DOWNING TWO VCT PLC
HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2014
PERFORMANCE SUMMARY
| 'C' Share pool | 30 Jun 2014 | 31 Dec 2013 | 31 Jul 2013 | ||
| Pence | Pence | Pence | |||
| Net asset value per 'C' Share | 91.6 | 90.9 | 93.2 | ||
| Net asset value per 'A' Share | 0.1 | 0.1 | 0.1 | ||
| Cumulative distributions per 'C' Share | 25.0 | 22.5 | 20.0 | ||
| Total return per 'C' Share and 'A' Share | 116.7 | 113.5 | 113.3 |
| 'D' Share pool | 30 Jun 2014 | 31 Dec 2013 | 31 Jul 2013 | ||
| Pence | Pence | Pence | |||
| Net asset value per 'D' Share | 76.0 | 77.0 | 78.9 | ||
| Net asset value per 'E' Share | 0.1 | 0.1 | 0.1 | ||
| Cumulative distributions per 'D' Share | 20.0 | 17.5 | 15.0 | ||
| Total return per 'D' Share and 'E' Share | 96.1 | 94.6 | 94.0 |
| 'F' Share pool | 30 Jun 2014 | 31 Dec 2013 | 31 Jul 2013 | ||
| Pence | Pence | Pence | |||
| Net asset value per 'F' Share | 77.8 | 80.0 | 84.0 | ||
| Cumulative distributions per 'F' Share | 12.5 | 10.0 | 7.5 | ||
| Total return per 'F' Share | 90.3 | 90.0 | 91.5 |
| 'G' Share pool | 30 Jun 2014 | 31 Dec 2013 | 31 Jul 2013 | ||
| Pence | Pence | Pence | |||
| Net asset value per 'G' Share | 92.4 | 95.1 | 100.1 | ||
| Cumulative distributions per 'G' Share | 7.5 | 5.0 | - | ||
| Total return per 'G' Share | 99.9 | 100.1 | 100.1 |
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Half-Yearly Report for the six months ended 30 June 2014. Investment performance throughout the period has been generally satisfactory, with the strongest results coming from the more mature portfolios that are starting to approach their planned exit date.
Net asset values and overview
'C' Share pool
At 30 June 2014, the net asset value ("NAV") for a combined holding of one 'C' Share and one 'A' Share was 91.7p, an increase of 3.1p (3.4%) over the period. Total Return (NAV plus dividends paid to date) is now 116.7p for a combined holding. This compares to the original cost, net of income tax relief, of 70p per share.
The fifth anniversary of the close of the 'C' Share fundraising offer falls in September 2014 and the process of disposing of investments in order to return funds to 'C' Shareholders can then begin. The Manager is already progressing a number of transactions which may lead to exits from a significant proportion of the portfolio. The exact timing of when exits will be achieved is difficult to predict, but we are optimistic that the Company will be in a position to make a significant return of capital payment to 'C' Shareholders in early 2015.
'D' Share pool
At 30 June 2014, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 76.1p, an increase of 1.5p (2.0%) over the period. Total Return (NAV plus dividends paid to date) is now 96.1p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.
The initial five year period for 'D' Shareholders comes to an end in April 2015, when the task of realising the 'D' Share investments will commence. As plans are less well developed than for the 'C' Share pool, it is more difficult to make estimates about when capital might be returned to 'D' Shareholders, but the Board believes it is realistic to expect the first major payment to be made during 2015.
'F' Share pool
At 30 June 2014, the net asset value ("NAV") for a holding of one 'F' Share was 77.8p, an increase of 0.2p (0.2%) over the period. Total Return (NAV plus dividends paid to date) is now 90.3p, compared to the original cost, net of income tax relief, of 70p per share.
The task of building the qualifying 'F' Share portfolio is now close to completion. It is expected that a small number of additional qualifying investments will be made and, if necessary, will be funded by disposals from the non-qualifying investments currently held. The exit process for the 'F' Share pool is not due to commence until 2018.
'G' Share pool
At 30 June 2014, the net asset value ("NAV") for a holding of one 'G' Share was 92.4p. This represents a small fall of 0.2p per share over the period after adjusting for the dividends paid out and arises from a small excess of cost over income. Total Return (NAV plus dividends paid to date) is now 99.9p, compared to the initial NAV of 100.0p.
It is still early days for the 'G' Share pool but several qualifying investments have already been completed, alongside a core of non-qualifying investments which helps to reduce the "cash drag" that can arise with uninvested funds.
A full review for each share pool is covered in the specific Investment Manager's Reports on pages 3 to 12.
Dividends
In line with the Company's stated policies, interim dividends will be paid as follows:
'D' Shares 2.5p per share
'F' Shares 2.5p per share
'G' Shares 2.5p per share
Each of the above dividends will be paid on 12 December 2014 to Shareholders on the register at 21 November 2014.
In respect of the 'C' Shares, the Board has decided not to declare the usual dividend at this time, but will monitor the investment disposals from the 'C' Share pool over the coming month and intends to make a significant distribution early in 2015.
Share buybacks
The Company has a general policy of buying in its own shares that become available in the market for cancellation. No shares were purchased in the six month period to 30 June 2014.
The current policy is that the Company will buy 'D' Shares and 'E' Shares at approximately a 10% discount to the latest published NAV and 'F' Shares and 'G' Shares at a nil discount.
