Downing FOUR VCT plc LEI: 21380035MV1VRYEXPR95 Half-Yearly Report for the six months ended 30 September 2017
FINANCIAL HIGHLIGHTS 30 Sept 31 March 30 Sept 2017 2017 2016
pence pence pence
DSO B Share pool
Net asset value per DSO B Share 4.444 20.7 20.0
Net asset value per DSO C Share 10.939 0.1 0.1
Cumulative dividends per DSO B Share 91.500 91.5 91.5
Estimated performance incentive * (1) - (5.5) (5.3) --------- ---------- -------- Total return per DSO B Share and DSO C Share 106.883 106.8 106.3 --------- ---------- --------
DSO D Share pool
Net asset value per DSO D Share 78.5 76.1 75.5
Cumulative dividends per DSO D Share 27.5 25.0 22.5
Estimated performance incentive * (4.2) - - --------- ---------- -------- Total return per DSO D Share 101.8 101.1 98.0 --------- ---------- --------
DP67 Share pool
Net asset value per DP67 Share 68.7 66.1 63.9
Cumulative dividends per DP67 Share 29.8 27.8 25.8 --------- ---------- -------- Total return per DP67 Share 98.5 93.9 89.7 --------- ---------- --------
DP2011 General Share pool
Net asset value per DP2011 Gen Ord Share 15.0 15.0 25.0
Net asset value per DP2011 Gen A Share 34.4 31.2 30.3
Cumulative dividends per DP2011 Gen Ord Share 55.0 55.0 45.0 --------- ---------- -------- Total return per DP2011 Gen Ord Share and Gen A 104.4* 101.2 100.3 Share --------- ---------- -------- Estimated Performance incentive (already included 5.2 above) *
DP2011 Structured Share pool
Net asset value per DP2011 Struc Ord Share 5.0 4.8 14.9
Net asset value per DP2011 Struc A Share 34.5 31.9 31.8
Cumulative dividends per DP2011 Struc Share 65.0 65.0 55.0 --------- ---------- -------- Total return per DP2011 Struc Ord Share and Struc A 104.5* 101.7 101.7 Share --------- ---------- -------- Estimated Performance incentive (already included 5.2 above) *
DP2011 Low Carbon Share pool
Net asset value per DP2011 Low Carbon Share 39.1 43.0 41.7
Cumulative dividends per DP2011 Low Carbon Share 73.9 73.9 73.9
Estimated performance incentive * (5.5) (2.5) (6.8) --------- ---------- -------- Total return per DP2011 Low Carbon Share 107.5 114.4 108.8 --------- ---------- --------
Generalist Share pool --------- ---------- -------- Net asset value and Total return per Generalist 98.7 99.9 N/A Share --------- ---------- --------
Healthcare Share pool --------- ---------- -------- Net asset value and Total return per Healthcare 98.6 99.7 N/A Share --------- ---------- --------
*A full explanation of the performance incentive arrangements for each share pool will be shown in the half-yearly report. (1)As at 30 September 2017, the performance incentive has been provided for by virtue of the allocation of proceeds to the DSO C Share class. The estimated performance incentive is equivalent to 5.5p per DSO B Share.
CHAIRMAN'S STATEMENT
Introduction I am pleased to present the Company's Half Yearly Report for the six months ended 30 September 2017. It has been a productive start to the year for your Company with good progress made on share pools working towards exits and the completion of a successful fundraising for the Generalist and Healthcare Share pools.
Share pools The Company now has eight active share pools, each with a different profile. This report includes sections covering the individual share pools and I will give a brief overview of each.
DSO B Share Pool The combined NAV of one DSO B Share and one DSO C Share stood at 15.383p at 30 September 2017, an increase of 0.1p from 31 March 2017. Total Return now stands at 106.883p per share, compared to the cost for Shareholders who invested in the B Share offer, net of income tax relief, of 70.0p. A performance fee equivalent to 5.5p per B Share will be paid to members of the management team when the task of returning funds to Shareholders is complete. This performance incentive fee has already been deducted in arriving at the Total Return of 106.883p.
