Octopus Eclipse VCT plc

Unaudited Half-Yearly Report for the Six Months Ended 31 March 2016

Octopus Eclipse VCT plc, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 31 March 2016.

These results were approved by the Board of Directors on 24 May 2016.

You may shortly view the Half-Yearly 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 Headlines

32.5p                                       Net asset value ('NAV') as at 31 March 2016

79.7p*                                      Cumulative dividends paid since launch

112.2p                                     Total Value (NAV plus cumulative dividends paid) as at 31 March 2016

1.0p**                                      Interim dividend declared for the half-year to 31 March 2016

*This includes the 2015 final 1p dividend paid on 1 April 2016 to shareholders on the register on 4 March 2016.
**This will be paid on 24 June 2016 to shareholders on the register as at 10 June 2016.

Financial Summary

	Six months to 31 March 2016	Six months to 31 March 2015	Year to 30 September 2015
Net assets (£'000s)	32,614	34,666	35,089
Profit/(loss) after tax (£'000s)	(233)	(284)	66
Net asset value per share ('NAV')	32.5p	35.2p	34.7p
Cumulative dividends paid since launch	79.7p*	76.7p	77.7p
Total Value (NAV plus cumulative dividends paid)	112.2p	111.9p	112.4p
Dividends declared**	1.0p	1.0p	3.0p

*  Includes 1p final dividend paid on 1 April 2016
** Year to 30 September 2015 includes a 1p interim, 1p special and 1p final dividend

Chairman's Statement

I present your Company's results for the six month period ended 31 March 2016 which show a modest decrease in Total Value from 112.4p to 112.2p, primarily due to the standard operating costs incurred during the period.

In the period Swiftkey was sold to Microsoft generating a profit of £485,000 on a cost of £765,000 in a 9 month period and Reading Room was sold to IDOX generating a profit of £569,000 on a cost of £834,000 over a 10 year investment term.

The Board's strategy is to maintain an appropriate level of liquidity of circa 20% in the balance sheet to allow the Company to continue to achieve its four overarching aims:

• to support a consistent dividend flow;
• to support further investment in existing portfolio companies, if required;
• to take advantage of new investment opportunities as they arise; and
• to provide liquidity in the shares through the buyback facility.

During the six month period the Investment Manager continued to source a broad range of new investments to create a balanced portfolio between early stage high growth opportunities, later stage development capital prospects and attractive AIM company placings.  We expect that this strategy will continue for the foreseeable future allowing proceeds from realisations to be recycled back into new portfolio investments and, when prudent, enhanced dividends to be paid to shareholders.

By value, 65% of the VCT's net assets are in unquoted investments, 16% in AIM-traded investments and 19% of the VCT's net assets are currently in cash or near-cash equivalents. 

Dividend and Dividend Policy
It is your Board's policy to maintain a regular dividend flow which is dependent upon the level of profitable realisations and available cash reserves. Your Board has targeted an annual 5% dividend yield on net asset value plus further special dividend distributions when realisations permit.

Your Board therefore declares an interim dividend of 1.0p per share for the period ended 31 March 2016. The dividend will be paid on 24 June 2016 to shareholders who are on the register as at 10 June 2016. This is in addition to the 1p special dividend paid on 26 February to shareholders on the register on 29 January as a result of profitable portfolio realisations, and the 2015 final dividend paid on 1 April to shareholders on the register on 4 March.

As shown in the Financial Summary above the three 1p dividends paid in respect of the year to 30 September 2015 represent a yield of 8.2%, and the 1p declared interim dividend in respect of the current period to 31 March 2016 represents an annualised yield of 5.8%.

Investment Portfolio Review
The Company has investments in 23 unquoted and 10 AIM-traded companies at 31 March (including one unquoted investment in liquidation). The primary focus continues to be on the existing portfolio, which is being actively managed concurrently with the search for new investment opportunities.

There were eight investments made in the period totalling £1,826,000, of which seven were into new investments. The new investments include:

• £361,000 into Eve Sleep Limited. Eve is an online mattress retailer and brand. It makes the buying process easier for customers by offering a single product (currently only one mattress in six sizes), combined with a hassle-free and intuitive online sales experience.
• £312,000 into Tailsco Limited. Tails.com is an online pet nutrition service that provides tailor-made food designed to deliver perfectly optimised nutrition for dogs.
• £301,000 into Origami Energy Limited. Origami is developing technology that will help energy providers actively manage the way they generate, store and deliver electricity. Origami's technology will enable assets to communicate with each other so that energy can be delivered where and when it is needed in a more efficient, money-saving way for consumers that will also be better for the environment.
• £300,000 into Nektan Plc. Nektan listed on AIM in November 2014.  The company has developed a B2B mobile gaming platform called Evolve. The company can also provide a white label mobile casino for its customers and develop unique gaming content.
• £205,000 into Yu Group plc. Yu Group is a challenger energy supplier to the business market, targeting SMEs in verticals such as healthcare, hotels & leisure and construction. The company obtained its supply license in 2013 and commenced supply operations under a controlled market entry in 2014. 
• £188,000 into Segura Systems Limited. Segura Systems has created a software solution called Segura Order Manager, which aims to solve the problem of supply chain visibility. Segura Order Manager facilitates the order process beyond just the direct retailer and primary manufacturer relationship, to include the entire extended supply chain; and
• £130,000 into Zynstra Limited. Zynstra offers technology infrastructure to small and medium-sized businesses on a subscription basis using 'cloud computing' that is available with the installation of minimal hardware. By leveraging hybrid cloud technologies, Zynstra offers the services of a corporate-grade IT infrastructure at an affordable cost.

