Octopus AIM VCT 2 plc : Half-yearly report

8 augustus 2016

Half-yearly Results

8 August 2016

Octopus AIM VCT 2 plc, managed by Octopus Investments Limited, today announces the half-yearly results for the six months ended 31 May 2016.

These results were approved by the Board of Directors on 8 August 2016.

You may shortly view the half-yearly report in full by visiting  www.octopusinvestments.com/investors/shareholder-information/aim-vct-2/ . All other statutory information will also be found there.

FINANCIAL HEADLINES

78.5p    Net asset value per share as at 31 May 2016 (2015: 80.0p)

2.0p      Interim dividend declared for the half-year to 31 May 2016 (2015: 2.0p)

5.4%     Annualised Dividend Yield on share price as at 31 May 2016 (2015: 5.2%)  

About AIM VCT 2 PLC
Octopus AIM VCT 2 PLC (the "Company" or "Fund") is a venture capital trust ("VCT") which aims to provide shareholders with attractive tax-free dividends and long-term capital growth.

The Investment Manager is Octopus Investments Limited ("Octopus" or "Manager"). The Company was launched as Close IHT AIM VCT PLC and raised £25 million in March 2006 through an offer for subscription.

On 12 August 2010 the Company acquired the assets and liabilities of Octopus Third AIM VCT plc (formerly Octopus Second AIM VCT plc) ("the merger") and changed its name from Octopus IHT AIM VCT plc to Octopus Second AIM VCT plc. Shareholders of Octopus Third AIM VCT received 0.48356191 Ordinary shares in the Company for each Ordinary share they held prior to the merger. Prior to July 2009 Octopus Third AIM had two classes of shares, Ordinary and C shares.  The C shares converted into Ordinary shares in July 2009 and C shareholders received 2.4313 Ordinary shares for each C share held. The prospectus also raised a total of £6.4m for the Company.

A Top-up offer launched on 6 February 2012 and which closed on 5 April 2012 raised £1.3m for the Company. A Top-up offer launched on 25 April 2012 and which closed on 31 July 2012 raised a further £0.5m for the Company.

On 1 February 2013, the Board launched an offer for subscription with the target of raising £10.0m for the Company. The offer closed on 17 January 2014, having raised £5.9m.

On 30 January 2014, the Company name changed to Octopus AIM VCT 2 plc.

A combined new share offer was launched on 3 February 2014 to raise up to £4.1m. This closed on 28 March 2014, fully subscribed.

A combined fund-raise with Octopus AIM VCT plc was launched on 29 August 2014 to raise up to £8 million with an over-allotment facility of £4 million. This offer closed, fully subscribed, on 11 August 2015.

The Board decided to open a further Offer for subscription, again combined with Octopus AIM VCT plc, to raise up to £8 million with an overallotment facility of £4 million. This Offer was launched on 21 December 2015 and to date 9,998,805 shares have been issued for £7.8 million.

Financial Summary

	Six months to 31 May 2016	Six months to 31 May 2015	Year to 30 November 2015
Net assets (£'000s)	56,631	49,478	52,317
Net profit/(loss) after tax (£'000s)	138	2,353	4,047
Net asset value per share ('NAV')	78.5	80.0p	80.6p
Dividends paid	2.0p	2.0p	4.0p
Special Dividend paid	-	2.0p	2.0p
Interim dividend*	2.0p	2.0p	2.0p

*The interim dividend will be paid on 30 September 2016 to shareholders on the register on 16 September 2016. This dividend will be eligible for the DRIS.

Investment Policy
The Company's investment policy has been designed to enable it to comply with the VCT qualifying conditions. The Board intends that the long-term disposition of the Company's assets will be not less than 80 per cent in a portfolio of qualifying AIM, ISDX Growth Market traded investments or unquoted companies where the management view an initial public offering (IPO) on AIM or the ISDX Growth Market is a short to medium term objective. With the qualifying target achieved, the Board intends that approximately 20 per cent of its funds will be invested in non-qualifying investments generally comprising gilts, floating rate securities and short-term money market funds with, or issued by, major companies and institutions with a minimum Moody's long term debt rating of 'A'.  A proportion of the 20 per cent could be invested in authorised funds managed by Octopus or direct in equity investments and bonds. This provides a reserve of liquidity which should maximise the Company's flexibility as to the timing of investment acquisitions and disposals, dividend payments and share buybacks.