Since the period end, I am pleased to report that the final investments have been realised at values equal to the carrying value at 30 September 2017. This has allowed the Board to declare final dividends as follows:
DSO B Shares 4.444p per share
DSO C Shares 10.939p per share
Both dividends will be paid on 26 January 2018 to Shareholders on the register as at 5 January 2018.
The payment of these final distributions will bring this Share Pool to a close and in due course, the share classes will be cancelled. These distributions will bring Total Return to Shareholders who invested at the launch of the share pools in 2010 to 106.883p for a combined holding of one DSO B Share and one DSO C Share compared to the original cost of 70p net of tax relief. The Board considers this to be a satisfactory outcome for investors.
DSO D Share Pool The DSO D Share NAV stood at 78.5p at 30 September 2017, an increase of 4.9p per share or 6.4% over the period, after adjusting for the dividends paid in the period of 2.5p. Total Return now stands at 101.8p per share, compared to the cost for Shareholders who invested in the D Share offer, net of income tax relief, of 70.0p. Based on the current performance it is estimated that a performance fee equivalent to 4.2p per D Share may become payable to the Manager. This has been reflected in the Total Return figure shown above.
Following a number of disposals from the D Share Pool, the first major distribution of 25.0p per DSO D Share was paid on 2 November 2017. Plans are progressing in respect of realising the remaining investments, although Shareholders should note that it is expected that it will take some time to complete this process in full.
DP67 Share Pool As at 30 September 2017, the NAV of the DP67 Shares stood at 68.7p per share. This represents an increase of 4.6p (7.0%), after adjusting for dividends paid in the period of 2.0p. Total Return for DP67 shareholders now stands at 98.5p per share.
The fifth anniversary of the last allotment of DP67 Shares occurs early next year and so the process of preparing to return funds to Shareholders is now underway. We anticipate that the first significant distribution will be paid early in 2018.
DP2011 General Share Pool The DP2011 General Share Pool is now in the process of returning funds to Shareholders. After providing for an estimated performance incentive of 5.2p per DP2011 General Ordinary Share, as at 30 September 2017, the NAV of a combined holding of one DP2011 General Ordinary Share and one DP2011 General A Share stood at 49.4p per share. This represents an increase of 3.2p or 6.9% after adjusting for dividends paid during the period, as well as the performance incentive estimate.
Total Return for DP2011 General Shareholders now stands at 104.4p compared to the cost for Shareholders who invested in the original offer, net of income tax relief, of 70.0p.
On 2 November 2017 dividends of 15.0p per DP2011 General Ordinary Share and 15.0p per DP2011 General A Share were paid, bringing total dividends paid to Shareholders to 85.0p for a combined holding. Further distributions will be made to Shareholders as the remaining investments are realised. DP2011 Structured Share Pool The DP2011 General pool is at a similar stage to the DP2011 General Shares. After providing for an estimated performance incentive of 5.2p per DP2011 Structured Ordinary Share, as at 30 September 2017, the NAV of a combined holding of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share stood at 39.5p per share. This represents an increase of 2.8p or 7.6% after adjusting for dividends paid during the period, as well as the performance incentive estimate.
Total Return for DP2011 Structured Shareholders now stands at 104.5p compared to the cost for Shareholders who invested in the original offer, net of income tax relief, of 70.0p.
On 2 November 2017 dividends of 5.0p per DP2011 Structured Ordinary Share and 20.0p per DP2011 Structured A Share were paid, bringing total dividends paid to Shareholders to 90.0p for a combined holding. Further distributions will be made to Shareholders as the remaining investments are realised.
DP2011 Low Carbon Share Pool The NAV of the DP2011 Low Carbon Shares as at 30 September 2017 was 39.1p per share, a decrease of 3.9p (9.0%) for the period as a result of reductions in investment values. Total Return for DP2011 Low Carbon Shareholders now stands at 107.5p compared to the equivalent cost for Shareholders who invested in the original offer, net of income tax relief, of 70.0p. The Total Return figure reflects the estimated performance incentive fee of 5.5p, which is expected to become payable to the manager, Downing LLP, and the adviser, Low Carbon Investors.
As with the other DP2011 share pools, the process of returning funds to investors commenced in 2016. In respect of the Low Carbon pool, the Manager is working on transactions to realise the remaining investments and we believe that a final distribution should be made to Shareholders in early 2018.
