ECLIPSE VCT 4 
By
Eclipse VCT 4 plc
Final Results
12 November 2008
Eclipse VCT 4 plc (the "Company"), managed by Octopus Investments
Limited, today announces the final results for the year ended 31
August 2008.
These results were approved by the Board of Directors on 12 November
2008.
You may view the Annual Report in full at www.octopusinvestments.com
and navigating to the VCT Annual and Interim Reports under the 'Learn
More' section.
About Eclipse VCT 4 plc
Eclipse VCT 4 plc ("Eclipse 4" or "Company") 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 unquoted and AIM-quoted companies. The Company
is managed by Octopus Investments Limited ("Octopus" or "Manager").
Eclipse 4 was launched in August 2005 and raised approximately £29.1
million (£28.7 million net of expenses) through an offer for
subscription. The Company co-invests with other funds managed by
Octopus. This allows Eclipse 4 to invest in a wider range of
opportunities and in larger and more developed companies than are
typically available to a single VCT.
Financial Highlights
+-------------------------------------------------------------------+
| | Year to 31 | Year to 31 |
| | August 2008 | August 2007 |
|---------------------------------------+-------------+-------------|
| | | |
|---------------------------------------+-------------+-------------|
| Net assets (£'000s) | 22,994 | 29,815 |
|---------------------------------------+-------------+-------------|
| Net (loss)/return after tax (£'000s) | (6,056) | 1,805 |
|---------------------------------------+-------------+-------------|
| Net asset value per share ("NAV") | 78.0p | 101.1p |
|---------------------------------------+-------------+-------------|
| Dividends paid and proposed relating | | |
| to the year | 2.5p | 2.2p |
|---------------------------------------+-------------+-------------|
| Cumulative dividends since launch - | | |
| paid and proposed | 4.7p | 0.7p |
+-------------------------------------------------------------------+
The table below shows the NAV per share and lists the dividends that
have been paid since the launch of Eclipse 4:
+-------------------------------------------------------------------+
| | | Dividends paid | NAV + cumulative |
| Period Ended | NAV | in period* | dividends |
|------------------+--------+----------------+----------------------|
| 28 February 2006 | 94.9p | - | 94.9p |
|------------------+--------+----------------+----------------------|
| 31 August 2006 | 95.7p | - | 95.7p |
|------------------+--------+----------------+----------------------|
| 28 February 2007 | 103.0p | 0.7p | 103.7p |
|------------------+--------+----------------+----------------------|
| 31 August 2007 | 101.1p | - | 101.8p |
|------------------+--------+----------------+----------------------|
| 29 February 2008 | 94.1p | 1.5p | 96.3p |
|------------------+--------+----------------+----------------------|
| 31 August 2008 | 78.0p | 1.0p | 81.2p |
+-------------------------------------------------------------------+
*Please note, dividends stated are dividends which have been paid in
that period
Chairman's Statement
I am pleased to present the annual results for the year to 31 August
2008.
In the year to 31 August 2008, the total return to shareholders
(being the change in the net asset value per share or NAV, added to
dividends paid out to shareholders) was -20.2%, falling from 101.8p
to 81.2p. In comparison, the FTSE AIM All Share index fell 12.0% and
the FTSE Small Cap index fell 31.6% over the same period.
In the current economic environment, there has been a significant
decline in asset values overall. This reflects a generally cautious
view of the valuations of unquoted investments. Since the year end,
the AIM market has continued to fall. This has affected the Fund's
AIM portfolio which has also fallen in value. We expect to see a
recovery in the Fund's NAV when stability returns to the financial
markets, though this may be some time.
The Fund has, however, fulfilled the requirement for VCTs to be 70%
invested at the end of the third accounting period. It is not
required to invest further funds in the short term. Consequently at
the year end, cash accounted for over 27% of the Fund's net asset
value meaning the fund is well placed to take advantage of excellent
investment opportunities inherent in the current environment.
Further details of investments made and the investment strategy can
be found in the Investment Manager's Review which includes a review
of the performance of investments.
The Board's strategy is to maintain an appropriate level of liquidity
in the balance sheet to achieve four aims:
* to take advantage of new investment opportunities as they
arise;
* to support further investment in existing portfolio
companies if required;
* to assist liquidity in the shares through the buy back
facility; and
* to support a consistent dividend flow.
Given the Board's desire to pay a consistent dividend flow, a final
dividend of 1.5p per share has been proposed. Subject to shareholder
approval at the annual general meeting, this dividend will be paid on
5 January 2009 to those shareholders on the register on 5 December
2008. This will take dividends for the year ended 31 August 2008 to
2.5p per share.
Investment Portfolio
The year, particularly the latter half, has been challenging for many
businesses, with the impact of the credit crunch being followed by a
worsening of the economic environment. Inevitably this has had an
impact on the portfolio, particularly reducing company valuations.
