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Downing Plan Exit 2 (DP2C)

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Wednesday 26 September, 2012

Downing Plan Exit 2

Downing Planned Exit VCT 2 PLC : Half-yearly re...

Downing Planned Exit VCT 2 PLC : Half-yearly report

Downing Planned Exit VCT 2 plc

Half-Yearly Report for the six months ended 31 July 2012

 

PERFORMANCE SUMMARY

 

'C' Share pool31 Jul

2012
 31 Jan

2012
 31 Jul

2011
  pence pence pence
Net asset value per 'C' Share 90.8   91.5   88.6
Net asset value per 'A' Share 0.1   0.1   0.1
Cumulative distributions per 'C' Share 15.0   12.5   10.0
Total return per 'C' Share and 'A' Share 105.9   104.1   98.7

 

'D' Share pool31 Jul

2012
 31 Jan

2012
 31 Jul

2011
  pence pence pence
Net asset value per 'D' Share 80.2   83.2   91.5
Net asset value per 'E' Share 0.1   0.1   0.1
Cumulative distributions per 'D' Share 10.0   7.5   5.0
Total return per 'D' Share and 'E' Share 90.3   90.8   96.6

 

'F' Share pool31 Jul

2012
 31 Jan

2012
 31 Jul

2011
  pence pence pence
Net asset value per 'F' Share 94.4   n/a   n/a

 

CHAIRMAN'S STATEMENT

 

Introduction

I am pleased to present my report for the six months ended 31 July 2012. The Company's 'C' Share and 'D' Share pools have now completed their investment phase and so have seen little investment activity in the period. This is in contrast to the new 'F' Share pool which has continued to raise new funds and has been a very active investor during the period.

 

Fundraising

As at 31 July 2012, the 'F' Share offer for subscription with its sister company, Downing Planned Exit VCT 3 plc, had raised gross proceeds of approximately £18 million or £8.9 million per company. The offer has been extended from the original closing date and will now close on 28 September 2012.

 

Net asset values

'C' Share pool

At 31 July 2012, the net asset value ("NAV") for a combined holding of one 'C' Share and one 'A' Share was 90.9p, an increase of 1.8p (2.0%) over the period. Total Return (NAV plus dividends paid to date) is now 105.9p for a combined holding.

 

'D' Share pool

At 31 July 2012, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 80.3p, a decrease of 0.5p (0.6%) over the period. Total Return (NAV plus dividends paid to date) is now 90.3p for a combined holding.

 

'F' Share pool

At 31 July 2012, the net asset value ("NAV") per 'F' Share was 94.4p, a decrease of 0.1p from the initial NAV after issue costs.

 

Dividends

In line with the Company's stated policies, interim dividends will be paid as follows:

 

'C' Shares                          2.5p per share

'D' Shares                         2.5p per share

'F' Shares                          5.0p per share

 

Each of these dividends will be paid on 30 November 2012 to Shareholders on the register at 2 November 2012.

 

Ordinary Share pool

The Company's original share pool, the Ordinary Share pool, completed returning funds to Shareholders in 2010. Proposals to wind up the Ordinary Shares were approved by Shareholders at a meeting on 25 July 2012 and they have now been cancelled.

 

Share buybacks

The Company has a general policy of buying in for cancellation its own shares that become available in the market. No shares were purchased in the period for cancellation.

 

The current policy is that the Company will buy in any 'C' Shares, 'A' Shares, 'D' Shares or 'E' Shares at approximately a 10% discount to the latest published NAV of those share classes. In respect of the 'F' Shares, any such purchases will be undertaken at a price equal to the latest published NAV (i.e. at nil discount) until 1 October 2016. Buybacks are subject to regulatory restrictions and other factors such as availability of liquid funds.

 

Outlook

With approximately two years to go until the 'C' Share pool seeks to start realising investments and returning funds to shareholders, and three years in the case of the 'D' Share pool, any new investment activity by these pools is now expected to be very limited.

 

The 'C' Share portfolio has reasonable prospects for continuing to make further progress as it moves towards the exit date. The 'D' Share portfolio has suffered from specific issues with two investments. These have now stabilised although some value has been lost. The Board is satisfied with the remainder of the 'D' Share portfolio and believes there are reasonable prospects for NAV growth from here.