Generalist Share pool The Generalist Share was launched in late 2016. As at 30 September 2017, NAV and Total Return stood at 98.7p, a decrease of 1.2p per share or 1.2% over the period. This fall has arisen as the majority of fundraising proceeds are yet to be invested, meaning that the portfolio is generating little income to offset against running costs.
As detailed in the Investment Manager's Report, the process of building the Generalist portfolio is underway, with £2.0m having been invested in VCT Qualifying investments during the six months to 30 September 2017. The Manager has a good pipeline of investment opportunities from which the portfolio will be built over the next 18 months.
Healthcare Share pool The Healthcare Share pool was also launched in late 2016. As at 30 September 2017, the Healthcare Share NAV and Total Return stood at 98.6p at 30 September 2017. Similarly, the fall is as a result of the pool being in an early stage, having no income to offset against running costs.
There is strong competition for deals in the healthcare sector, which tends to inflate the valuations of investee companies. However, the manager has been working to develop a pipeline of opportunities, in order to grow the portfolio.
Dividends In line with the dividend policy on the DSO D and DP67 Share Pools, interim dividends were paid as follows:
DSO D Shares 2.5p
DP67 Shares 2.5p
The interim dividends were paid on 29 September 2017 to Shareholders on the register at 1 September 2017.
As mentioned above, a number of other dividends in respect of other Share classes were paid on 2 November and some have been declared for payment on 26 January 2018.
No dividends have been declared in the Generalist and Healthcare Share pools as they are still in the early stage of building their initial portfolios.
Share buybacks The Company has a policy of buying in any Generalist and Healthcare Shares that become available in the market and will usually expect to do so at a price approximately equal to the latest NAV of the shares, subject to regulatory restrictions and other factors such as availability of liquid funds.
In respect of the other share pools that are in the process of returning, or preparing to commence returning, funds to Shareholders, the Board does not intend to buy in any of those shares as it is envisaged that the exit for these Shareholders will be facilitated by way of distributions
No shares were purchased during the period ended 30 September 2017.
Fundraising The Generalist Share offer launched in December 2016 and closed having reached full subscription of £30 million in August 2017. The Healthcare offer closed on 30 November 2017, having raised a total of £12.32m.
A small top-up offer for the Generalist Share class was subsequently launched under which regular monthly subscriptions have been allotted.
The Boards congratulates Downing, the promoter, on the successful fundraising, which provides the Company with a substantial asset base in 'evergreen' share classes for the future.
VCT regulations The Government's recent Budget outlined further changes to the VCT regulations resulting from the 'Patient Capital Review', which has sought to strengthen the availability of capital for innovative growth businesses in the UK. The Board welcomes the Government's ongoing support of Venture Capital Trusts and believe that the new regulations will ensure that VCTs continue provide well targeted capital in the future.
The most significant amendment to the regulations impacting the Company is the requirement for VCTs to hold at least 80% of their investments in qualifying companies, an increase on the 70% previously in place. For the Company, this increase will be effective from 1 April 2020.
Although final details of all the changes are not yet available the Board and Manager consider that the new regulations will not have a major impact on the Company's investment strategy or risk profile, although the we will continue to monitor developments as further guidance is published.
Outlook A significant proportion of the Manager's resources over the remainder of the year will be focused on realising investments from the share pools that are now in the process of returning, or starting to return, funds to Shareholders. We also expect the remainder of the year to be busy in terms of new investment activity in both the Generalist and Healthcare Share Pools as their initial portfolios are built.
Generally, the Board is satisfied with the performance of the portfolio companies, which the Manager will continue to closely monitor.
I look forward to reporting developments in my statement with the Annual Report to 31 March 2018 as the Company steadily transitions from being a planned exit vehicle to an evergreen VCT.
Lord Flight Chairman
INVESTMENT MANAGER'S REPORT DSO B SHARE POOL
Portfolio Activity The DSO B Share pool continued to make good progress during the six month period, with one partial and two full realisations having taken place, generating total proceeds of £1.4m.