Risk is spread by investing in a number of different businesses across a range of industry sectors using a mixture of securities. The maximum amount invested in any one company is limited to the amount permitted pursuant to VCT legislation in a fiscal year and no more than 15 per cent of the Company's assets, at cost, will be invested in the same company.  The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale. However, shareholders should be aware that the Company's qualifying investments are held with a view to long-term capital growth as well as income and will often have limited marketability; as a result it is possible that individual holdings may grow in value to the point where they represent a significantly higher proportion of total assets prior to a realisation opportunity being available. Investments will normally be made using the Company's equity shareholders' funds and it is not intended that the Company will take on any borrowings.

The Company's Articles permit borrowings of amounts up to 10 per cent of the sum equal to the aggregate of the amount paid up on the allotted or issued share capital of the Company and the amount standing to the credit of the capital and revenue reserves of the Company (whether or not distributable) after adding thereto or deducting therefrom any balance to the credit or debit of the profit and loss account.

No material changes may be made to the Company's investment policy described above without the prior approval of shareholders by the passing of an Ordinary Resolution. The Directors will continually monitor the investment process and ensure compliance with the investment policy.

Chairman's Statement

Overview
The six months to 31 May 2016 was another unsettled period for the stock market, with attention moving from the international stage and fears about a slowdown in the Chinese economy at the beginning of the period to issues of domestic policy and the impending UK referendum on Europe in the second quarter of the year.  Despite all of this noise and some sharp movements in share prices, the market was surprisingly resilient overall and the indices finished the period very little changed from their level at the end of November 2015.

AIM continued to raise money for companies, albeit at a slower rate than in 2014 and 2015.  The fall in prices early in 2016 caused some potential new issues to delay their market debut although others did manage to raise money and float, with a notable pick-up in activity in May.  Once again, further fundraisings for existing business exceeded those for new issues, demonstrating that AIM continues to support its existing members.  VCTs have also been getting to grips with the new legislation which was introduced in November with the Royal Assent of the second Finance Bill.

Performance
Adding back the 2p paid out in dividends in the period, the Net Asset Value was unchanged over the six months.  This compares with a 2.6% rise in the Smaller Companies Index (ex Investment Trusts), a 0.1% increase in the FTSE All Share Index and a 1.0% rise in AIM, all on a total return basis.  Smaller companies performed slightly better than the FTSE 100 as the latter was held back by its international exposure at a time of fears about slowing international growth. However, the cautious tone of the market also impacted the share prices of early stage companies not yet making a profit, of which we hold a number in the portfolio, particularly in the pharmaceutical, medical device and technology sectors.  Poor performers in this category in the six months included Midatech Pharma, Nektan, Microsaic and Cambridge Cognition, but there were others such as Escher Group, Fusionex and Ergomed which remain profitable but have had downgrades to forecasts as a result of pursuing a more aggressive growth strategy and which have also suffered from weak share prices.

Among the more mature and profitable businesses which still account for more than 80% of the equity investments in the VCT there was also a more mixed performance than had been the case previously.  As the Referendum approached, a few of the larger established businesses such as Staffline and Vertu Motors saw their share prices decline as the market began to worry about the effect that an exit result could have on companies exposed to the consumer.  Staffline in particular is seen as being in the 'wrong' sector as well as sourcing a large percentage of factory and other workers for customers from Europe.  Vertu Motors shares have also been under pressure as a supplier of high ticket consumer goods even though most of its profit comes from servicing and second hand car sales rather than new car sales. The managers do not share the market's current pessimism about these companies which have been held in the portfolio for a number of years and where the management teams have successfully dealt with economic challenges in the past.