 

It is early days for the 'F' Share pool and the process of building the investment portfolio has some way to go. The Manager reports that it is continuing to see a steady flow of promising investment opportunities so we should expect a significant level of activity over the remainder of the year.

 

Hugh Gillespie

Chairman

26 September 2012

 

INVESTMENT MANAGER'S REPORT

'C' SHARE POOL

 

Investment activity

The 'C' Share pool is now fully qualifying; accordingly, no new qualifying investments were made during the period. 

 

The majority of the 'C' Share portfolio has performed well during the first half of the year with a net valuation uplift of £76,000 recognised at the interim stage.

 

At the interim stage, the 'C' Share pool commissioned independent valuations for Atlantic Dogstar Limited, East Dulwich Tavern Limited and Westow House Limited which all operate pubs in South London. The valuations resulted in uplifts in value of £50,000, £41,000 and £64,000 respectively. All three pubs are performing well and are significantly surpassing their original business plans.

 

A £79,000 write down in value was made to Honeycombe Pubs VCT Limited which owns a bar in Burnley, Lancashire. An independent valuation was commissioned which indicated that the value of the property had fallen below the loan stock cost and a reduction in value was recognised.

 

Net asset value

At 31 July 2012, the NAV per 'C' Share stood at 90.8p and per 'A' Share at 0.1p, producing a combined total of 90.9p. This is an increase of 1.8p (2.0%) since the previous year end of 31 January 2012 (after adjusting for dividends of 2.5p per 'C' Share paid during the period). Total return (NAV plus cumulative dividends paid) was 105.9p per 'C' Share and 'A' Share at 31 July 2012.

 

Results and dividend

The profit on ordinary activities for the 'C' Shares, after taxation, for the period was £128,000, comprising a revenue profit of £52,000 and a capital profit of £76,000.

 

The Company will pay an interim dividend of 2.5p per 'C' Share, on 30 November 2012, to 'C' Shareholders on the register at 2 November 2012.

 

Outlook

We are pleased with the progress made by the 'C' Share portfolio to date and believe that the there is potential for further growth before we start to seek realisations and commence returning funds to Shareholders in 2014. Trading conditions do, however, remain challenging for most businesses and therefore close monitoring of all portfolio companies will remain a priority.

 

Downing LLP

26 September 2012

 

SUMMARY OF INVESTMENT PORTFOLIO

'C' SHARE POOL

as at 31 July 2012

 

 
 
 
Cost
 
 
Valuation
Unrealised
gain/(loss)
in period
% of
portfolio
by value
 £'000
 
£'000
 
£'000
 
Qualifying investments 
Bijou Wedding Venues Limited 815   884   - 13.6%
Future Biogas (SF) Limited 627   703   - 10.8%
Atlantic Dogstar Limited 429   654   50   10.0%
Domestic Solar Limited* 500   500   -   7.7%
Redmed Limited* 438   437   -   6.7%
Westow House Limited 304   395   64   6.1%
East Dulwich Tavern Limited 344   385   41   5.9%
Quadrate Catering Limited 330   330   -   5.1%
Quadrate Spa Limited* 323   323   -   5.0%
Ecossol Limited 250   250   -   3.8%
The 3D Pub Co Limited 267   187   -   2.9%
Mosaic Spa and Health Club Limited* 125   125   -   1.9%
Chapel Street Services Limited 50   50   -   0.8%
Chapel Street Food and Beverage Limited 50   50   -   0.8%
     
Non-qualifying investments      
Hoole Hall Country Club Holdings Limited 581   581   -   8.9%
The Thames Club Limited 500   500   -   7.7%
Honeycombe Pubs VCT Limited 175   96   (79)   1.5%
Vermont Developments Limited 25   25   -   0.4%
Commercial Street Hotel Limited 2   2   -   0.0%
     
  6,135   6,477   76   99.6%
       
Cash at bank and in hand   38     0.4%
       
Total   6,515     100.0%

 

SUMMARY OF INVESTMENT MOVEMENTS

'C' SHARE POOL

for the six months ended 31 July 2012

 

Additions
£'000
Quadrate Spa Limited* 13

* Partially qualifying investment

INVESTMENT MANAGER'S REPORT

'D' SHARE POOL

 

Investment activity

The 'D' Share pool made two new qualifying investments (including partially qualifying investments or investments that will become qualifying in due course) and two non-qualifying investments during the period at a total cost of £1,167,000, details of which are set out below.

