Downing ONE VCT plc : Half-yearly report

Downing ONE VCT plc

(formerly Downing Distribution VCT 1 plc)
Half-Yearly Report for the six months ended 30 September 2013

CHAIRMAN'S STATEMENT
As I am sure Shareholders are aware, there have been some major changes to your Company that have taken place recently. On 12 November, the Company completed a merger with five other VCTs and on 13 November 2013, changed its name from Downing Distribution VCT 1 plc to Downing ONE VCT plc. The Company's shares also underwent a consolidation such that the New Ordinary Shares created had a net asset value of 100.0p per share based on investment valuations as at 8 November 2013.

Along with the merger, there have been a number of Board changes, including my appointment as Chairman. I am therefore pleased to present my first report to Shareholders.

Reporting period
The Company is required to report on the six-month period ended 30 September 2013, however, as this period ended prior to the completion of the merger, we have also included an unaudited balance sheet and summary of the investment portfolio immediately following the merger (as at 12 November 2013) and much of the focus of this report will be on the Company since the merger and future plans.

Board changes
In structuring the merger of six VCTs, it was agreed that the merged entity should have representation on the post-merger board from each of the participating VCTs. Accordingly, Barry Dean, Andrew Griffiths, Helen Sinclair and I all joined the Board as non-executive directors on 12 November 2013.

In addition, Christopher Powell, Roger Jeynes and Michael Cunningham stepped down from the Board. I would like to thank each of them for their considerable contribution over the years that they were directors of Downing Distribution VCT 1 plc and wish them well for the future. I also wish to thank all of the non-executive directors of the other participating VCTs who have not joined the Downing ONE board. I believe the merger has been a very positive development for all Shareholders and could not have taken place without a substantial amount of additional work from all directors of each of the participating VCTs.

Merger
The merger was undertaken on a relative net asset value basis using net asset values as at 8 November 2013.

The VCTs whose assets and liabilities were acquired by the Company ("DD1") are summarised as follows:

Downing Absolute Income VCT 1 plc ("DAI1"); Downing Absolute Income VCT 2 plc ("DAI2"); Downing Income VCT plc ("DI");
Downing Income VCT 3 plc ("DI3"); and
Downing Income VCT 4 plc ("DI4").

The merger was undertaken by means of five schemes of reconstruction under Section 110 of the Insolvency Act 1986 and was followed by a share consolidation.

This resulted in New Ordinary Shares being issued to the various groups of shareholders as follows:

Original shares held	Approximate number of New Ordinary Shares issued for each share originally held
DD1	0.713
DI	0.353
DI3: Ordinary	0.916
DI3: E Share	0.870
DI4	0.387
DAI1: Ordinary	0.842
DAI1: C Share	0.705
DAI2: Ordinary	0.688
DAI2: A Share	0.001

Review of period to 30 September 2013
I will now turn to the period prior to the merger. As at 30 September 2013, the Company's NAV stood at 69.2p; a small increase of 0.2p (or 0.3%) compared to 31 March 2013 and after taking into account the 2.5p dividend paid during the period.

In general, the Company's AIM-quoted investments performed well over the period producing net unrealised gains of £676,000 and realised gains of £19,000. Amongst the unquoted investments, one significant provision was required which contributed to net unrealised losses of £523,000 from the unquoted portfolio.

After the period end, the AIM-quoted investments continued to perform strongly, helping NAV increase by 2.1p to 71.3p at 8 November 2013, being the NAV which was used for the merger.

Post merger
As at 12 November 2013, the newly merged Company had net assets of £74.9 million and the NAV per New Ordinary Share was 100.4p, the increase of 0.4p arising from uplifts in the valuation of quoted investments between the 8 November and 12 November.

The Company now holds investments in more than 100 companies. In round numbers, approximately 60% of the Company's net assets are invested in unquoted businesses, 35% in quoted companies and the remaining 5% is in cash.

The unaudited Balance Sheet and portfolio summary as at 12 November 2013 is shown on pages 4 and 5.

The Company's strategy going forward is to maintain a fair proportion of assets in growth businesses, which will predominantly comprise AIM-quoted investments. A larger proportion will be maintained in unquoted investments which are expected to produce a steady yield which will contribute towards funding annual dividends, share buybacks and running costs.

Dividend policy
It is the Board's intention to pay annual dividends of at least 4% per annum. Initially the dividends are likely to be paid at the 4% level but where the Company is able to generate significant capital profits, the Board will consider increasing the rate.

In line with this policy, an interim dividend of 2.0p per share will be paid on 28 March 2014 to Shareholders on the register at 14 February 2014.

Share buybacks
The Company intends to operate a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

The Company has appointed Panmure Gordon to act as its corporate broker. The Board believes that this will be helpful in operating the share buyback process and in keeping the quoted spread on the Company's shares at a reasonable level.