Now that the 'C' Share pool is approaching the time when capital will start to be returned to Shareholders, the Board is unlikely to support any further buybacks of 'C' and 'A' Shares. The Board believes that the fairest way to manage liquid funds during this process is to keep realisation proceeds intact and distribute them to all 'C' Shareholders by way of dividends rather than utilising some funds on share buybacks. For this same reason, the Board also expects to cease supporting 'D' Share buybacks in March 2015.
Outlook
With the share pools at different stages in their lives, the Investment Manager will have a number of different tasks over the remainder of the year.
The exit process for the 'C' Share pool may provide some challenges but early indications are that there is a good chance that the task can be completed effectively and reasonably quickly. Potential plans for the exits from 'D' Share pool investments are also likely to be developed later in the period.
The task of continuing to build the investment portfolio will continue for the 'F' Share and 'G' Share pool, whilst close monitoring of all existing investments will remain a high priority.
The Board is also considering creating a further share class and undertaking a new fundraising later in the year. This will help to maintain the size of the Company once 'C' Share funds start being returned and will therefore contribute to keeping running costs at a low level.
The next Annual Report is expected to be published in April 2015. Prior to that I expect to communicate with Shareholders in respect of the new fundraising proposals, and also with 'C' Shareholders about the first return of capital payment.
Hugh Gillespie
Chairman
INVESTMENT MANAGER'S REPORT
'C' SHARE POOL
Investment activity and performance
The main task of investing the 'C' Share pool fund was completed some time ago and so investment activity during the period was limited. An opportunity to invest further funds in three existing investments to repay bank debt was taken with a further £300,000 being invested in East Dulwich Tavern Limited, £225,000 in Atlantic Dogstar Limited and £125,000 in Westow House Limited.
The majority of the 'C' Share pool investments have performed in line with expectations over the period, with no change in valuation. However, there have been several valuation adjustments which resulted in a net valuation increase of £154,000.
An increase in value of £55,000 in Future Biogas (SF) Limited was recognised to reflect the fact that the operational issues that were initially experienced have now been resolved and performance has significantly improved.
Westow House Limited owns the Westow House, a pub in Crystal Palace, South London. A £50,000 increase in the valuation was recognised at the period end to reflect the continued performance beyond the original business plan.
Atlantic Dogstar Limited owns two pubs in London: The Dogstar in Brixton and The Clapton Hart in Clapton. The Dogstar's performance, in particular, has supported an increase in value of £33,000.
There were also several smaller uplifts including: £13,000 on Vermont Developments Limited; and £3,000 on East Dulwich Tavern Limited.
Details of the 'C' Share pool portfolio and investment activity during the period are shown in the following pages.
Net asset value
At 30 June 2014, the net asset value ("NAV") for a combined holding of one 'C' Share and one 'A' Share was 91.7p, an increase of 3.1p (3.4%) over the period. Total Return (NAV plus dividends paid to date) is now 116.7p for a combined holding.
Results
The profit on ordinary activities for the 'C' Shares, after taxation, for the period was £228,000, comprising a revenue profit of £74,000 and a capital profit of £154,000.
Outlook
Our focus with the 'C' Share portfolio has now turned to exits and a significant number of realisations plans are being progressed. We are optimistic that investment exits can be achieved in a timely manner and at values equal to or in excess of current carrying value.
Although it will take some time to exit from all investments, we are working on plans that should result in a number of exits by the end of the year such that the Company will be in a position to pay a significant distribution early in 2015.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'C' SHARE POOL
as at 30 June 2014
Cost | Valuation | Unrealisedgainin period | % ofportfolioby value | |
£'000 | £'000 | £'000 | | |
| | ||||
| Qualifying investments | | |||
| Atlantic Dogstar Limited | 663 | 986 | 33 | 14.9% |
| Future Biogas (SF) Limited* | 697 | 786 | 55 | 11.8% |
| East Dulwich Tavern Limited | 644 | 709 | 3 | 10.7% |
| Westow House Limited | 429 | 602 | 50 | 9.1% |
| Domestic Solar Limited | 500 | 560 | - | 8.4% |
| Redmed Limited | 350 | 451 | - | 6.8% |
| Quadrate Spa Limited* | 363 | 363 | - | 5.5% |
| Quadrate Catering Limited | 330 | 359 | - | 5.4% |
| The 3D Pub Co Limited | 267 | 227 | - | 3.4% |
| Ecossol Limited | 250 | 212 | - | 3.2% |
| Mosaic Spa and Health Clubs Limited* | 125 | 105 | - | 1.6% |
| Chapel Street Food and Beverage Limited | 50 | 13 | - | 0.2% |
| Chapel Street Services Limited | 50 | 13 | - | 0.2% |
| | ||||
| Non-qualifying investments | | |||
| Hoole Hall Country Club Holdings Limited | 581 | 581 | - | 8.8% |
| The Thames Club Limited | 500 | 500 | - | 7.5% |
| Honeycombe Pubs VCT Limited | 188 | 66 | - | 1.0% |
| Vermont Developments Limited | 25 | 38 | 13 | 0.5% |
| Chapel Street Hotel Limited | 2 | 1 | - | 0.0% |
| | ||||
| 6,014 | 6,572 | 154 | 99.0% | |
| | ||||
| Cash at bank and in hand | 65 | 1.0% | ||
| | ||||
| Total | 6,637 | 100% |
SUMMARY OF INVESTMENT MOVEMENTS
'C' SHARE POOL
for the six months ended 30 June 2014
| Additions | £'000 |
| Qualifying investments | |
| East Dulwich Tavern Limited | 300 |
| Atlantic Dogstar Limited | 225 |
| Westow House Limited | 125 |
| Total | 650 |
* Partially qualifying investment
INVESTMENT MANAGER'S REPORT
'D' SHARE POOL
Investment activity and performance
The 'D' Share pool has already completed its main investment phase and accordingly no new qualifying investments were made during the period.
