	1,308	-	-
Plastics Capital plc	20	32	35	3	15
Subtotal			1,843	3
Total			5,960	159

The total realised gain on disposals of £293,000 in the Income Statement comprises the £159,000 tabulated above and £134,000 from the liquidators of Convivial and First Sports Group.

Review of Investments

At 30 September 2015 the Company's portfolio comprised investments in 20 unquoted and eight AIM-quoted companies (including one unquoted company in liquidation). 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.

Quoted and unquoted investments are valued in accordance with the valuation methodology and the accounting policy which takes account of current industry guidelines for the valuation of venture capital portfolios and is compliant with IPEVC Valuations guidelines and current financial reporting standards.

Ten Largest Holdings

Listed below are the ten largest investments by value as at 30 September 2015:

Tristar Worldwide Limited

Tristar is one of the world's leading chauffeur companies. The business operates in over 80 countries across six continents and has wholly owned subsidiaries in the UK, US and Hong Kong. It has a blue chip customer base which includes Virgin Atlantic, Emirates, BP, Goldman Sachs and many other leading multinationals.  In 2015 it won two awards at the annual Professional Driver QSI Awards.  It also won two gold awards from the Royal Society for the Prevention of Accidents.  These awards highlight the commitment Tristar has to safety and quality of service.  The business continues to develop into new territories and markets.  In particular it has made strong inroads into the travel market, which helps combat the cyclicality from the financial services market.  Further information can be found at the company's website www.tristarworldwide.com.

Initial investment date:                                        January 2008
Cost:                                                                      £4,106,000
Valuation:                                                              £5,440,000

Last audited accounts:                                             31 May 2015                           31 May 2014          
Revenues:                                                               £45,877,000                           £45,677,000                                                                           
Profit before interest & tax:                                      £2,235,000                             £1,579,000                                                                             
Net assets:                                                              £6,447,000                              £4,936,000        
                                     

Plastics Capital plc

AIM-quoted Plastics Capital plc is a specialist manufacturer of plastic components, often with specific applications, with customers worldwide and in a wide range of industries.  The recent acquisition of Flexipol has helped to increase revenue in the interim results by nearly 50% to £24.5m and profit before tax rose by a similar percentage, despite the problems of adverse foreign exchange and some high raw material prices. With new account wins across the group, the board is looking forward to a good second half and brokers forecast revenue of £51m. Profitability and good cash flow will reduce debt, although the group remains acquisitive.

Initial investment date:                                        March 2006
Cost:                                                                      £2,388,000
Valuation:                                                              £2,941,000

Last audited accounts:                                             31 March 2015                        31 March 2014
Revenues:                                                               £39,576,000                            £32,456,000                           
Profit before interest & tax:                                      £1,511,000                              £1,539,000                             
Net assets:                                                              £26,349,000                            £23,087,000                           

Dyscova Limited

This investment company was set up in July 2015 with £2.5m invested from each of Eclipse and Apollo VCT, alongside non-executive director Peter Toland, formerly CEO of Autologic, a previous successful investment of Apollo VCT.

Initial investment date:                                        July 2015                                
Cost:                                                                      £2,500,000
Valuation:                                                              £2,500,000

No audited accounts have been produced as the company is in its first year of incorporation.

Luther Pendragon Limited

Luther Pendragon is one of the UK's leading independent communications consultancies. The company has qualified consultants managing corporate communications, public affairs, media relations and crisis and stakeholder communications. In the last audited year, Luther saw a drop in profitability due to a large project finishing that had boosted profits in the year to December 2013.  In general, the business continues to see more project work rather than retainer work and the team work hard to keep the pipeline strong.  Luther's change in valuation reflects the flat performance during the year and lack of growth.  We remain positive about its longer term prospects.Further information can be found at the company's website www.luther.co.uk.

Initial investment date:                                        November 2005
Cost:                                                                      £2,380,000
Valuation:                                                              £2,344,000

Last audited accounts:                                             31 December 2014 31 December 2013
Revenues:                                                               £4,732,443                              £5,432,644
Profit before interest & tax:                                      £447,139                                 £1,171,452
Net assets:                                                              £3,689,624                              £3,985,394

Spiralite Holdings Limited

Spiralite manufactures and installs ducting which is transforming air conditioning in the building industry.  The technology behind Spiralite® takes an organic, non-metal, pre-insulated material, which is formed into a duct for delivering heating, ventilation and air conditioning in domestic, commercial and industrial buildings.   Customers include Marks and Spencer's in Stratford City and Guy's and St Thomas' Hospital in London Bridge.

