Octopus Titan VCT 3 PLC : Octopus Titan VCT 3 PLC : Final Results

      Octopus Titan VCT 3 PLC : Octopus Titan VCT 3 PLC : Final Results

Octopus Titan VCT 3 plc

Final Results

23 January 2013

Octopus Titan VCT 3 plc ("Titan"), managed by Octopus Investments Limited
("Octopus"), today announces the final results for the year ended 31 October
2012.

These results were approved by the Board of Directors on 23 January 2013.



You  may,   in   due   course,   view   the   Annual   Report   in   full   at 
www.octopusinvestments.com



Octopus Titan VCT 3 plc



Registered Number: 06523078

                              Financial Summary

                                                         As at           As at
                                               31 October 2012 31 October 2011
Net assets (£'000s)                                     25,034          18,811
Return on ordinary activities after tax                  5,264           (780)
(£'000s)
Net asset value (NAV) per share                         116.4p           92.9p
Cumulative dividends paid since launch                    1.0p               -
NAV plus cumulative dividends paid to 31                117.4p           92.9p
October 2012
Special Dividend proposed                                20.0p               -

                             Chairman's Statement

I am pleased to present the annual results for Octopus Titan VCT 3 plc (the
'Company' or the 'Fund') for the year ended 31 October 2012.

  Performance

During the year the Total Return of the Company, being the Net Asset Value
(NAV) plus cumulative dividends paid, has increased significantly from 92.9
pence per share to 117.4 pence per share, representing an increase of 24.5
pence per share or a 26.4% growth in value. This appreciation reflects the
overall performance of the investment portfolio, and particularly the strong
performance from four companies in the portfolio.

As the portfolio starts to mature, it is encouraging to see strong performance
from a handful of companies and the impact they have had on increasing the
NAV. As the Fund develops and matures further, we anticipate further growth
in the portfolio value delivered by other companies which are currently at an
earlier stage in their development.

By value, 84.3% of the Company's net assets were in unquoted investments, 2.1%
in AIM-quoted investments and 13.6% in Octopus Open Ended Investment Companies
(OEICs), money market funds, cash and debtors, less creditors.

The Fund's holding in Nature Delivered was realised after the year end on 30
November 2012. This yielded £5,884,000 for the Fund of which £3,764,000 was
paid in cash and £2,120,000 was reinvested. The overall exit price represents
a return of a significant multiple on the cost of the Fund's investment in
Nature Delivered.

  Dividend and Dividend Policy

It remains your Board's objective to maintain a regular dividend whilst
retaining the appropriate level of liquidity in the Company. As a result of
realisations, notably that of Nature Delivered, and the overall performance of
the investment portfolio during the year, your Board has declared a special
dividend of 20.0 pence per share. Therefore, total dividends paid in the year
will be 21.0 pence per share.

The special dividend will be paid on 28 March 2013 to those shareholders who
are on the register on 11 January 2013. The payment date has been amended from
the original date of payment in order to give shareholders more time to apply
to reinvest their special dividend.

Given the size of the special dividend, the Board is hoping to offer
shareholders the facility to re-invest their cash dividend in to new shares of
the Company. Further details of this will be sent to you shortly.

  Investment Portfolio

Over the year, the portfolio has seen an overall increase in fair value of
£6,356,000 which is largely attributable to substantial increases in fair
value in Nature Delivered, Secret Escapes, Zoopla, Calastone and TouchType
totalling £7,441,000. However, elsewhere in the portfolio there have been
decreases in fair value. Diverse Energy, Elonics and AQS Holdings have been
written down to nil value representing a reduction in fair value of £487,000
during the year. In addition, Vega-Chi, Michelson Diagnostics and Applied
Superconductor having suffered a combined decrease in fair value of £886,000
in the year.

Given that the Fund's portfolio had been largely formed by the start of the
year, the Investment Manager's focus has been to develop and nurture the
existing portfolio. This included making 13 follow-on investments amounting to
£2,786,000, of which the largest investments were made in to Secret Escapes,
Certivox and Semafone totalling £1,452,000.

During the year the Fund disposed of 31.4% of its holding in Zoopla, receiving
proceeds of £361,000 on an investment cost of £210,500 and therefore realising
a gain of £150,000. The Company also disposed of its entire holding in Evi
Technologies which incurred a small loss of £16,000.

Top-up and Buybacks
As I mentioned in my interim report, the Company successfully raised
£1,215,000, net of costs, through a 'top-up' offer which was fully subscribed.
The majority of these funds are being used to support existing portfolio
companies where the Investment Manager sees the opportunity for building
further value.

Following the success of the 2012 'top-up', the Board has announced its
intention to launch a further offer for new shares in conjunction with the
four other Octopus Titan VCTs. For further details, including a copy of the
full brochure when it is available, please contact Octopus using the details
provided on page X of this report.

During the period, the company repurchased 48,975 shares which reduced the
share capital by £5,000. Further details can be found in Note 14 of the
accounts. In common with many other VCTs, and as recently announced, your
Board has decided to reduce the discount to NAV at which it will repurchase
shares from 10% to 5%.

  Open Ended Investment Companies (OEICs)

The Fund has maintained a holding in the Micro Cap Growth Fund which has also
continued to perform well, ending the year £854,000 above its original cost.
The strategy of investing in OEICs has helped compensate for the low return
received on uninvested cash which was particularly important during the early
life of the Company.

Your Board believes that it remains a sensible strategy to maintain part of
the Fund's non-qualifying portfolio in OEICs given their potential to achieve
greater returns as compared to cash deposits. Further details of the Micro Cap
Growth Fund may be found at www.octopusinvestments.com where monthly
factsheets are published.

  Investment Strategy

The investment strategy in respect of the non-qualifying portfolio will
continue to be monitored by your Board. As was envisaged in the Company's
prospectus, between 15% and 25% of the Company's assets will be retained as
non-qualifying to provide liquidity for follow-on investments in the existing
portfolio. Some of the portfolio companies will require further rounds of
investment where the investments may not be qualifying for VCT purposes.
However, your Board believes that there will be circumstances where it will be
in our shareholders' interests to continue to invest, not least to avoid
dilution and to protect shareholder value.

  VCT Qualifying Status

PricewaterhouseCoopers LLP provides the Board and Investment Manager with
advice concerning ongoing compliance with HMRC rules and regulations
concerning VCTs. The Board has been advised that the Company is compliant
with the conditions laid down by HMRC for maintaining provisional approval as
a VCT.

A key requirement now is to maintain the 70% qualifying investment level. As
at 31 October 2012, 91.37% of the portfolio, as measured by HMRC rules, was
invested in VCT qualifying investments.

  Annual General Meeting

The VCT's Annual General Meeting will take place on 14 March 2013 at 3.30 p.m.
I look forward to welcoming you to the meeting which will be held at the
offices of Octopus Investments Limited, at 20 Old Bailey, London, EC4M 7AN.

  Outlook

The economic climate remains uncertain with little visibility on when the UK
economy will return to reasonable growth. Inevitably, there have been
continuing challenges for small companies exposed to the UK marketplace not
least because of the increased pressure on working capital. While several
companies have not achieved their expectations, in part due to the weak
markets, others have exceeded their original business plans and some of these
are starting to deliver significant value.

The Investment Manager strives to improve the performance of the weaker
performing companies through the introduction of new management and, where
appropriate, follow-on funding. However, priority will be given to those
companies that are performing well and have the prospect of delivering the
most value to the portfolio. Some of that strong performance has been
demonstrated in the significant uplift in NAV over the last year, and more is
expected as the portfolio continues to mature.

Mark Hawkesworth
Chairman
23 January 2013

                         Investment Manager's Review

Personal Service
At Octopus Investments Limited ("Octopus"), we focus on both 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 informed about the progress of your
investment. During this time of economic upheaval, we consider it particularly
important to be in regular contact with our investors and are working hard to
manage your money in the current climate.

Octopus was established in 2000 and has a strong commitment to both smaller
companies and to VCTs. We currently manage 13 VCTs, including this VCT, and
manage over £340 million in the VCT sector. Octopus has over 200 employees and
was voted 'Best VCT Provider of the Year' by the financial adviser community
in 2006 to 2010.