The majority of the 'D' Share pool investments have performed in line with expectations over the period, with no change in valuation. There have, however, been a small number of adjustments which have resulted in total valuation increase of £55,000.
Kidspace Adventures Holdings Limited is the holding company of Kidspace Adventures Limited which owns three children's play centres. Continued good performance at all three sites has resulted in an increase in value of £40,000.
The valuation of Slopingtactic Limited was increased by £30,000. The company is the owner and operator of the Lamb and Lion freehold public house in York. The business has performed consistently ahead of projections.
Continued good yields from the solar arrays owned by Progressive Energies Limited, a domestic solar installer and operator, has supported an increase in valuation of £10,000.
On the negative side, a £14,000 reduction in value was recognised for Liverpool Nurseries (Holdings) Limited as the business is performing a little behind budget. A small reduction of £11,000 was also made in the value of Camandale Limited, the owner of The Riverbank pub in Kilmarnock, Scotland, which continues to struggle to perform.
Details of the 'D' Share pool portfolio and investment activity during the period are shown in the following pages.
Net asset value
At 30 June 2014, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 76.1p, an increase of 1.5p (2.0%) over the period. Total Return (NAV plus dividends paid to date) is now 96.1p for a combined holding.
Results and dividend
The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £153,000 comprising a revenue profit of £98,000 and a capital profit of £55,000.
The Company will pay an interim dividend of 2.5p per 'D' Share, on 12 December 2014, to 'D' Shareholders on the register at 21 November 2014.
Outlook
After some early setbacks, the 'D' Share portfolio is now making progress. We believe there is potential for further growth ahead of 2015, when the pool will seek to start realising its investments in order to return funds to Shareholders.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'D' SHARE POOL
as at 30 June 2014
Cost | Valuation | Unrealisedgain/(loss)in period | % ofportfolioby value | |
£'000 | £'000 | £'000 | | |
| | ||||
| Qualifying investments | | |||
| Future Biogas (Reepham Road) Limited | 842 | 842 | - | 10.9% |
| Quadrate Spa Limited* | 496 | 496 | - | 6.4% |
| Quadrate Catering Limited | 441 | 481 | - | 6.2% |
| Kidspace Adventures Holdings Limited | 375 | 449 | 40 | 5.8% |
| Domestic Solar Limited | 400 | 448 | - | 5.8% |
| Alpha Schools (Holdings) Limited | 367 | 402 | - | 5.2% |
| Mosaic Spa and Health Clubs Limited* | 475 | 387 | - | 5.0% |
| Liverpool Nurseries (Holdings) Limited | 435 | 386 | (14) | 5.0% |
| Green Electricity Generation Limited | 250 | 303 | - | 3.9% |
| Westcountry Solar Solutions Limited | 250 | 250 | - | 3.2% |
| West Tower Property Limited | 250 | 250 | - | 3.2% |
| Slopingtactic Limited | 195 | 225 | 30 | 2.9% |
| Ecossol Limited | 250 | 212 | - | 2.8% |
| Avon Solar Energy Limited | 210 | 210 | - | 2.7% |
| Progressive Energies Limited | 170 | 180 | 10 | 2.3% |
| Ridgeway Pub Company Limited | 136 | 126 | - | 1.6% |
| Camandale Limited* | 516 | 47 | (11) | 0.6% |
| | ||||
| Non-qualifying investments | | |||
| Aminghurst Limited | 1,650 | 1,650 | - | 21.4% |
| Fenkle Street LLP | 122 | 122 | - | 1.6% |
| Commercial Street Hotel Limited | 100 | 100 | - | 1.3% |
| Kilmarnock Monkey Bar Limited | 42 | 42 | - | 0.6% |
| | ||||
| 7,972 | 7,608 | 55 | 98.4% | |
| | ||||
| Cash at bank and in hand | 125 | 1.6% | ||
| | ||||
| Total | 7,733 | 100% |
* Partially qualifying investment
INVESTMENT MANAGER'S REPORT
'F' SHARE POOL
Investment activity and performance
The 'F' Share pool continued building its qualifying portfolio during the period and completed two new qualifying investments Details of the new qualifying investments are as follows:
£760,000 was invested in Goonhilly Earth Station Limited in January 2014. The company operates a large satellite communications site in Cornwall. The investment provided funding to allow the Company to secure a long lease on its site and will now develop a space science centre.
In March 2014, the 'F' Share pool invested £378,000 in Grasshopper 2007 Limited. The company operates The Grasshopper Inn, a public house near Westerham, Kent, which is run as a traditional pub, restaurant and wedding venue.
The majority of the 'F' Share pool investments have performed in line with expectations over the period and continue to be valued at original cost, however, there have been two adjustments.
Kidspace Adventures Holdings Limited is the holding company of Kidspace Adventures Limited which owns three children's play centres. Continued good performance at all three sites has resulted in an increase in value of £26,000.
City Falkirk Limited, which owns a large nightclub in Falkirk, Scotland, has struggled to deliver the anticipated trading performance since it was first acquired in March 2012. A further reduction of £38,000 was made to the value during the period.
In total, the portfolio produced net unrealised capital losses of £12,000 in the period.