 

A further investment of £125,000 was made in Kidspace Adventure Holdings Limited, to redevelop an indoor and outdoor children's play centre known as Hobbledown Farm, which opened in July 2012.

 

In February 2012, a £467,000 non-qualifying investment was made in Liverpool Nurseries Holdings Limited to purchase the assets of one of the Company's existing investments, Gingerbread Pre-Schools (UK) Limited, after the original investment encountered some difficulties and went into administration. As part of the reorganisation, the existing manager and investment partner has been dismissed. A new manager has been appointed and the nurseries are now starting to make progress. A loss against cost of £181,000 arose on the reorganisation.

 

A £150,000 non-qualifying loan was made to Aminghurst Limited to fund the continued build of the hotel and apartment development near Salcombe, Devon.

 

The majority of the 'D' Share pool investments have performed in line with expectations over the period and continued to be valued at original cost. There have, however, been two adjustments.

 

An uplift in value of £13,750 was recognised on the Alpha Schools Holdings Limited, an independent primary school operator, to reflect that the business is performing well and in line with expectations.

 

A further reduction in value was made to Camandale Limited which owns two pubs, The Riverbank and The Monkey Bar, located in Kilmarnock, Scotland. The Monkey Bar was closed in January 2012 and no buyer has yet been found for the property. The Riverbank, which remains open, is still not performing to expectations and, accordingly, a cautionary £46,000 write down in value was made at the interim. 

 

In total, the portfolio produced net unrealised capital losses of £31,500 for the six months.

 

Net asset value

At 31 July 2012, the NAV per 'D' Share stood at 80.2p and per 'E' Share at 0.1p, producing a combined total of 80.3p. This is a small decrease of 0.5p (0.6%) since the previous year end of 31 January 2012 (after adjusting for dividends of 2.5p per 'D' Share paid during the period). Total return (NAV plus cumulative dividends paid) was 90.3p per 'D' Share and 'E' Share at 31 July 2012.

 

Results and dividend

The loss on ordinary activities for the 'D' Shares, after taxation, for the period was £52,000, comprising a revenue loss of £20,000 and a capital loss of £32,000.

 

The Company will pay an interim dividend of 2.5p per 'D' Share, on 30 November 2012, to 'D' Shareholders on the register at 2 November 2012.

 

Outlook

The problems with Camandale and Gingerbread Pre-Schools have been a setback for the pool. After a period of intensive management of both investments, these businesses have now been brought under control and we do not expect to see any further loss of value. The remainder of the 'D' Share portfolio is still at a relatively early stage, but we are satisfied with progress to date and believe there is good potential for growth ahead of 2015, when the pool will seek to start realising its investments.

 

Downing LLP

26 September 2012

 

SUMMARY OF INVESTMENT PORTFOLIO

'D' SHARE POOL

as at 31 July 2012

 

 
 
 
Cost
 
 
Valuation
Unrealised
gain/(loss)
in period
% of
portfolio
by value
 
£'000
 
£'000
 
£'000
 
Qualifying investments 
Future Biogas (Reepham Road) Limited* 748   748   - 9.2%
Quadrate Catering Limited 441   441   -   5.4%
Quadrate Spa Limited* 436   436   -   5.4%
Domestic Solar Limited* 400   400   -   4.9%
Alpha Schools (Holdings) Limited 367   381   14   4.7%
Kidspace Adventures Holdings Limited* 375   375   -   4.6%
Mosaic Spa and Health Club (Shrewsbury) Limited 350   350   -   4.3%
Avon Solar Energy Limited 250   250   -   3.1%
Ecossol Limited 250   250   -   3.1%
Green Electricity Generation Limited 250   250   -   3.1%
West Country Solar Solutions Limited 250   250   -   3.1%
Slopingtactic Limited 195   195   -   2.4%
Progressive Energies Limited 170   170   -   2.1%
Ridgeway Pub Company Limited 136   136   -   1.7%
Mosaic Spa and Health Club Limited* 125   125   -   1.5%
Camandale Limited* 561   113   (46)   1.4%
       