  

  Investment Policy Summary

The investment approach of the Company is not designed to deliver a return
that is measured against a stock market index. Instead, the focus of the
Company is on generating absolute returns over the medium-term. In order to
achieve this, the Company focuses on providing early stage, development and
expansion funding to unquoted companies with the Company making a typical
initial deal size of £0.5 million to £1 million and will continue to comprise
20-25 unquoted companies, predominantly focussed within the following sectors:

  oEnvironment
  oTechnology
  oMedia
  oTelecoms
  oConsumer lifestyle and well-being sectors.

  Investment Strategy

The investee companies are those that we believe have great potential but need
some financial support to realise it. Each company that we target has the
potential to create a large business by taking a relatively modest market
share. We are particularly interested in businesses that address current
market trends and are able to be innovative in mature markets. We have created
a balanced investment portfolio spanning multiple industries and business
sectors.

Having reached the level of invested funds required by HMRC, our focus has now
shifted to managing the portfolio and developing capital growth. The current
portfolio of holdings built by the Company now encompasses investments in 24
unquoted companies and one AIM-quoted company in a range of sectors.

As Investment Manager, we have typically purchased a significant minority
equity stake in these qualifying companies, providing financial capital to
each business to build and grow its operations and then usually to sell to an
acquirer at some point in the future. These entrepreneurial early stage
businesses frequently face challenges as they seek to establish themselves in
their market, often developing new products and services. The amount of
capital we initially deploy is intended to be only the first investment that
we will make into a business, prior to seeing if the company meets or exceeds
its initial objectives.

If the business is unsuccessful in meeting these first objectives we strive to
minimise the financial exposure the Company faces without committing further
money to the investment. Other businesses, which meet some of their
objectives, but not necessarily all, will require more time to prove their
concept and these businesses will typically be reduced in value prior to our
making a further investment where we still believe that there is a promising
opportunity, and to allow them to progress forward and prove their business
model. Finally, there are those that meet and exceed the expectations
originally set. It is these businesses in which we wish to increase our
investment exposure as they remain on course to create a large business.

We maintain liquidity in the Company to ensure adequate resources are
available to support further portfolio funding needs as they arise. This
situation should be further aided following the Top-up as described in the
Chairman's Statement and it is an important feature of our model in delivering
returns to shareholders.



  Portfolio Review

As at 31 October 2012, the Total Return (being the net asset value plus the
cumulative dividends) of the Company was 117.4p per share compared to 92.9p
per share at 31 October 2011. This represents a considerable gain of 26.4%.
The performance of the portfolio was excellent during the year with a number
of notable uplifts in fair value contributing to this large appreciation in
the value of the fund.

The Company now holds 91.37% of its assets in qualifying holdings from an HMRC
perspective and we continue to work with each portfolio business as they
develop capital growth in their respective markets.

As Investment Manager, it is our continued intention to invest more into those
businesses in which we first invested a small amount of money as they meet or
exceed the initial milestone objectives we agreed with them. This approach can
be demonstrated through 13 follow on investments being made totalling £2.8m.
There were no new investments during the year as the focus has been to develop
the established diverse portfolio.

Investment highlights
As mentioned above, the portfolio has excelled during the year with
significant uplifts in fair value in a number of companies. The top performing
portfolio businesses are from a range of sectors and experienced notable
growth as shown in the below table.

Company   Industry             Cost, £'000    Uplift in year, Effect of uplift
                                                        £'000        on NAV, p
                                         
Nature    Consumer lifestyle   4,180     
Delivered & wellbeing                  798                               19.44
Limited
Secret    Consumer lifestyle     1,288   
Escapes   & wellbeing                1,265                                5.99
Limited
Zoopla    Media                 1,335   
Limited                                459                                6.21
Calastone Technology                 
Limited                              1,265                260             1.21
                                 7,063      
                                     3,787                               32.85

We continue to have one quoted investment, e-therapeutics, which has performed
well in the year with an increase in fair value of £114,000 giving rise to an
increase in NAV of 0.5p per share.

Realisations in the year
The fund successfully disposed of 31.4% of its holding in Zoopla during the
year, realising a gain of £150,000 on an investment cost of £210,500,
rendering the investment a success. The Company also fully disposed of Evi
Technologies recognising a small loss of £16,000.

Post year end
Since the balance sheet date, although no new investments have been made, the
Company has continued to support investee companies by investing a further
£242,000 into Calastone, £109,000 into Bowman Power and £74,000 into Vega-Chi.
In addition, the Company disposed of its holding in Nature Delivered Limited
for £5,884,000 of which £3,764,000 was paid in cash and £2,120,000 was
reinvested.

Outlook
The continued uncertainty in the current economy remains a concern for small
companies. There are still fierce challenges for these companies, with many
being subjected the pressure of tough trading conditions and tight working
capital. It remains unclear when the timing of the economic downturn will
revert and until it does cash requirements will remain a concern for small
companies.

Despite this, there remain opportunities for entrepreneurs and small companies
as shown in this portfolio. They can execute business plans quickly to meet
and enhance customer experiences in comparison to slower moving large
corporate businesses. A number of businesses in this portfolio have already
shown these characteristics and continue to grow aggressively, despite the
volatile economic environment.

If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2349.

Alex Macpherson
Octopus Investments Limited
23 January 2013

                             Investment Portfolio

                                                                Movement              %
                                              Movement                in      %  equity
                                                    in    Fair valuation voting held by
                                  Investment valuation   value   in year rights     all
                                  cost as at     to 31   at 31     to 31   held   funds
                                  31 October   October October   October     by managed
Fixed asset                             2012      2012    2012      2012  Titan      by
investments    Sector                (£'000)   (£'000) (£'000)   (£'000)      3 Octopus
Nature
Delivered      Consumer lifestyle
Limited        & wellbeing               798     5,086   5,884     4,180  7.53   32.02
Secret Escapes Consumer lifestyle
Limited        & wellbeing             1,265     1,374   2,639     1,288   7.93   17.44
Zoopla Limited Media                     459     2,044   2,503     1,335  0.85    5.15
Calastone
Limited        Technology              1,265       521   1,786       260 10.81    34.1
Certivox
Limited        Technology                950        22     972         6 12.64   33.08
TouchType
Limited        Telecommunications        384       544     928       379  4.20   20.07
Semafone
Limited        Telecommunications        826        72     898        72  7.24   46.64
Mi Pay Limited Telecommunications        848      (99)     749       160  8.49    28.3
Executive
Channel Europe
Limited        Media                     640        61     701         -  7.29   36.12
Surrey
Nanosystems
Limited        Technology                621        43     664        43   6.18   24.55
Metrasens      Consumer lifestyle
Limited        & wellbeing               465       171     636       127   6.68   28.01
GetOptics      Consumer lifestyle
Limited        & wellbeing               507        73     580       163  5.75   21.88
e-Therapeutics Consumer lifestyle
plc            & wellbeing               402       120     522       114    1.1    8.23
Ultrasoc
Technologies
Limited        Technology                492         -     492         - 10.69   65.21
Amplience
Limited        Technology                700     (261)     439         - 12.12   63.13
Vega-Chi
Limited        Technology                641     (296)     345     (296)  6.94   20.92
Bowman Power
Limited        Environmental             312      (42)     270      (70)   2.69   15.55
Michelson
Diagnostics    Consumer lifestyle
Limited        & wellbeing               442     (221)     221     (221)   5.62   42.87
Phase Vision
Limited        Technology                475     (330)     145     (164)  10.09   42.96
PrismaStar
Inc.           Media                     425     (301)     124     (150)   4.95   33.02
Applied
Superconductor
Limited        Environmental             493     (370)     123     (370)  7.96   24.22
Phasor
Solutions
Limited        Technology                 50      (37)      13      (13)   0.62    23.5
AQS Holdings
Limited        Environmental             660     (660)       -     (364)  14.2    50.7
Diverse Energy
Limited        Environmental             414     (414)       -      (47)   5.47   29.76
Elonics
Limited        Technology                306     (306)       -      (76)   3.11   19.54
                                                                               
Total fixed asset investments         14,840     6,794  21,634     6,356
Money market
funds                                    603         -     603         -
Open ended investment companies        1,268       853   2,121       178
Cash at bank                              34         -      34         -
Total
investments                           16,745     7,647  24,392     6,534
Debtors less
creditors                                                  642
Total net
assets                                                  25,034

  Valuation Methodology

Initial measurement
Financial assets are measured at fair value. The initial best estimate of the
fair value of a financial asset that is either quoted or not quoted in an
active market is the transaction price (i.e. cost).