During the year, ten new investments were made and three investments
were fully disposed of. New investments totalled £9.9 million in
seven unquoted and three AIM-quoted companies. There were also a
number of follow-on investments. A disposal of Gyro International
Limited led to crystallising a profit of £619,000. Unfortunately this
was more than offset by the realised loss on the disposal of NPI
Media Group Limited of £986,000. In addition, as well as the losses
on AIM listed companies, it is particularly disappointing to report
the full write down in value of our investments in Adrenalin Design
Limited and The Grill Group Limited. In both cases the businesses
had suffered from falling sales and, with the expectation of
continuing market weakness, it was not considered prudent to invest
further funds. Experience of previous recessionary periods shows
that further financial support for existing investments has to be
considered very carefully, and is dependent on having a strong
business model and exceptional management team.
Whilst valuations across the portfolio have been carefully evaluated,
several investments have made significant underlying progress during
the period, including Audio Visual Machines Limited, Promotion Space
Limited, Hydrobolt Limited and SweetCred Holdings Limited. In the
longer term these should lead to positive returns, allowing for the
payment of more significant dividends.
Further details about the portfolio, including new investments and
realisations can be found in the Investment Manager's Review on pages
6 to 14.
Change of Name
With a wide range of Octopus funds now under management, it is
considered appropriate that the name of the Company should reflect
the name of Octopus so as to avoid confusion in the marketplace.
Therefore it is proposed to change the name of the Company to Octopus
Eclipse VCT 4 plc.
It should be made clear to shareholders, however, that current
directors will remain in office and their independence from Octopus
is in no way affected.
VAT on Management Fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008. This
follows a European Court of Justice judgement against the Government
in a case relating to VAT payable by investment trusts. It is
becoming more certain that a VAT repayment will be obtained for VAT
paid on management fees for the last three years. However, the
extent and timing of repayments is not yet known. We will follow
developments with the help of our advisers. The saving in VAT for
the 2008/2009 year should amount to around £83,000.
Share Buy-backs
At the date of publication, the Company's mid market share price
stood at 53p compared to the previously published NAV of 89.9p and
the NAV at 31 August 2008 of 78.0p. Whilst the Board, where possible,
endeavours to offer a buy-back facility at around a 10% discount to
the prevailing NAV, reflecting the economic environment at that time,
we hope that as our Fund demonstrates its ability to deliver
sustained growth and regular dividends in the future, its discount to
NAV will narrow and a more active secondary market will develop.
Details of shares issued and bought back in the year can be found in
the Directors' Report commencing on page 19.
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 Eclipse VCT 4 plc is in compliance with the
conditions laid down by HMRC for maintaining approval as a VCT.
A key requirement now is to maintain the required 70% qualifying
investment level, particularly at a time when we are successfully
realising some of our investments and new deal flow is not as great
as it has been over the last few years. As at 31 August 2008 over
76% of the portfolio (as measured by HMRC rules) was invested in VCT
qualifying investments.
Outlook
In what has been a difficult period for stock markets generally, and
smaller companies in particular, your Board continues to seek a
balanced portfolio of investments in smaller, developing companies.
The portfolio should provide attractive returns to investors with a
medium to long-term horizon. The investment strategy for Eclipse 4
remains focused on the delivery of absolute returns and a regular
tax-free dividend stream for investors. Whilst both the unquoted and
quoted investment portfolios will not be immune to the wider impact
of the credit crunch, the Board does consider that the portfolio as a
whole is well positioned to benefit from any improvement in the
overall financial climate.
Greg Melgaard
Chairman
12 November 2008
Investment Manager's Review
Personal Service
At Octopus, we have a dual focus on 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 involved about
the progress of your investment.
During this time of economic upheaval, we consider it particularly
important to be in contact with our investors. We are working hard to
manage your money in the current climate. We share your goal to make
money from your investment, as our money is invested alongside yours.
If you have any questions about this review, or if it would help to
speak to one of the fund managers, please do not hesitate to contact
us on 0800 316 2347.
Portfolio Review
The performance of the Fund over the last year has been mixed. The
overall performance of the portfolio has been affected by that of the
stock market and by the weak performance of some of the portfolio
companies in adverse economic conditions.
Despite the diversity of the unquoted portfolio across sectors, some
companies have been impacted by the slowing economy. The Fund sold
its investment in Gyro International Limited, crystallising a profit
of £619,000. However, this was more than offset by the realised loss
on the disposal of NPI Media Group Limited of £986,000. So a loss of
£387,000 was crystallised during the year from the disposal of
unquoted investments.
Furthermore we have written down the value of a number of the
companies. In particular it is disappointing to report the full write
down of the investments in Adrenalin Design Limited and The Grill
Group Limited. These companies both operated in the mid-market
consumer sector and experienced severe declines in sales levels. In
the circumstances it was not considered appropriate to support either
business further.
Meanwhile the AIM portfolio, whilst only accounting for around 13% of
the investment portfolio by value, has impacted the NAV negatively by
around 9p per share. A modest profit of £63,000 was successfully
crystallised during the period. Price falls in smaller quoted
companies have been severe due to lack of liquidity in some of the
stocks. Price falls on the whole reflect market de-ratings rather
than stock-specific issues.
Portfolio Review
Valuation write downs have also been made on a number of unquoted
investments where company performance is behind forecast plan. The
approach taken to portfolio valuations may be viewed as prudent, and
we have been cautious in the current environment about writing up
investment values, even where demonstrable progress has been made by
the investee company. However, the valuation of the investments is
in accordance with the policy stated on page 42 and the valuations
represent the fair value of the investments at 31 August 2008.