Non-qualifying investments      
Aminghurst Limited 2,150   2,150   - 26.4%
Liverpool Nurseries (Holdings) Limited 467   467   - 5.7%
Retallack Surfpods Limited 250   250   -   3.1%
Fenkle Street LLP 147   147   -   1.8%
Kidspace Adventures Limited 135   135   -   1.7%
Commercial Street Hotel Limited 100   100   -   1.2%
       
  8,553   8,119   (32)   99.9%
     
Cash at bank and in hand   10     0.1%
       
Total   8,129     100.0%

* Partially qualifying investment

 

SUMMARY OF INVESTMENT MOVEMENTS

'D' SHARE POOL

for the six months ended 31 July 2012

 

Additions
£'000
 
Qualifying investments
Kidspace Adventures Holdings Limited* 125
Quadrate Spa Limited* 17
Non-qualifying investments
Liverpool Nurseries (Holdings) Limited 467
Liverpool Nurseries (House) Limited 203
Aminghurst Limited 150
Liverpool Nurseries (Greenbank) Limited 138
Liverpool Nurseries(Cottage) Limited 67
Total 1,167

DisposalsCostMarket
value at
01/02/12**
Disposal
proceeds
Loss
against
cost
Total
realised
gain/
(loss)
£'000 £'000£'000 £'000£'000
Qualifying investments
Gingerbread Pre-Schools (UK) Limited 576 395 395 (181) -
Non-qualifying investments
Liverpool Nurseries (House) Limited 203 203 203 - -
Liverpool Nurseries (Greenbank) Limited 138 138 138 - -
Liverpool Nurseries(Cottage) Limited 67 67 67 - -
Hoi Polloi Pub Co Limited 60 60 60 - -
Total 1,044 863 863 (181) -

* Partially qualifying investment

** Adjusted for purchases in the year

 

INVESTMENT MANAGER'S REPORT

'F' SHARE POOL

 

During the period, 8.9 million 'F' Shares were issued under the offer for subscription, generating net proceeds of £8.4 million after share issue costs. The task of investing these new funds is now underway.

 

Investment activity

During the 'F' Share pool's initial period, 13 new investments were made at a total cost of £4.4 million. Of these investments, five were VCT qualifying.

 

Brief details of the largest of these qualifying investments (or investments that will become qualifying in due course) are as follows:

 

£816,000 was invested in Tor Solar PV Limited which owns a portfolio of solar panels on farms in the south west of the UK.

 

Three investments were made in City Falkirk Limited, Fubar Stirling Limited and Cheers Dumbarton Limited totalling £737,000. Each of these companies owns and operates a Scottish nightclub. The clubs are managed by Lochrise Limited which is associated with the Castle Leisure Group, an experienced operator in the region.

 

A £560,000 investment was made in Vulcan Renewables Limited which is developing a 2MW gas injection biogas plant near Doncaster. Through an anaerobic digestion process, biogas is produced which is used to generate electricity. The company benefits from the receipt of Feed-in Tariffs and payments for electricity exported to the National Gas Grid.

 

£200,000 was invested in Fresh Green Power Limited and £100,000 was invested in Green Energy Production Limited. Both companies install, own and manage solar panels on domestic rooftops. Both businesses benefit from the receipt of Feed-in Tariffs from solar energy generation.

 

In addition to the above, a number of non-qualifying investments were made in the form of secured loans. These helped to generate investment income on funds ahead of them being employed in VCT qualifying investments.

 

At this early stage, the investment portfolio has a disproportionately high exposure to a small number of business sectors. This has resulted from investment opportunities that have presented themselves and we expect the portfolio to become more diversified and better balanced as the task of investing funds continues.

 

Results and dividend

At 31 July 2012, the net asset value ("NAV") per 'F' Share stood at 94.4p, compared to an initial NAV of 94.5p, a fall of 0.1p (0.1%).

 

The loss on ordinary activities for the 'F' Shares, after taxation, for the period was £8,000, relating wholly to a revenue loss.

 

In accordance with the policy set out in the 'F' Share prospectus, the Company will pay an interim dividend of 5.0p per 'F' Share on 30 November 2012 to 'F' Shareholders on the register at 2 November 2012.