During the period under review the Company made two unquoted disposals in full, one part disposal from the AIM-traded portfolio and two loan repayments from Tristar and The History Press.  A summary of these transactions is shown in the following table:

Company	Cost £'000	Proceeds £'000	Total profit £'000	Profit in the period £'000	Full or part disposal
Touchtype *	765	1,250	485	126	Full
Reading Room	834	1,403	569	31	Full
Plastics Capital Plc	577	852	275	(14)	Part
Tristar	500	500	-	-	Loan repayment
The History Press	30	30	-	-	Loan repayment
Total	2,706	4,035	1,329	143

* Trades as Swiftkey

The unquoted portfolio saw an increase in value of £198,000 during the period, excluding additions and disposals. This was mainly attributable to increases in Tristar, Eve Sleep and Swoon Editions.

The AIM-traded portfolio saw a decrease in value of £157,000 during the period, excluding additions and disposals. This was predominantly attributable to decreases in the value of Plastics Capital, Vertu Motors and Mi-Pay Group, but offset by uplifts in Cello Group and Yu Group.

Post-Balance Sheet Events
I am pleased to report that since the period end:

• Small part disposals were made in Vianet Group Plc and Plastics Capital Plc, and
• Three follow-on investments have been made into MIRACL (£73,000), Zynstra (£154,000) and CurrencyFair (£41,000).

VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice on the ongoing compliance with HMRC's rules and regulations concerning VCTs.  The Board has been advised that Eclipse is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT.  As at 31 March 2016, over 80% of the portfolio (as measured by HMRC rules) was invested in VCT qualifying investments as reviewed and confirmed by PwC. 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.

Principal Risks and Uncertainties
The Company's assets consist of equity and fixed-rate interest investments, cash and cash equivalents. The associated risks are valuation, investment and liquidity risk. Other risks faced by the Company include loss of approval as a VCT, regulatory, reputational, operational and financial risks. These risks, and the ways in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 30 September 2015. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Outlook
Following a period of uncertainty around the interpretation of recent VCT legislation, we are pleased that there is now clarity on the Government's approach and are confident in Eclipse's eligibility to make new investments under the new VCT rules. We have continued to exit legacy investments and believe that the portfolio is judiciously balanced and diversified.

Continued restrictions to the amount investors can tax-efficiently save into their pensions are thrusting VCTs into the limelight as an attractive way to complement other forms of retirement saving. Last year saw many VCT articles published in the mainstream media for the first time and inflows across the industry reached a 10 year high of £457 million in the 2015/16 tax year.

With bright prospects for the VCT industry as a whole, and an exciting investment pipeline appearing for Eclipse, we are in discussions with the Manager about instigating a fundraising early in the next calendar year. This could fund a range of new investments and help reinvigorate portfolio performance over the coming years. We will be in contact with shareholders to provide more detail in the coming months. In the meantime I would like to thank you all for your continued support.