Portfolio valuation The remaining investments have been revalued as at 30 September 2017, resulting in an overall uplift of £76,000. This increase predominantly relates to deferred consideration due from Snow Hill Developments LLP and London City Shopping Centre Limited, as a result of the DSO B Share pool having an historic interest in these companies.
Net asset value and results The NAV at 30 September was 4.444p per DSO B Share and 10.939p per DSO C Share, for a combined holding of one DSO B Share and one DSO C Share. Total Return (combined NAV plus cumulative dividends) stood at 106.883p for a combined holding, after taking into account the estimated performance incentive fee of 5.5p.
The profit on ordinary activities after taxation for the period was £9,000, comprising a revenue loss of £86,000 and a capital return of £95,000.
Outlook Following 30 September 2017, the remaining investments in the DSO B Share pool were transferred to the Generalist Share pool at a price equal to their carrying value as at 30 September 2017. This transfer has allowed the manager to progress with returning funds to shareholders, whilst also allowing the Generalist Share pool to add further investments to its growing portfolio.
The final distributions to Shareholders, of 4.444p per B share and 10.939p per C share, will be paid on 26 January 2017, to Shareholders on the register as at 5 January 2018.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DSO B SHARE POOL as at 30 September 2017 Unrealised % of gain/(loss) portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
Fenkle Street LLP* 154 361 (1) 8.5%
Snow Hill Developments LLP* - 86 86 2.0%
Mosaic Spa & Health Clubs Limited 282 37 (39) 0.9%
London City Shopping Centre Limited* - 30 30 0.7%
Future Biogas (Reepham Road) Limited* 632 - - 0.0%
Quadrate Spa Limited 276 - - 0.0% -------------------------------------- 1,344 514 76 12.1% ------- -------------
Cash at bank and in hand 3,717 87.9%
----------- ---------- Total investments 4,231 100.0% ----------- ---------- *non-qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS DSO B SHARE POOL for the period ended 30 September 2017
Total gain/(loss) Realised gain Valuation at Disposal against in period Disposals Cost 31/03/2017 proceeds cost
£000 £000 £000 £000 £000
Avon Solar Energy Limited 420 515 528 108 13
Westcountry Solar Solutions Limited 500 434 445 (55) 11
Mosaic Spa & Health Clubs Limited 480 411 385 (95) (26)
--------------------------------------------------------------- Total 1,400 1,360 1,358 (42) (2) --------------------------------------------------------------- INVESTMENT MANAGER'S REPORT DSO D SHARE POOL
Venture Capital portfolio One partial and four full realisations took place during the period, generating proceeds of £1.5m. As at 30 September 2017, the D Share Pool had a portfolio of ten investments with a value of £3.6m.
Structured Product portfolio The one remaining Structured Product investment was sold during April, generating proceeds of £608,000, resulting in a gain over cost of £106,000.
Portfolio valuation Two small uplifts in value were recognised in the period, for Merlin Renewables Limited and Fresh Green Power Limited, totalling £106,000.
Results and net asset value The net asset value ('NAV') per DSO D Share at 30 September 2017 stood at 78.5p, an increase of 4.9p or 6.4% over the period, after adjusting for dividends paid. Total Return stands at 101.8p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share.
The profit on ordinary activities after taxation for the period was £384,000, comprising a revenue gain of £45,000 and a capital gain of £339,000.
Dividends In light of the recent realisations from the D Share Pool, the first return of capital, being 25.0p per DSO D Share, was paid on 2 November 2017 to shareholders on the register as at 13 October 2017.
This is in addition to the interim dividend of 2.5p, which was paid in line with the annual dividend policy, on 29 September 2017 to shareholders on the register at 1 September 2017.
