Downing TWO VCT plc Half-Yearly Report for the six months ended 30 June 2017
Performance summary 'D' Share pool 30 Jun 31 Dec 30 Jun 2017 2016 2016
Pence Pence Pence
Net asset value per 'D' Share 23.9 36.6 34.8
Net asset value per 'E' Share 0.1 0.1 0.1
Cumulative distributions per 'D' Share 80.0 66.5 66.5 ---------- ---------- --------- Total return per 'D' Share and 'E' Share 104.0 103.2 101.4 ---------- ---------- ---------
'F' Share pool 30 Jun 31 Dec 30 Jun 2017 2016 2016
Pence Pence Pence
Net asset value per 'F' Share 70.0 69.7 70.0
Cumulative distributions per 'F' Share 27.5 25.0 22.5 ---------- ---------- --------- Total return per 'F' Share 97.5 94.7 92.5 ---------- ---------- ---------
'G' Share pool 30 Jun 31 Dec 30 Jun 2017 2016 2016
Pence Pence Pence
Net asset value per 'G' Share 82.5 83.5 85.4
Cumulative distributions per 'G' Share 22.5 20.0 17.5 ---------- ---------- --------- Total return per 'G' Share 105.0 103.5 102.9 ---------- ---------- ---------
'K' Share pool 30 Jun 31 Dec 30 Jun 2017 2016 2016
Pence Pence Pence
Net asset value per 'K' Share 98.4 99.0 99.7 ------------ ------------ -----------
CHAIRMAN'S STATEMENT Introduction I am pleased to present the Half-Yearly Report for the six months ended 30 June 2017. The Company has a number of share pools, each of which is in a different stage in its planned exit life. Generally, progress has been satisfactory over the period, with all the mature share pools seeing an increase in their total return.
Net asset values and overview 'D' Share pool The 'D' Share pool is now in the process of exiting from its investments.
At 30 June 2017, the net asset value ('NAV') for a combined holding of one 'D' Share and one 'E' Share was 24.0p. Total Return (NAV plus dividends paid to date) is now 104.0p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.
Total dividends of 80p per combined share have been paid to date. The Manager is optimistic that one final dividend can be paid before the end of the year to bring the share pool to a close.
'F' Share pool The 'F' Share pool launched in 2012 and is scheduled to start exiting from investments in early 2018.
At 30 June 2017, the net asset value ('NAV') for a holding of one 'F' Share was 70.0p, an increase of 2.8p (4.0%) over the period. Total Return (NAV plus dividends paid to date) is now 97.5p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.
The Manager anticipates that the first major distribution will be paid in the first quarter of 2018.
'G' Share pool The 'G' Share pool raised funds in 2013 and has completed its initial investment phase. The target date to start realising investments is late 2018.
At 30 June 2017, the net asset value ('NAV') for a holding of one 'G' Share was 82.5p which represents a net increase of 1.5p (1.8%) over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 105.0p, compared to the initial NAV, before income tax relief, of 100.0p.
'K' Share pool The 'K' Share pool raised funds in 2016 and is continuing to build its initial investment portfolio. The target date to start realising investments is late 2021.
At 30 June 2017, the net asset value ('NAV') and total return for a holding of one 'K' Share was 98.4p which represents a net decrease of 0.6p (0.6%) over the period, compared to the initial NAV of 100.0p. This deficit arises from that fact that initially the share pool holds funds awaiting investment in cash which generates very little yield. As the portfolio is developed this effect will diminish.
The Investment Manager's Report below will provide more detail on each of the share pools.
Dividends In line with the Company's stated policies, interim dividends will be paid as follows:
'F' Shares 2.5p per share 'G' Shares 2.5p per share
Each of the above dividends will be paid on 15 December 2017 to Shareholders on the register at 24 November 2017.
No interim dividend is being declared in respect of the 'D' Shares as additional dividends will be declared once further investment realisations have been completed. No dividend is being declared in respect of the 'K' Share pool as the VCT regulations effectively prohibit dividends at this early stage in the pool's life.
Share buybacks The Company has a general policy in the first five years after the launch of a share class, of buying in its own shares that become available in the market for cancellation. As a result, the Company will currently buy 'G' Shares and 'K' Shares that become available in the market and will, subject to liquidity and regulatory constraints, buy at prices approximately equal to net asset value i.e. with no discount.
During the period to 30 June 2017, the Company repurchased and subsequently cancelled 24,000 'G' Shares for an aggregate consideration of £20,040, being an average price of 83.5p per 'G' Share.
