Half-yearly report

Octopus Titan VCT 2 PLC Half-Yearly Results 29 June 2009 Octopus Titan VCT 2 PLC, managed by Octopus Investments Limited, today announces the Half-Yearly results for the six months ended 30 April 2009. These results were approved by the Board of Directors on 29 June 2009. You may view the Half-Yearly Report in full at www.octopusinvestments.com by navigating to the VCT Meetings & Reports under the 'Services' section. About Octopus Titan VCT 2 PLC Octopus Titan VCT 2 plc ("Titan 2", "Company" or "Fund") is a venture capital trust ("VCT") which aims to provide shareholders with attractive tax-free dividends and long-term capital growth, by investing in a diverse portfolio of predominately unquoted companies. The Company is managed by Octopus Ventures Limited ("Octopus" or "Manager"). Octopus Ventures Limited is a subsidiary of Octopus Investments Limited. Titan 2 was incorporated on 12 October 2007 with the first allotment of equity being 19 December 2007. In collaboration with Octopus Titan VCT 1 plc ("Titan 1"), the funds raised over £30.8 million in aggregate (£29.5 million net of expenses) through an offer for subscription which closed on 16 May 2008. Titan 2 will invest primarily in unquoted UK smaller companies and aims to deliver absolute returns on its investments. Financial Summary Six months to Six months to Year to 30 30 31 October April 2009 April 2008 2008 Net assets (000s) £14,292 £14,509 £14,036 Net profit/(loss) after tax (000s) £334 £70 £(722) Net asset value per share ("NAV") 91.5p 95.0p 89.9p Cumulative dividends paid since launch 0.5p - - Total return (NAV plus dividends paid) 92.0p 95.0p 89.9p Dividend proposed at the period end 0.5p - 0.5p The table below shows the movement in net asset value per share ("NAV") and lists the dividends that have been paid since the launch of Titan 2: Dividends paid NAV + cumulative Period Ended NAV in period dividends 30 April 2008 95.0p - 95.0p 31 October 2008 89.9p - 89.9p 30 April 2009 91.5p 0.5p 92.0p Chairman's Statement I'm am pleased to present the second half-yearly report covering the six month period to 30 April 2009 for Octopus Titan VCT 2 plc. Performance The total return (being the change in NAV plus dividends paid in the period) of the Fund rose 2.1p or 2.3% for the period. This is particulalry pleasing given the period under review has seen considerable volatility in the stock market with a low on 10 March 2009 before a recovering somewhat to where we are today. The portfolio of non-qualifying investments in money market securities managed by Goldman Sachs and Open Ended Investments Companies ("OEICs") managed by Octopus has shown signifcant gains since the year end. The building of the quaifying investment portfolio has continued apace with three new investments made in the period. A further investment has been made since the period end too. Disappointingly however, our investment in GBE Environmental has been written down to nil due to the company being placed into administration. Further details of both the non-qualifying and qualifying investment portfolios are set out below. Dividend and Dividend Policy The Board's primary aim is to create distributable capital gains. We anticipate declaring modest dividends out of revenue reserves in the early years although these are likely to be smaller than originally envisaged due to the substantial reduction in interest rates. That said, for the period ended 30 April 2009, the Board has declared an interim dividend of 0.5p per share, payable from revenue reserves. This dividend will be paid to shareholders, on 31 July 2009, who are on the register on 10 July 2009. Investment Portfolio Non-qualifying investments Our portfolio of corporate bonds and floating rate notes managed by Goldman Sachs has recovered significantly in value since the year end in October and currently all are trading above their purchase costs. As I reported in the Annual Report earlier this year, the Board closely monitor the performance of the portfolio managed by Goldman Sachs. The focus remains on capital preservation and, with the mix of bonds, floating rate notes and money market funds in the portfolio, the Board are confident this objective should be achieved whilst providing a modest level of income for the Fund whilst the funds await deployment in qualifying investments. Furthermore, our investment in the CF Octopus Partner Fund (Absolute Return) has gained some £540,000 over the six months to 30 April 2009. This investment, along with our investment in the CF