 

Outlook

The task of building the 'F' Share investment portfolio is at an early stage but we are satisfied with the progress made to date in investing the funds. The general economic climate remains challenging, but we continue to see good quality deal flow which we believe will allow us to build a portfolio which can deliver the targeted returns to Shareholders over the life of the pool.

 

Downing LLP

26 September 2012

 

SUMMARY OF INVESTMENT PORTFOLIO

'F' SHARE POOL

as at 31 July 2012

 

 
 
 
Cost
 
 
Valuation
Unrealised
gain/(loss)
in period
% of
portfolio
by value
 
£'000
 
£'000
£'000
 
Qualifying investments 
Tor Solar PV Limited* 816   816   - 9.0%
Vulcan Renewables Limited 560   560   - 6.2%
City Falkirk Limited* 421   421   -   4.6%
Fresh Green Power Limited 200   200   -   2.2%
Green Energy Production UK Limited 100   100   -   1.1%
       
Non-qualifying investments      
Baron House Developments LLP 625   625   - 6.9%
Clareville Street LLP 500   500   - 5.5%
Holdland House Developments Ltd 300   300   -   3.3%
West Tower Holdings Limited 290   290   -   3.2%
Fubar Stirling Limited 268   268   -   3.0%
Kidspace Adventures Holdings Limited 250   250   -   2.8%
Cheers Dumbarton Limited 48   48   -   0.5%
Lochrise Limited 13   13   -   0.1%
       
  4,391   4,391   -   48.4%
     
Cash at bank and in hand   4,677     51.6%
       
Total   9,068     100.0%

* Partially qualifying investment

All of the above investments were additions in the period.

 

DisposalsCostMarket
value at
01/02/12**
Disposal
proceeds
Gain
against
cost
Total
realised
gain
£'000 £'000£'000 £'000£'000
Non-qualifying investments
Baron House Developments LLP 75 75 75 - -

 

** Adjusted for purchases in the year

 

UNAUDITED SUMMARISED BALANCE SHEET

as at 31 July 2012

 

 

31 Jul 2012
31 Jul

2011
31 Jan

2012

 

'C'

Shares
'D'

Shares
'F'

Shares
Total

(inc

Ords)
Total

(inc

Ords)
 Total

(inc

Ords)

 

£'000£'000£'000£'000£'000 £'000

 

 
Fixed assets 
Unquoted investments 6,477 8,119 4,391 18,987 13,774   14,240
 
Current assets  
Debtors 112 26 26 164 1,129   213
Cash at bank and in hand 38 10 4,677 4,725 1,014   3,031
150 36 4,703 4,889 2,143 3,244
 
Creditors: amounts falling
due within one year
(108) (125) (689) (922) (384)   (1,399)
 
Net current assets 42 (89) 4,014 3,967 1,759   1,845
 
 
Net assets 6,519 8,030 8,405 22,954 15,533   16,085
 
Capital and reserves 
Called up share capital 18 25 9 152 143   143
Share capital to be issued - - - - -   1,178
Capital redemption reserve 4 - - 6 6   6
Special reserve 5,996 8,730 - 14,726 15,487   15,155
Share premium account - - 8,404 8,404 -   -
Revaluation reserve 343 (616) - (273) (133)   (317)
Capital reserve - realised 53 - - 48 -   53
Revenue reserve 105 (109) (8) (109) 30 (133)
 
Total equity shareholders'
funds
6,519 8,030 8,405 22,954 15,533   16,085
 
Basic and diluted net asset value per:
'C' Share 90.8p 88.6p 91.5p
'A' Share 0.1p 0.1p 0.1p
'D' Share 80.2p 83.2p 83.2p
'E' Share 0.1p 0.1p 0.1p
'F' Share 94.4p n/a n/a

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

 

 

31 July 2012
 31 Jul

2011
 31 Jan

2012

 

'C'

Shares
'D'

Shares
'F'

Shares
Total

(inc

Ords)
 Total

(inc

Ords)
 Total

(inc

Ords)

 

£'000£'000£'000£'000 £'000 £'000

 

  
Opening Shareholders' funds 6,570 8,332 1,178 16,085 16,027   16,027
Issue of shares - - 8,903 8,903 -   -
Share issue costs - - (490) (490) -   -
Total recognised gains/
(losses) for the year
128 (52) (8) 63 114   (83)
Share capital to be issued - - (1,178) (1,178) -   1,178
Dividends (179) (250) - (429) (608)   (1,037)
 