Details of the 'F' Share pool portfolio and investment activity during the period are shown in the following pages.
Net asset value
At 30 June 2014, the net asset value ("NAV") for a holding of one 'F' Share was 77.8p, an increase of 0.2p (0.2%) over the period. Total Return (NAV plus dividends paid to date) is now 90.3p.
Results and dividend
The return on ordinary activities for the 'F' Shares, after taxation, for the period was £24,000, comprising a revenue profit of £36,000 and a capital loss of £12,000.
The company will pay an interim dividend of 2.5p per 'F' Share, on 12 December 2014 to 'F' Shareholders on the register at 21 November 2014.
Outlook
The 'F' Share portfolio is still at a relatively early stage, but has suffered from some initial setbacks which have been disappointing. We are seeking to identify further good quality qualifying investments to utilise remaining funds and produce a portfolio with good potential for growth over the next three or so years before the commencement of the exit process.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2014
Cost | Valuation | Unrealisedgain/(loss)in period | % ofportfolioby value | |
£'000 | £'000 | £'000 | | |
| | ||||
| Qualifying investments | | |||
| Goonhilly Earth Station Limited | 760 | 760 | - | 9.0% |
| Tor Solar PV Limited | 680 | 680 | - | 8.0% |
| Vulcan Renewables Limited | 588 | 588 | - | 7.6% |
| Pearce and Saunders Limited * | 644 | 644 | - | 6.9% |
| Grasshopper 2007 Limited | 378 | 378 | - | 4.5% |
| Kidspace Adventures Holdings Limited | 250 | 299 | 26 | 3.5% |
| Augusta Pub Company Limited | 290 | 290 | - | 3.4% |
| Fubar Stirling Limited | 268 | 268 | - | 3.2% |
| Redmed Limited | 250 | 250 | - | 3.0% |
| City Falkirk Limited | 421 | 206 | (38) | 2.4% |
| Fresh Green Power Limited | 200 | 200 | - | 2.4% |
| Pabulum Pubs Limited | 200 | 200 | - | 2.4% |
| Green Energy Production UK Limited | 100 | 100 | - | 1.2% |
| Cheers Dumbarton Limited | 48 | 17 | - | 0.2% |
| Lochrise Limited | 13 | - | - | 0.0% |
| | ||||
| | ||||
| Non-qualifying investments | | |||
| Aminghurst Limited | 1,110 | 1,110 | - | 13.1% |
| Pub People Limited | 500 | 500 | - | 5.9% |
| Baron House Developments LLP | 481 | 481 | - | 5.7% |
| Hoole Hall Hotel Limited | 265 | 265 | - | 3.1% |
| Dominions House Limited | 107 | 107 | - | 1.3% |
| 3D Pub Co Limited | 55 | 55 | - | 0.6% |
| London City Shopping Centre Limited | 43 | 43 | - | 0.5% |
| Redmed Limited | 26 | 26 | - | 0.3% |
| Southampton Hotel Developments Limited | 300 | - | - | 0.0% |
| | ||||
| 7,977 | 7,467 | (12) | 88.2% | |
| | ||||
| Cash at bank and in hand | 995 | 11.8% | ||
| | ||||
| Total | 8,462 | 100.0% |
* Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2014
| Additions | £'000 |
| Qualifying investments | |
| Goonhilly Earth Station Limited | 760 |
| Grasshopper 2007 Limited | 378 |
| Non-qualifying investments | |
| London City Shopping Centre Limited | 43 |
| Total | 1,181 |
| Disposals | Cost | Marketvalue at01/01/14 | Disposalproceeds | Gainagainstcost | Totalrealisedgain |
£'000 | £'000 | £'000 | £'000 | £'000 | |
| Non-qualifying investments | |||||
| Retallack Limited | 98 | 98 | 98 | - | - |
| 98 | 98 | 98 | - | - |
* adjusted for purchases made in the period
INVESTMENT MANAGER'S REPORT
'G' SHARE POOL
Investment activity and performance
The 'G' Share pool is in the early stages of building its qualifying portfolio and completed four new qualifying during the period as follows:
£1,710,000 was invested in Goonhilly Earth Station Limited in January 2014. The company operates a large satellite communications site in Cornwall. The investment provided funding to allow the Company to secure a long lease on its site and will now develop a space science centre.
In March 2014, the 'F' Share pool invested £1,050,000 in Grasshopper 2007 Limited. The company operates The Grasshopper Inn, a public house near Westerham, Kent, which is run as a traditional pub, restaurant and wedding venue.
Several non-qualifying investments were also completed in the period as follows:
In March 2014, £662,000 was invested in Craft Beer Pub Co Limited. This non-qualifying secured loan was made to help funds the purchase of The Pensioner's public house in Southampton.
Another non-qualifying secured loan of £525,000 was made to Future Biogas (SF) Limited. The company owns and operates a 1.4MW self-contained biogas plant in Norfolk.
During the period, two existing non-qualifying loan stock investments were repaid. £1,200,000 from Augusta Pub Company Limited and £400,000 from Snow Hill Developments Limited.
The 'G' Share pool investments have performed in line with expectations over the period and continue to be valued at original cost.
Net asset value
At 30 June 2014, the net asset value ("NAV") for a holding of one 'G' Share was 92.4p which represents a small decrease of 0.2p over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 99.9p, compared to the initial NAV of 100.0p.
Results and dividend
The loss on ordinary activities for the 'G' Shares, after taxation, for the period was £73,000, comprising a revenue loss of £74,000 and a capital profit of £1,000.