Octopus actively works with all unquoted investee companies to ensure
value will be added in due course.
Outlook
Whilst the economic outlook remains a concern, a majority of the
companies in the fund portfolios, in particular the AIM portfolio,
are established, profitable companies. Furthermore, many of the
investments are engaged in business activities that have demonstrated
robust pricing power and will not be reliant on the ebb and flow of
the wider economy. With this in mind, whilst there are undoubtedly
short term challenges ahead, we remain confident about the longer
term prospects of the underlying holdings within the portfolios.
A summary of all disposals, new investments and existing portfolio
revaluations is set out below.
Investment Portfolio
+----------------------------------------------------------------------------------------------------------------+
| | | | | | | Carrying| | | | |
| | | | | | | value at| | | | |
|Unquoted | |Investment| | Unrealised| |31 August| | % equity| | % equity held by all|
|Qualifying | | at cost| |profit/(loss)| | 2008| | held by| | funds managed by|
|Investments |Sector | (£'000)| | (£'000)| | (£'000)| |Eclipse 4| | Octopus|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Promotion Space |Media & Marketing | 1,678| | -| | 1,678| | 12.3%| | 38.0%|
|Limited |Services | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Sweet Cred |Consumer Products | 1,677| | -| | 1,677| | 7.7%| | 24.5%|
|Holdings Limited| | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|The History |Publishing | 1,672| | -| | 1,672| | 15.2%| | 60.0%|
|Press Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Hydrobolt |Engineering & | 1,408| | -| | 1,408| | 16.3%| | 48.1%|
|Limited |Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|CSL DualCom |Technology & | 1,168| | 184| | 1,352| | 11.5%| | 45.8%|
|Limited |Telecommunications| | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Bruce Dunlop & |Media & Marketing | 1,250| | -| | 1,250| | 9.4%| | 33.4%|
|Associates |Services | | | | | | | | | |
|Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Vulcan Services |Engineering & | 1,000| | -| | 1,000| | 24.5%| | 49.0%|
|Limited |Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Tristar |Transport Services| 1,000| | -| | 1,000| | 10.0%| | 35.0%|
|Worldwide | | | | | | | | | | |
|Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Audio Visual |Technology & | 711| | 217| | 928| | 10.8%| | 43.1%|
|Machines Limited|Telecommunications| | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|T4 Holdings |Media & Marketing | 1,000| | (347)| | 653| | 11.1%| | 41.7%|
|Limited |Services | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Lilestone |General Retail | 375| | -| | 375| | 2.7%| | 23.4%|
|Holdings Limited| | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Perfect Pizza |Leisure & Hotels | 372| | -| | 372| | 4.9%| | 34.3%|
|Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|The Capital Pub |Leisure & Hotels | 200| | (44)| | 156| | 1.2%| | 8.2%|
|Company 2 plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Blanc Brasseries|Leisure & Hotels | 55| | (28)| | 27| | 0.7%| | 3.3%|
|Holdings plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|The Grill Group |Leisure & Hotels | 2,175| | (2,175)| | -| | 15.9%| | 51.6%|
|Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Adrenalin Design|General Retail | 947| | (947)| | -| | 11.0%| | 42.9%|
|Limited | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Red-M Group |Technology & | 241| | (241)| | -| | 3.6%| | 9.3%|
|Limited |Telecommunications| | | | | | | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Total unquoted qualifying | 16,929| | (3,381)| | 13,548| | | | |
|investments | | | | | | | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
| | | | | | | Carrying| | | | |
| | | | | | | value at| | | | |
|AIM-quoted | |Investment| | Unrealised| |31 August| | % equity| | % equity held by all|
|Qualifying | | at cost| |profit/(loss)| | 2008| | held by| | funds managed by|
|Investments | Sector| (£'000)| | (£'000)| | (£'000)| |Eclipse 4| | Octopus|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Hexagon Human |Support Services | 677| | (154)| | 523| | 2.6%| | 16.3%|
|Capital plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|CBG Group plc |General Financial | 381| | 51| | 432| | 1.9%| | 13.9%|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Plastics Capital|Engineering & | 500| | (160)| | 340| | 1.9%| | 17.9%|
|plc |Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Hasgrove plc |Media & Marketing | 400| | (77)| | 323| | 1.6%| | 7.7%|
| |Services | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Pressure |Engineering & | 165| | 138| | 303| | 1.0%| | 10.9%|
|Technologies plc|Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Healthcare |Support Services | 100| | 118| | 218| | 0.2%| | 2.6%|
|Locums plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Brulines |Support Services | 148| | 44| | 192| | 0.5%| | 5.5%|
|(Holdings) plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Northern Bear |Construction & | 299| | (151)| | 148| | 1.1%| | 7.6%|
|plc |Materials | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Concateno plc |Support Services | 85| | 63| | 148| | 0.1%| | 0.9%|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Cohort plc |Engineering & | 68| | 45| | 113| | 0.1%| | 2.4%|
| |Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Vertu Motors plc|General Retail | 250| | (142)| | 108| | 0.4%| | 7.7%|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Cantono plc |Technology & | 420| | (353)| | 67| | 1.4%| | 9.8%|
| |Telecommunications| | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Optimisa plc |Media & Marketing | 195| | (146)| | 49| | 1.0%| | 14.1%|
| |Services | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Tanfield Group |Engineering & | 130| | (82)| | 48| | 0.2%| | 3.0%|
|plc |Machinery | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Invocas plc |General Financial | 40| | (11)| | 29| | 0.1%| | 1.2%|