Octopus Partner Fund (UK Smaller Companies) are long term, non-qualifying holdings, and despite the disappointing performance to date of the latter fund, we expect it to recover this lost ground over the longer time period we have in mind. Qualifying investments Calastone and True Knowledge continue to trade to plan and are held at cost within these accounts. Our investment in The Key Revolution is shown at a lower valuation than at the price of our original investment. During the period the company fell behind its budget as a result of a longer development period of the Mobiu product than initially forecast and, as a result, the company approached its shareholders for additional funds whilst streamlining the cost base of the business. Titan 2, along with Titan 1, each invested £155,000 in this investment round, the investment has been reduced by £263,000 and is now valued on the basis of this fund raising round. However, it is unfortunate to be reporting a full write down in the value of our investment in GBE Environmental. The Manager had been in discussions with the management team who have had problems with the development of new products. This, combined with the inability to fully exploit its existing technologies given the current market conditions, led to the company being placed into administration with little likelihood of recovering any of our investment. New qualifying investments As mentioned above, there have been three new qualifying investments in the period with a fourth investment after the period end. These are all detailed below: Zoopla Limited In January, Titan 2 made an investment of £559,000 into Zoopla Limited, an award-winning online property information service and community website, presenting information on house pricing, free valuation estimates, for sale listings, and local community information. Zoopla has become one of the UK's leading website for house prices and value data, as it provides the most comprehensive source of residential property market information. Phasor Solutions Limited In March Titan 2 invested £100,000 into Phasor Solutions Limited. Phasor is a research and development company in the process of producing flat panel phased array antennae, which will be a fraction of the cost associated with traditional phased array technology. They are used across many industries including travel and engineering and can facilitate communication signals. Phasor has the potential to transform the 'communication on the move' market through its phased array product offering. Additionally, Phasor's product range, which will be expanded to include radars, has numerous other applications in both the aerospace and military sectors. e-Therapeutics plc Also in March, Titan 2 invested £450,000 into e-Therapeutics plc a business listed on the Alternative Investment Market. e-Therapeutics focuses on three core areas: the discovery of new drugs; discovering novel uses for existing drugs; and analysis of the interactions between different drugs. The company has developed a unique drug discovery technology that enables it to assess drug candidates for high efficacy and safety ahead of clinical trials. The use of this technology dramatically reduces the time between drug discovery and market applicability, and reduces the risks associated with clinical trials. Phase Vision Limited After the end of the period Titan 2 completed an investment into Phase Vision Limited. Phase Vision is a manufacturer of optical inspection solutions for high-speed, three dimensional shape measurement with micro-scale accuracy. The company has developed (and patented) a unique optical approach to the measurement of very large industrial items with free-form or curved surfaces, such as ship propellers and aircraft wings to tighten manufacturing tolerances, increase throughput and reduce waste. Principal Risks and Uncertainties The principal risks and uncertainties are set out in note 6 of the Notes to the Half-Yearly Report on page 13. Outlook Our Manager is presently seeing a strong deal flow and they are in active negotiations with several businesses which they hope will lead to an investment. Since smaller businesses lag the general economy, we are hopeful that we will be able to reach our investment target while prices are more realistic than in recent years. As has been seen from our investment in GBE Environmental, investing in early stage technology businesses carries with it significant risk. Your Board believes that the combination of co-investment with the Octopus