No share buybacks in respect of any other share classes were undertaken during the period.
Outlook The Manager will be engaged in a number of different activities for each of the share pools over the remainder of the year. We hope to see the 'D' Share come to the end of its life with a final dividend and expect preparations for investment realisations in the 'F' Share pool to advance significantly. The 'G' Share pool is expected to have limited investment activity over the remainder of the year while the Manager focuses on the existing portfolio, but we expect to see a number of new additions to the 'K' Share portfolio as the funds raised continue to be employed.
Shareholders may be aware of the 'Patient Capital Review' currently being undertaken by the Government which is seeking to strengthen the UK as a place for growing innovative businesses. It is possible that this review could result in some changes to the VCT regulations and the associated tax reliefs. We expect that any planned changes will be announced in the Budget in November. The Board and Manager are closely monitoring developments and we will communicate with Shareholders if we believe there are any changes which could have a significant impact on Shareholders' investments.
In addition to any communications in connection with the above, I will update all Shareholders in my statement in the next Annual Report, and I also expect to write separately to 'D' Shareholders as and when there is news of a final distribution.
Hugh Gillespie Chairman
INVESTMENT MANAGER'S REPORT 'D' SHARE POOL
The 'D' Share pool is in the process of realising its investments in order to return funds to 'D' Shareholders. Progress has continued through the period and we are optimistic it will be completed in the near future.
Investment activity During the period under review, there was one partial disposal of £245,000 in Mosaic Spa and Health Clubs Limited. This represented a gain of £68,000 against the previous carrying value. Further proceeds for this investment are expected in due course at which point the company will be fully exited from the pool.
At 30 June 2017, the pool held seven investments with a valuation of £2.2 million. Three small valuation changes were made at the period end resulting in a total valuation reduction of £4,000. The carrying values adopted at the end of the period are consistent with the values at which we believe the investments can be exited.
Realisation plans The pools most significant holding is in Gara Rock Resort Limited, formerly Aminghurst Limited. We are pleased to report that we have recently exchanged contracts for the sale of the investment and expect this transaction to complete shortly.
Of the remaining six investments Avon Solar Energy Limited and Westcountry Solar Solutions Limited are expected to exit in the next two months. Mosaic Spa and Health Clubs Limited has partially exited in the period and we are exploring options to facilitate a complete exit for the share pool. No further proceeds are expected from Quadrate Spa Limited or Future Biogas (Reepham Road) Limited.
Net asset value and results At 30 June 2017, the net asset value ('NAV') for a combined holding of one 'D' Share and one 'E' Share was 24.0p. Total Return (NAV plus dividends paid to date) is now 104.0p for a combined holding.
The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £78,000, comprising a revenue loss of £20,000 and a capital profit of £98,000.
Outlook The end of the task of realising all the share pool's investments is now in sight. The exact timing is dependent on transactions involving third parties so is somewhat uncertain, however we anticipate that the pool should be able to make one final payment before the end of the year.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO 'D' SHARE POOL as at 30 June 2017
% of Unrealised portfolio gain/ by Cost Valuation (loss) in period value
£'000 £'000 £'000
VCT qualifying and partially qualifying investments
Avon Solar Energy Limited 210 252 12 10.2%
Westcountry Solar Solutions 250 216 (34) 8.8% Limited
Mosaic Spa and Health Clubs 325 123 - 5.0% Limited*
Quadrate Spa Limited 144 - - 0.0%
Non-qualifying investments
Gara Rock Resort Limited 1,322 1,322 - 53.6%
Fenkle Street LLP 122 287 18 11.6%
Future Biogas (Reepham Road) 320 - - 0.0% Limited --------------------------------------------
2,693 2,200 (4) 89.2% ------- ------------------
Cash at bank and in hand 266 10.8% ----------- -----------
Total 2,466 100% ----------- -----------
* Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS 'D' SHARE POOL for the six months ended 30 June 2017
Market Gain Total value at Disposal against realised Disposals Cost 01/01/17 proceeds cost gain
£'000 £'000 £'000 £'000 £'000
Mosaic Spa and Health Clubs Limited 196 177 245 49 68
------------------------------------------ 196 177 245 49 68 ------------------------------------------
* Adjusted for additions made in the period
INVESTMENT MANAGER'S REPORT 'F' SHARE POOL
The 'F' Share pool is fully invested in a portfolio focussed on asset backed businesses and those with predictable revenue streams. Planning has begun in respect of the process to realise investments and start returning funds to Shareholders which can commence early in 2018.