Closing Shareholders' funds 6,519 8,030 8,405 22,954 15,533   16,085

INCOME STATEMENT

for the six months ended 31 July 2012

 

Company Total (including Ordinary Share pool)

Six months ended

31 Jul 2012
Six months ended
31 Jul 2011
Year
ended
31 Jan
2012
RevenueCapitalTotalRevenueCapitalTotalTotal
£'000£'000£'000£'000£'000£'000£'000
Income 295 - 295 573 - 573 676
Gains/(losses) on investments
- realised - (5) (5) - - - 53
- unrealised - 44 44 - (133) (133) (317)
295 39 334 573 (133) 440 412
Investment management fees (145) - (145) (102) - (102) (211)
Other expenses (110) - (110) (110) - (110) (199)
Return on ordinary activities
before taxation
40 39 79 361 (133) 228 2
Taxation (16) - (16) (114) - (114) (85)
Return attributable to
equity shareholders
24 39 63 247 (133) 114 (83)
Return per 'C' Share 0.7p 1.1p 1.8p 0.8p - 0.8p   6.2p
Return per 'A' Share - - - - - -   -
Return per 'D' Share (0.2p) (0.3p) (0.5p) 1.9p (1.3p) 0.6p   (5.3p)
Return per 'E' Share - - - - - -   -
Return per 'F' Share (0.1p) - (0.1p) n/a n/a n/a   n/a

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.

 'C' Shares

Six months ended

31 Jul 2012

 
 Six months ended

31 Jul 2011
Year
ended
31 Jan
2012
RevenueCapitalTotal RevenueCapitalTotalTotal
£'000£'000£'000£'000£'000£'000 £'000
   
Income 151 - 151   160 - 160   337
   
Gains on investments    
- realised - - -   - - -   53
- unrealised - 76 76   - - -   267
151 76 227   160 - 160   657
   
Investment management fees (44) - (44) (44) - (44) (88)
Other expenses (39) - (39)   (36) - (36)   (74)
   
Return on ordinary activities
before taxation
68 76 144   80 - 80   495
   
Taxation (16) - (16)   (25) - (25)   (51)
   
Return attributable to
equity shareholders
52 76 128   55 - 55   444

 'D' Shares

Six months ended

31 Jul 2012

 
 Six months ended

31 Jul 2011
Year
ended
31 Jan
2012
RevenueCapitalTotalRevenueCapitalTotalTotal
£'000£'000£'000£'000£'000£'000£'000
   
Income 85 - 85   413 - 413   339
   
Losses on investments    
- realised - - -   - - -   -
- unrealised - (32) (32)   - (133) (133)   (584)
85 (32) 53   413 (133) 280   (245)
   
Investment management fees (56) - (56) (58) - (58) (123)
Other expenses (49) - (49)   (74) - (74)   (125)
   
Return on ordinary activities
before taxation
(20) (32) (52)   281 (133) 148   (493)
   
Taxation - - -   (89) - (89)   (34)
   
Return attributable to
equity shareholders
(20) (32) (52)   192 (133) 59   (527)

 'F' Shares

Six months ended

31 Jul 2012

 
 Six months ended

31 Jul 2011
Year
ended
31 Jan
2012
RevenueCapitalTotalRevenueCapitalTotalTotal
£'000£'000£'000£'000£'000£'000 £'000
   
Income 59 - 59   - - -   -
   
Gains on investments    
- realised - - -   - - -   -
- unrealised - - -   - - -   -
59 - 59   - - -   -
   
Investment management fees (45) - (45) - - - -
Other expenses (22) - (22)   - - -   -
   
Loss on ordinary activities
before taxation
(8) - (8)   - - -   -
   
Taxation - - -   - - -   -
   
Loss attributable to
equity shareholders
(8) - (8)   - - -   -

UNAUDITED CASH FLOW STATEMENT

for the six months ended 31 July 2012

 

 

 

31 Jul 2012
31 Jul
2011
31 Jan
2012

 

'C'
Shares
'D'
Shares
'F'
Shares
Total (inc Ords) Total
(inc
Ords)
Total
(inc
Ords)