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Myhome |Support Services | 350| | (327)| | 23| | 0.8%| | 6.2%|
|International | | | | | | | | | | |
|plc | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Autoclenz plc |Support Services | 125| | (102)| | 23| | 1.0%| | 12.7%|
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Total AIM-quoted qualifying | 4,333| | (1,246)| | 3,087| | | | |
|investments | | | | | | | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Non-qualifying AIM-quoted | 20| | (11)| | 9| | | | |
|investments | | | | | | | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Non-qualifying unquoted investments| 2| | -| | 2| | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Total non-qualifying investments | 22| | (11)| | 11| | | | |
|-----------------------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Fixed income | | 6,255| | (41)| | 6,214| | | | |
|securities | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Total | | 27,539| | (4,679)| | 22,860| | | | |
|investments | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Net current | | -| | -| | 134| | | | |
|assets | | | | | | | | | | |
|----------------+------------------+----------+-+-------------+-+---------+-+---------+-+-----------------------|
|Total net assets| | | | | | 22,994| | | | |
+----------------------------------------------------------------------------------------------------------------+
Please refer to notes 10 & 11 in the Notes to the Financial
Statements to provide clarity on the unrealised gain carried forward
Review of Investments
At 31 August 2008, the Eclipse 4 qualifying portfolio comprised
investments in 17 unquoted and 17 AIM-quoted companies. The unquoted
investments are in ordinary shares with full voting rights as well as
loan notes and other securities. The AIM-quoted investments are in
ordinary shares, also with full voting rights.
Quoted and unquoted investments are valued in accordance with the
accounting policy set out on page 42, which takes account of current
industry guidelines for the valuation of venture capital portfolios.
Provision against cost is made where an unlisted investment is
under-performing significantly, and unlisted investments are not
normally revalued upwards within 12 months of acquisition.
Disposals
During the period, three investments were fully disposed of; Gyro
International Limited, NPI Media Group Limited and BBI Holdings plc.
Gyro was particularly successful, crystallising a profit of £619,000
for the Fund and returning a 67% IRR. We exited from BBI Holdings plc
following an agreed bid for the company at a 99.4% premium to the
original book cost.
As noted above the Fund suffered the full loss of its investment in
Adrenalin Design totaling £947,000, which was placed into
administration. Every effort was made to save this investment or
recover some value through a sale. However the funds required to
secure the company were too high to make this option viable and the
ability to sell the business at a reasonable value was limited by
current market conditions.
As previously disclosed in the interim accounts, NPI Media Limited
was disposed of at a loss to a new vehicle, The History Press
Limited, in December 2007. Eclipse 4 invested £1.6 million, as part
of a £6.1 million investment by Octopus funds, into the new vehicle,
set up to acquire NPI through a restructuring process. NPI had
performed poorly since the initial investment and had been
particularly impacted by its printing operations. Through the
restructuring process, initiated by Octopus, The History Press only
acquired the publishing assets from NPI and we believe that this will
make a more robust and exciting investment for the future. Through
the new investment, Eclipse 4 realised just under half its original
investment in NPI, the balance being written off.
A summary of these realisations is shown below:
+--------------------------------------------------------------------+
| | | Cost of| | |
| | Initial| investment|Proceeds of| Total|
| | investment| realised| investment|gain/(loss)|
|Realisations | date| (£'000)| (£'000)| (£'000)|
|---------------+------------+---------------+-----------+-----------|
|Gyro | | | | |
|International | | | | |
|Limited |October 2006| 704| 1,323| 619|
|---------------+------------+---------------+-----------+-----------|
|BBI Holdings | | | | |
|plc | May 2006| 64| 127| 63|
|---------------+------------+---------------+-----------+-----------|
|NPI Media Group| | | | |
|Limited |January 2007| 1,898| 912| (986)|
|---------------+------------+---------------+-----------+-----------|
| | | 2,666| 2,362| (304)|
+--------------------------------------------------------------------+
New Investments
During the last twelve months, a number of opportunities available in
both the unquoted and AIM-quoted markets led to Eclipse making ten
new investments and several follow on investments. Details of the
new investments are set-out below:
Unquoted investments
The Grill Group Limited
Investment date: September 2007
Cost: £2,175,000 (ordinary shares and loan
notes)
Valuation: £nil
The Grill Group had three restaurant brands: Smollensky's, with nine
Bar & Grill and Burgershack sites in London, and the Le Frog Bistros
and Pastiche with eight restaurants in the North West and Midlands.
In September 2007, Octopus committed £6 million to fund the
acquisition of the Smollensky's chain of restaurants by The Shire
Group which owned the Le Frog Bistros and Pastiche chains. The
investment strategy included the operational turnaround of
Smollensky's, followed by the roll-out of the Smollensky's and Le
Frog restaurant brands. Whilst considerable progress was made in the
period from investment, performance ran well behind plan as the
business felt the impact of the consumer downturn. A decision was
taken not to invest further funds and we have therefore taken a full
impairment to the value as the company has been placed in
administration.