Subsequent measurement
Further funding rounds are a good indicator of fair value and this measure is
used where appropriate. Subsequent adjustment to the fair value of unquoted
investments can be made using sector multiples based on information as at 31
October 2012, where applicable. In some cases the multiples can be compared to
equivalent companies, especially where a particular sector multiple does not
appear appropriate. It is currently industry norm to discount the quoted
earnings multiple to reflect the lack of liquidity in the investment, there
being no ready market for our holding. Typically the discount is 30% but this
can be increased where the relevant multiple appears too high. A lower
discount would also be possible if an investment was close to an exit event.

In accordance with the International Private Equity and Venture Capital
(IPEVC) valuation guidelines investments made within 12 months are usually
kept at cost unless performance indicates that fair value has changed.

Quoted investments are valued at market bid price. No discounts are applied.
If you would like to find out more regarding the IPEVC valuation guidelines,
please visit their website at: www.privateequityvaluation.com.

Review of Investments
During the year, the Company made thirteen follow-on investments amounting to
£2,786,000. The AIM-quoted and unquoted investments are in Ordinary shares
with full voting rights as well as loan note securities.

Quoted and unquoted investments are valued in accordance with the accounting
policy set out in note 1 to the financial statements, which takes account of
current industry guidelines for the valuation of venture capital portfolios
and is compliant with IPEVC valuation guidelines and current financial
reporting standards. The valuations listed are a reflection of the total
investment i.e. both the equity and loan note elements.

Listed below are details of the Company's 10 largest investments by value.

Nature Delivered Limited
Graze.com delivers tasty nutritious snacks to grazers up and down the
country. All boxes are hand picked from over 100 delicious snacks and
delivered in the post. Founded in 2007 and launched in 2009, graze.com was
created to solve office snacking for the better. Delivered directly to
customers' desks or home anywhere in the UK through Royal Mail, each graze box
is packed with four snacks, from flavoured nuts, traditional rice crackers and
exotic dried fruits to freshly baked bread, marinated olives and dips.
Grazers choose the foods they like then graze.com hand picks the perfect box
and sends it to them for just £3.49, including delivery using Royal Mail.The
boxes fit perfectly through the letter box and arrive with the rest of your
post, they are being delivered everywhere in the UK, from the Channel Islands
to the Shetland Islands.

Initial investment date:
 June 2009
Cost: 
 £798,000
Valuation:  
 £5,884,000
Voting rights held by Fund: 
 7.53%
Equity held by all funds managed by Octopus: 32.02%
Last submitted audited accounts: 28
February 2012
Turnover
£20,929,775
Profit before tax: 
 £3,335,215
Net assets: 
 £5,758,161

Secret Escapes Limited
Launched in February 2011, Secret Escapes is an online travel club that offers
its members exclusive discounts of up to 70 per cent on luxury hotels and
holidays. Offers are usually available for between three and seven days. The
founders are aiming for Secret Escapes to become the leading luxury holiday
deal provider in the UK.

Initial investment date:
 April 2011
Cost: 
 £1,265,000
Valuation: 
 £2,639,000
Voting rights held by Fund: 
 7.93%
Equity held by all funds managed by Octopus: 17.44%
Last submitted audited accounts:  31
December 2011
Turnover
:
£2,035,803
Loss before tax: 
 (£1,235,506)
Net assets: 
 £2,126,845

Zoopla Property Group Limited
Zoopla Property Group Ltd owns and operates some of the UK's leading online
property brands including Zoopla.co.uk and Primelocation.com. Over 16,000
estate agent and lettings agent branches across the UK advertise on the
company's websites each month, in addition to all the leading new homes
developers, attracting over 28 million visitors a month and generating over 2
million enquiries per month for the member estate/letting agents and property
developers. In addition to operating its own websites, Zoopla Property Group
Ltd exclusively powers the property search facility on a number of the UK's
biggest websites including The Times, The Telegraph, Independent, Evening
Standard, The Daily Mail, Homes & Property, AOL, MSN, Globrix, Homes24 and
many more. Zoopla Property Group Ltd launched in 2008 and has since acquired
and integrated a number of brands. Zoopla Property Group Ltd is a privately
held company whose shareholders include A&N Media (a division of the Daily
Mail and General Trust) as well as the Octopus Investments managed funds, and
has a highly-experienced management team, led by Founder & CEO, Alex
Chesterman.

Initial investment date:
 January
2009
Cost: 
 £459,000
Valuation: 
 £2,503,000
Voting rights held by Fund: 
 0.85%
Equity held by all funds managed by Octopus: 5.15%
Last submitted audited accounts:  31
December 2011
Turnover
£13,816,236
Loss before tax: 
 (£890,030)
Net assets: 
 £2,811,549

Calastone Limited
Calastone is the UK's only independent transaction service for the mutual fund
industry. It enables buyers and sellers of mutual funds on different
platforms to communicate orders electronically, by providing a universal
message communication and 'translation' service - the "Calastone Transaction
Network" (CTN). This is being welcomed in an industry which has not previously
been able to invest in the real-time exchange of information between
participants. Orders are commonly communicated by fax or telephone with a high
level of manual re-keying and manual error correction. Calastone's
'translation' service means that neither the transmitter nor receiver need to
purchase additional technology or change their existing systems.

Initial investment date:
 October 2008
Cost: 
 £1,265,000
Valuation: 
 £1,786,000
Voting rights held by Fund:  
 10.81%
Equity held by all funds managed by Octopus: 34.10%
Last submitted audited accounts:   30
September 2011
Turnover
£3,324,658
Loss before tax: 
 (£435,182)
Net assets: 
 £1,051,426

CertiVox Limited
CertiVox was founded in 2009 based on the simple belief that everyone deserves
the right to secure their online information exchanges simply and easily. Its
leading-edge technology enables industries around the world - including
defence, government, legal and financial services - to protect and control
their information exchanges, whether through PCs, smart devices or the cloud.
By combining state-of-the-art crypto technology with its unique on-demand
encryption key management service, CertiVox is the only company in the global
market today that can arm businesses and individuals with frictionless
end-to-end encryption, key management and identity management services for the
web 2.0 world.

Initial investment date:
 March
2011
Cost: 
 £950,000
Valuation: 
 £972,000
Equity held: 
 12.64%
Equity held by all funds managed by Octopus: 33.08%
Last submitted audited accounts:  30 June
2011
Turnover
:
NA
Net assets: 
 £1,720,269

TouchType Limited
TouchType is a leader in the development of artificial intelligence and
machine learning technologies, encapsulated in its Fluency prediction engine,
a patent pending set of software algorithms. Its first product, SwiftKey(TM),
a text prediction technology designed to significantly boost the accuracy,
fluency and speed of text entry on mobile and computing devices, resulting in
users having to make less than half the number of keystrokes compared to a
standard QWERTY keyboard. SwiftKey(TM) has enjoyed tremendous success as both
an Android App, with over 10 million downloads to date, and as the installed
text prediction technology on a increasing range of smartphones and tablets.
It has won several high profile industry awards, including a prestigious
Global Mobile Award for the "Most Innovative App" and the Guardian Digital
Innovation Award for the "Best Startup Business".

Initial investment date:
 August
2010
Cost: 
 £384,000
Valuation: 
 £928,000
Voting rights held by Fund: 
 4.20%
Equity held by all funds managed by Octopus: 20.07%
Last submitted group accounts:   31
December 2011
Turnover
:
£654,623
Loss before tax: 
 (£1,285,798)
Net assets: 
 £1,005,210

Semafone Limited
Based in London, Semafone was founded in 2009 by a consortium of call centre
professionals, who were instrumental in the development of its fraud
prevention software for use in call centres. It aims to secure sensitive data
passed over the phone, including bank details, personal identification data
and credit/debit card transactions. Without interrupting caller and agent
dialogue, customers input their card details via the telephone keypad,
eliminating the need to read out the card number and three digit security
number to the phone operator therefore removing the risk of operator fraud.
Semafone has secured valued customers such as BSkyB, the John Lewis
Partnership, Argos, Specsavers and the Manchester Airports Group.