Investment activity With the pool being fully invested, no new investments were made in the period although one follow-on investment of £194,000 was made in Goonhilly Earth Station Limited, where further funding was required.
Funds had previously been invested in two companies, Morava Limited and Brownfields Trading Limited to explore business opportunities in specific sectors. In the event both companies were unable to find suitable opportunities, the £275,000 of funds invested were returned to the Share pool.
One partial divestment took place in the period being the part repayment of a non-qualifying loan to Gara Rock Resort Limited, formerly Aminghurst Limited, which generated proceeds of £95,000.
The majority of investments remain valued at or above cost and there were several valuation movements in the period.
Merlin Renewables Limited, the anaerobic digestion plant in Norfolk continues to perform well and the valuation was increased by £67,000.
Vulcan Renewables Limited has been sold after the period and the increase in value of £66,000 reflected expected sales proceeds minus a discount for execution risk. The sale subsequently completed at a higher value than shown overleaf.
An uplift of £39,000 was recognised in the period on Fresh Green Power Limited. The domestic rooftop solar company is generating profits in line with our expectations and we are now exploring options to sell the investment.
The valuation of Lambridge Solar Limited, the owner of commercial solar arrays in Lincolnshire, has been increased by £26,000 as it continues to perform well.
Atlantic Dogstar Limited continues to perform to plan and a small valuation uplift of £7,000 has been recognised in the period.
Net asset value, results and dividend At 30 June 2017, the net asset value ('NAV') for a holding of one 'F' Share was 70.0p, an increase of 2.8p (4.0%) over the period. Total Return (NAV plus dividends paid to date) is now 97.5p for a combined holding.
The gain on ordinary activities for the 'F' Shares, after taxation, for the period was £294,000, comprising a revenue profit of £89,000 and a capital gain of £205,000.
The Company will pay an interim dividend of 2.5p per 'F' Share, on 15 December 2017 to 'F' Shareholders on the register at 24 November 2017.
Outlook The focus now for the 'F' Share portfolio is shifting towards planning for exits. Good progress is being made and we anticipate that the first major distribution will be paid in the first quarter of 2018.
Downing LLP SUMMARY OF INVESTMENT PORTFOLIO 'F' SHARE POOL as at 30 June 2017
% of Unrealised portfolio Cost Valuation gain in period by value
£'000 £'000 £'000
VCT qualifying and partially qualifying investments
Apex Energy Limited 1,000 1,000 - 13.4%
Goonhilly Earth Station Limited 954 954 - 12.8%
Vulcan Renewables Limited 653 844 66 11.3%
Merlin Renewables Limited 500 642 67 8.6%
Lambridge Solar Limited 500 595 26 8.0%
Pearce and Saunders Limited 497 497 - 6.6%
Augusta Pub Company Limited 290 349 - 4.7%
Vectis Alpha Limited 300 300 - 4.0%
Fresh Green Power Limited 200 239 39 3.2%
Pabulum Pubs Limited 200 237 - 3.2%
Atlantic Dogstar Limited 200 234 7 3.2%
City Falkirk Limited 422 177 - 2.4%
Fubar Stirling Limited 268 169 - 2.3%
Rhodes Solutions Limited 125 125 - 1.7%
Green Energy Production UK Limited 100 100 - 1.3%
Cheers Dumbarton Limited 48 17 - 0.2%
Lochrise Limited 13 - - 0.0%
Non-qualifying investments
Baron House Developments Limited 481 481 - 6.5%
Gara Rock Resort Limited 163 163 - 2.2%
London City Shopping Centre Limited 66 66 - 0.9%
Pearce and Saunders DevCo Limited 46 46 - 0.6% ------------------------------------------
7,026 7,235 205 97.1% ------- ----------------
Cash at bank and in hand 218 2.9% ----------- -----------
Total 7,453 100.0% ----------- -----------
* Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS 'F' SHARE POOL as at 30 June 2017
Additions £'000
Goonhilly Earth Station Limited 194
-------- Total 194 --------
Market Gain Total value at Disposal against realised Disposals Cost 01/01/17 proceeds cost gain
£'000 £'000 £'000 £'000 £'000
Brownfields Trading Limited 150 150 150 - -
Morava Limited 125 125 125 - -
Gara Rock Resort Limited 95 95 95 - -
------------------------------------------ 370 370 370 - - ------------------------------------------
* adjusted for purchases made in the period
INVESTMENT MANAGER'S REPORT 'G' SHARE POOL
The 'G' Share pool raised funds in 2013 the task of building the initial VCT qualifying portfolio is now complete.