The History Press Limited
Investment date: December 2007
Cost: £1,672,000 (ordinary shares and loan
notes)
Valuation: £1,672,000
The History Press was incorporated in order to buy the assets of NPI
Media Limited which had been placed into administration. It is the UK
market leading publisher of distinctive 'local interest' history
books. The company is based in Stroud with subsidiary operations in
France, Germany, and the US. Further information can be found at the
company's website www.thehistorypress.co.uk
Bruce Dunlop Associates Limited
Investment date: December 2007
Cost: £1,250,000 (ordinary shares and loan
notes)
Valuation: £1,250,000
Bruce Dunlop Associates provides promotion and design services to
broadcasters and advertisers worldwide and also creates brand films
and internal communications for leading UK corporations, including
Hallmark, Barclays, Discovery and Sony. The company operates from
offices in London, Munich, Dubai, Singapore and Sydney. Revenues
have grown against the prior year and the management team has been
strengthened by the appointment of a new Chairman, introduced by
Octopus. The company has recently made a small acquisition of Jago
Design Limited. Jago has a strong international reputation for set
design, particularly in news sets and there is the potential for
cross marketing BDA/Jago services to the respective broadcaster
client basis. Further information can be found at the company's
website www.brucedunlop.com
Tristar Worldwide Limited
Investment date: January 2008
Cost: £1,000,000 (ordinary shares and loan
notes)
Valuation: £1,000,000
Tristar is one of the world's leading chauffeur companies, carrying
over 400,000 passengers for 400 clients in 2007 alone. The business
operates in 44 countries with its own vehicles in the UK and a
rapidly expanding service in the US. It has a blue chip customer base
which includes Virgin, Emirates, BP, Goldman Sachs and Merrill
Lynch. In the year to May 2008, the business achieved EBITA before
deal costs of £2.2m, 36% up on prior year. Further information can be
found at the company's website www.tristarworldwide.com
Hydrobolt Limited
Investment date: April 2008
Cost: £1,408,000 (ordinary shares and loan
notes)
Valuation: £1,408,000
Eclipse 4 invested in the management buy-out of Hydrobolt Limited in
April 2008 as part of a £3.5 million investment across all the
Eclipse funds. Hydrobolt is a specialist manufacturer of high
integrity fasteners for the oil & gas and energy sectors. The
business has progressed well since investment, with year to date
sales over 20% ahead of prior year. Further information can be found
at the company's website www.hydrobolt.co.uk
Vulcan Services Limited
Investment date: August 2008
Cost: £1,000,000 (ordinary shares and loan
notes)
Valuation: £1,000,000
Eclipse 4 has invested in an acquisition vehicle it has formed with
an experienced manager to jointly seek strategic acquisitions in the
fast growing oil and gas services sector. This is a sector in which
Octopus has identified a number of highly profitable, fast growing,
niche manufacturing businesses, which benefits from above average oil
prices. The management partner in this venture has a track record of
identifying successful investments in the sector and currently sits
on the board of another Octopus investment called Hydrobolt Limited.
Octopus expects to complete the first acquisition in the next six to
twelve months.
Lilestone Holdings Limited
Investment date: August 2008
Cost: £375,000 (ordinary shares and loan
notes)
Valuation: £375,000
Eclipse 4 invested £375,000 in Lilestone Holdings (the owner of the
Myla brand of lingerie) in August 2008. The business remains in the
investment phase and has ambitious plans for international growth.
Myla has opened a new store in Canary Wharf and a further outlet in
the new Westfield shopping centre in West London. In addition the
company has plans to extend space in some of the existing concessions
and has launched a new internet offering in the US. Further
information can be found at the company's website www.myla.com
In addition to the new investments noted above, the Company has made
follow-on investments in another five of the unquoted portfolio
companies as follows:
* Sweet Cred Holdings Limited - In January 2008 Eclipse 4 invested
an additional £677,000 to fund continued working capital growth.
This amount was part of a further £2 million funding from Octopus
Funds agreed at the time of the original investment and triggered
by achievement of certain profit targets.
* Promotion Space Limited - In April 2008 Eclipse 4 invested
£951,000 as part of a £2.75 million round from Octopus managed
Funds, to finance the acquisition of BrandSpace Limited.
Together with the acquisition of Fitting Exposure in 2007,
Promotion Space has now become the UK's leading arranger of
promotional activities in UK shopping centres.
* NPI Media Group Limited - From August 2007 Eclipse 4 made a
series of further investments in NPI totalling £137,000, prior to
the sale of the business to The History Press in December 2007.
Further small follow on investments were also made during the year in
CSL Dualcom and Adrenalin Design, in both cases to support the
working capital needs of the company.
AIM-quoted investments
Optimisa plc
Investment date: October 2007
Cost: £195,000
Valuation: £49,000
Optimisa plc provides market research and consultancy services.