Initial investment date:
 June
2010
Cost: 
 £826,000
Valuation: 
 £898,000
Voting rights held by Fund: 
 7.24%
Equity held by all funds managed by Octopus: 46.64%
Last submitted group accounts: 31
December 2011
Turnover
£2,025,528
Loss before tax: 
 (£1,114,892)
Net liabilities: 
 (£312,180)

Mi-Pay Limited
Mi-Pay was founded in 2004 with its objective to establish itself as a leading
processor of payments for the fast-emerging mobile money sector. The service
enables customers to 'top-up' their pre-paid mobile phone directly online, or
via their mobile phone, rather than using indirect brand channels such as
PayPoint or bank ATMs. Benefits of the direct service include cost reductions
for mobile network operators and a more personal engagement with customers,
removing the anonymity of customer relationships and allowing for substantial
improvements in customer retention.

Mi-Pay continues to make progress in a very dynamic and fast moving market,
most recently agreeing terms with several tier one European, Middle Eastern
and African mobile operators to provide its direct top up service.

Initial investment date:
 February 2010
Cost: 
 £848,000
Valuation: 
 £749,000
Voting rights held by Fund: 
 8.49%
Equity held by all funds managed by Octopus: 28.3%
Last submitted group accounts: 31
December 2011
Turnover
 £2,401,949
Loss before
tax:
(£2,781,342)
Net assets: 
 £1,069,602

Executive Channel Europe Limited
Executive Channel installs digital display screens in office buildings which
it uses to display advertising, up-to-date news and information, via the
internet. These screens are usually located in the elevator lobby to engage an
exclusive audience with high spending power in an uncluttered environment.
Executive Channel is leveraging the industry move in the media market from
static billboards to interactive digital formats.

Initial investment date:
 September
2010
Cost: 
 £640,000
Valuation: 
 £701,000
Voting rights held by Fund: 
 7.29%
Equity held by all funds managed by Octopus: 36.12%
Last submitted group accounts: 30 June
2011
Turnover
293,292
Loss before tax: 
 (£900,612)
Net assets: 
 £1,746,998

Surrey NanoSystems Limited
Surrey NanoSystems has developed a leading technology portfolio addressing the
needs of the global nanoelectronics sector. Its proven technologies deliver
precise, ordered nano-material structures for advanced manufacturing
processes, meeting the scaling challenges of the semiconductor industry.

Surrey NanoSystems works with its partners to deliver practical nano-materials
and technologies to the semiconductor, renewable-energy and clean technology
industries. This partnering approach facilitates the migration of materials
and processes developed on Surrey NanoSystems bespoke research platforms to
production-ready tooling.

Initial investment date:
 July 2009
Cost: 
 £621,000
Valuation: 
 £664,000
Voting rights held by Fund: 
 6.18%
Equity held by all funds managed by Octopus: 24.55%
Last submitted group accounts: 30 June
2011
Turnover
not disclosed
Loss before tax: 
 not disclosed
Net assets: 
 £941,229

How Octopus creates and delivers value for the shareholders of the Company
The Company focuses on providing early stage, development and expansion
funding to predominantly unquoted companies with a typical deal size of £0.25
million to £1 million, in aggregate from the five Titan VCTs managed by
Octopus. The focus is on establishing a portfolio of qualifying investments
in companies that have the potential to achieve a high level of profitability
through the combination of:-

· Scalability: The potential to deliver services to significant numbers of new
customers at very low incremental cost and to generate repeat sales from
customers.

· Scope: The ability to expand into complimentary areas by leveraging customer
and/or distributor relationships, new product development or brand
positioning.

· Pricing power: An ability to charge high and defensible prices for its
products or services as a result of having intellectual property rights, a
strong brand and/or a dominant position in a market niche.

The Investment Manager looks to identify opportunities where the people
involved - the entrepreneur, management team, investors, advisers and any
other significant stakeholders - have a proven record of success. Although
the Company has the ability to invest across a wide range of industries, the
focus will be on several principal sectors:-

· environment
· technology
· media
· telecoms
· consumer lifestyle and wellbeing

Directors' Responsibilities Statement

The Directors are responsible for preparing the Directors' Report, the
Remuneration 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 the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable laws).
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs and 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 accounting 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 the financial statements on the going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and 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 2006. 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.

In so far as each of the Directors is 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 Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.

To the best of my knowledge:

· the financial statements, prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Standard and
applicable laws), give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
· the Investment managers and Directors' reports include fair
reviews of the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties that it faces.

On behalf of the Board

Mark Hawkesworth
Chairman
23 January 2013

                               Income Statement

                                                    Year to 31 October 2012
                                                     Revenue  Capital Total
                                              Notes    £'000    £'000 £'000
Gain on disposal of fixed asset investments    10          -      154   154
Loss on disposal of current asset investments              -       81    81
Fixed asset investment holding losses          10          -    6,356 6,356
Current asset investment holding gains                     -      178   178
Other income                                    2         99        -    99
Investment management fees                      3       (94)    (282) (376)
Performance fee incentive                      19          -    (937) (937)
Other expenses                                  4      (291)        - (291)
Return on ordinary activities before tax               (286)    5,550 5,264
Taxation on return on ordinary activities       6          -        -     -
Return on ordinary activities after tax                (286)    5,550 5,264
Earnings per share - basic and diluted          8     (1.4)p    26.5p 25.1p

  oThe '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.
  oAll revenue and capital items in the above statement derive from
    continuing operations.
  oThe 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.

The accompanying notes form an integral part of the financial statements.

                               Income Statement
                                               Year to 31 October 2011
                                             Revenue      Capital        Total
                               Notes           £'000        £'000        £'000
Loss on disposal of current
asset investments                                  -          (2)          (2)
Fixed asset investment
holding losses                                     -        (597)        (597)
Current asset investment
holding gains                                      -          373          373
Other income                     2               101            -          101
Investment management fees       3              (98)        (294)        (392)
Other expenses                   4             (263)            -        (263)
Return on ordinary
activities before tax                          (260)        (520)        (780)
Taxation on return on
ordinary activities              6                 -            -            -
Return on ordinary
activities after tax                           (260)        (520)        (780)
Loss per share - basic and
diluted                          8            (1.3)p       (2.6)p       (3.9)p

  oThe '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.
  oAll revenue and capital items in the above statement derive from
    continuing operations.
  oThe 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 had no recognised gains or losses other than the results for the
year as set out above.

The accompanying notes form an integral part of the financial statements.

Reconciliation of Movements in Shareholders' Funds

                                                Year to         Year to
                                        31 October 2012 31 October 2011
                                                  £'000           £'000
Shareholders' funds at start of year             18,811          19,607
Return on ordinary activities after tax           5,264           (780)
Net proceeds of share issue                       1,215               -
Purchase of own shares                             (41)            (16)
Dividends paid                                    (215)               -
Shareholders' funds at end of year               25,034          18,811
                                                     

The accompanying notes form an integral part of the financial statements.

                                Balance Sheet
                                             As at 31 October As at 31 October
                                                         2012             2011
                                       Notes    £'000   £'000    £'000   £'000
Fixed asset investments*                10             21,634           14,129
Current assets:
Debtors                                 11      1,629             123
Money market funds and other deposits*  12      2,724            4,493
Cash at bank                                       34             115
                                                4,387            4,731
Creditors: amounts falling due within
one year                                13      (987)            (49)
Net current assets                                      3,400            4,682
Net assets                                             25,034           18,811
Called up equity share capital          14      2,150            2,025
Share premium                           15      1,085               -
Special distributable reserve           15     16,883           17,139
Capital reserve - losses on disposals   15    (1,642)           (534)
 - holding
gains                                   15      7,648             990
Capital redemption reserve              15          7               2
Revenue reserve                         15    (1,097)           (811)
Total equity shareholders' funds                       25,034           18,811
NAV per share                            9             116.4p            92.9p

* Held at fair value through profit or loss

The statements were approved by the Directors and authorised for issue on 23
January 2013 and are signed on their behalf by:

Mark Hawkesworth
Chairman

Company No: 06523078

The accompanying notes form an integral part of the financial statements.

                     Cash Flow Statement
                                                       Year to         Year to
                                               31 October 2012 31 October 2011
                                         Notes           £'000           £'000
Net cash outflow from operating
activities                                               (662)           (650)
Capital expenditure and financial
investment:
Purchase of fixed asset investments       10           (2,786)         (6,990)
Sale of fixed asset investments           10               380             225
Management of liquid resources:
Purchase of current asset investments                  (1,696)         (4,965)
Disposal of current asset investments                    3,724          12,352
Taxation                                                     -               -
Dividends paid                             7             (215)               -
Financing:
Issue of own shares                       14             1,215               -
Purchase of own shares                    14              (41)            (16)
Decrease in cash resources at bank                        (81)            (44)



The accompanying notes form an integral part of the financial statements.