Investment activity No new investments were made in the period and one follow-on investment of £436,000 was made in Goonhilly Earth Station Limited, where further funding was required.
In the period, proceeds of £92,000 were received from the repayment in full of a loan to Craft Beer Pub Co Limited.
The majority of investments remain valued at or above cost and there were three valuation uplifts in the period totalling a gain of £229,000.
Atlantic Dogstar Limited continues to perform to plan and a valuation uplift of £133,000 has been recognised in the period.
The Antelope Pub Limited owns a pub of the same name in Tooting which continues to trade well and ahead of budget resulting in an increase in value of £82,000 being recognised in the period.
Ormsborough Limited owns several pubs and restaurants in Yorkshire with some trading well and others are under construction. Overall performance of the group has been good resulting in an uplift in valuation of £14,000.
Net asset value At 30 June 2017, the net asset value ('NAV') for a holding of one 'G' Share was 82.5p which represents a net increase of 1.5p (1.8%) over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 105.0p.
Results and dividend The profit on ordinary activities for the 'G' Shares, after taxation, for the period was £383,000, comprising a revenue profit of £154,000 and a capital profit of £229,000.
The Company will pay an interim dividend of 2.5p per 'G' Share, on 15 December 2017 to 'G' Shareholders on the register at 24 November 2017.
Outlook The focus for the 'G' Share pool is on close monitoring and support of the portfolio companies in order to nurture growth before the commencement of the exit process expected in early 2019.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO 'G' SHARE POOL as at 30 June 2016
% of Unrealised gain/ (loss) portfolio Cost Valuation in period by value
£'000 £'000 £'000
VCT qualifying and partially qualifying investments
Atlantic Dogstar Limited 3,500 4,113 133 19.7%
Goonhilly Earth Station 2,146 2,146 - 10.3% Limited
Antelope Pub Limited 1,760 1,842 82 8.8%
Quadrate Catering Limited 1,450 1,450 - 6.9%
Walworth House Pub Limited 1,330 1,330 - 6.4%
Apex Energy Limited 1,300 1,300 - 6.2%
Hermes Renewables Limited 1,000 1,000 - 4.8%
Zora Energy Limited 750 750 - 3.6%
Augusta Pub Company 580 697 - 3.3% Limited
Ormsborough Limited 500 523 14 2.5%
Pabulum Pubs Limited 400 475 - 2.3%
Oak Grove Renewables 420 231 - 1.1% Limited
Non-qualifying investments
Quadrate Spa Limited 1,450 1,450 - 6.9%
Hedderwick Limited 1,250 1,250 - 6.0%
Baron House Developments 1,093 1,093 - 5.2% LLP
Gara Rock Resort Limited 801 801 - 3.8%
Pearce and Saunders 193 193 - 0.9% Limited
London City Shopping 110 110 - 0.5% Centre Limited ----------------------------------------------------
20,033 20,754 229 99.3% -------- -------------------------
Cash at bank and in hand 158 0.7% ----------- -----------
Total 20,912 100% ----------- -----------
SUMMARY OF INVESTMENT MOVEMENTS 'G' SHARE POOL as at 30 June 2017
Additions £'000
Goonhilly Earth Station Limited 436
-------- Total 436 --------
Market Gain Total value at Disposal against realised Disposals Cost 01/01/17 proceeds cost gain
£'000 £'000 £'000 £'000 £'000
Craft Beer Pub Co Limited 92 92 92 - -
---------------------------------------------------- 92 92 92 - - ----------------------------------------------------
INVESTMENT MANAGER'S REPORT 'K' SHARE POOL
The 'K' Share pool closed its fundraising in September 2016 having raised £16.2 million. The process of investing the funds is well under way with £9.2 million invested in qualifying investments.
Investment activity During the last six months, three new qualifying investments have been made totalling £1.3 million as we continue to build the qualifying portfolio of the 'K' Share pool. The qualifying investments include a £900,000 investment into Ormsborough Limited. The company owns several pubs and restaurants across Yorkshire and this investment supported their continued expansion. £432,000 was invested in Pilgrim Trading Limited. The company acquired two sites to be converted in to children's nurseries, one of which has recently been opened in Twickenham and the other is in the planning stage.
A £10,000 investment was made in Exclusive Events Venues Limited to pay a deposit to secure a site in Chester that will be used exclusively as a wedding venue. Since the period end, following a successful planning application, a further investment has been made to acquire and develop the site.