Investor Group alongside strong due diligence will reduce these risks but not, of course, eliminate them. I am pleased to report that the unrealised losses on our quoted portfolio, which followed the unfortunate events of last autumn, have largely reversed leading to the modest uplift in our net asset value. However, since we need to retain significant resources in cash or near cash (with low yield at present) and minimal income from the unquoted portfolio, it is difficult to cover the combined running costs. However your Board remain confident that current circumstances will allow us to achieve our objective of absolute return in the medium term. If you have any questions on any aspect of your investment, please write to me c/o Octopus or call one of the team on 0800 316 2347. John Hustler Chairman 29 June 2009 Investment Portfolio % equity Carrying % held by value at equity all Unrealised 30 held funds Investment profit/ April by managed Qualifying at cost (loss) 2009 Titan by Investments Sector (£'000) (£'000) (£'000) 2 Octopus True Knowledge Media Limited 682 - 682 6.8% 32.1% Calastone Technology Limited 635 - 635 7.5% 23.5% Zoopla Limited Media 559 - 559 4.7% 16.7% e-Therapeutics Consumer lifestyle plc & wellbeing 450 - 450 0.4% 5.1% The Key Telecommunications Revolution Limited 566 (263) 303 12.4% 35.9% Phasor Technology Solutions Limited 100 - 100 2.0% 33.1% GBE Environmental Limited Environmental 325 (325) - 11.3% 22.5% Total qualifying investments 3,317 (588) 2,729 Money market securities 7,568 (18) 7,550 OEICs 3,542 425 3,967 Cash at bank 99 - 99 Total investments 14,526 (181) 14,345 Net current assets (52) Total net assets 14,293 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 John Hustler Chairman 29 June 2009 Income Statement Six months to 30 Six months to 30 Year to 31 October April 2009 April 2008 2008 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Loss on disposal of fixed asset investments - - - - - - - - - Gain on disposal of current asset investments - 73 73 - - - - - - Loss on valuation of fixed asset investments - (372) (372) - - - - (215) (215) Gain/(loss) on valuation of current asset investments - 527 527 - 98 98 - (437) (437) Income 339 - 339 65 - 65 326 - 326 Investment management fees (34) (104) (138) (11) (33) (44) (55) (164) (219) Other expenses (95) - (95) (49) - (49) (177) - (177) Profit/(loss) on ordinary activities before tax 210 124 334 5 65 70 94 (816) (722) Taxation on profit/(loss) on ordinary activities - - - - - - - - - Profit/(loss) on ordinary activities after tax 210 124 334 5 65 70 94 (816) (722) Return per share - basic and diluted 1.4p 0.8p 2.2p 0.1p 1.6p 1.8p 1.0p (8.3)p (7.3)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 half-yearly report * The Company has no recognised gains or losses other than those disclosed in the income statement. Reconciliation of Movements in Shareholders' Funds Six months Six months Year to ended ended 31 October 30 April 2009 30 April 2008 2008 £'000 £'000 £'000 Shareholders' funds at start of period 14,036 - - Profit/(loss) on ordinary activities after tax 334 70 (722) Issue of equity (net of expenses) - 14,439 14,758 Dividends paid (78) - - Shareholders' funds at end of period 14,292 14,509 14,036 Balance Sheet As at 30 April As at 30 As at 31 2009 April 2008 October 2008 £'000 £'000 £'000 £'000 £'000 £'000 Fixed asset investments 2,729 - 1,837 Current assets: Investments 11,517 9,304 11,663 Debtors 50 5 162 Cash at bank 97 5,786 461 11,664 15,095 12,286 Creditors: amounts falling due within one year (101) (586) (87) Net current assets 11,563 14,509 12,199 Net assets 14,292 14,509 14,036 Called up equity share capital 1,562 1,528 1,562 Share premium 13,196 12,911 13,196 Capital reserve - Realised (115) 65 (600) - Unrealised (578) - (216) Revenue reserve 227 5 94 Total equity shareholders' funds 14,292 14,509 14,036 Net asset value per share 91.5p 95.0p 89.9p Cash Flow Statement Six months Six months to to Year to 30 April 30 April 31 October 2009 2008 2008 £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 233 553 (145) Capital expenditure and financial investment: Purchase of investments (1,264) - (2,052) Management of liquid resources: Purchase of cash equivalent investments (1,551) (9,206) (24,433) Sale of cash equivalent investments 2,296 - 12,333 Dividends paid (78) - - Financing: Issue of equity (net of expenses) - 15,280 15,443 Share issue expense - (841) (685) (Decrease)/increase in cash at bank (364) 5,786 461 Reconciliation of net cash flow to movement in net funds