The company will pay an interim dividend of 2.5p per 'G' Share, on 12 December 2014, to 'G' Shareholders on the register at 21 November 2014.
Outlook
The task of building the 'G' Share investment portfolio is at an early stage but we are satisfied with the progress made to date in investing the funds. The improving economic climate, combined with the good quality deal flow which we are seeing, should assist us in building a portfolio which can deliver the targeted returns to Shareholders over the life of the pool.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'G' SHARE POOL
as at 30 June 2014
Cost | Valuation | Unrealisedgainin period | % ofportfolioby value | |
£'000 | £'000 | £'000 | | |
| | ||||
| Qualifying investments | | |||
| Goonhilly Earth Station Limited | 1,710 | 1,710 | - | 7.3% |
| Grasshopper 2007 Limited | 1,050 | 1,050 | - | 4.5% |
| Augusta Pub Company Limited | 580 | 580 | - | 2.5% |
| Redmed Limited | 500 | 501 | 1 | 2.1% |
| Pabulum Pubs Limited | 400 | 400 | - | 1.7% |
| | ||||
| Non-qualifying investments | | |||
| Harrogate Street LLP | 1,400 | 1,400 | - | 5.9% |
| Baron House Developments LLP | 1,093 | 1,093 | - | 4.6% |
| Aminghurst Limited | 1,000 | 1,000 | - | 4.2% |
| Pub People Limited | 911 | 911 | - | 3.9% |
| Craft Beer Pub Co Limited | 662 | 662 | - | 2.8% |
| Future Biogas (SF) Limited | 525 | 525 | - | 2.2% |
| Pearce and Saunders Limited | 493 | 493 | - | 2.1% |
| Antelope Pub Limited | 300 | 300 | - | 1.3% |
| Dominions House | 178 | 178 | - | 0.8% |
| London City Shopping Centre Ltd | 72 | 72 | - | 0.3% |
| | ||||
| | ||||
| 10,874 | 10,875 | 1 | 46.2% | |
| | ||||
| Cash at bank and in hand | 12,686 | 53.8% | ||
| | ||||
| Total | 23,561 | 100% |
SUMMARY OF INVESTMENT MOVEMENTS
'G' SHARE POOL
as at 30 June 2014
| Additions | £'000 |
| Qualifying investments | |
| Goonhilly Earth Station Limited | 1,710 |
| Grasshopper 2007 Limited | 1,050 |
| Non-qualifying investments | |
| Craft Beer Pub Co Limited | 662 |
| Future Biogas (SF) Limited | 525 |
| London City Shopping Centre Limited | 72 |
| Total | 4,019 |
| Disposals | Cost | Marketvalue at01/01/14 | Disposalproceeds | Gainagainstcost | Totalrealisedgain |
£'000 | £'000 | £'000 | £'000 | £'000 | |
| Non-qualifying investments | |||||
| Augusta Pub Company Limited | 1,200 | 1,200 | 1,200 | - | - |
| Snow Hill Developments LLP | 400 | 400 | 400 | - | - |
| 1,600 | 1,600 | 1,600 | - | - |
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2014
| 30 Jun 2014 | 31 Jul 2013 | 31 Dec 2013 | |||||||
| | 'C' Shares | 'D' Shares | 'F' Shares | 'G' Shares | Total | Total | Total | ||
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| | |||||||||
| Fixed assets | |||||||||
| Unquoted investments | 6,572 | 7,608 | 7,467 | 10,875 | 32,522 | 26,400 | 28,173 | ||
| Current assets | |||||||||
| Debtors | 56 | 92 | 97 | 190 | 435 | 350 | 290 | ||
| Cash at bank and in hand | 65 | 125 | 995 | 12,686 | 13,871 | 19,676 | 18,969 | ||
| 121 | 217 | 1,092 | 12,876 | 14,306 | 20,026 | 19,259 | |||
| Creditors: amounts falling due within one year | (156) | (211) | (144) | (258) | (769) | (555) | (370) | ||
| Net current assets/(liabilities) | (35) | 6 | 948 | 12,618 | 13,537 | 19,471 | 18,889 | ||
| Net assets | 6,537 | 7,614 | 8,415 | 23,493 | 46,059 | 45,871 | 47,062 | ||
| Capital and reserves | |||||||||
| Called up share capital | 18 | 25 | 11 | 25 | 79 | 76 | 79 | ||
| Share capital to be issued | - | - | - | - | - | 245 | - | ||
| Capital redemption reserve | 106 | - | - | - | 106 | 106 | 106 | ||
| Special reserve | 5,744 | 7,815 | 9,890 | 24,868 | 48,317 | 13,945 | 13,988 | ||
| Share premium account | - | - | - | - | - | 32,097 | 35,664 | ||
| Revaluation reserve | 557 | (365) | (511) | 1 | (318) | (200) | (516) | ||
| Capital reserve - realised | - | - | (1,034) | (1,221) | (2,255) | (709) | (2,255) | ||
| Revenue reserve | 112 | 139 | 59 | (180) | 130 | 311 | (4) | ||
| Total equity shareholders' funds | 6,537 | 7,614 | 8,415 | 23,493 | 46,059 | 45,871 | 47,062 | ||
| Basic and diluted net asset value per: | |||||||||
| 'C' Share | 91.6p | 93.2p | 90.9p | ||||||
| 'A' Share | 0.1p | 0.1p | 0.1p | ||||||
| 'D' Share | 76.0p | 78.9p | 77.0p | ||||||
| 'E' Share | 0.1p | 0.1p | 0.1p | ||||||
| 'F' Share | 77.8p | 84.0p | 80.0p | ||||||
| 'G' Share | 92.4p | 100.1p | 95.1p | ||||||
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