Funds had previously been invested in two companies, Morava Limited and Brownfields Trading Limited to explore business opportunities in specific sectors. In the event both companies were unable to find suitable opportunities, the £2.1 million of funds invested were returned to the Share pool. There were no other disposals in the period.
One valuation adjustment was made in the period on Ormsborough Limited following good overall performance of the group which resulted in an uplift in valuation of £25,000.
Net asset value, results and dividend At 30 June 2017, the net asset value ('NAV') and total return for a holding of one 'K' Share was 98.4p which represents a net decrease of 0.6p (0.6%) over the period.
The loss on ordinary activities for the 'K' Shares, after taxation, for the period was £99,000, comprising a revenue loss of £123,000 and a capital profit of £24,000.
Outlook Over the remainder of the year, we will continue to pursue investment opportunities in order to add to the investment portfolio. We are satisfied with progress to date but there is a significant level of funds still to invest before the task of building the portfolio is complete.
Downing LLP
SUMMARY OF INVESTMENT MOVEMENTS 'K' SHARE POOL as at 30 June 2017
% of Unrealised gain/ portfolio Cost Valuation (loss) in period by value
£'000 £'000 £'000
VCT qualifying investments
Jito Trading Limited 1,500 1,500 - 9.7%
Yamuna Renewables Limited 1,300 1,300 - 8.4%
Rhodes Solutions Limited 1,250 1,250 - 8.1%
Vectis Alpha Limited 1,000 1,000 - 6.4%
Ormsborough Limited 900 925 25 6.0%
Ironhide Generation Limited 736 736 - 4.7%
Indigo Generation Limited 736 736 - 4.7%
Rockhopper Renewables Limited 591 591 - 3.8%
Pilgrim Trading Limited 432 432 - 2.8%
Zora Energy Renewables Limited 350 350 - 2.2%
SF Renewables (Solar) Limited 337 337 - 2.2%
Exclusive Events Venues Limited 10 10 - 0.1% --------------------------------------------
9,142 9,167 25 59.1% ------- ------------------
Cash at bank and in hand 6,339 40.9% ----------- -----------
Total 15,506 100% ----------- -----------
SUMMARY OF INVESTMENT MOVEMENTS 'K' SHARE POOL as at 30 June 2017
Additions £'000
Ormsborough Limited 900
Pilgrim Trading Limited 432
Exclusive Events Venues Limited 10
-------- Total 1,342 --------
Market Gain Total value at Disposal against realised Disposals Cost 01/01/17 proceeds cost gain
£'000 £'000 £'000 £'000 £'000
Morava Limited 1,100 1,100 1,099 (1) (1)
Brownfields Trading Limited 1,000 1,000 1,000 - -
--------------------------------------------------- 2,100 2,100 2,099 (1) (1) ---------------------------------------------------
UNAUDITED SUMMARISED BALANCE SHEET as at 30 June 2017 *
30 Jun 31 Dec 30 Jun 2017 2016 2016
'D' 'F' Shares 'G' Shares 'K' Shares Shares Total Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Unquoted 2,200 7,235 20,754 9,167 39,356 40,497 39,670 investments
Current assets
Debtors 3 185 269 17 474 484 312
Cash at bank and 266 218 158 6,339 6,981 5,307 8,461 in hand --------------------------------------------- --------- -------- 269 403 427 6,356 7,455 5,791 8,773
Creditors: amounts falling (78) (76) (281) (41) (476) (1,593) (486) due within one year --------------------------------------------- --------- --------
Net current 191 327 146 6,315 6,979 4,198 8,287 assets --------------------------------------------- --------- --------
Net assets 2,391 7,562 20,900 15,482 46,335 44,695 47,957 --------------------------------------------- --------- --------
Capital and reserves
Called up share 25 11 25 16 77 91 95 capital
Capital 124 - - - 124 106 106 redemption reserve
Special reserve 2,312 8,110 21,073 (2) 31,493 35,072 33,666
Share premium - - - 16,170 16,170 12,237 16,170 account
Revaluation (597) 211 721 25 360 (1,366) (115) reserve
Capital reserve - (1,033) (1,221) 1 (2,253) (2,254) (2,254) - realised
Revenue reserve 527 263 302 (728) 364 809 289 --------------------------------------------- --------- -------- Total equity shareholders' 2,391 7,562 20,900 15,482 46,335 44,695 47,957 funds --------------------------------------------- --------- --------
Basic and diluted net asset value per:
'C' Share - - -
'A' Share - - -
'D' Share 23.9p 34.8p 36.6p
'E' Share 0.1p 0.1p 0.1p
'F' Share 70.0p 70.0p 69.7p
'G' Share 82.5p 85.4p 83.5p
'K' Share 98.4p 99.7p 99.0p
* The comparative Balance Sheet at 30 June 2016 and 31 December 2016 includes the 'C' Share pool which has subsequently been cancelled.
