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Since the reporting date, the Company has invested £13.3 million in two new investments and £3 million in a follow-on investment. I remain optimistic for the future given the composition of the portfolio and recent performance.

Murray Steele
Chair
24 September 2021
Interim Management Report

Performance
In the six months under review, the NAV Total Return has increased by 6.3%. This performance is attributable to positive fair value movements across the majority of the investments in the portfolio but, in particular, continued strong contribution from the newer technology-focused investments, which now make up most of the portfolio.

The value of the portfolio has increased by £16.7 million, excluding additions. The largest contributors were Perfect Ward Limited (£3.4 million valuation increase), Sova Assessment Limited (£2.1 million valuation increase) and Dyscova Limited (£2.0 million valuation increase), supported by positive contributions from other investments across all parts of the portfolio.

Portfolio Activity
During the period £6.8 million was invested into two new investments:

• Perfect Ward Limited: £4.0 million - a digital quality inspection platform designed to drive improvements in quality and care across clinical environments.

• Zapnito Limited £2.8 million – an expert community management SaaS platform, which provides business to business customers with the ability to deliver knowledge, expert content and active forums within online community networks.

During the period £2.6 million was invested into two follow-on investments, the majority of which was into:

• N2JB Limited (trading as Natterbox): £2.5 million – a provider of business to business cloud telephony services that are uniquely integrated into Customer Resource Management (“CRM”) software platforms.

Since the reporting date, the Company has invested £13.3 million in two new investments and £3 million in a follow-on investment. There has also been one partial disposal generating £0.3 million of proceeds.

Transactions with Manager

Details of amounts paid to the Manager are disclosed in note 7 to the financial statements.

Share Buybacks

The Company has continued to buy back shares as required. In the six months to July 2021, the Company bought back 12,617,575 Ordinary shares for total consideration of £6 million.

Dividend and Dividend Policy

It is the Board’s policy 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 Board has declared an interim dividend of 1.3p per Ordinary share in respect of the period ended 31 July 2021. The dividend will be payable on 14 January 2022 to Ordinary shareholders on the register at 31 December 2021. In addition, following some profitable disposals of holdings, your Board is declaring a special dividend of 3.1p which will be paid at the same time as the interim dividend.

VCT Qualifying Status

PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice concerning ongoing compliance with Her Majesty’s Revenue & Customs (‘HMRC’) rules and regulations concerning VCTs. The Board has been advised that the Company is in compliance with the conditions set by HMRC for maintaining approval as a VCT.

A key requirement is to ensure that at least 80% of the assets of the fund are in VCT qualifying investments. As at 31 July 2021, 92.9% of the portfolio, as measured by HMRC rules, was invested in VCT qualifying investments.

Principal Risks and Uncertainties

The principal risks and uncertainties are described in detail within the strategic report in the Company’s annual report for the year ended 31 January 2021.

Summary and Future Prospects
The economic environment continues to be somewhat uncertain in the UK, even as we emerge from what is hoped will be the worst of the pandemic and as recovery continues. To date the impact on the portfolio has been very limited, noting the Investment Manager’s focus on technology investments which have demonstrated they are more resilient to the lockdown and other measures which were imposed. Indeed, the technology sector as a whole has seen a number of benefits, as companies increase adoption of software in response to the societal and logistical challenges posed by the pandemic. The investment team remains highly vigilant in case of any future economic deterioration, including a strong focus on the safety and robustness of the companies invested in and, indeed, their employees. However, we believe that the portfolio is well-positioned, and we remain confident of adding new and exciting investments to the portfolio in the coming months and years.

Richard Court
Octopus Investments Limited
24 September 2021

Investment Portfolio

Investment Portfolio at Cost

Directors’ Responsibilities Statement

We confirm that to the best of our knowledge:

• the half-yearly financial statements have been prepared in accordance with the Financial Reporting Standard 104 “Interim Financial Reporting” issued by the Financial Reporting Council;

• the half-yearly financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company;

• the half-yearly report includes a fair review of the information required by the Financial Conduct Authority’s 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

Murray Steele
Chairman
24 September 2021

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 no recognised gains or losses other than those disclosed in the income statement.

• The accompanying notes are an integral part of the half-yearly report.

Balance Sheet

The statements were approved by the Directors and authorised for issue on 24 September 2021 and are signed on their behalf by:

Murray Steele
Chairman
Company Number: 05840377

Statement of Changes in Equity

Cash Flow Statement

Notes to the Half-Yearly Report

1. Basis of preparation
The unaudited half-yearly report which covers the six months to 31 July 2021 has been prepared in accordance with the Financial Reporting Council’s (FRC) Financial Reporting Standard 104 “Interim Financial Reporting” (March 2018) and the Statement of Recommended Practice for Investment Companies, re-issued by the Association of Investment Companies in February 2018.

The Directors consider it appropriate to adopt the going concern basis of accounting. The Directors have not identified any material uncertainties to the Company’s ability to continue to adopt the going concern basis over a period of at least twelve months from the date of approval of the financial statements. In reaching this conclusion the Directors have had regard to the potential impact on the economy and the Company of the current Coronavirus pandemic.

The principal accounting policies have remained unchanged from those set out in the Company’s 2021 Annual Report and Accounts.

2. Publication of non-statutory accounts
The unaudited half-yearly report for the six months ended 31 July 2021 does not constitute Statutory Accounts within the meaning of s.415 of the Companies Act 2006. The comparative figures for the year ended 31 January 2021 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 of 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 is based on 399,977,423 shares, being the weighted average number of shares in issue during the period (31 January 2021: 308,643,164; 31 July 2020: 300,616,820).

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are identical.

4. Net asset value per share

5. Dividends
The interim dividend of 1.3p and the special dividend of 3.1p per share will be paid on 14 January 2022, to those shareholders on the register on 31 December 2021.

6. Principal risks and uncertainties

The principal risks and uncertainties faced by the Company are described in detail within the strategic report in the Company’s annual report for the year ended 31 January 2021.

The principal risks include loss of VCT status, investment risk, valuation risk, financial risk, economic risk, internal control risk, regulatory risk, cash flow risk, market risk liquidity risk and price risk. The Board has also considered emerging risks, including the Coronavirus pandemic, which the Board seeks to mitigate by setting policy and reviewing performance.

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 annum of the net assets of the Company for the investment management services.

The Company has incurred management fees of £2,288,000 during the period to 31 July 2021 (31 July 2020: £1,253,000; 31 January 2021: £2,612,000). Included in the £2,288,000, there is an amount of £324,000 which has arisen from a recalculation of historic management fees in accordance with the management agreement.

During the period the Company has also incurred performance fees of £3,449,000 (31 July 2020: £368,000; 31 January 2021: £4,926,000).

Octopus also provides administration and company secretarial services to the Company. Octopus receives a fee of 0.3% per annum of net assets of the Company for administration services and £20,000 per annum for company secretarial services.

The Company receives certain reductions in the management fee, including for investments in other Octopus managed funds, to ensure the Company is not double charged on these products. There were no rebates for the current period (31 July 2020: £57,000; 31 January 2021 £140,000).

8. Post balance sheet events

The Company invested a total of £13.3 million in two new investments and £3 million in a follow-on investment. The Company also received £0.3 million for the partial disposal of an investment.

9. Additional Information

An online version of this report will be available to view on the Investment Manager’s website at www.octopusinvestments.com.