The Spiralite® patented technology is up to 40% more energy efficient than traditional metal ducts due to its virtually airtight construction and efficient shapes. The funding will allow the team to continue developing the product and further build out the team.  A further investment was made in the year to support working capital.

Initial investment date:                                        September 2014                    
Cost:                                                                      £2,200,000
Valuation:                                                              £2,200,000             

Last audited accounts:                                             30 June 2014                          30 June 2013 (restated)
Revenues:                                                               £8,175,884                              £5,839,893
Loss before interest & tax:                                      £(994,775)                              £(902,210)
Net liabilities:                                                            £(3,794,073)                           £(2,536,331)

Oxifree Group Holding Limited

Oxifree reduces the cost of protecting metal assets with a durable anti-corrosion coating that requires minimal surface preparation.

Initial investment date:                                        July 2015                                
Cost:                                                                      £1,774,000
Valuation:                                                              £1,774,000

A new investment company was incorporated to purchase the assets of Oxifree and therefore no audited accounts have been produced for this company as it's in its first year of incorporation.

The History Press Limited

The History Press is the UK market leading publisher of distinctive 'local interest' history books. History Press continues to operate in a challenging market.  In the past year a number of accounts have withdrawn from the local interest and history market resulting in performance behind expectations.  This has resulted in the downward movement in the valuation for the period.  The team works hard to explore alternative areas of growth and despite being behind budget, trades favourably compared to its peers.  They also continue to work on opportunities where they are able to exploit its vast local and specialist history content, as well as continually reshaping the business to optimise its business model.  The drop in turnover in the audited accounts reflects full year trading following the disposal of the overseas entities.  Further information can be found at the company's website www.thehistorypress.co.uk.
                               
Initial investment date:                                        December 2007                                     
Cost:                                                                      £4,219,000
Valuation:                                                              £1,409,000

Last audited accounts:                                             31 December 2014                 31 December 2013
Revenues:                                                               £7,774,000                              £11,575,000
Loss before interest & tax:                                       £(750,000)                              £(26.000)
Net liabilities:                                                            £(2,625,000)                           £(936,000)
           

Reading Room Limited

Reading Room is a leading web design agency with offices in London, Manchester, Sydney, Canberra, Singapore and Brisbane. It provides online brand strategy, web design, content management system development and usability testing. The business has targeted specific sectors including professional service organisations, charities and the government. There are offices throughout Australia, the UK and Singapore.  Post the year end this business was disposed and the valuation reflects the proceeds received.  Further information can be found at the company's website www.readingroom.com.

Initial investment date:                                        April 2005
Cost:                                                                      £833,000
Valuation:                                                              £1,371,000

Last audited accounts:                                             31 March 2014                        31 March 2013
Revenues:                                                               £13,839,852                            £15,084,107
Profit before interest & tax:                           £264,651                                 £259,512
Net assets:                                                              £1,687,238                              £1,321,993

Artesian Solutions Limited

Artesian helps its business to business customers accelerate revenue by building stronger and deeper customer relationships. It provides a sales productivity application that automates the process of looking for sales and market intelligence from the web and in social media. The service is 100% cloud-based and helps sales and marketing teams achieve better results by acting on key insights from customer-based information.

The company has developed technology that allows it to interpret and analyse millions of web pages. Through a combination of natural-language-processing and a unique heuristic ranking approach, the company is able to deliver accurate contextual insight about its clients' customers and the relevant things they are doing, enabling its clients to drive better customer engagement.  

Initial investment date:                              December 2011
Cost:                                                      £1,010,000
Valuation:                                                              £1,331,000

Last audited accounts:                                             31 March 2015                        28 February 2014
Revenues:                                                               £4,009,168                              £2,623,608
Loss before interest & tax:                           £(2,918,774)                           £(2,368,633)
Net liabilities:                                              £(736,412)                              £(472,749)

TouchType Limited (Trades as Swiftkey)

TouchType, trading as SwiftKey, is a leader in the development of Natural Language Processing (NLP) based language inference technologies providing innovative mobile software solutions for handset manufactures and consumers. SwiftKey's text prediction technology is designed to significantly boost the accuracy, fluency and speed of text entry on mobile devices and is installed on upwards of 250m devices across multiple platforms (BlackBerry, iOS and Android).  The results for the year to December 2014 versus the previous year reflect the change in strategy from a paid app to a freemium model.