Reconciliation of Return before Taxation to Cash Flow from
Operating Activities
                                               Year to 31 October   Year to 31
                                                             2012 October 2011
                                                            £'000        £'000
Return on ordinary activities before tax                    5,264        (780)
(Gain) on disposal of fixed asset investments               (154)            -
(Gain)/loss on disposal of current asset
investments                                                  (81)            2
(Gain)/loss on valuation of fixed asset
investments                                               (6,356)          597
Gain on valuation of current asset
investments                                                 (178)        (373)
Increase in debtors                                          (91)         (64)
Increase/(decrease) in creditors                              938         (32)
Outflow from operating activities                           (662)        (650)

Reconciliation of Net Cash Flow to Movement in Net Funds
                                                 Year to         Year to
                                         31 October 2012 31 October 2011
                                                   £'000           £'000
Decrease in cash resources at bank                  (81)            (44)
Movement in cash equivalents                     (1,769)         (7,016)
Opening net funds                                  4,608          11,668
Net funds at 31 October                            2,758           4,608

Net funds at 31 October comprised:

                                Year to         Year to
                        31 October 2012 31 October 2011
                                  £'000           £'000
Cash at bank                         34             115
OEICs                             2,121           3,362
Money market funds                  603           1,131
Net funds at 31 October           2,758           4,608

The accompanying notes form an integral part of the financial statements.

                      Notes to the Financial Statements

1. Principal Accounting Policies

Basis of accounting
The financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain financial
instruments, and in accordance with UK Generally Accepted Accounting Practice
(UK GAAP), and the Statement of Recommended Practice (SORP) 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' (revised
2009).

The Company's business activities and the factors likely to affect its future
development, performance and position are set out in the Chairman's Statement
and Investment Manager's Review on pages X to X. Further details on the
management of financial risk may be found in note 16 to the Financial
Statements.

The Board receives regular reports from the Investment Manager and the
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
The assets of the company consist of cash, Money Market Funds and OEIC
Investments, which are readily realisable (11% of net assets) and accordingly,
the company has adequate financial resources to continue in operational
existence for the foreseeable future. Thus, as no material uncertainties
leading to significant doubt about going concern have been identified, it is
appropriate to continue to adopt the going concern basis in preparing the
financial statements.

The principal accounting policies have remained unchanged from those set out
in the Company's 2011 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.

The Company presents its income statement in a three column format to give
shareholders additional detail of the performance of the Company, split
between items of a revenue or capital nature.

The preparation of the financial statements requires management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. Estimates and assumptions
mainly relate to the fair valuation of the fixed asset investments
particularly those that are unquoted investments. Estimates are based on
historical experience and other assumptions that are considered reasonable
under the circumstances. The estimates and the assumptions are under
continuous review with particular attention paid to the carrying value of the
investments.

Capital valuation policies are those that are most important to the depiction
of the Company's financial position and that require the application of
subjective and complex judgements, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and may
change in subsequent periods. The critical accounting policies that are
declared will not necessarily result in material changes to the financial
statements in any given period but rather contain a potential for material
change. The main accounting and valuation policies used by the Company are
disclosed below. Whilst not all of the significant accounting policies require
subjective or complex judgements, the Company considers that the following
accounting policies should be considered critical.

The Company has designated all fixed asset investments as being held at fair
value through profit or loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value
through profit or loss. Accordingly, all interest income, fee income, expenses
and investment gains and losses are attributable to assets designated as being
at fair value through profit or loss.

Current asset investments comprising money market funds are held at fair value
through profit or loss. Cash and short term deposits are held at amortised
cost.

Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Quoted investments are valued in accordance with the
bid-price on the relevant date, unquoted investments are valued in accordance
with current IPEVC valuation guidelines, although this does rely on subjective
estimates such as appropriate sector earnings multiples, forecast results of
investee companies, asset values of subsidiary companies and liquidity or
marketability of the investments held.

Although the Company believes that the assumptions concerning the business
environment and estimates of future cash flows are appropriate, changes in
estimates and assumptions could require changes in the stated values. This
could lead to additional changes in fair value in the future.

Fixed Asset Investments
Purchases and sales of investments are recognised in the financial statements
at the date of the transaction (trade date) at cost.

These investments will be managed and their performance evaluated on a fair
value basis in accordance with a documented investment strategy and
information about them is provided internally on that basis to the Board.
Accordingly, as permitted by FRS 26, the investments are designated as fair
value through profit or loss (FVTPL) on the basis that they qualify as a group
of assets managed, and whose performance is evaluated, on a fair value basis
in accordance with a documented investment strategy. The Company's investments
are measured at subsequent reporting dates at fair value, with the holding
gains and losses recorded in the income statement each year. In accordance
with the investment strategy, the investments are held with a view to
long-term capital growth and it is therefore possible that individual holdings
may increase in value to a point where they represent a significantly higher
proportion of total assets than the original cost.

In the case of investments quoted on a recognised stock exchange, fair value
is established by reference to the closing bid price on the relevant date or
the last traded price, depending upon the convention of the exchange on which
the investment is quoted. This is consistent with the IPEVC valuation
guidelines.

In the case of unquoted investments, fair value is established by using
measures of value such as the price of recent transactions, earnings multiple
and net assets. This is consistent with IPEVC valuation guidelines.

Gains or losses arising from the revaluation of investments at the year end
are recognised as part of the capital return within the income statement and
allocated to the capital reserve - investment holding gains/(losses).

In the preparation of the valuations of assets the Directors are required to
make judgements and estimates that are reasonable and incorporate their
knowledge of the performance of the investee companies.

Current asset investments
Current asset investments comprise money market funds and OEICs and are
classified as held for trading carried at FVTPL. Gains and losses arising from
changes in fair value of investments are recognised as part of the capital
return within the Income Statement and allocated to the capital reserve -
investment gains/(losses) on disposal.

The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the option of the Company. The
current asset investments are actively managed and the performance is
evaluated in accordance with a documented investment strategy. Information
about them has to be provided internally on that basis to the Board.

Other income
Investment income includes interest earned on bank balances and money market
funds and includes income tax withheld at source. Dividend income is shown net
of any related tax credit.

Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt that payment
will be received. Fixed returns on debt and money market funds are recognised
so as to reflect the effective interest rate; provided there is no reasonable
doubt that payment will be received in due course.

Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
wholly to revenue with the exception of the investment management fee, which
is charged 25% to the revenue account and 75% to the capital reserve to
reflect, in the Directors' opinion, the expected long-term split of returns in
the form of income and capital gains respectively from the investment
portfolio, and the performance fee which has been charged 100% to capital, as
the fees relate to the gains made on fixed asset investments.

The transaction costs incurred when purchasing or selling assets are written
off to the Income Statement in the year that they occur. The performance,
however, has been attributed fully to capital since it has arisen through
capital growth of companies.

Revenue and capital
The revenue column of the income statement includes all income and revenue
expenses of the Company. The capital column includes gains and losses on
disposal and gains and losses arising from the revaluation of investments at
the period end. Gains and losses arising from changes in fair value of
investments are recognised as part of the capital return within the income
statement.

Taxation
Corporation tax payable is applied to profits chargeable to corporation tax,
if any, at the current rate. The tax effect of different items of income/gain
and expenditure/loss is allocated between capital and revenue return on the
'marginal' basis as recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all timing
differences that have originated but not reversed at the balance sheet date or
where transactions or events have occurred at that date that will result in an
obligation to pay more, or a right to pay less tax. This is with the exception
that deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing can be
deducted.

Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand. Liquid
resources are current asset investments which are disposable without
curtailing or disrupting the business and are either readily convertible into
known amounts of cash at or close to their carrying values or traded in an
active market. Liquid resources comprise term deposits of less than one year
(other than cash), government securities, investment grade bonds and
investments in money market funds, as well as OEICs.

Loans and receivables
The Company's loans and receivables are initially recognised at fair value
which is normally transaction cost and subsequently measured at amortised cost
using the effective interest method.

Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprise disclosures relating to
financial instruments.

We define capital as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the
business with optimising the return on equity. The Company currently has no
borrowings nor does it anticipate that it will drawdown any borrowing
facilities in the future to fund the acquisition of investments.