Recently Optimisa completed the earnings enhancing acquisition of EQ
Group, a business operating in a similar sector. Historically
Optimisa and EQ have competed for contracts and we expect the larger
and more diversified group to exploit a number of synergies and cross
selling opportunities. Further details of the company may be found at
www.optimisaplc.com
Plastics Capital plc
Investment date: October 2007
Cost: £500,000
Valuation: £340,000
Plastics Capital was set up to build a group of niche plastics
manufacturing companies, each with a strong market position and good
cash generating characteristics. The group currently comprises three
separate businesses with factories located in Knaresborough,
Leicester, Dartford and Poole with an aggregate turnover in excess of
£20 million. We expect Plastics Capital, which was valued at £19.2
million at the end of August 2008, to achieve a profit before tax of
£4.3 million for the year ending March 2009. Further details of the
company may be found at www.plasticscapital.com
Myhome International plc
Investment date: November 2007
Cost: £350,000
Valuation: £23,000
It is extremely disappointing to report that Myhome has commenced
insolvency proceedings since the year end with the appointment of
administrators. The group have experienced huge difficulties in the
light of the credit crisis. Most significantly the ability of
franchisees to finance the expansion of their operations was
materially curtailed by the restrictive credit terms imposed by their
banks. With the expansion of franchisee operations being key to the
Myhome business model, the group's bank has since demanded the
immediate repayment of their outstanding loan. We are disappointed at
the bank's stance but acknowledge that it is symptomatic of the
current nervousness within the banking sector and the sentiment
towards smaller companies.
Ten Largest Holdings
Listed below are the ten largest investments by value as at 31 August
2008:
Promotion Space Limited
Based in Wilmslow, Cheshire, Promotion Space organises promotions,
brand awareness campaigns, events and Retail Mobile Unit (RMU)
provision in shopping centres across the UK. These activities allow
shopping centres to commercialise their unused spaces and generate
incremental income. The company also works for brands looking for
high quality retail environments to promote their products through
face to face marketing or brand awareness events. It has a blue chip
customer base including Virgin Media, Sky, Barclaycard and npower.
Octopus Private Equity has supported two acquisitions since
investment into Promotion Space. The first was the acquisition of the
UK's leading provider of changing room media, Fitting Exposure, which
completed in November 2007. In April 2008, Promotion Space acquired
its main competitor BrandSpace for an undisclosed sum, creating a
clear market leader in the sector, with a strong national presence.
Further details of the company may be found at
www.promotion-space.com
Initial investment date: April 2007
Cost: £1,678,000
Valuation: £1,678,000
Valuation basis: Cost
Equity held: 12.3%
Last audited accounts: 31 March 2008
Profit before interest & tax: £0.3 million
Net assets: £4.5 million
Sweet Cred Holdings Limited
Sweet Cred sells a wide range of products which combine sweets with
toys that are themed around the five cartoon characters in the
SweetCred gang. The range is sold through distribution partners in
Europe, the US and the Middle East. In the UK, distribution is
through the main wholesalers and retail distribution through the
major multiple retailers, motorway service stations and leading
toyshop chains. In March 2007 Octopus committed £5 million to fund
working capital relating to the orders pipeline. £3 million was drawn
down at completion, and the balance of £2 million was invested on 31
January 2008 after the company had been able to demonstrate
significant progress against its business plan.
Current trading at Sweet Cred is strong, with increases in both new
customer accounts as well as further revenue from existing
customers. Sweet Cred products can be purchased in many of the UK's
major confectionary retailers including Woolworths, Asda, Sainsbury,
Morrisons, Martin McColls and Tesco. Further details of the company
may be found at www.sweetcred.com
Initial investment date: March 2007
Cost: £1,677,000
Valuation: £1,677,000
Valuation basis: Cost
Equity held: 7.7%
Last audited accounts: 31 December 2007
Profit before interest & tax: £0.08 million
Net assets: £0.3 million
The History Press Limited
The History Press was incorporated in order to buy the assets of NPI
Media Limited which had been placed in administration. It is the UK
market leading publisher of distinctive 'local interest' history
books. In December 2007 Eclipse invested £1.7 million, as part of a
£6.15 million investment by Octopus funds, into a new vehicle, The
History Press Limited, set up to acquire NPI through a restructuring
process. NPI had performed poorly since the initial investment and
had been particularly impacted by its printing operations. Through
the restructuring process, initiated by Octopus, The History Press
only acquired the publishing assets from NPI and we believe that this
will make a more robust and exciting investment for the future. We
have been pleased with the progress made by THP since its inception.