There were also a number of good contributors to performance in the six months, among them Idox, Quixant, GB Group, Breedon, Skyepharma and TLA.  Skyepharma and TLA were both the subject of takeover bids, with the former now resulting (post the period end) in a shareholding in Vectura Group and the latter due to list on Nasdaq later this year.  GB Group, Quixant, Tasty and Breedon all continued to grow in their different markets helped by some significant acquisitions.

In the period, the Company made two new qualifying investments totalling £970,000. The new investments were Yu Group plc and Osirium Technologies.  Yu Group trades as Yu Energy and is an independent supplier of gas and electricity to UK small and medium sized enterprises. Osirium is a UK based cyber-security software provider that protects the critical IT infrastructure of companies from attacks targeting privileged user accounts.

Your management continued to use non-qualifying investments to manage liquidity while awaiting new qualifying investment opportunities.  Existing holdings for this purpose include some AIM non-qualifying stocks, but under the new rules new AIM non-qualifying purchases are no longer permitted and to the extent that we use direct equity holdings we will in future use fully listed stocks.  In view of these rule changes, since the period end we have invested a further £4 million of the cash balances into Octopus managed portfolios of mixed equity and bond funds, adding to the individual investments already held with the objective of obtaining a better return on our cash. 

The only disposal during the period was Tangent Communications for net proceeds of £154,000, a net loss of £231,000.  Its attempt to turn itself into an on-line printing business had not been a success and the management team bought the business and took it private.

Share Buy-backs
In the six months to May 2016, the Company bought back 1,132,116 Ordinary shares.  It is evident from the conversations which your managers have that this facility remains an important consideration to investors.  Your Board remains committed to maintaining its policy of buying back shares at a 5% discount to NAV.

Dividend
The Board has declared an interim dividend of 2p. This will be paid on 30 September 2016 to shareholders on the register on 16 September 2016.

On 20 May 2016, the Company paid 2p of dividends, being the final dividend for the year ended 30 November 2015.

It remains the Board's intention to maintain a minimum annual dividend payment of 3.6p per share or a 5% yield based on average share price, whichever is the greater, which we would expect to pay in two instalments each year.

New VCT Regulations
VCTs have always been subject to UK regulations, not least as they confer tax benefits on investors.  In recent years these regulations have become subject themselves to European State Aid rules.  The Chancellor proposed new rules in his Summer Budget in July 2015 and, following discussions with European authorities in Brussels, these became law following the granting of Royal Assent in November 2015.  These are in addition to existing rules which already limited investment to companies with gross assets of no more than £15 million, 250 employees and where no more than £5 million of State Aided funds had been raised within the past 12 months.

The new rules now in force relate to the age of companies receiving a first investment, a lifetime limit on State Aided funds and rules designed to target any funds raised on a company's growth. They also recognise that there is a class of company which is 'knowledge intensive' and therefore hungrier for capital, and some of the limits are more generous for these types of companies.

To summarise the changes, in order to qualify companies must:

• have fewer than 250 full time equivalent employees; and
• have less than £15 million of gross assets at the time of investment and no more than £16 million immediately post investment; and
• be less than seven years old (or 10 years if a knowledge intensive company) if raising State Aided funds for the first time; and
• have raised no more than £5 million of State Aided funds in the previous 12 months and less than the lifetime limit of £12 million (or £20 million if a knowledge intensive company); and
• produce a business plan to show that its funds are being raised for growth.

Follow-on investments are allowed to provide further capital for an existing investment up to the lifetime limit, and in certain circumstances a company may obtain clearance to raise money to develop a new business or market. Money raised from VCTs is not allowed to be used for acquisitions (unless they qualify too), or to buy out debt or existing equity. In addition, non-qualifying purchases of AIM shares are no longer allowed.

Draft clarification notes to go with the VCT legislation have only been published relatively recently and so it is still too early to come to any firm conclusions about what effect these new rules will have on VCT qualifying deal flow for AIM companies.  Your VCT has made two investments since the rules became law and has seen a steady flow of qualifying opportunities.  At 90%, the VCT is well above the minimum 70% qualifying requirement and therefore under no immediate pressure to invest its cash.