Note

£'000£'000£'000£'000 £'000£'000

 

  
Net cash inflow/(outflow)

from operating activities
1 57 62 655 774 (453) 353
Taxation
Corporation tax paid - - - - - (119)
Capital expenditure
Purchase of investments (13) (1,167) (4,466) (5,646) (5,321) (8,469)
Sale of investments - 863 75 938 4,636 7,187
Net cash outflow from capital expenditure (13) (304) (4,391)     
(4,708)
(685) (1,282)
Equity dividends paid (179) (250) - (429) (608) (1,037)
Net cash outflow before financing (135) (492) (3,736) (4,363) (1,746) (2,085)
Financing
Proceeds from share issue - - 7,725 7,725 - -
Share issue costs - - (490) (490) - -
Share capital to be issued - - - - - 1,178
Raised for/paid to a related fund - - (1,178) (1,178) - 1,178
Net cash inflow from financing - - 6,057 6,057 - 2,356
(Decrease)/increase in cash2 (135) (492) 2,321 (1,694) (1,746) 271
Notes to the cash flow statement:
1 Cash inflow from operating activities and returns on investments
Return on ordinary activities
before taxation
144 (52) (8) 79 228 2
(Gains)/losses on investments (76) 32 - (39) 133 264
Decrease/(increase) in other debtors 2 72 (26) 48 (732) 184
(Decrease)/increase in other creditors (13) 10 621 (1,670) (82) (97)
Net cash inflow/(outflow) from operating activities 57 62 655 (1,582) (453) 353
2 Analysis of net funds
Beginning of period 173 502 2,356 3,031 2,760 2,760
Net cash (outflow)/inflow (135) (492) 2,321 1,694 (1,746) 271
End of period 38 10 4,677 4,725 1,014 3,031

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1.     The unaudited half-yearly results cover the six months to 31 July 2012 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 year ended 31 January 2012, 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 2011 and the year ended 31 January 2012 respectively.

5.     Dividends

 Six months ended

31 July 2012
Year ended

31 Jan 2012
Paid in yearPer shareRevenue Capital Total Total
pence£'000 £'000 £'000 £'000
'C' Shares          
2011 Final 5.0p -   -   -   358
2012 Interim 2.5p -   -   -   179
2012 Final 2.5p -   179   179   -
-   179   179   537
'D' Shares          
2011 Final 2.5p -   -   -   250
2012 Interim 2.5p -   -   -   250
2012 Final 2.5p -   250   250   -
-   250   250   500

No dividends have been paid or declared in respect of the 'A' Shares, 'E' Shares or 'F' Shares.

6.     Basic and diluted return per share

 'C'
Shares
'A'
Shares
'D'
Shares
'E'
Shares
'F'
Shares
Revenue return per share based on:
Net revenue after taxation
(£'000)
52 - (20) - (8)
Capital return/(loss) per share based on:
Net capital gain for the

financial year (£'000)
76 - (32) - -
Weighted average number of

shares in issue
7,166,806 10,754,329 10,000,000 15,000,000 6,560,140

7.     Net asset value per share

 

Shares in issueNet asset value
per share£'000

'C' Shares

7,166,806

  90.8p   6,508

'A' Shares

10,754,329

  0.1p   11

'D' Shares

10,000,000

  80.2p   8,015

'E' Shares

15,000,000

  0.1p   15

'F' Shares

8,902,699

  94.4p   8,405

Ordinary Shares *

9,994,968

  -   -

 

 

   22,954

 

* The Ordinary Shares have been cancelled since the period end.

 

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 February 2012 6 - 15,155 (133) 53 (317)
Issue of shares - 8,894 - - - -
Share issue costs - (490) - - - -
Net (loss)/gain on investments - - - - (5) 44
Expenses capitalised - - - - - -
Dividends paid - - - - (429) -
Transfer between reserves - - (429) - 429 -
Retained revenue - - - 24 - -
At 31 July 2012 6 8,404 14,726 (109) 48 (273)

The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £607,000 which are included in the calculation of distributable reserves. Total distributable reserves are £14,058,000 (£14,411,000 at 31 January 2012).

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 year ended 31 January 2012 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.

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:

(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 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.  




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Source: Downing Planned Exit VCT 2 PLC via Thomson Reuters ONE

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