A considerable amount of time has been put into the investment by
Octopus, including strengthening the management team. The company
has been through a number of reorganisation exercises, including the
outsourcing of the warehouse and distribution facility. Despite
challenging market conditions, the company is now in a much stronger
position going forward. Further information can be found at the
company's website www.thehistorypress.co.uk
Initial investment date: December 2007
Cost: £1,672,000
Valuation: £1,672,000
Valuation basis: Cost
Equity held: 15.2%
Last audited accounts: N/A
Hydrobolt Limited
Eclipse 4 invested in the management buy-out of Hydrobolt Limited in
April 2008 as part of £3.5 million investment across all the Eclipse
funds. Hydrobolt is a specialist manufacturer of high integrity
fasteners for the oil & gas and energy sectors. The business has
progressed well since investment, with year to date sales over 20%
ahead of prior year. Further information can be found at the
company's website www.hydrobolt.co.uk
Investment date: April 2008
Cost: £1,408,000
Valuation: £1,408,000
Valuation basis: Cost
Equity held: 16.3%
Last audited accounts: 31 December 2007
Profit before interest & tax: £2.7 million
Net assets: £3.1 million
CSL DualCom Limited
CSL DualCom is the UK's leading supplier of dual path signalling
devices, which link burglar alarms to the police or a private
security firm. The devices communicate using a telephone line and a
Vodafone wireless link. Vodafone has been a partner of CSL DualCom
since 2000. The business has traded well in the last twelve months,
launching 2 new GPRS products and supplementing its senior sales team
with the result that monthly unit sales are at record levels and the
business is continuing to drive market share gains. Although the
reported PBIT has decreased in the year to March 2008 this is due to
a change in the depreciation policy. There has been a small uplift
in the carrying value of this investment in recognition of the
progress the business has made since the initial investment. Further
information can be found at the company's website www.csldual.com
Initial investment date: June 2006
Cost: £1,168,000
Valuation: £1,352,000
Valuation basis: Earnings
Equity held: 11.5%
Last audited accounts: 31 March 2008
Profit before interest & tax: £0.2 million
Net assets: £0.4 million
Bruce Dunlop Associates Limited
Bruce Dunlop Associates provides promotion and design services to
broadcasters and advertisers worldwide and also creates brand films
and internal communications for leading UK corporations, including
Hallmark, Barclays, Discovery and Sony. The company operates from
offices in London, Munich, Dubai, Singapore and Sydney. Revenues
have grown against prior year and the management team has been
strengthened by the appointment of a new Chairman, introduced by
Octopus. The company has recently made a small acquisition of Jago
Design Limited. Jago has a strong international reputation for set
design, particularly in news sets and there is the potential for
cross marketing BDA/Jago services to the respective broadcaster
client basis. Further information can be found at the company's
website www.brucedunlop.com
Investment date: December 2007
Cost: £1,250,000
Valuation: £1,250,000
Valuation basis: Cost
Equity held: 9.4%
Last audited accounts: 31 June 2007
Profit before interest & tax: £1.1 million
Net assets: £2.8 million
Vulcan Services Limited
Eclipse 4 has invested in an acquisition vehicle it has formed with
an experienced manager to jointly seek strategic acquisitions in the
fast growing oil and gas services sector. This is a sector in which
Octopus has identified a number of highly profitable, fast growing,
niche manufacturing businesses, which benefits from above average oil
prices. The management partner in this venture has a track record of
identifying successful investments in the sector and currently sits
on the board of another Octopus investment called Hydrobolt Limited.
Octopus expects to complete the first acquisition in the next six to
twelve months.
Investment date: August 2008
Cost: £1,000,000
Valuation: £1,000,000
Valuation basis: Cost
Equity held: 24.5%
Last audited accounts: n/a
Tristar Worldwide Limited
Tristar is one of the world's leading chauffeur companies, carrying
over 400,000 passengers for 400 clients in 2007 alone. The business
operates in 44 countries with its own vehicles in the UK and a
rapidly expanding service in the US. It has a blue chip customer base
which includes Virgin, Emirates, BP, Goldman Sachs and Merrill
Lynch. In the year to May 2008, the business achieved EBITA before
deal costs of £2.2m, 36% up on prior year. Further information can be
found at the company's website www.tristarworldwide.com
Investment date: January 2008
Cost: £1,000,000
Valuation: £1,000,000
Valuation basis: Cost
Equity held: 10.0%
Last audited accounts: 31 May 2008
Profit before interest & tax: £2.2 million
Net assets: £2.7 million
Audio Visual Machines Limited
Audio Visual Machines is a leading audio visual systems integrator
and service provider with a blue chip client base. It generates
revenue from the installation of the AV system and from providing
ongoing maintenance and support to its customers. We backed an MBO
team in a buy and build strategy. The company has made three
acquisitions since our investment, resulting in a proforma turnover
for the year to June 2008 of £43 million. The latest acquisition
results in a diversification into the Education and Public Sector
markets, which we believe will be resilient in the current climate.
Further information can be found at the company's website
www.avmachines.com
Initial investment date: September 2006
Cost: £711,000
Valuation: £928,000
Valuation basis: Earnings
Equity held: 10.8%
Last audited accounts: 30 June 2007
Profit before interest & tax: £1.0 million
Net assets: £0.6 million
T4 Holdings Limited
London-based T4 Media is an innovative media company selling
advertising space on ticket barriers in railway stations and car park
barriers throughout the UK and Ireland. Advertisements placed on
ticket machines and barriers enjoy a number of benefits. Most
crucially, the advertisements are unavoidable to the consumer as they
physically interact with the equipment achieving guaranteed impact.
Viewership is also completely accountable as it is independently
audited by the number of tickets inserted in the ticket readers.