Fundraising
The current prospectus offer to raise up to £12 million, launched as part of a combined fundraise with the Octopus AIM VCT in December 2015, remains open with £4.2 million of capacity remaining at the time of writing.

Outlook
The current headlines are dominated by speculation about the likely effect of the Referendum result on our economy in both the short and longer term as well as the shape of our eventual relationship with Europe and the rest of the world.  The initial political turmoil post the announcement of a majority vote to leave Europe was unhelpful to share prices and your VCT's NAV suffered. The political situation has now found some firmer foundations with the swift appointment of a new Prime Minister and this has calmed the markets and allowed share prices to recover some of their losses.

These questions are unlikely to be settled quickly and it seems therefore that investors have to be prepared for continued bouts of uncertainty. However, we have seen a number of encouraging trading statements from companies in the portfolio in the past two months with more news to come with the interim results season in September.  The portfolio now contains 70 holdings across a range of sectors including several such as Craneware, Fusionex and GB Group that have significant international exposure.  Domestic companies such as Breedon, Vertu and Staffline have already demonstrated their management's ability to grow their businesses successfully in difficult economic conditions.   The balance of the portfolio towards profitable companies remains, and the cash available for new investments will be able to take advantage of any weakness in share prices that may result from the current uncertainty.  With the VCT 90% invested in qualifying companies for HMRC purposes your manager can afford to be selective about new investments.