Contact details for Panmure Gordon are on the inside back cover of this report.

New Share offer
Following the merger, the Board believes that the Company is well placed to undertake a new fundraising and is making plans for a launch. The new offer will allow Shareholders and other investors to subscribe for New Ordinary Shares so they will gain exposure to the Company's existing diverse and reasonably mature portfolio.

The new offer is expected to launch in the near future. Details will be sent to all existing Shareholders at that time.

Outlook
Having successfully completed the first ever merger of six VCTs, the Company and its Shareholders should now start to reap the benefits of the transaction. The burden of running costs has been significantly reduced for most Shareholders and the new share buyback and dividend policies have been implemented.

Although the Company currently has a reasonable level of cash, new investment activity is likely to be mainly funded from investment realisation proceeds and funds raised under the new share offer. Over the reminder of the year, we expect to see the Manager undertake some rationalisation of the portfolio and seek opportunities to exit from investments that are not considered to be core holdings.

I look forward to updating Shareholders on developments with my report in the Annual Report to 31 March 2014.

Chris Kay
Chairman

POST MERGER UNAUDITED BALANCE SHEET
as at 12 November 2013

	12 Nov 2013
	£'000
Fixed assets
Investments	71,215
Current assets
Debtors	444
Cash at bank and in hand	4,759
	5,203
Creditors: amounts falling due within one year	(1,512)
Net current assets	3,691
Net assets	74,906
Capital and reserves
Called up share capital	746
Other reserves	74,160
Equity shareholders' funds	74,906
Basic and diluted net asset value per share	100.4p
New Ordinary Shares in issue	74,594,798

POST MERGER UNAUDITED SUMMARY OF INVESTMENT PORTFOLIO
as at 12 November 2013

	Cost	Valuation	% of portfolio by value
	£'000	£'000
Top twenty five venture capital investments (by value)
Accumuli plc*	2,519	3,221	4.2%
Cadbury House Holdings Limited	3,233	2,778	3.7%
Mosaic Spa and Health Clubs Limited	2,747	2,734	3.6%
Baron House Developments LLP	2,695	2,695	3.5%
Ludorum plc*	3,443	2,576	3.4%
Inland Homes plc*	2,075	2,407	3.2%
Tracsis plc*	2,051	2,305	3.0%
Vulcan Renewables Limited	2,300	2,300	3.0%
Universe Group plc*	1,705	2,184	2.9%
Hoole Hall Country Club Holdings Limited	2,316	1,980	2.6%
Science in Sport plc*	1,689	1,742	2.3%
Tramps Nightclub Limited	1,582	1,545	2.0%
Bowman Care Homes Limited	1,535	1,535	2.0%
Hoole Hall Spa and Leisure Club Limited	1,467	1,335	1.8%
Plastics Capital plc*	848	1,304	1.7%
Leytonstone Pub Limited	1,258	1,302	1.7%
Anpario plc*	1,296	1,296	1.7%
Blue Cedars Limited	1,267	1,267	1.7%
Future Biogas (Reepham Road) Limited	1,123	1,123	1.5%
Aminghurst Limited	1,106	1,106	1.5%
Quadrate Spa Limited	1,074	1,074	1.4%
Residential PV Trading Limited	1,060	1,060	1.4%
Domestic Solar Limited	1,008	1,008	1.3%
Data Centre Response Limited	983	983	1.3%
Pennant International Group plc*	977	977	1.3%
	43,357	43,837	57.7%
Other venture capital investments	29,437	27,378	36.0%
	72,794	71,215	93.7%
Cash at bank and in hand		4,759	6.3%
Total investments		75,974	100.0%

All venture capital investments are unquoted unless otherwise stated.

*   quoted on AIM

DOWNING ONE VCT PLC

FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013
(PRE MERGER)

UNAUDITED BALANCE SHEET
as at 30 September 2013

		30 Sept 2013		30 Sept 2012		31 Mar 2013
		£'000		£'000		£'000
Fixed assets
Investments		12,979		13,830		13,960
Current assets
Debtors		45		109		111
Cash at bank and in hand		673		526		123
		718		635		234
Creditors: amounts falling due within one year		(132)		(155)		(189)
Net current assets		586		480		45
Net assets		13,565		14,310		14,005
Capital and reserves
Called up share capital		196		199		196
Capital redemption reserve		1,153		1,226		1,153
Share premium		315		6,066		315
Special reserve		13,743		8,085		13,743
Capital reserve - realised		270		4,057		1,136
Capital reserve - unrealised		(2,125)		(5,295)		(2,555)
Revenue reserve		13		(28)		17
Equity shareholders' funds		13,565		14,310		14,005
Basic and diluted net asset value per share		69.2p		72.0p		71.5p

UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2013

	Six months ended 30 September 2013				Six months ended 30 September 2012			Year ended 31 March 2013
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	155	-	155		141	-	141		329
(Losses)/gains on investments
- realised	-	(6)	(6)		-	333	333		470
- unrealised	-	154	154		-	(852)	(852)		(598)
	155	148	303		141	(519)	(378)		201
Investment management fees	(32)	(94)	(126)		(35)	(107)	(142)		(250)
Other expenses	(127)	-	(127)		(124)	-	(124)		(239)
Return/(loss) on ordinary activities before taxation	(4)	54	50		(18)	(626)	(644)		(288)
Taxation	-	-	-		-	-	-		-
Return/(loss) attributable to equity shareholders	(4)	54	50		(18)	(626)	(644)		(288)
Basic and diluted return/(loss) per share	-	0.3p	0.3p		(0.1p)	(3.1p)	(3.2p)		(1.5p)

The total column within the Income Statement represents the profit and loss account of the Company. All Revenue and Capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above.

Other than revaluation movements arising on investments held at fair value through the Income Statement, there were no differences between the return/(loss) as stated above and at historical cost.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 September 2013

	30 Sept 2013		30 Sept 2012		31 Mar 2013
	£'000		£'000		£'000
Opening Shareholders' funds	14,005		15,812		15,812
Issue of shares	-		393		393
Unallotted shares	-		(382)		(382)
Issue of shares under Share Realisation and Reinvestment Programme	-		5,850		5,850
Share issue costs	-		(99)		(97)
Purchase of own shares	-		(242)		(413)
Purchase of own shares under Share Realisation and Reinvestment Programme	-		(5,879)		(5,879)
Total recognised gains/(losses) for the period	50		(644)		(288)
Dividends paid	(490)		(499)		(991)
Closing Shareholders' funds	13,565		14,310		14,005

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2013

	30 Sept 2013		30 Sept 2012		31 Mar 2013
	£'000		£'000		£'000
Net cash outflow from operating activities and returns on investments	(58)		(86)		(119)
Capital expenditure
Purchase of investments	(724)		(1,883)		(2,188)
Disposal of investments	1,852		2,152		2,719
Net cash inflow from capital expenditure	1,128		269		531
Equity dividends paid	(484)		(499)		(989)
Net cash inflow/(outflow) before financing	586		(316)		(577)
Financing
Proceeds from new share issue	-		393		393
Proceeds from new share issue under Share Realisation and Reinvestment Programme	-		5,850		5,850
Unalloted share issue proceeds	-		(382)		(382)
Share issue costs	2		(99)		(99)
Purchase of own shares	(38)		(325)		(467)
Purchase of own shares under Share Realisation and Reinvestment Programme	-		(5,879)		(5,879)
Net cash outflow from financing	(36)		(442)		(584)
Increase/(decrease) in cash	550		(758)		(1,161)

SUMMARY OF INVESTMENT PORTFOLIO
as at 30 September 2013

	Cost	Valuation	Valuation movement in period	% of portfolio by value
	£'000	£'000	£'000
Top ten venture capital investments (by value)
Cadbury House Holdings Limited	2,369	1,914	-	14.0%
Hoole Hall Country Club Holdings Limited	1,920	1,584	-	11.6%
Ludorum plc *	2,068	1,201	40	8.8%
Hoole Hall Spa and Leisure Limited	1,200	1,068	-	7.8%
Accumuli plc*	338	736	159	5.4%
Vulcan Renewables Limited	700	700	-	5.1%
First Care Limited	942	668	-	4.9%
Plastics Capital plc*	166	622	172	4.6%
Inland Homes plc*	390	585	195	4.3%
Universe Group plc *	293	563	78	4.1%
	10,386	9,641	644	70.6%
Other venture capital investments	4,718	3,338	(490)	24.5%
	15,104	12,979	154	95.1%
Cash at bank and in hand		673		4.9%
Total investments		13,652		100.0%

All venture capital investments are unquoted unless otherwise stated.

*   quoted on AIM

SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 September 2013

Additions

	£'000
Inland Homes plc	390
Science in Sport plc	333
Other sundry investments	1
	724

Disposals	Cost	Value at 31/03/13*	Disposal proceeds	(Loss)/gain against cost	Realised (loss)/gain in period
	£'000	£'000	£'000	£'000	£'000
Quoted (market sales)
Animalcare Group plc	219	222	236	17	14
Belgravium Technologies plc	43	34	45	2	11
Craneware plc	293	326	302	9	(24)
Netcall plc	55	187	210	155	23
Travelzest plc	96	17	3	(93)	(14)
Tristel plc	511	193	179	(332)	(14)
Unquoted (including loan note redemptions)
Baron House Developments LLP	115	115	115	-	-
Cadbury House Holdings Limited	149	149	149	-	-
Real Time Logistics Solutions Limited	-	125	125	125	-
Tender offer
Hasgrove plc	95	133	156	61	23
Bonds
Ulster Bank (IRE) 11.75% Subord	558	357	332	(226)	(25)
	2,134	1,858	1,852	(282)	(6)

*   adjusted for purchases in the period

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
for the six months ended 30 September 2013

1. The unaudited half-yearly financial results cover the six months to 30 September 2013 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2013, which were prepared under UK Generally Accepted Accounting Practice and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" January 2009.

2. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

3. The comparative figures were in respect of the six months ended 30 September 2012 and the year ended 31 March 2013 respectively.

4. Return per share

Weighted average number of shares in issue			Revenue (loss)/return		Capital gain/(loss)
			£'000		£'000
Period ended 30 September 2013	19,592,490		(4)		54
Period ended 30 September 2012	20,160,488		(18)		(626)
Year ended 31 March 2013	19,958,558		27		(315)

5. Dividends paid in the period

		Six months ended 30 September 2013				Year ended 31 March 2013
		Revenue	Capital	Total		Total
		£'000	£'000	£'000		£'000
	Date paid
2013 Final	30/09/2013: 2.5p	-	490	490		-
2013 Interim	28/03/2013: 2.5p	-	-	-		492
2012 Final	28/09/2012: 2.5p	-	-	-		499
		-	490	490		991

6. Basic and diluted net asset value per share

	Shares in issue		Net assets		NAV per share
			£'000		pence
Period ended 30 September 2013	19,592,490		13,565		69.2
Period ended 30 September 2012	19,872,990		14,310		72.0
Year ended 31 March 2013	19,592,490		14,005		71.5

7. Called up share capital

			Shares in issue		£'000
Period ended 30 September 2013			19,592,490		196
Period ended 30 September 2012			19,872,990		199
Year ended 31 March 2013			19,592,490		196

8. Reserves

	Capital redemption reserve		Share premium	Special reserve	Capital reserve -realised	Capital reserve -unrealised	Revenue reserve
		£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2013		1,153	315	13,743	1,136	(2,555)	17
Capital expenses		-	-	-	(94)	-	-
Gains/(losses) on investments		-	-	-	(6)	154	-
Realisation of revaluations from previous years		-	-	-	(276)	276	-
Dividends paid		-	-	-	(490)	-	-
Retained net revenue		-	-	-	-	-	(4)
At 30 September 2013		1,153	315	13,743	270	(2,125)	13

The Special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends/capital distributions.

Distributable reserves are calculated as follows:

	30 Sept 2013		31 Mar 2013
	£'000		£'000
Special reserve	13,743		13,743
Capital reserve - realised	270		1,136
Revenue reserve	13		17
Unrealised losses (excluding unrealised unquoted gains)	(2,179)		(2,765)
Total distributable reserves	11,847		12,131

9. Reconciliation of return on ordinary activities before taxation to net cash flow from operating activities

	30 Sept 2013		30 Sept 2012		31 Mar 2013
	£'000		£'000		£'000
Return/(loss) on ordinary activities before taxation	50		(644)		(288)
(Gains)/losses on investments	(148)		519		128
Decrease in other debtors	59		63		60
Decrease in other creditors	(19)		(24)		(19)
Net cash outflow from operating activities	(58)		(86)		(119)

10. Reconciliation of net cash flow to movement in net funds

	30 Sept 2013		30 Sept 2012		31 Mar 2013
	£'000		£'000		£'000
Beginning of period	123		1,284		1,284
Net cash inflow/(outflow)	550		(758)		(1,161)
End of period	673		526		123

11. The unaudited 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 year ended 31 March 2013 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

12. Going concern
The Directors have reviewed the Company's financial resources at the period end and concluded that the Company is well placed to manage its business risks.

The Directors confirm that they are satisfied that the Company has adequate resources to continue to operate for the foreseeable future. For this reason, the Directors believe 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. Risks and uncertainties
Under the Disclosure and Transparency Rules, the Board is required, in the Company's half-year results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks are:

(i)        compliance risk of failure to maintain approval as a VCT; and
(ii)        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 regularly reports to the Board on the current position. The Company also retains PricewaterhouseCoopers LLP 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 into VCT qualifying investments. 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.

14. The Directors confirm that, to the best of their knowledge, the half yearly financial report has 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 during 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.

15. Copies of the unaudited half-yearly financial results will be sent to Shareholders shortly. Further copies can be obtained from the Company's Registered Office and will be available for download from www.downing.co.uk.

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Downing ONE VCT plc via Globenewswire

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