| | 30 June 2014 | 31 Jul 2013 | 31 Dec 2013 | ||||||
| | 'C' Shares | 'D' Shares | 'F' Shares | 'G' Shares | Total | Total | Total | ||
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| | |||||||||
| Opening Shareholders' funds | 6,488 | 7,711 | 8,661 | 24,202 | 47,062 | 24,964 | 24,964 | ||
| Issue of shares | - | - | - | - | - | 22,884 | 26,631 | ||
| Share issue costs | - | - | - | - | - | (925) | (1,102) | ||
| Purchase of own shares | - | - | - | - | - | (4) | (98) | ||
| Total recognised gains/(losses) for the period | 228 | 153 | 24 | (73) | 332 | 44 | (638) | ||
| Share capital to be issued | - | - | - | - | - | (393) | (25) | ||
| Dividends | (179) | (250) | (270) | (636) | (1,335) | (699) | (2,670) | ||
| Closing Shareholders' funds | 6,537 | 7,614 | 8,415 | 23,493 | 46,059 | 45,871 | 47,062 | ||
INCOME STATEMENT
for the six months ended 30 June 2014
Company Total
| Six months ended 30 Jun 2014 | Six months ended 31 Jul 2013 | Period ended31 Dec2013 | |||||||
Revenue | Capital | Total | Revenue | Capital | Total | Total | |||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Income | 928 | - | 928 | 808 | - | 808 | 1,451 | ||
| Gains/(losses) on investments | |||||||||
| - realised | - | - | - | - | - | - | 24 | ||
| - unrealised | - | 198 | 198 | - | (258) | (258) | (486) | ||
| 928 | 198 | 1,126 | 808 | (258) | 550 | 989 | |||
| Investment management fees | (534) | - | (534) | (297) | - | (297) | (593) | ||
| Other expenses | (189) | - | (189) | (120) | - | (120) | (266) | ||
| Return/(loss) on ordinary activities before taxation | 205 | 198 | 403 | 391 | (258) | 133 | 130 | ||
| Taxation | (71) | - | (71) | (89) | - | (89) | (155) | ||
| Return/(loss) attributable to equity shareholders | 134 | 198 | 332 | 302 | (258) | 44 | (25) | ||
| Return per 'C' Share | 1.0p | 2.2p | 3.2p | 1.6p | (0.7p) | 0.9p | 1.1p | ||
| Return per 'A' Share | - | - | - | - | - | - | - | ||
| Return per 'D' Share | 1.0p | 0.5p | 1.5p | 1.5p | 0.2p | 1.7p | 2.3p | ||
| Return per 'E' Share | - | - | - | - | - | - | - | ||
| Return per 'F' Share | 0.3p | (0.1p) | 0.2p | 0.2p | (2.9p) | (2.7p) | (3.4p) | ||
| Return per 'G' Share | (0.3p) | 0.0p | (0.3p) | 0.1p | 0.0p | 0.1p | 0.2p | ||
A Statement of Total Recognised Gains and Losses has not been prepared as all gains/losses are recognised in the Income Statement as noted above.
INCOME STATEMENT
for the six months ended 30 June 2014
| 'C' Shares | Six months ended 30 Jun 2014 | Six months ended 31 Jul 2013 | Period ended31 Dec2013 | ||||||
Revenue | Capital | Total | | Revenue | Capital | Total | Total | ||
£'000 | £'000 | £'000 | | £'000 | £'000 | £'000 | £'000 | ||
| Income | 168 | - | 168 | 220 | - | 220 | 347 | ||
| Gains/(losses) on investments | |||||||||
| - realised | - | - | - | - | - | - | 24 | ||
| - unrealised | - | 154 | 154 | - | (49) | (49) | (76) | ||
| 168 | 154 | 322 | 220 | (49) | 171 | 295 | |||
| Investment management fees | (44) | - | (44) | (46) | - | (46) | (84) | ||
| Other expenses | (25) | - | (25) | (26) | - | (26) | (82) | ||
| Return/(loss) on ordinary activities before taxation | 99 | 154 | 253 | 148 | (49) | 99 | 129 | ||
| Taxation | (25) | - | (25) | (31) | - | (31) | (51) | ||
| Return/(loss) attributable to equity shareholders | 74 | 154 | 228 | 117 | (49) | 68 | 78 | ||
| 'D' Shares | Six months ended 30 Jun 2014 | Six months ended 31 Jul 2013 | Period ended31 Dec2013 | ||||||
Revenue | Capital | Total | | Revenue | Capital | Total | Total | ||
£'000 | £'000 | £'000 | | £'000 | £'000 | £'000 | £'000 | ||
| Income | 210 | - | 210 | 274 | - | 274 | 463 | ||
| Gains/(losses) on investments | |||||||||
| - realised | - | - | - | - | - | - | - | ||
| - unrealised | - | 55 | 55 | - | 25 | 25 | (6)- | ||
| 210 | 55 | 265 | 274 | 25 | 299 | 457 | |||
| Investment management fees | (53) | - | (53) | (54) | - | (54) | (98) | ||
| Other expenses | (25) | - | (25) | (28) | - | (28) | (53) | ||
| Return on ordinary activities before taxation | 132 | 55 | 187 | 192 | 25 | 217 | 306 | ||
| Taxation | (34) | - | (34) | (44) | - | (44) | (77) | ||
| Return attributable to equity shareholders | 98 | 55 | 153 | 148 | 25 | 173 | 229 | ||
INCOME STATEMENT
for the six months ended 30 Jun 2014
| 'F' Shares | Six months ended 30 Jun 2014 | Six months ended 31 Jul 2013 | Period ended31 Dec2013 | ||||||
Revenue | Capital | Total | | Revenue | Capital | Total | Total | ||