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2017
Called Capital Share Capital up redemption Special Premium Revaluation reserve Revenue share capital Reserve Reserve Reserve reserve realised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2016 79 106 40,086 - (1,248) (2,252) 1,962 38,733
Total comprehensive income - - - - 908 217 (280) 845
Transactions with owners
Purchase of own shares - - - - - - (36) (36)
Issue of new shares 16 - - 16,170 - - - 16,186
Share issue costs - - - - - - (448) (448)
Transfer between reserves - - (6,420) - 225 7,104 (909) -
Dividends paid - - - - - (7,323) - (7,323) --------------------------------------------------------------------- At 31 December 2016 95 106 33,666 16,170 (115) (2,254) 289 47,957
Total comprehensive income - - - - 455 101 100 656
Transaction with owners
Purchase of own shares - - - - - - (25) (25)
Transfer between reserves - - (2,173) - 20 2,153 - -
Dividends paid - - - - - (2,253) - (2,253)
Cancellation of shares (18) 18 - - - - - --------------------------------------------------------------------- At 30 June 2017 77 124 31,493 16,170 360 (2,253) 364 46,335 ---------------------------------------------------------------------
INCOME STATEMENT for the six months ended 30 June 2017
Company Total
Year ended Six months ended Six months ended 31 Dec 30 Jun 2017 30 Jun 2016* 2016
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 719 34 753 634 - 634 1,046
Gains on investments
- realised - 67 67 - 266 266 177
- unrealised - 455 455 - 109 109 908 ------------------------ ------------------------ ----------- 719 556 1,275 634 375 1,009 1,085
Investment management fees (445) - (445) (409) - (409) (861)
Other expenses (150) - (150) (174) - (174) (308)
------------------------ ------------------------ ----------- Return on ordinary activities before taxation 124 556 680 51 375 426 962
Tax on total comprehensive income and ordinary activities (24) - (24) - - - (117)
------------------------ ------------------------ ----------- Return attributable to equity shareholders 100 556 656 51 375 426 845 ------------------------ ------------------------ -----------
Return per 'C' - - - (0.4p) - (0.4p) (0.4p) Share
Return per 'A' - - - - - - - Share
Return per 'D' (0.2p) 1.0p (0.8p) (0.4p) 0.5p 0.1p 1.7p Share
Return per 'E' - - - - - - - Share
Return per 'F' 0.8p 1.9p 2.7p 0.5p 0.2p 0.7p 2.8p Share
Return per 'G' 0.6p 0.9p 1.5p 0.4p 1.2p 1.6p 2.2p Share
Return per 'K' (1.2p) 0.2p (1.0p) (0.4p) - (0.4p) (1.4p) Share
* The comparative Income Statement as at 30 June 2016 and 31 December 2016 includes the 'C' Share Pool which has subsequently been cancelled.