Outlook Plans are progressing in respect of realising the remaining investments, however due to the number of investments held this process may take some time to complete.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DSO D SHARE POOL as at 30 September 2017
Unrealised % of gain portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
Goonhilly Earth Station Limited 715 715 - 11.7%
Merlin Renewables Limited 500 642 67 10.5%
Nightjar Sustainable Power Limited 485 600 - 9.8%
Lambridge Solar Limited 500 595 - 9.7%
Apex Energy Limited 400 400 - 6.5%
Pearce and Saunders Limited* 300 300 - 4.9%
Fresh Green Power Limited 200 239 39 3.9%
Green Energy Production UK Limited 100 100 - 1.6%
Fubar Stirling Limited 135 25 - 0.4%
Pearce and Saunders DevCo Limited** 20 20 - 0.3% ------------------------------------- 3,355 3,636 106 59.3% ------- ------------
Cash at bank and in hand 2,479 40.7%
----------- ---------- Total investments 6,115 100.0% ----------- ---------- *partially qualifying **non-qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS DSO D SHARE POOL for the period ended 30 September 2017 Total gain/(loss) Valuation at Disposal against Realised Disposals Cost 31/03/2017 proceeds cost gain in period
£000 £000 £000 £000 £000
Venture Capital investments
Vulcan Renewables 653 779 903 250 124 Limited
City Falkirk 562 236 324 (238) 88 Limited
Fubar Stirling 223 201 209 (14) 8 Limited
Cheers Dumbarton 64 22 37 (27) 15
Lochrise Limited 17 - 10 (7) 10 -------------------------------------------------------------- 1,519 1,238 1,483 (36) 245
Structured Product investments
HSBC 5.4% Dual 501 598 608 107 10 Index Synthetic Zero -------------------------------------------------------------- 2,020 1,836 2,091 71 255 --------------------------------------------------------------
INVESTMENT MANAGER'S REPORT DP67 SHARE POOL
Portfolio activity One partial and one full realisation occurred during the period. As at 30 September 2017, the DP67 Share Pool had a portfolio of 7 investments with a value of £4.9m.
Results and net asset value The net asset value ('NAV') per DSO DP67 Share at 30 September 2017 stood at 68.7p, an increase of 4.6p (7.0%) over the period, after adjusting for dividends paid. Total Return stands at 98.5p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share.
The profit on ordinary activities after taxation for the period was £514,000, comprising a revenue gain of £57,000 and a capital gain of £457,000.
Portfolio valuation The DP67 portfolio continues to perform well, with two uplifts during the period, totalling £244,000, and all other investment valuations remaining unchanged from the year end.
Dividends The fifth anniversary of the close of the offer will fall during January 2018 and the first return of capital is expected to be announced shortly thereafter.
Outlook The focus for the Share pool is on realisations and monitoring performance in order to maximise growth opportunities. Several companies are currently in exit processes and we hope to see further progress in this regard over the next six months.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DP67 SHARE POOL as at 30 September 2017
Unrealised % of gain portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
Cadbury House Holdings Limited 1,409 1,613 - 22.5%
Snow Hill Developments LLP* 809 1,203 143 16.8%
Fenkle Street LLP* 405 678 - 9.5%
Oak Grove Renewables Limited 820 451 - 6.3%
Gatewales Limited* 344 446 101 6.2%
Yamuna Energy Limited 400 400 - 5.6%
London City Shopping Centre Limited* 99 99 - 1.4% ------------------------------------- 4,286 4,890 244 68.3% ------- ------------
Cash at bank and in hand 2,264 31.7%
----------- ---------- Total investments 7,154 100.0% ----------- ---------- *non-qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS DP67 SHARE POOL for the period ended 30 September 2017
Total gain Valuation at Disposal against Realised Disposals Cost 31/03/2017 proceeds cost gain in period
£000 £000 £000 £000 £000
Brownfields Trading 300 300 300 - - Limited
Gatewales Limited 65 102 340 275 238 ----------------------------------------------------------- 365 402 640 275 238 -----------------------------------------------------------
INVESTMENT MANAGER'S REPORT DP2011 GENERAL SHARE POOL
Portfolio activity During the period, six full exits and two partial disposals completed, generating proceeds of £5.1m. The largest of these, Vulcan Renewables Limited, generated proceeds of £2.5m and a profit over cost of £333,000. As at 30 September 2017, the DP2011 General Share Pool had a portfolio of ten investments with a value of £2.9m.
Net asset value and results The combined net asset value ('NAV') of one DP2011 General Ordinary Share and one DP2011 General A Share at 30 September 2017 stood at 49.4p, a decrease of 3.2p or 6.9% over the period. Total Return stands at 104.4p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per share.