 Keith Mullins
Chairman
8 August 2016

Investment Portfolio

Investments	Sector	Book cost as at 31 May 2016 (£'000)	Cumulative change in fair value (£'000)	Fair Value at 31 May 2016 (£'000)	Movement in the period to 31 May 2016 (£'000)	% equity held by AIM VCT 2 plc	% equity held by all funds managed by Octopus
Breedon Aggregates Limited	Construction & Materials	573	2,840	3,413	334	0.42%	1.63%
GB Group plc	Software	477	1,824	2,301	150	0.58%	8.63%
Idox plc	Software	356	1,911	2,267	581	1.04%	3.53%
Quixant plc	Technology Hardware	465	1,705	2,170	535	1.56%	6.39%
Animalcare Group plc	Pharmaceuticals & Biotech	824	1,258	2,082	26	4.16%	6.78%
Tasty plc	Travel & Leisure	336	1,628	1,964	(78)	2.09%	5.20%
TLA Worldwide plc	Media	538	982	1,520	323	1.88%	4.69%
Staffline Recruitment plc	Support Services	225	1,122	1,347	(479)	0.44%	11.23%
Brooks MacDonald Group plc	General Financial	610	654	1,264	(130)	0.54%	8.78%
Netcall plc	Software	421	807	1,228	(64)	1.85%	4.47%
Craneware plc	Software	479	732	1,211	(23)	0.58%	1.85%
Learning Technologies Group plc	Support Services	880	269	1,149	370	0.93%	2.32%
Vertu Motors plc	General Retail	777	315	1,092	(361)	0.47%	4.94%
Adept Telecom plc	Fixed Line Telecommunications	502	430	932	(36)	1.59%	3.77%
RWS Holdings plc	Support Services	249	680	929	90	0.20%	6.77%
Skyepharma plc	Pharmaceuticals & Biotech	448	431	879	258	0.18%	0.53%
Ergomed plc	Pharmaceuticals & Biotech	960	(146)	814	(166)	1.49%	7.67%
Restore plc	Support Services	311	502	813	94	0.24%	9.53%
Plastics Capital plc	Chemicals	485	259	744	(14)	2.05%	8.76%
CityFibre Infrastructure Holdings plc	Fixed Line Telecommunications	739	(7)	732	(94)	0.44%	1.59%
Gooch & Housego plc	Electronic & Electrical	326	398	724	16	0.33%	12.41%
DP Poland plc	Travel & Leisure	364	322	686	79	1.86%	4.66%
Escher Group Holdings plc	Software	753	(67)	686	(243)	2.36%	5.51%
Vianet Group plc	Support Services	867	(185)	682	(14)	2.57%	4.54%
Brady plc	Software	647	15	662	(112)	1.23%	3.02%
Abcam plc	Pharmaceuticals & Biotech	597	43	640	66	0.05%	2.22%
Advanced Medical Solutions plc	Healthcare Equipment	505	117	622	91	0.15%	8.04%
Osirium Technologies	Software	500	109	609	109	3.08%	15.42%
Oxford Pharmascience Group plc	Pharmaceuticals & Biotech	900	(293)	607	113	0.75%	3.50%
Nektan Limited	Travel & Leisure	893	(289)	604	(320)	1.75%	16.21%
Next Fifteen Plc	Media	458	131	589	73	0.30%	6.92%
Yu Group Plc	Electronic & Electrical	470	114	584	114	1.81%	9.60%
Clinigen Group plc	Pharmaceuticals & Biotech	625	(51)	574	(119)	0.09%	3.42%
Nasstar plc	Software	320	240	560	32	1.66%	7.06%
EKF Diagnostics plc	Healthcare Equipment	864	(377)	487	(22)	0.95%	2.15%
Judges Scientific plc	Electronic & Electrical	209	266	475	5	0.55%	1.38%
Access Intelligence plc	Software	446	18	464	18	2.56%	5.18%
Omega Diagnostics Group plc	Healthcare Equipment	318	140	458	43	2.63%	6.15%
SQS Software plc	Software	207	244	451	(118)	0.30%	13.76%
Tyratech plc	Chemicals	400	33	433	133	3.64%	19.87%
Cello Group plc	Media	205	226	431	44	0.51%	5.29%
Ideagen plc	Software	280	148	428	28	0.44%	5.29%
Haydale Plc	Chemicals	399	25	424	(5)	1.64%	8.99%
Sinclair Pharma plc	Pharmaceuticals & Biotech	274	124	398	(28)	0.22%	0.55%
Gamma Communications plc	Mobile Telecommunications	326	54	380	(11)	0.09%	7.62%
Bond International Software plc	Software	303	48	351	(58)	0.98%	2.97%
Gear4Music plc	Leisure Goods	372	(24)	348	(35)	1.33%	5.10%
Mattioli Woods plc	General Financial	101	208	309	6	0.19%	2.32%
Iomart Group plc	Software	178	92	270	(29)	0.09%	8.49%
Sphere Medical	Healthcare Equipment	400	(144)	256	6	1.76%	4.41%
Cambridge Cognition Holdings plc	Healthcare Equipment	400	(183)	217	(269)	2.80%	14.59%
Proxama plc	Software	509	(296)	213	111	1.96%	11.85%
Fusionex International plc	Software	188	17	205	(236)	0.26%	1.22%
Midatech plc	Pharmaceuticals & Biotech	400	(196)	204	(186)	0.45%	2.96%
Scientific Digital Imaging plc	Healthcare Equipment	119	30	149	(7)	2.32%	12.00%
WANdisco plc	Software	160	(14)	146	59	0.25%	0.63%
ReNeuron Group plc	Pharmaceuticals & Biotech	216	(76)	140	22	0.14%	1.17%
TP Group plc	Industrial Engineering	452	(314)	138	28	0.87%	6.30%
Futura Medical plc	Pharmaceuticals & Biotech	408	(287)	121	(47)	0.72%	5.17%
MyCelx Technologies plc	Oil Equipment	980	(890)	90	(126)	2.89%	9.19%
Microsaic Systems plc	Electronic & Electrical	416	(332)	84	(185)	1.53%	8.57%
Enteq Upstream plc	Oil Equipment	687	(605)	82	-	1.15%	3.70%
Mears Group plc	Support Services	51	20	71	(10)	0.02%	0.14%
Lombard Medical Technologies plc	Healthcare Equipment	589	(542)	47	(1)	0.25%	0.53%
Altitude Group plc	Support Services	24	7	31	4	0.65%	4.53%
1Spatial plc	Support Services	200	(172)	28	(5)	0.09%	0.23%
Work Group plc	Support Services	473	(458)	15	(12)	2.05%	6.15%
Clean Air Power Limited	Automobiles & Parts	323	(323)	-	-	1.31%	8.78%
Total quoted investments		30,757	15,267	46,024	318
Rated People Limited	Software	236	(178)	58	37	0.34%	1.49%
Hasgrove plc	Media	153	(9)	144	-	0.00%	4.38%
Total unquoted investments		389	(187)	202	37
Total fixed asset investments		31,146	15,080	46,226	355
Money market funds				5,410
Total fixed asset investments and money market funds				51,636
Cash at bank				5,168
Debtors less creditors				(173)
Total net assets				56,631