The Company does not have any externally imposed capital requirements.

The value of the managed capital is indicated in note 14. The Board considers
the distributable reserves and the total return for the year when recommending
a dividend. In addition, the Board is authorised to make market purchases up
to a maximum of 5% of the issued Ordinary share capital of the Company in
accordance with Special Resolution 8 in order to maintain sufficient liquidity
in the Company.

Capital management is monitored and controlled using the internal control
procedures set out on page X of this report. The capital being managed
includes equity and fixed-interest investments, cash balances and liquid
resources including debtors and creditors.

Financial instruments
The Company's principal financial assets are its investments and the policies
in relation to those assets are set out above. Financial liabilities and
equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any contract
that evidences a residual interest in the assets of the entity after deducting
all of its financial liabilities. Where the contractual terms of share capital
do not have any terms meeting the definition of a financial liability then
this is classed as an equity instrument. Dividends and distributions relating
to equity instruments are debited direct to equity.

Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established. This
liability is established for interim dividends when they are declared by the
Board, and for final dividends when they are approved by the shareholders.

2. Other Income

                                     Year to         Year to
                             31 October 2012 31 October 2011
                                       £'000           £'000
Money market funds and OEICs               5              28
Loan note interest                        94              73
                                          99             101

3. Investment Management Fees

                          Year to 31 October 2012 Year to 31 October 2011
                           Revenue  Capital Total  Revenue  Capital Total
                             £'000    £'000 £'000    £'000    £'000 £'000
Investment management fee       94      282   376       98      294   392

For the purposes of the revenue and capital columns in the income statement,
the management fee has been allocated 25% to revenue and 75% to capital, in
line with the Board's expected long term return in the form of income and
capital gains respectively from the Company's investment portfolio.

Octopus Investments provides investment management and accounting and
administration services to the Company under a management agreement which runs
for a period of five accounting periods with effect from 21 July 2008 and may
be terminated at any time thereafter by not less than 12 months' notice given
by either party. No compensation is payable in the event of terminating the
agreement by either party, if the required notice period is given. The fee
payable, should insufficient notice be given, will be equal to the fee that
would have been paid should continuous service be provided, or the required
notice period was given. The basis upon which the management fee is
calculated is disclosed within note 19 to the financial statements.

4. Other Expenses

                                                       Year to         Year to
                                               31 October 2012 31 October 2011
                                                         £'000           £'000
Directors' remuneration                                     50              50
Fees payable to the Company's auditor for the               12               9
audit of the financial statements
Fees payable  to  the  Company's  auditor  for               2               2
other services - tax compliance
Legal and professional expenses                              1               3
Accounting and administration services                      56              59
Trail Commission                                            83              62
Other expenses                                              87              78
                                                           291             263

Total annual  running  costs are  capped  at  3.2% of  net  assets  (excluding 
irrecoverable VAT). For  the year to  31 October 2012  the running costs,  as 
defined in the prospectus, were 2.81% of net assets (2011: 3.1%).

5. Directors' Remuneration

                                       Year to                         Year to
                               31 October 2012                 31 October 2011
                                         £'000                           £'000
Directors' emoluments
Mark Hawkesworth
(Chairman)                                  20                             20
Tim Lebus                                   15                              15
David Bundred                               12                               -
Chris Hulatt (paid to
Octopus Investments
Limited)                                     3                              15
                       
                       50             50

None of the Directors received any other remuneration or benefit from the
Company during the year. The Company has no employees other than
non-executive Directors. The average number of non-executive Directors in the
year was three (2011: three).

6. Tax on Ordinary Activities
The corporation tax charge for the year was £nil (2011: £nil)

      Factors affecting the tax charge for the current year:

The current tax charge for the period differs from the standard rate of
corporation tax in the UK of 24.83% (2011: 26.83%).

The differences are explained
below.

Current tax reconciliation:                           Year to         Year to
                                              31 October 2012 31 October 2011
                                                        £'000           £'000
(Loss)/gain on ordinary activities before tax           5,264           (780)
Capital gains not taxable                             (6,534)               -
                                                      (1,270)           (780)
Current tax at 24.83% (2011: 26.83%)                   (315)           (209)
Income not taxable for tax purposes                         -               -
Expenses not deductible for tax purposes                    -              69
Unrelieved tax losses                                     315            140
Total current tax charge                                    -               -

Excess management charges of £2,292,000  (2011: £1,779,000) have been  carried 
forward at 31 October 2012 and are available for offset against future taxable
income subject to  agreement with  HMRC. The  Company has  not recognised  the 
deferred tax asset  of £536,000 (2011:  £477,000) in respect  of these  excess 
management charges.

Approved VCTs are exempt from tax on capital gains within the Company. Since
the Directors intend that the Company will continue to conduct its affairs so
as to maintain its approval as a VCT, no current deferred tax has been
provided in respect of any capital gains or losses arising on the revaluation
or disposal of investments.

7. Dividends

                                                       Year to         Year to
                                               31 October 2012 31 October 2011
                                                         £'000           £'000
Recognised as distributions in the financial
statements for the period
Previous year's final dividend                               -               -
Current period's interim dividend                          215               -
                                                           215               -
Paid and proposed in respect of the period
Interim dividend paid - 1.0p per share (2011:
nil)                                                       215               -
Proposed Special dividend - 20.0p per share
(2011: nil)                                              4,300               -
                                                         4,515               -

The special dividend of 20.0p will be paid on 28 March 2013 to shareholders on
the register on 11 January 2013.

8. Earnings per Share
The total earnings per share are based on a total gain of £5,264,000 (2011:
loss of £780,000) and 20,960,151 (2011: 20,255,857) Ordinary shares, being the
weighted average number of Ordinary shares in issue during the year.

The revenue earnings per share are based on a revenue loss of £286,000 (2011:
loss of £260,000) and 20,960,151 (2011: 20,255,857) Ordinary shares, being the
weighted average number of Ordinary shares in issue during the year.

The capital earnings per share are based on a capital profit of £5,550,000
(2011: loss of £520,000) and 20,960,151 (2011: 20,255,857) Ordinary shares,
being the weighted average number of Ordinary shares in issue during the year.

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

9. Net Asset Value per Share
The calculation of NAV per share as at 31 October 2012 is based on net assets
of £25,034,000 (2011: £18,811,000) and 21,497,993 (31 October 2011:
20,250,554) Ordinary shares in issue at that date.

10. Fixed Asset Investments
Where financial instruments are measured in  the balance sheet at fair  value; 
FRS 29 requires disclosure  of the fair value  measurements by level based  on 
the following fair vale investment hierarchy:

Level 1: quoted prices in active markets for identical assets and liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available, and those prices
represent actual and regularly occurring market transactions on an arm's
length basis. The quoted market price used for financial assets held is the
current bid price. These instruments are included in level 1 and comprise
AIM-quoted investments classified as held at fair value through profit or
loss.

Level 2: the fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable data where it is available and
rely as little as possible on entity-specific estimates. If all significant
inputs required to fair value an instrument
are observable, the instrument is included in level 2. The Company held no
such investments in the current or
prior year.

Level 3: the fair value of financial instruments that are not traded in an
active market (for example investments in
unquoted companies) is determined by using valuation techniques such as
earnings multiples. If one or more of
the significant inputs is not based on observable market data, the instrument
is included in level 3.

There have been no transfers between these classifications in the year (2011:
nil). The change in fair value
for the current and previous year is recognised through the income statement.

All items held at fair value through profit or loss were designated as such
upon initial recognition. Movements in
investments at fair value through profit or loss during the year to 31 October
2012 are summarised below.

                                    Level 1:        Level 3:
                                  AIM-quoted        Unquoted
                                 investments     investments Total investments
                             31 October 2012 31 October 2012   31 October 2012
                                       £'000           £'000             £'000
Valuation and net book
amount:
Book cost as  at 1  November 
2011                                     402          13,938            14,340
Cumulative revaluation                     7           (218)             (211)
Valuation at 1 November 2011             409          13,720            14,129
Movement in the year:
Purchases at cost                          -           2,786             2,786
Disposal proceeds                          -         (1,791)           (1,791)
Profit on realisation of
investments                                -             154               154
Revaluation in year                      113           6,243             6,356
Valuation at 31 October 2012             522          21,112            21,634
Book cost at 31 October                               14,438
2012:                                    402                            14,840
Revaluation to 31 October                              6,674
2012:                                    120                             6,794
Valuation at 31 October 2012             522          21,112            21,634

The investment portfolio is managed with capital growth as the primary focus.
The loan and equity investments are considered as one instrument for valuation
purposes due to the legal binding within the investment agreement and
therefore they are combined in the table shown above.