Initial investment date:                                        June 2015              
Cost:                                                                      £765,000
Valuation:                                                              £1,125,000

Last audited accounts:                                             31 December 2014 31 December 2013
Revenues:                                                               £8,412,000                              £9,779,628
Loss before interest & tax:                           £(5,963,000)                           £(111,994)
Net assets:                                              £3,479,000                              £8,270,219

If you have any questions on any aspect of your investment, please do not hesitate to call one of the team on 0800 316 2295.

Alex Macpherson
Octopus Investments Limited
27 January 2016

Income Statement
		Year to 30 September 2015			Year to 30 September 2014*
		Revenue	Capital	Total	Revenue		Capital		Total
		£'000	£'000	£'000	£'000		£'000		£'000
Realised gain on disposal of fixed asset investments		-	293	293	-		6,189		6,189
Fixed asset investment holding gains		-	515	515	-		371		371
Investment income		527	-	527	660		-		660
Investment management fees		(159)	(476)	(635)	(171)		(514)		(685)
Other expenses		(634)	-	(634)	(646)		-		(646)
Profit/(Loss) before tax		(266)	332	66	(157)		6,046		5,889
Taxation		-	-	-	-		-		-
Profit//(Loss) after tax		(266)	332	66	(157)		6,046		5,889
Earnings per share - basic and diluted		(0.2)p	0.3p	0.1p	(0.2)p		6.3p		6.1p

* The results for 2014 have been restated as discussed fully in note 2 in the Annual Report.

• 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 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 other comprehensive income for the period.

Balance Sheet
		As at 30 September 2015		As at 30 September 2014*
		£'000	£'000	£'000	£'000
Fixed asset investments**			28,259		26,552
Current assets:
Debtors		136		405
Money market securities* and other deposits		2,042		4,550
Cash at bank		4,853		4,091
		7,031		9,046
Creditors: amounts falling due within one year		(201)		(514)
Net current assets			6,830		8,532
Net assets			35,089		35,084
Called up equity share capital			10,122		9,589
Share premium			1,893		-
Special distributable reserve			20,633		22,366
Capital redemption reserve			5,760		5,540
Capital reserve - realised gains/(losses)			(1,548)		585
- holding gains/(losses)			(861)		(2,352)
Revenue reserve			(910)		(644)
Total equity shareholders' funds			35,089		35,084
Net asset value per share			34.7p		36.6p

* The results for 2014 have been restated as discussed fully in note 2 in the Annual Report.
** Held at fair value through profit and loss

The statements were approved by the Directors and authorised for issue on 27 January 2016 and are signed on their behalf by:

Alex Hambro
Chairman

Statement of changes in Equity

	Year to 30 September 2015	Year to 30 September 2014*
	£'000	£'000
Shareholders' funds at start of year	35,084	38,662
Profit after tax	66	5,889
Purchase of own shares	(739)	(766)
Issue of equity	2,646	-
Dividends paid	(1,968)	(8,701)
Shareholders' funds at end of year	35,089	35,084

* The comparative reconciliation for 2014 has been restated as discussed fully in note 2 in the Annual Report.

Cash Flow Statement
		Year to 30 September 2015		Year to 30 September 2014*
		£'000		£'000
Reconciliation of profit to cash flows from operating activities
Profit before tax		66		5,889
Decrease/(increase) in debtors		269		(225)
Decrease in creditors		(313)		(3)
Gains on disposal of fixed assets		(293)		(6,189)
Gains on valuation of fixed asset investments		(515)		(371)
Outflow from operating activities		(786)		(899)
Cash flows from investing activities
Purchase of fixed asset investments		(6,993)		(3,889)
Sale of fixed asset investments		6,094		16,592
(Outflow)/Inflow from investing activities		(899)		12,703
Cash flows from financing activities
Dividends paid		(1,968)		(8,701)
Purchase of own shares		(739)		(766)
Share issue		2,646		-
Outflow from financing activities		(61)		(9,467)
(Decrease)/Increase in cash and cash equivalents		(1,746)		2,337
Opening cash and cash equivalents		8,641		6,304
Closing cash and cash equivalents**		6,895		8,641

* The comparative reconciliation for 2014 has been restated as discussed fully in note 2 in the Annual Report.
** Comprises cash at bank, money market securities and other deposits.