£'000 | £'000 | £'000 | | £'000 | £'000 | £'000 | £'000 | ||
| Income | 232 | - | 232 | 149 | - | 149 | 261 | ||
| Losses on investments | |||||||||
| - realised | - | - | - | - | - | - | - | ||
| - unrealised | - | (12) | (12) | - | (234) | (234) | (404) | ||
| 232 | (12) | 220 | 149 | (234) | (85) | (143) | |||
| Investment management fees | (107) | - | (107) | (86) | - | (86) | (153) | ||
| Other expenses | (62) | - | (62) | (35) | - | (35) | (59) | ||
| Return/(loss) on ordinary activities before taxation | 63 | (12) | 51 | 28 | (234) | (206) | (355) | ||
| Taxation | (27) | - | (27) | (9) | - | (9) | (16) | ||
| Return/(loss) attributable to equity shareholders | 36 | (12) | 24 | 19 | (234) | (215) | (371) | ||
| 'G' Shares | Six months ended 30 Jun 2014 | Six months ended 31 Jul 2013 | Period ended31 Dec2013 | ||||||
Revenue | Capital | Total | | Revenue | Capital | Total | Total | ||
£'000 | £'000 | £'000 | | £'000 | £'000 | £'000 | £'000 | ||
| Income | 318 | - | 318 | 165 | - | 165 | 379 | ||
| Gains on investments | |||||||||
| - realised | - | - | - | - | - | - | - | ||
| - unrealised | - | 1 | 1 | - | - | - | - | ||
| 318 | 1 | 319 | 165 | - | 165 | 379 | |||
| Investment management fees | (330) | - | (330) | (111) | - | (111) | (258) | ||
| Other expenses | (77) | - | (77) | (31) | - | (31) | (71) | ||
| (Loss)/Return on ordinary activities before taxation | (89) | 1 | (88) | 23 | - | 23 | 50 | ||
| Taxation | 15 | - | 15 | (5) | - | (5) | (11) | ||
| (Loss)/Return attributable to equity shareholders | (74) | 1 | (73) | 18 | - | 18 | 39 | ||
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2014
| | 30 Jun 2014 | 31 Jul 2013 | 31 Dec 2013 | |||||||
| 'C' Shares | 'D' Shares | 'F' Shares | 'G' Shares | Total | Total | Total | ||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Net cash inflow from operating activities | 1 | 103 | 183 | 81 | 23 | 389 | 438 | 603 | ||
| Taxation | ||||||||||
| Corporation tax paid | - | - | - | - | - | - | (157) | |||
| Capital expenditure | ||||||||||
| Purchase of investments | (650) | - | (1,181) | (4,019) | (5,850) | (8,834) | (12,151) | |||
| Sale of investments | - | - | 98 | 1,600 | 1,698 | 2,707 | 4,125 | |||
| Net cash outflow from capital expenditure | (650) | - | (1,083) | (2,419) | (4,152) | (6,127) | (8,026) | |||
| Equity dividends paid | (178) | (250) | (271) | (636) | (1,335) | (699) | (2,670) | |||
| Net cash outflow before financing | (725) | (67) | (1,273) | (3,032) | (5,098) | (6,388) | (10,250) | |||
| Financing | ||||||||||
| Purchase of own shares | - | - | - | - | - | (4) | (98) | |||
| Proceeds from share issue | - | - | - | - | - | 22,883 | 25,993 | |||
| Share issue costs | - | - | - | - | - | (925) | (1,102) | |||
| Share capital to be issued | - | - | - | - | - | (393) | - | |||
| Net cash inflow outflow from financing | - | - | - | - | - | 21,561 | 24,793 | |||
| (Decrease)/increase in cash 2 | 2 | (725) | (67) | (1,273) | (3,032) | (5,098) | 15,173 | 14,543 | ||
NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2014
| | 30 Jun 2014 | 31 Jul 2013 | 31 Dec 2013 | ||||||
| | 'C' Shares | 'D' Shares | 'F' Shares | 'G' Shares | Total | Total | Total | ||
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| 1 Cash inflow from operating activities and returns on investments | |||||||||
| Return on ordinary activities before taxation | 253 | 187 | 51 | (88) | 403 | 133 | 130 | ||
| Losses/(gains) on investments | (154) | (55) | 12 | (1) | (198) | 258 | 462 | ||
| (Increase)/decrease in other debtors | (34) | 6 | (44) | (74) | (146) | (32) | 29 | ||
| Increase/(decrease) in other creditors | 5 | 7 | (3) | 21 | 30 | 20 | 8 | ||
| Increase/(decrease) in amount due to subsidiary undertaking | 33 | 38 | 64 | 165 | 300 | 59 | (26) | ||
| Net cash inflow from operating activities | 103 | 183 | 80 | 23 | 389 | 438 | 603 | ||
| 2 Analysis of net funds | |||||||||
| Beginning of period | 790 | 192 | 2,268 | 15,718 | 18,969 | 4,426 | 4,426 | ||
| Net cash (outflow)/inflow | (725) | (67) | (1,273) | (3,032) | (5,098) | 15,173 | 14,543 | ||
| End of period | 65 | 125 | 995 | 12,686 | 13,871 | 19,599 | 18,969 | ||
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly results cover the six months to 30 June 2014 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the 11 month period ended 31 December 2013, which were prepared under UK Generally Accepted Accounting Practice.