Trading in the first year following investment was behind plan,
resulting in a valuation impairment. Recent trading and order levels
have been encouraging. Further information can be found at the
company's website www.t4media.com
Investment date: September 2007
Cost: £1,000,000 (ordinary
shares and loan notes)
Valuation: £653,000
Valuation basis: Earnings
Equity held: 11.4%
Last audited accounts: 30 June 2007
Profit before interest & tax: £1.0 million
Net assets: £0.6 million
If you have any questions on any aspect of your investment, please
call one of the team on 020 7710 2800.
Simon Rogerson
Chief Executive
Directors' Responsibility Statement
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected
to prepare financial statements in accordance with United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
The financial statements are required by law to give a true and fair
view of the state of affairs of the Company and of the profit or loss
of the Company for that period. In preparing these financial
statements, the Directors are required to:
* select suitable accounting policies and then
apply them consistently;
* make judgements and estimates that are
reasonable and prudent;
* state whether applicable UK accounting
standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and
* prepare financial statements on the going
concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors confirm that to the best of their knowledge the
financial statements for the year ended 31 August 2008 comply with
the requirements set out above and that suitable accounting policies,
consistently applied and supported by reasonable and prudent
judgement, have been used in their preparation. They also confirm
that the annual report includes a fair review of the development and
performance of the business together with a description of the
principal risks and uncertainties faced by the Company.
The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 1985. They are also
responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the Directors are responsible
for preparing a Directors' Report (including Business Review),
Directors' Remuneration Report and Corporate Governance Statement
which comply with that law and those regulations.
In so far as the Directors are aware:
* there is no relevant audit information of
which the Company's auditor is unaware; and
* the Directors have taken all steps that they
ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
The Company's financial statements are published on the Octopus
Investments website. The investment manager is responsible for the
maintenance and integrity of the corporate and financial information
set out on their website, and not this is not the responsibility of
the Company. The work carried out by Grant Thornton UK LLP as
independent auditor of the Company does not involve consideration of
the maintenance and integrity of the website and accordingly they
accept no responsibility for any changes that have occurred to the
financial statements since they were initially presented on the
website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation
in other jurisdictions.
To the best of my knowledge:
* the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
* the management report includes a fair review of the development
and performance of the business and the provision of the Company,
together with a description of the principal risks and
uncertainties that it faces.
On Behalf of the Board
Greg Melgaard
Chairman
12 November 2008
Profit and Loss Account
Year to 31 August 2008
Revenue Capital Total
Notes £'000 £'000 £'000
Gain on disposal of fixed asset
investments 10 - 222 222
Gain on disposal of current asset
investments 11 - 135 135
Loss on valuation of fixed asset
investments 10 - (5,949) (5,949)
Loss on valuation of current asset
investments 11 - (45) (45)
Other income 2 601 - 601
Investment management fees 3 (176) (529) (705)
Other expenses 4 (315) - (315)
Profit/(loss) on ordinary activities
before tax 110 (6,166) (6,056)
Taxation on profit/(loss) on ordinary
activities 6 - - -
Profit/(loss) on ordinary activities
after tax 110 (6,166) (6,056)
Earnings/(loss) per share - basic and
diluted 8 0.4p (20.9)p (20.5)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 financial
statements
* 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 recognised gains or losses other than the results
for the year as set out above.
Profit and Loss Account
Year to 31 August 2007
Revenue Capital Total
Notes £'000 £'000 £'000
Gain on disposal of fixed asset
investments - 940 940
Loss on disposal of current asset
investments - (14) (14)
Gain on valuation of fixed asset
investments - 728 728
Gain on valuation of current asset
investments - 95 95
Other income 2 948 - 948
Investment management fees 3 (166) (499) (665)
Other expenses 4 (194) - (194)
Profit on ordinary activities before tax 588 1,250 1,838
Taxation on profit on ordinary
activities 6 (33) - (33)
Profit on ordinary activities after tax 555 1,250 1,805
Earnings per share - basic and diluted 8 1.9p 4.2p 6.1p
* 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 financial
statements
* 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 recognised gains or losses other than the results
for the year as set out above.
Note of Historical Cost Profits and Losses
Year ended Year ended
31 August 2008 31 August 2007
£'000 £'000
(Loss)/profit on ordinary activities (6,056) 1,838
before taxation
Unrealised loss/(gain) on valuation 5,995 (823)
of investments
Realisation of prior years' net (518) 138
unrealised gains on investment
Historical cost (loss)/profit on (579) 1,153
ordinary activities before taxation
Historical cost (loss)/profit on (579) 1,120
ordinary activities after taxation
Reconciliation of Movements in Shareholders' Funds
Year ended Year ended
31 August 2008 31 August 2007
£'000 £'000
Shareholders' funds at start of year 29,815 28,247
(Loss)/profit on ordinary activities (6,056)
after tax 1,805
Cancellation of own shares (28) (30)
Dividends paid (737) (207)
Balance as at end of year 22,994 29,815
Balance Sheet
As at 31 August As at 31 August
2008 2007
Notes £'000 £'000 £'000 £'000
Fixed asset investments 10 16,646 12,535
Current assets:
Investments 11 6,214 17,079
Debtors 12 208 238
Cash at bank 53 42
6,475 17,359
Creditors: amounts falling due
within one year 13 (127) (79)
Net
ECLIPSE VCT 4 : Final Results
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