Responsibility Statement of the Directors in respect of the half-yearly report

We confirm that to the best of our knowledge:

• the half-yearly financial statements have been prepared in accordance with the statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board;
• the half-yearly report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules, being:
• an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements.
• a description of the principal risks and uncertainties for the remaining six months of the year; and
• a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

Keith Mullins
Chairman
8 August 2016

Income Statement
	Six months to 31 May 2016			Six months to 31 May 2015			Year to 30 November 2015
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gain/(loss) on disposal of fixed asset investments	-	87	87	-	(11)	(11)	-	172	172
Gain/(loss) on valuation of fixed asset investments	-	355	355	-	2,768	2,768	-	4,555	4,555
Income	289	-	289	198	-	198	547	-	547
Investment management fees	(104)	(312)	(416)	(115)	(346)	(461)	(230)	(689)	(919)
Other expenses	(177)	-	(177)	(141)	-	(141)	(308)	-	(308)
Profit/(loss) on ordinary activities before tax	8	130	138	(58)	2,411	2,353	9	4,038	4,047
Taxation on profit/(loss) on ordinary activities	-	-	-	-	-	-	-	-	-
Profit/(loss) on ordinary activities after tax	8	130	138	(58)	2,411	2,353	9	4,038	4,047
Return per share - basic and diluted	0.0p	0.2p	0.2p	(0.1)p	4.1p	4.0p	0.0p	6.6p	6.6p

• 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 half-yearly report.
• the Company has no recognised gains or losses other than those disclosed in the income statement.

Statement of changes in equity

	Share Capital	Share Premium	Special distributable reserves	Capital reserve realised	Capital reserve unrealised	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 December 2014	6	8,979	34,183	(10,457)	12,452	(147)	45,016
Management fee allocated as capital expenditure	-	-	-	(346)	-	-	(346)
Current period (loss)/gains on disposal	-	-	-	(11)	-	-	(11)
Current period losses on fair value of investments	-	-	-	-	2,768	-	2,768
Prior periods' holding gains/losses now realised	-	-	-	2,608	(2,608)	-	-
Loss on ordinary activities after tax	-	-	-	-	-	(58)	(58)
Total other comprehensive income for the period	-	-	-	-	-	-	-
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	-	-	(525)	-	-	-	(525)
Issue of shares	-	5,463	-	-	-	-	5,463
Share issue costs	-	(352)	-	-	-	-	(352)
Cash received for shares to be issued	-	-	-	-	-	-	-
Dividends paid	-	-	(2,477)	-	-	-	(2,477)
Balance as at 31 May 2015	6	14,090	31,181	(8,206)	12,612	(205)	49,478
As at 1 December 2014	6	8,979	34,183	(10,457)	12,452	(147)	45,016
Management fee allocated as capital expenditure	-	-	-	(689)	-	-	(689)
Current period gains on disposal	-	-	-	172	-	-	172
Current period gain on fair value of investments	-	-	-	-	4,555	-	4,555
Prior periods' holding gains/losses now realised	-	-	-	2,601	(2,601)	-	-
Loss on ordinary activities after tax	-	-	-	-	-	9	9
Total other comprehensive income for the period	-	-	-	-	-	-	-
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	-	-	(925)	-	-	-	(925)
Cancellation of Share Premium	-	(5,362)	5,362	-	-	-	-
Issue of shares	-	8,320	-	-	-	-	8,320
Share issue costs	-	(362)	-	-	-	-	(362)
Dividends paid	-	-	(3,779)	-	-	-	(3,779)
Balance as at 30 November 2015	6	11,575	34,841	(8,373)	14,406	(138)	52,317
As at 1 December 2015	6	11,575	34,841	(8,373)	14,406	(138)	52,317
Management fee allocated as capital expenditure	-	-	-	(312)	-	-	(312)
Current period gains on disposal	-	-	-	87	-	-	87
Current period gain on fair value of investments	-	-	-	-	355	-	355
Prior periods' holding gains/losses now realised	-	-	-	(318)	318	-	-
Loss on ordinary activities after tax	-	-	-	-	-	8	8
Total other comprehensive income for the period	-	-	-	-	-	-	-
Contributions by and distributions to owners:
Repurchase and cancellation of own shares	-	-	(849)	-	-	-	(849)
Issue of shares	1	6,675	-	-	-	-	6,676
Share issue costs	-	(218)	-	-	-	-	(218)
Dividends paid	-	-	(1,433)	-	-	-	(1,433)
Balance as at 31 May 2016	7	18,032	32,559	(8,916)	15,079	(130)	56,631