2. All revenue and capital items in the Income Statement derive from continuing operations.
3. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
4. The comparative figures are in respect of the six month period ended 31 July 2013 and the 11 month period ended 31 December 2013 respectively.
5. Dividends
| Six months ended 30 June 2014 | Period to 31 Dec 2013 | ||||||
| Per share | Revenue | Capital | Total | Total | |||
| Paid in period | pence | £'000 | £'000 | £'000 | £'000 | ||
| 'C' Shares | |||||||
| P/E Dec 2013 Final | 2.5p | - | 179 | 179 | - | ||
| P/E Dec 2013 Interim | 2.5p | - | - | - | 178 | ||
| Y/E Jan 2013 Final | 2.5p | - | - | - | 178 | ||
| - | 179 | 179 | 356 | ||||
| 'D' Shares | |||||||
| P/E Dec 2013 Final | 2.5p | - | 250 | 250 | - | ||
| P/E Dec 2013 Interim | 2.5p | - | - | - | 250 | ||
| Y/E Jan 2013 Final | 2.5p | - | - | - | 250 | ||
| - | 250 | 250 | 500 | ||||
| 'F' Shares | |||||||
| P/E Dec 2013 Final | 2.5p | - | 270 | 270 | - | ||
| P/E Dec 2013 Interim | 2.5p | - | - | - | 271 | ||
| Y/E Jan 2013 Final | 2.5p | - | - | - | 271 | ||
| - | 270 | 270 | 542 | ||||
| 'G' Shares | |||||||
| P/E Dec 2013 Final | 2.5p | - | 636 | 636 | - | ||
| P/E Dec 2013 Interim | 2.5p | - | - | - | 636 | ||
| - | 636 | 636 | 636 | ||||
No dividends have been paid or declared in respect of the 'A' Shares or 'E' Shares.
6. Basic and diluted return per share
| | Weighted average number of shares in issue | Revenue return/(loss) | Capital return/(loss) | ||||
| £'000 | Per share | £'000 | Per share | ||||
'C' Shares | 7,126,194 | 74 | 1.0p | 154 | 2.2p | ||
'A' Shares | 10,724,029 | - | - | - | - | ||
'D' Shares | 10,000,000 | 98 | 1.0p | 55 | 0.5p | ||
'E' Shares | 14,950,000 | - | - | - | - | ||
'F' Shares | 10,822,154 | 36 | 0.3p | (12) | (0.1p) | ||
'G' Shares | 25,436,996 | (74) | (0.3p) | 1 | (0.0p) | ||
| | 134 | 198 | |||||
7. Net asset value per share
| | Shares in issue | Net asset value | |||
| per share | £'000 | ||||
| | | ||||
'C' Shares | 7,126,194 | 91.6p | 6,526 | ||
'A' Shares | 10,724,029 | 0.1p | 11 | ||
'D' Shares | 10,000,000 | 76.0p | 7,599 | ||
'E' Shares | 14,950,000 | 0.1p | 15 | ||
'F' Shares | 10,822,154 | 77.8p | 8,415 | ||
'G' Shares | 25,436,996 | 92.4p | 23,493 | ||
| | | 46,059 | |||
8. Reserves
| Capital redemption reserve | Share premium reserve | Special reserve | Revenue reserve | Capital reserve - realised | Revaluation reserve | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2014 | 106 | 35,664 | 13,988 | (4) | (2,255) | (516) |
| Net gain on investments | - | - | - | - | - | 198 |
| Share premium cancellation | - | (35,664) | 35,664 | - | - | - |
| Dividends paid | - | - | - | - | (1,335) | - |
| Transfer between reserves | - | - | (1,335) | - | 1,335 | - |
| Retained revenue | - | - | - | 134 | - | - |
| At 30 June 2014 | 106 | - | 48,317 | 130 | (2,255) | (318) |
On 26 March 2014, the share premium account that arose on the issue of the 'F' Shares and 'G' Shares was cancelled following the granting of court approval. The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £1,508,000 which are included in the calculation of distributable reserves. Total distributable reserves are £47,045,000 (£10,438,000 at 31 December 2014).
9. The unaudited condensed financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the 11 month period ended 31 December 2013 have been extracted from the financial statements for that period, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.
10. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.
11. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.
The Board concluded that the key risks facing the Company over the remainder of the financial period are as follows:
- Compliance risk of failure to maintain approval as a VCT; and
- Investment risk associated with investing in small and immature businesses.
The Company's compliance with the VCT regulations is continually monitored by the Manager, who reports regularly to the Board on the current position. The Company has also appointed PricewaterhouseCoopers to provide regular reviews and advice in this area.
In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature. It also has a limited period in which it must invest the majority of its funds. The Manager follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible and, after an investment is made, closely monitoring the business.
The Board is satisfied that these approaches provide satisfactory management of the key risks.
12. Going concern
The Directors have reviewed the Company's financial resources at the period end and conclude that the Company is well placed to manage its business risks.
The Board confirms that it is satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, the Board believes that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.
13. Copies of the unaudited half-yearly report will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or will be available for download from www.downing.co.uk.