Level 3 valuations include assumptions based on non-observable market data,
such as discounts applied either to reflect fair value of financial assets
held at the price of recent investment, or, in the case of unquoted
investments, to adjust earnings multiples. Further details in respect of the
methods and assumptions applied in determining the fair value of the
investments are described in the Investment Manager's Review and within the
principal accounting policies in note 1. The costs incurred in the disposals
amount to £15,000.

At 31 October 2012 and 31 October 2011 there were no commitments in respect of
investments approved by the manager but not yet completed.

11. Debtors

                  31 October 2012 31 October 2011
                            £'000           £'000
Prepayments                   126             123
Disposal proceeds           1,503               -
                            1,629             123

Disposal proceeds of £186,000 are due in more than one year.

12. Current Asset Investments
Current asset investments at 31 October 2012 comprised money market funds  and 
OEIC's.

                   31 October 2012 31 October 2011
                             £'000           £'000
Money Market funds             603           1,131
OEIC's                       2,121           3,362
                             2,724           4,493

All current asset investments held at the year end sit within the level 1
hierarchy for the purposes of FRS29.

Level 1 money market funds and OEICs: Level 1 valuations are based on quoted
prices (unadjusted) in active markets for identical assets or liabilities. The
valuation of money market funds and OEIC's at 31 October 2012 was £2,724,000
(2011: £4,493,000).

13. Creditors: Amounts Falling Due Within One Year

         31 October 2012 31 October 2011
                   £'000           £'000
Accruals             987              49
                     987              49

14. Share Capital

                                               31 October 2012 31 October 2011
                                                         £'000           £'000
Authorised:
50,000,000 Ordinary shares of 10p                       5,000           5,000
Allotted:
21,497,993 (2011: 20,250,554) Ordinary  shares           2,150           2,025
of 10p (fully paid)

The capital of the Company is managed in accordance with its investment policy
with a view to the achievement of its investment objective as set on page X.
The Company is not subject to any externally imposed capital requirements.

We define capital as shareholders' funds and our financial strategy in the
medium term is to manage a level of cash that balances the risks of the
business with optimising the return on equity. The Company currently has no
borrowings nor does it anticipate that it will drawdown any borrowing
facilities in the future to fund the acquisition of investments.

The Board considers the distributable reserves and the total return for the
year when recommending a dividend. In addition, the Board is authorised to
make market purchases up to a maximum of 5% of the issued Ordinary share
capital of the Company in accordance with Special Resolution 8 in order to
maintain sufficient liquidity in the Company.

Capital management is monitored and controlled using the internal control
procedures set out on page X of this report. The capital being managed
includes equity and fixed-interest investments, cash balances and liquid
resources including debtors and creditors.

The Company issued 1,296,414 shares at a price of 99.1p during the year (2011:
No shares were issued during the year).

The Company repurchased the following Ordinary shares for cancellation (2011:
17,595 shares):

                                                33,500 at a price of 83.5p per
· 2 March 2012: share
                                                15,475 at a price of 84.2p per
· 30 April 2012 share

15. Reserves

              Share                      Capital        Capital    Capital
            Premium       Special        reserve        reserve redemption
                    distributable gains/(losses)        holding    reserve  Revenue
                          reserve    on disposal gains/(losses)             reserve
              £'000         £'000          £'000          £'000      £'000    £'000
As at 1           -       17,139*                                        2   (811)*
November
2011                                      (534)*            990
Purchase of       -          (41)                                        5        -
own shares                                     -              -
Issue of      1,085             -                                        -        -
Equity                                         -              -
Return on         -             -                                        -    (286)
ordinary
activities
after tax                                      -              -
Management        -                                                      -        -
fees
allocated
as capital
expenditure                     -        (1,219)              -
Current           -             -                                        -        -
year gains
on disposal
- fixed
assets                                       154              -
Current           -             -                                        -        -
year gains
on disposal
- current
assets                                        81              -
Holding           -             -                                        -        -
gains on
disposal                                   (124)            124
Current           -             -                                        -        -
year fair
value gain
- Fixed
asstets                                        -          6,356
Current           -             -                                        -        -
year gain
fair value
gain -
Current
assets                                         -            178
Dividends         -         (215)                                        -        -
paid                                           -              -
Balance as    1,085       16,883*                                        7 (1,097)*
at 31
October
2012                                    (1,642)*          7,648

*Reserves considered  when  calculating potential  distribution  by way  of  a 
dividend.

When the Company revalues its investments during the period, any gains or
losses arising are credited/charged to the income statement. Holding
gains/losses are then transferred to the 'capital reserve - holding
gains/(losses)'. When an investment is sold, any balance held on the 'capital
reserve - holding gains/(losses)' is transferred to the 'capital reserve -
gains/(losses) on disposal' as a movement in reserves.

Distributable Reserves:

                        £'000
As at 1 November 2011  15,794
Movement in year      (1,650)
As at 31 October 2012  14,144

This is the minimum value of reserves available for potential distribution,
which will be impacted by the future realisibility, into cash, of gains and
losses included in the Capital Holding reserve.

The purpose of the special distributable reserve was to create a reserve which
will be capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a view to
narrowing the discount to net asset value at which the Company's Ordinary
shares trade. In the event that the capital reserve gains/(losses) on disposal
do not have sufficient funds to pay dividends, these will be paid from the
special distributable reserve.

16.  Financial Instruments and Risk Management
The  Company's  financial  instruments  comprise  equity  and  fixed  interest 
investments,  cash  balances  and  liquid  resources  including  debtors   and 
creditors.  The  Company  holds  financial  assets  in  accordance  with   its 
investment policy  of  investing  mainly  in a  portfolio  of  VCT  qualifying 
unquoted securities  whilst holding  a proportion  of its  assets in  cash  or 
near-cash investments in order to provide a reserve of liquidity.

  Classification of financial instruments

The Company held the following categories of financial instruments, all of
which are included in the balance sheet at fair value, at 31 October 2012.

                                            31 October 2012 31 October 2011
                                                       £000            £000
Assets at fair value through profit or loss
Fixed asset investments                              21,634          14,129
Current asset investments                             2,724           4,493
Total                                                24,358          18,622
Loans and receivables
Cash at bank                                             34             115
Disposal proceeds                                     1,503               -
Total                                                 1,537             115
Liabilities at amortised cost
Accruals                                                987              49
Total                                                   987              49

Fixed asset investments (see note 10) are carried at fair value. Unquoted
investments are carried at fair value as determined by the directors in
accordance with current venture capital industry guidelines. The fair value of
all other financial assets and liabilities is represented by their carrying
value in the balance sheet.

In carrying on its investment activities, the Company is exposed to various
types of risk associated with the financial instruments and markets in which
it invests. The most significant types of financial risk facing the Company
are price risk, interest rate risk, credit risk and liquidity risk. The
Company's approach to managing these risks is set out below together with a
description of the nature and amount of the financial instruments held at the
balance sheet date.

Market risk
The Company's strategy for managing investment risk is determined with regard
to the Company's investment objective, as outlined on page X. The management
of market risk is part of the investment management process and is a central
feature of venture capital investment. The Company's portfolio is managed with
regard to the possible effects of adverse price movements and, with the
objective of maximising overall returns to shareholders. Investments in
unquoted companies, by their nature, usually involve a higher degree of risk
than investments in companies quoted on a recognised stock exchange, though
the risk can be mitigated to a certain extent by diversifying the portfolio
across business sectors and asset classes. The overall disposition of the
Company's assets is regularly monitored by the Board.

Details of the Company's investment portfolio at the balance sheet date are
set out on pages X to X.

84.3% (2011: 72.9%) by value of the Company's net assets comprises investments
in unquoted companies held at fair value. The valuation methods used by the
Company include the application of a price/earnings ratio derived from listed
companies with similar characteristics, and consequently the value of the
unquoted element of the portfolio can be indirectly affected by price
movements on the London Stock Exchange. A 5% overall increase in the valuation
of the unquoted investments at 31 October 2012 would have increased net assets
and the total return for the period by £1,056,000 (2011: £686,000). An
equivalent change in the opposite direction would have reduced net assets and
the total return for the period by the same amount.