Balance Sheet
	As at 31 May 2016		As at 31 May 2015		As at 30 November 2015
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments held at fair value through profit and loss		46,226		38,683		44,968
Current assets:
Current asset investments held at fair value through profit and loss	5,410		589		5,397
Debtors	62		12		54
Cash at bank	5,168		12,889		2,010
	10,640		13,490		7,461
Creditors: amounts falling due within one year	(235)		(2,695)		(112)
Net current assets		10,405		10,795		7,349
Net assets		56,631		49,478		52,317
Called up equity share capital		7		6		6
Share premium		18,032		14,090		11,575
Special distributable reserve		32,559		31,181		34,841
Capital reserve - realised		(8,916)		(8,206)		(8,373)
- unrealised		15,079		12,612		14,406
Revenue reserve		(130)		(205)		(138)
Total equity shareholders' Funds		56,631		49,478		52,317
Net asset value per share		78.5p		80.0p		80.6p

The statements were approved by the Directors and authorised for issue on 8 August 2016 and are signed on their behalf by:

Keith Mullins
Chairman

Company Number: 05528235

Statement of Cash Flow

	Six months to 31 May 2016	Six months to 31 May 2015	Year to 30 November 2015
	£'000	£'000	£'000
Cash flows from operating activities
Return on ordinary activities before tax	138	2,353	4,047
Adjustments for:
(Increase)/decrease in debtors	(8)	385	343
Increase in creditors	123	2,588	5
(Gain)/loss on disposal of fixed assets	(87)	11	(172)
Gain on valuation of fixed asset investments	(355)	(2,768)	(4,555)
Cash from operations	(189)	2,569	(332)
Income taxes paid	-	-	-
Net cash generated from operating activities	(189)	2,569	(332)
Cash flows from investing activities
Purchase of fixed asset investments	(970)	(3,359)	(8,883)
Sale of fixed asset investments	155	4,177	5,387
Net cash flows from investing activities	(815)	818	(3,496)
Cash flows from financing activities
Purchase of own shares	(849)	(525)	(925)
Share issues	6,457	5,111	7,958
Dividends Paid	(1,433)	(2,477)	(3,779)
Net cash flows from financing activities	4,175	2,109	3,254
Increase/(Decrease) in cash and cash equivalents	3,171	5,496	(574)
Opening cash and cash equivalents	7,407	7,982	7,981
Closing cash and cash equivalents	10,578	13,478	7,407
Cash and cash equivalents comprise
Cash at Bank	5,168	12,889	2,010
Money Market Funds	5,410	589	5,397
	10,578	13,478	7,407

Notes to the Half-yearly Report

1.          Basis of preparation
The unaudited half-yearly results which cover the six months to 31 May 2016 have been prepared in accordance with the Financial Reporting Council's (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in November 2014.