INCOME STATEMENT for the six months ended 30 June 2017
'D' Shares Year Six months ended Six months ended ended 30 Jun 2017 30 Jun 2016 31 Dec 2016
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 9 34 43 (14) - (14) 90
Gains/(losses) on investments
- realised - 68 68 - 109 109 167
- unrealised - (4) (4) - (58) (58) 27 -------------------------- ----------------------- ---------- 9 98 107 (14) 51 37 284
Investment management fees (19) - (19) (27) - (27) (50)
Other expenses (15) - (15) (19) - (19) (34)
-------------------------- ----------------------- ---------- (Loss)/return on ordinary activities before taxation (25) 98 73 (60) 51 (9) 200
Tax on total comprehensive income and ordinary activities 5 - 5 18 - 18 (24)
-------------------------- ----------------------- ---------- Return/(loss) attributable to equity shareholders (20) 98 78 (42) 51 9 176 -------------------------- ----------------------- ----------
INCOME STATEMENT for the six months ended 30 June 2017
'F' Shares Year Six months ended Six months ended ended 30 Jun 2017 30 Jun 2016 31 Dec 2016
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 222 - 222 170 - 170 98
Gains/(losses) on investments
- realised - - - - - - 5
- unrealised - 205 205 - 18 18 410 --------------------------- ----------------------- ---------- 222 205 427 170 18 188 513
Investment management fees (68) - (68) (70) - (70) (138)
Other expenses (43) - (43) (40) - (40) (78)
--------------------------- ----------------------- ---------- Return on ordinary activities before taxation 111 205 316 60 18 78 297
Tax on total comprehensive income and ordinary activities (22) - (22) (9) - (9) 5
--------------------------- ----------------------- ---------- Return attributable to equity shareholders 89 205 294 51 18 69 302 --------------------------- ----------------------- ----------
INCOME STATEMENT for the six months ended 30 June 2017
'G' Shares Year ended Six months ended Six months ended 31 Dec 30 Jun 2017 30 Jun 2016 2016
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 451 - 451 413 - 413 780
Gains on investments
- realised - - - - - - 4
- unrealised - 229 229 - 306 306 472 ----------------------- ----------------------- ----------- 451 229 680 413 306 719 1,256
Investment management fees (207) - (207) (219) - (219) (436)
Other expenses (53) - (53) (70) - (70) (127)
----------------------- ----------------------- ----------- Return on ordinary activities before taxation 191 229 420 124 306 430 693
Tax on total comprehensive income and ordinary activities (37) - (37) (24) - (24) (143)
----------------------- ----------------------- ----------- Return attributable to equity shareholders 154 229 383 100 306 406 550 ----------------------- ----------------------- -----------
INCOME STATEMENT for the six months ended 30 June 2017
'K' Shares Year ended Six months ended Six months ended 31 Dec 30 Jun 2017 30 Jun 2016 2016
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 37 - 37 59 - 59 71
Gains on investments
- realised - (1) (1) - - - -
- unrealised - 25 25 - - - - --------------------- ----------------------- ----------- 37 24 61 59 - 59 71
Investment management fees (151) - (151) (84) - (84) (228)
Other expenses (39) - (39) (14) - (14) (36)
--------------------- ----------------------- ----------- Loss on ordinary activities before taxation (153) 24 (129) (39) - (39) (193)
Tax on total comprehensive income and ordinary activities 30 - 30 8 - 8 39
--------------------- ----------------------- ----------- Loss attributable to equity shareholders (123) 24 (99) (31) - (31) (154) --------------------- ----------------------- -----------
UNAUDITED CASH FLOW STATEMENT for the six months ended 30 June 2017
30 Jun 31 Dec 30 Jun 2017 2016 2016
'D' 'F' 'G' 'K' Shares Shares Shares Shares Total Total Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net cash inflow 1 2 (65) 191 (164) (36) 1,506 281 from operating activities
Cash flows from investing activities
Purchase of - (194) (436) (1,342) (1,972) (14,150) (17,080) investments
Sale of investments 245 370 92 2,099 2,806 5,394 9,860 --------------------------------------- ---------- --------- Net cash inflow/(outflow) from investing activities 245 176 (344) 757 834 (8,756) (7,220) --------------------------------------- ---------- ---------
Net cash inflow/(outflow) 247 111 (153) 593 798 (7,250) (6,939) before financing activities
before financing activities
Cash flows from financing activities
Proceeds from share - - - - - 12,249 16,186 issue
Share issue costs - - - - - - (294) (448)
Equity dividend paid (1,350) (270) (633) - (2,253) (6,419) (7,323)
Purchase of own - - (20) (5) (25) - (36) shares --------------------------------------- ---------- --------- Net cash (outflow)/inflow (1,350) (270) (653) (5) (2,278) 5,536 8,379 from financing activities --------------------------------------- ---------- --------- (Decrease)/increase in cash 2 (1,103) (159) (806) 588 (1,480) (1,714) 1,440 --------------------------------------- ---------- ---------
NOTES TO THE UNAUDITED CASH FLOW STATEMENT for the six months ended 30 June 2017
30 Jun 2017 30 Jun 31 Dec 2016 2016
'D' 'F' 'G' 'K' Shares Shares Shares Shares Total Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 Cash inflow from operating activities
(Loss)/return on ordinary activities (129) before taxation 73 316 420 680 426 962
Corporation tax - - - - - 12 (224)
(Gains)/losses on (24) investments (64) (205) (229) (522) (375) (1,085)
Decrease/(increase) in other (14) debtors 3 (160) 14 (157) 395 564
(Decrease)/increase in other 3 creditors (10) (16) (14) (37) 1,048 64 -------------------------------------- --------- -------- Net cash inflow from operating (164) activities 2 (65) 191 (36) 1,506 281 -------------------------------------- --------- --------
2 Analysis of net funds
Beginning of period 1,369 377 964 5,751 8,461 7,021 7,021
Net cash 588 (outflow)/inflow (1,103) (159) (806) (1,480) (1,714) 1,440 -------------------------------------- --------- -------- End of period 266 218 158 6,339 6,981 5,307 8,461 -------------------------------------- --------- --------
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. General information Downing Two VCT plc ('the Company') is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales.