10.9% (2011: 23.9%) by value of the Company's net assets comprises of OEICs
and money market funds held at fair value. A 5% overall increase in the
valuation of the OEICs and money market funds at 31 October 2012 would have
increased net assets and the total return for the year by £136,000 (2011:
£226,000). An equivalent change in the opposite direction would have reduced
net assets and the total return for the year by the same amount.

The Investment Manager considers that the majority of the investment
valuations are based on earnings multiples which are ascertained with
reference to the individual sector multiple or similarly listed entities. It
is considered that due to the diversity of the sectors, the 5% sensitivity
discussed above provides the most meaningful potential impact of average
multiple changes across the portfolio.

Interest rate risk
Some of the Company's financial assets are interest-bearing. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates.

Fixed rate
The table below summarises weighted average effective interest rates for the
fixed interest-bearing financial instruments:

                   As at 31 October 2012            As at 31 October 2011
                                                                      Weighted
            Total fixed                Weighted      Total             average
                   rate Weighted   average time fixed rate Weighted   time for
              portfolio  average for which rate  portfolio  average which rate
               by value interest    is fixed in   by value interest   is fixed
                  £'000   rate %          years      £'000   rate %   in years
Fixed-rate
investments
in unquoted
companies         1,268      10%            2.8        297      12%        3.0

Due to the relatively short period to maturity of the fixed rate investments
held within the portfolio, it is considered that an increase or decrease of 1%
in the base rate as at the reporting date would not have had a significant
effect on the Company's net assets or total return for the year.

Floating rate
The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts and, where appropriate, within interest bearing money market
funds. The benchmark rate which determines the rate of interest receivable on
such investments is the bank base rate, which was 0.5% (2011: 0.5%) at 31
October 2012. The amounts held in floating rate investments at the balance
sheet date were as follows:

                                               31 October 2012 31 October 2011
                                                         £'000           £'000
Floating-rate investments in unquoted
companies                                                    -             495
Cash on deposit & money market funds                       603           1,247
                                                           603           1,742

A 1% increase in the base rate would increase income receivable from these
investments and the total return for the year by £6,000 (2011: £17,000).

Credit risk
There were no significant concentrations of credit risk to counterparties at
31 October 2012. By cost, no individual investment exceeded 7.9% (2011: 9.1%)
of the Company's net assets at 31 October 2012.

Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Investment Manager and the Board carry out a regular review
of counterparty risk. The carrying values of financial assets represent the
maximum credit risk exposure at the balance sheet date.

At 31 October 2012 the Company's financial assets exposed to credit risk
comprised the following:

                                               31 October 2012 31 October 2011
                                                         £'000           £'000
Fixed-rate investments in unquoted companies             1,268             297
Floating-rate investments in unquoted
companies                                                    -             495
Cash on deposit & money market funds                       603           1,247
                                                         1,871           2,039

Credit risk relating to listed money market funds is mitigated by investing in
a portfolio of investment instruments of high credit quality, comprising
securities issued by the UK Government and major UK companies and
institutions. Credit risk relating to loans to and preference shares in
unquoted companies is considered to be part of market risk.

The investments in money market funds and OEICS are uncertified.

Credit risk arising on the sale of investments is considered to be small due
to the short settlement and the contracted agreements in place with the
settlement lawyers.

The Company's interest-bearing deposit and current accounts are maintained
with HSBC Bank plc and BlackRock Inc. The Investment Manager has in place a
monitoring procedure in respect of counterparty risk which is reviewed on an
ongoing basis. Should the credit quality or the financial position of HSBC
deteriorate significantly, the Investment Manager will move the cash holdings
to another bank.

Liquidity risk
The Company's financial assets include investments in unquoted equity
securities which are not traded on a recognised stock exchange and which
generally may be illiquid. They may also include investments in AIM-quoted
companies, which by their nature; involve a higher degree of risk than
investments on the main market. As a result, the Company may not be able to
realise some of its investments in these instruments quickly at an amount
close to their fair value in order to meet its liquidity requirements, or to
respond to specific events such as deterioration in the creditworthiness of
any particular issuer.

The Company's liquidity risk is managed on a continuing basis by the
Investment Manager in accordance with policies and procedures laid down by the
Board. The Company's overall liquidity risks are monitored on a quarterly
basis by the Board.

The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses. At 31 October 2012
these investments were valued at £2,758,000 (2011: £4,608,000).

17.  Post Balance Sheet Events
The following events occurred between the balance sheet date and the signing
of these financial statements:

  oOn 12 November 2012 a further £244,000 was invested into Calastone
    Limited.
  oOn 15 November 2012 a further £109,000 was invested into Bowman Power
    Limited.
  oOn 30 November 2012 Titan disposed of its holding in Nature Delivered
    Limited for £5,884,000 of which £3,764,000 was paid in cash and £2,120,000
    was reinvested.
  oOn 9 January 2013 a further £74,000 was invested into Vega-Chi Limited.

18.  Contingencies, Guarantees and Financial Commitments
Provided that an intermediary continues to act for a shareholder and the
shareholder continues to be the beneficial owner of the shares, intermediaries
will be paid an annual trail commission of 0.5% of the initial net asset
value. Trail commission of £83,000 was paid during the year (2011: £62,000)
and there was £21,000 (2011: £21,000) outstanding at the year end.

There were no further contingencies, guarantees or financial commitments as at
31 October 2012.

19.  Transactions with manager
Octopus Titan VCT 3 plc has paid Octopus Investments £474,000 (2011: £392,000)
in the year as a management fee and there is £98,000 (2011: £nil) in
prepayments at the balance sheet date. The management fee is payable
quarterly in advance and is based on 2.0% of the net asset value calculated at
annual intervals as at 31 October.

Octopus Investments Limited also provides accounting, administrative and
company secretarial services to the Company, payable quarterly in advance for
a fee of 0.3% of the net asset value calculated at annual intervals as at 31
October. During the year £71,000 (2011: £59,000) was paid to Octopus
Investments and there is £15,000 (2011: £nil) in prepayments at the balance
sheet date, for the accounting and administrative services. In addition,
Octopus also provides secretarial services for a fee of £15,000 per annum.
During the year there was £2,500 (2011: £nil) in prepayments at the balance
sheet date.

In addition, Octopus Investments is entitled to performance related incentive
fees. The incentive fees are designed to ensure that there are significant
tax-free dividend payments made to Shareholders as well as strong performance
in terms of capital and income growth, before any performance related
incentive fee payment is made. Included within accruals is a provision of
£937,000 relating to a performance fee payable to the investment manager on
achieving a Total Return of 130p and declaring dividends of 40p per share. At
the year end, prior to recognising the performance fee, the Total Return is
120.8p per share and dividends declared amounted to 1p per share. The Board
has decided to recognise a provision for the performance fee to reflect the
cost of the fee in the period in which the fees were earned. The provision has
been made on the basis that fund has a constructive obligation to shareholders
to accrue the dividend once the Total Return is reached based on the dividends
declared in comparable VCTs.

In recognising this provision the Board has made a material estimate as to the
probability of the fees becoming payable. The Board has considered the success
of other VCTs managed by Octopus Investments Limited with a similar portfolio
of investments. It is the Board's view that the performance of these more
developed funds is evidence that the Total Return and dividend hurdles will be
reached and therefore it has taken the decision to accrue the performance fee
earned to date on a Total Return of 120.8 pence per share.

If, on a subsequent financial year end, the Performance Value of Octopus the
Company falls short of the Performance Value on the previous financial year
end, no incentive fee will arise. If, on a subsequent financial period end,
the performance exceeds the previous best Performance Value of Octopus the
Company, the Investment Manager will be entitled to 20% of such excess in
aggregate.

20.  Related Party Transactions
Chris Hulatt, a non-executive Director of Octopus Titan VCT 3 plc during the
course of the year prior to his resignation, is a Director of Octopus
Investments Limited. During the year, Tim Lebus became an observer on behalf
of Octopus Investments Limited, the Investment Manager, to a number of Octopus
Ventures investee companies.

The Directors received the following dividends from the Company:

                            31 October 2012 31 October 2011
Mark Hawkesworth (Chairman)            £106            £nil
Tim Lebus                              £106            £nil
David Bundred                          £nil            £nil

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Source: Octopus Titan VCT 3 PLC via Thomson Reuters ONE
HUG#1672405