Alex Hambro
Chairman
24 May 2016

Investment Portfolio

Unquoted investments	Sector	Investment cost at 31 March 2016 (£'000)	Unrealised profit/(loss) (£'000)	Carrying value at 31 March 2016 (£'000)	Unrealised profit/(loss) in period (£'000)	% equity held by Eclipse	% equity managed by Octopus
Tristar Worldwide Limited	Transport	3,605	1,811	5,416	475	28.0%	35.3%
Dyscova Limited	Investment company	2,500	-	2,500	-	49.9%	99.8%
Spiralite Holdings Limited	Manufacturing	2,200	-	2,200	-	36.1%	70.0%
Oxifree UK Limited	Manufacturing	1,774	-	1,774	-	42.1%	42.1%
Luther Pendragon Limited	Media & Marketing Services	2,380	(630)	1,750	(595)	29.5%	29.5%
History Press Limited	Publishing	4,188	(2,828)	1,360	(20)	46.9%	50.7%
Artesian Solutions Limited	Technology & Communications	1,010	321	1,331	-	4.9%	33.3%
Secret Escapes Limited	Consumer Products	542	448	990	-	0.4%	26.9%
Sourceable Limited*	Consumer Products	395	370	765	226	1.8%	31.0%
Eve Sleep Limited	Consumer Products	361	240	601	240	1.9%	27.6%
Other**		3,642	(1,275)	2,367	(128)
Total unquoted investments		22,597	(1,543)	21,054	198
AIM-traded investments
Plastics Capital plc	Engineering	1,810	183	1,993	(82)	5.8%	8.9%
Vertu Motors plc	Transport	685	273	958	(49)	0.4%	5.0%
Ergomed plc	Pharmaceuticals & Biotech	750	23	773	(15)	1.6%	10.6%
Cello Group plc	Media & Marketing Services	362	(37)	325	37	0.4%	5.4%
Nektan plc	Technology & Communications	300	(17)	283	(16)	0.1%	16.2%
Vianet Plc	Consumer Products	293	(25)	268	(2)	1.0%	4.6%
Yu Group plc	Consumer Products	205	28	233	28	0.8%	9.8%
Mi-Pay Group plc	Support Services	448	(302)	146	(25)	1.5%	3.1%
Augean plc	Support Services	500	(375)	125	(16)	0.3%	1.5%
Tanfield Group plc	Engineering	290	(214)	76	(17)	0.4%	0.6%
Total AIM-traded investments		5,643	(463)	5,180	(157)
Total investments		28,240	(2,006)	26,234	41
Money market securities		2,046	-	2,046
Cash at bank		4,261	-	4,261
Total investments and cash at bank		34,547	(2,006)	32,541
Debtors less creditors				73
Total net assets				32,614

* Trades as Swoon Editions

** Comprises 11 investments: Leanworks Limited (trades as Yplan), Hasgrove Limited, Tailsco Limited, Origami Energy Limited, Ecrebo Limited, CurrencyFair Limited, Segura Systems Limited, Trafi Limited, Zynstra Limited, MIRACL Limited, Behaviometrics AB. In addition to this there is one company in liquidation, Shopa Limited, and one company held at nil value, T4 Media Limited.

 

Income Statement

• 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.

Statement of Changes in Equity

	Six months to 31 March 2016	Year ended 30 September 2015	Six months to 31 March 2015
	£'000	£'000	£'000
Shareholders' funds at start of period*	35,089	35,084	34,949
(Loss)/Profit after tax	(233)	66	(284)
Purchase of own shares	(914)	(739)	(314)
Net proceeds from share issues	714	2,646	1,290
Dividends paid	(2,042)	(1,968)	(975)
Shareholders' funds at end of period	32,614	35,089	34,666

*Shareholders' funds at the start of the period for the year ended 30 September 2015 and the six months to 31 March 2015 do not match because a prior period adjustment was made in the 2015 annual accounts (explained in note 2 therein) in relation to the prior period figures. This adjustment has not been retrospectively applied to the prior year's comparative period in the final column above.

Balance Sheet

	Six months to 31 March 2016		Year to 30 September 2015
	£'000	£'000	£'000	£'000
Fixed asset investments*		26,234		28,259
Current assets:
Money market securities*	2,046		2,042
Debtors	286		136
Cash at bank	4,261		4,853
	6,593		7,031
Creditors: amounts falling due within one year	(213)		(201)
Net current assets		6,380		6,830
Net assets		32,614		35,089
Called up equity share capital		10,044		10,122
Share premium		2,401		1,893
Special distributable reserve		17,677		20,633
Capital redemption reserve		6,044		5,760
Capital reserve - realised losses		(482)		(1,548)
Capital reserve - holding losses		(2,006)		(861)
Revenue reserve		(1,064)		(910)
Total equity shareholders' funds		32,614		35,089
Net asset value per share		32.5p		34.7p

*Held at fair value through profit or loss

The statements were approved by the Directors and authorised for issue on 24 May 2016 and are signed on their behalf by:

Alex Hambro
Chairman
Company Number: 05074325

Cash flow statement

	Six months to 31 March 2016	Six months to 31 March 2015
	£'000	£'000
Reconciliation of profit to cash flows from operating activities
Loss before tax	(233)	(284)
(Increase)/Decrease in debtors	(150)	92
Increase in creditors	12	57
Gains on disposal of fixed assets	(143)	(28)
Gains on valuation of fixed asset investments	(41)	(74)
Outflow from operating activities	(555)	(237)
Cash flows from investing activities
Purchase of fixed asset investments	(3,826)*	(814)
Sale of fixed asset investments	6,035*	2,438
Inflow from investing activities	2,209	1,624
Cash flows from financing activities
Dividends paid	(2,042)	(975)
Purchase of own shares	(914)	(314)
Net proceeds from share issues	714	1,290
(Outflow)/Inflow from financing activities	(2,242)	1
(Decrease)/Increase in cash and cash equivalents	(588)	1,388
Opening cash and cash equivalents	6,895	8,641
Closing cash and cash equivalents	6,307	10,029

* These include £2m invested into Terido LLP, an Octopus managed partnership, and the subsequent repayment of this amount in the period.