Six months Six months to to Year to 30 April 30 April 31 October 2009 2008 2008 £'000 £'000 £'000 (Decrease)/increase in cash at bank (364) 5,786 461 Movement in liquid resources (146) 9,303 11,663 Opening net cash resources 12,124 - - Net cash resources at end of period 11,614 15,089 12,124 Reconciliation of profit before taxation to cash flow from operating activities Six months Six months to to Year to 30 April 30 April 31 October 2009 2008 2008 £'000 £'000 £'000 Profit/(loss) on ordinary activities before tax 334 70 (722) Gain on disposal of current asset investments (73) - - Loss on valuation of fixed asset investments 372 - 215 (Gain)/loss on valuation of current asset investments (527) (98) 437 Decrease/(increase) in debtors 112 (5) (162) Increase in creditors 15 586 87 Net cash inflow/(outflow) from operating activities 233 553 (145) Notes to the Half-Yearly Report 1. Basis of preparation The unaudited half-yearly results which cover the six months to 30 April 2009 have been prepared in accordance with the Accounting Standard Board's (ASB) statement on half-yearly financial reports (July 2007) and adopting the accounting policies set out in the statutory accounts of the Company for the year ended 31 October 2008, which were prepared under UK GAAP and in accordance with the Statement of Recommended Practice for Investment Companies issued by the Association of Investment Companies in July 2003, revised in December 2005. 2. Publication of non-statutory accounts The unaudited half-yearly results for the six months ended 30 April 2009 do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The comparative figures for the year ended 31 October 2008 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 under Section 235 of the Companies Act 1985 was unqualified. This half-yearly report has not been reviewed by the Company's auditor. 3. Earnings per share The revenue return per share is based on the net revenue return on ordinary activities after taxation of £210,000 (31 October 2008: £94,000 and 30 April 2008: £5,000) whilst the capital per share is based on the capital profit on ordinary activities after taxation of £124,000 (31 October 2008: £(816,000) and 30 April 2008: £65,000). This is in respect of 15,616,881 (31 October 2008: 9,832,696, 30 April 2008: 3,942,592) 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. 4. Net asset value per share The calculation of net asset value per share as at 30 April 2009 is based on net assets of £14,292,000 (31 October 2008: £14,036,000 and 30 April 2008: £14,509,000) divided by the 15,616,881 (31 October 2008: 15,616,881, 30 April 2008: 15,279,889) shares in issue at that date. 5. Dividends The interim dividend of 0.5 pence per share for the six months ending 30 April 2009 will be paid on 31 July 2009, to those shareholders on the register on 10 July 2009. This will be paid from revenue reserves. A final dividend, for the year ending 31 October 2009, of 0.5 pence per share was paid on 9 April 2009 to shareholders who were on the register on 3 March 2008. This was paid wholly from revenue reserves. 6. Principal Risks and Uncertainties The Company's assets consist of equity and fixed-rate interest investments, 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 31 October 2008. The Company's principal risks and uncertainties have not changed materially since the date of that report. 7. Related Party Transactions Octopus acts as the investment manager of the Company. Under the management agreement, Octopus receives a fee of 2.0 per cent per annum of the net assets of the Company for the investment management services. During the period, the Company incurred management fees of £138,000 (31 October 2008: £219,000 and 30 April 2008: £44,000) payable to Octopus. At the period end there was £4,000 (31 October 2008: Nil and 30 April 2008: Nil) outstanding to Octopus. Furthermore, Octopus Investments Limited provides administration and company secretarial services to the Company. Octopus Investments Limited receives a fee of 0.3 per cent per annum of net assets of the Company for administration services and £7,500 per annum for company secretarial services. 8. Copies of this statement are being sent to all shareholders. Copies are also available from the registered office of the Company at 8 Angel Court, London, EC2R 7HP, and will also be available to view on the Investment Manager's website at www.octopusinvestments.com. ---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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