2. Accounting policies - Basis of accounting The unaudited half-yearly results cover the six months to 30 June 2017 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 December 2016, which were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland ('FRS102').
3. All revenue and capital items in the Income Statement derive from continuing operations.
4. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
5. The comparative figures are in respect of the six month period ended 30 June 2016 and the year ended 31 December 2016 respectively.
6. Dividends
Year to Six months ended 31 Dec 2016 30 June 2017
Per share Revenue Capital Total Total
Paid in period pence £'000 £'000 £'000 £'000
'C' Shares
Special 'C' 2016 30.6p - - - 2,182
Special 'A' 2016 15.2p - - - 1,632 ----------------------- ------------ - - - 3,814 ----------------------- ------------
'D' Shares
Y/E Dec 2016 Final 13.5p - 1,350 1,350 -
Y/E Dec 2015 Final 17.0p - - - 1,700 ----------------------- ------------ - 1,350 1,350 1,700 ----------------------- ------------
'F' Shares
Y/E Dec 2016 Final 2.5p - 270 270 -
Y/E Dec 2015 Final 2.5p - - - 270
Y/E Dec 2015 Interim 2.5p - - - 270 ----------------------- ------------ - 270 270 540 ----------------------- ------------
'G' Shares
Y/E Dec 2016 Final 2.5p - 633 633 -
Y/E Dec 2015 Final 2.5p - - - 634
Y/E Dec 2015 Interim 2.5p - - - 635 ----------------------- ------------ - 633 633 1,269 ----------------------- ------------
No dividends have been paid or declared in respect of the 'E' Shares or 'K' Shares.
7. Basic and diluted return per share
Weighted average number of Revenue Capital shares in issue return/(loss) return
£'000 Per share £'000 Per share
'D' Shares 10,000,000 (20) (0.2p) 98 1.0p
'E' Shares 14,950,000 - - - -
'F' Shares 10,810,859 89 0.8p 205 1.9p
'G' Shares 25,318,897 154 0.6p 229 0.9p
'K' Shares 15,734,402 (123) (1.2p) 24 0.2p --------- --------- 100 556 --------- ---------
8. Net asset value per share
Shares in issue Net asset value
Per £'000 share
'D' Shares 10,000,000 2,376 23.9p
'E' Shares 14,950,000 15 0.1p
'F' Shares 10,810,859 7,562 70.0p
'G' Shares 25,328,571 20,900 82.5p
'K' Shares 15,734,429 15,482 98.4p ---------- 46,335 ----------
9. Reserves
Period ended Year ended 30 Jun 2017 31 Dec 2016
£'000 £'000
Capital redemption reserve 124 106
Special reserve 31,493 33,666
Share premium reserve 16,170 16,170
Revaluation reserve 360 (115)
Capital reserve- realised (2,253) (2,254)
Revenue reserve 364 289 ---------------- -------------- 46,258 47,862 ---------------- --------------
The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £1,381,000 which are included in the calculation of distributable reserves. Total distributable reserves are £28,223,000 (31 Dec 2016: £30,323,000).
10. The fair value of investments is determined using the detailed accounting policy set out in the statutory accounts for the year ended 31 December 2016.
The Company has categorised its financial instruments using the fair value hierarchy as follows:
Level a Reflects financial instruments quoted in an active market; Level b Reflects financial instruments that have prices that are observable either directly or indirectly; and Level c i) Reflects financial instruments that use valuation techniques that are based on observable market data. ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).
Period Year ended ended 31 Dec Level Level b Level c 30 June Level Level Level c 2016 a (ii) 2017 a b (ii)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Loan notes - - 9,914 9,914 - - 9,943 9,943
Unquoted - - 29,442 29,442 - - 29,727 29,727 equity ------------------------------- ---------------------------------- - - 39,356 39,356 - - 39,670 39,670 ------------------------------- ----------------------------------
11. 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 December 2016 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. 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 as well as in accordance with FRS 104 Interim Financial Reporting 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.
13. 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 reappointed Philip Hare and Associates 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. 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. 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.
15. 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.
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq 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 TWO VCT plc via GlobeNewswire
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