2.          Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 May 2016 do not constitute statutory accounts within the meaning of Section 415 of the Companies Act 2006. The comparative figures for the year ended 30 November 2015 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements, in accordance with chapter 3, part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company's auditor.

3.          Earnings per share
The earnings per share at 31 May 2016 are calculated on the basis of 67,932,426 (31 May 2015: 58,460,955 and 30 November 2015: 61,318,461) shares, being the weighted average number of Ordinary 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.

4.          Net asset value per share
The net asset value per share is based on net assets as at 31 May 2016 divided by 72,175,291 (31 May 2015: 61,885,583 and 30 November 2015: 64,934,873) Ordinary shares in issue at that date.
           
5.          Dividends
The Directors have declared a dividend of 2 pence per Ordinary share, payable from the special distributable reserve. This dividend will be paid on 30 September 2016 to those shareholders on the register at 16 September 2016.

6.         Buybacks/shares issued
During the six months ended 31 May 2016 the Company repurchased the following shares:

Date	No. of shares	Price (p)
23 December 2015	190,237	75.5
12 February 2016	138,398	72.5
24 March 2016	106,852	73.5
22 April 2016	555,667	76.0
20 May 2016	140,962	74.0

The weighted average price of all buybacks during the period was 75.0 pence per share.

During the six months ended 31 May 2016 the Company issued the following shares:

Date	No. of shares	Price (p)
04 February 2016	2,356,318	81.1
04 February 2016 (DRIS)	71	78.1
11 March 2016	1,172,938	81.6
31 March 2016	2,109,439	82.4
05 April 2016	1,523,936	82.4
14 April 2016	539,023	83.9
12 May 2016	480,749	82.4
20 May 2016 (DRIS)	190,060	77.9

The weighted average allotment price of all shares issued during the period was 81.9 pence per share.

7.         Principal risks and uncertainties
The Company's assets consist of equity, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company's Annual Report and Accounts for the year ended 30 November 2015. The Company's principal risks and uncertainties have not changed materially since the date of that report.

8.         Related party transactions
The Company has employed Octopus Investments Limited throughout the period as Investment Manager. Octopus has also been appointed as Custodian of the Company's investments under a Custodian Agreement. The Company has paid Octopus Investments £416,000 as a management fee in the period to 31 May 2016 (31 May 2015: £461,000 and 30 November 2015: £919,000). The management fee is payable quarterly in advance and is based on 2.0% of net assets at quarterly intervals.     

9.         Post balance sheet events

Since 31 May 2016 the Company has made the following investments:

Company	Date	Cost (£)
Octopus Portfolio Manager - Profile 3*	9 June 2016	665,000
Octopus Portfolio Manager - Profile 4*	9 June 2016	665,000
Octopus Portfolio Manager - Profile 3*	16 June 2016	665,000
Octopus Portfolio Manager - Profile 4*	16 June 2016	665,000
Octopus Portfolio Manager - Profile 3*	27 June 2016	670,000
Octopus Portfolio Manager - Profile 4*	27 June 2016	670,000
Genedrive plc (formerly Epistem Holdings)	8 July 2016	140,000

*Octopus Portfolio Manager Profile 3 and Profile 4 refer to the Defensive Capital Growth and Conservative Capital Growth portfolios, respectively. These funds are managed by Octopus.

The investment into the Octopus managed portfolios was carried out with the objective of obtaining a better return on the cash held by the VCT. This came about as a result of new VCT rules, as discussed in the Chairman's statement.

Since 31 May 2016 the Company has bought back the following shares:

Date	No. of shares	Price (p)
1 July 2016	140,000	68.5
15 July 2016	213,952	71.0

Since 31 May 2016 the Company has issued the following shares:

Date	No. of shares	Price (p)
22 June 2016	785,094	81.6
5 August 216	1,031,308	83.9

10.         Additional information
Copies of this report are available from the registered office of the Company at 33 Holborn, London, EC1N 2HT.

---