The profit on ordinary activities after taxation for the period was £593,000, comprising a revenue profit of £56,000 and a capital gain of £537,000.
Portfolio valuation One small uplift and one small reduction in value were recognised in the period, generating a net uplift of £88,000. The valuations of the remaining investments are unchanged from the year end.
Dividends The Share pool started the task of realising its investments earlier this year. As a result, a further return of capital, being 15.0p per DP2011 General Ordinary Share and 15.0p per DP2011 General A Share was paid on 2 November 2017 to shareholders on the register as at 13 October 2017. Further distributions will be made to shareholders as the remaining investments are realised.
Outlook The focus for the pool is now on realising investments, in order to return funds to Shareholders. Shareholders will be provided with a further update in the annual report to 31 March 2018, which will be published in June 2018.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DP2011 GENERAL SHARE POOL as at 30 September 2017
Unrealised % of gain/(loss) portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
Snow Hill Developments LLP* 750 1,095 113 12.8%
Wickham Solar Limited 550 600 - 7.0%
Odysian Holdings Limited 873 591 - 6.9%
Oak Grove Renewables Limited 400 233 - 2.7%
Mosaic Spa and Health Clubs Limited 212 101 (25) 1.2%
London City Shopping Centre Limited* 88 88 - 1.0%
Clean Electricity Limited* 70 70 - 0.8%
UK Renewable Power Limited* 55 55 - 0.6%
Fubar Stirling Limited 142 29 - 0.3%
21(st) Century Energy Limited* 22 22 - 0.3% -------------------------------------- 3,162 2,884 88 33.6% ------- -------------
Cash at bank and in hand 5,675 66.4%
----------- ---------- Total investments 8,559 100.0% ----------- ---------- *non-qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS DP2011 GENERAL SHARE POOL for the period ended 30 September 2017 Realised Total gain/(loss) gain Disposals Valuation at Disposal against in Cost 31/03/2017 proceeds cost period
£000 £000 £000 £000 £000
Vulcan Renewables 2,199 2,199 2,532 333 333 Limited
Avon Solar Energy 505 618 633 128 15 Limited
Mosaic Spa & Health 935 699 699 (236) - Clubs Limited
Westcountry Solar 600 521 535 (65) 14 Solutions Limited
City Falkirk Limited 330 283 389 59 106
Fubar Stirling 268 241 251 (17) 10 Limited
Cheers Dumbarton 27 27 22 (5) (5) Limited
Lochrise Limited - - 12 12 12
----------------------------------------------------------- 4,864 4,588 5,073 209 485 -----------------------------------------------------------
INVESTMENT MANAGER'S REPORT DP2011 STRUCTURED SHARE POOL
Portfolio activity Six full and two partial realisations occurred during the period, generating proceeds of £3.1m. The largest of these, Vulcan Renewables Limited, generated proceeds of £1.5m and a profit over cost of £225,000 As at 30 September 2017, the DP2011 Structure Share Pool had a portfolio of five investments with a value of £1.4m.
Net asset value and results The combined net asset value ('NAV') of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share at 30 September 2017 stood at 39.5p, a decrease of 2.8p or 7.6% over the period. Total Return stands at 104.5p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per share. The profit on ordinary activities after taxation for the period was £332,000 comprising a revenue profit of £43,000 and a capital gain of £289,000.
Portfolio valuation One small reduction in value of £16,000 was recognised in the period. The valuations of the remaining investments are unchanged from the year end.
Dividends The Share pool started the task of realising its investments earlier this year. As a result, a further return of capital, being 5.0p per DP2011 Structured Ordinary Share and 20.0p per DP2011 Structured A Share was paid on 2 November 2017 to shareholders on the register as at 13 October 2017. Further distributions will be made to shareholders as the remaining investments are realised.
Outlook The focus for the pool is now on realising investments, in order to return funds to Shareholders. Shareholders will be provided with a further update in the annual report to 31 March 2018, which will be published in June 2018.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DP2011 STRUCTURED SHARE POOL as at 30 September 2017
Unrealised % of loss portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
Wickham Solar Limited 550 600 - 12.5%
Odysian (Holdings) Limited 582 394 - 8.2%
Oak Grove Renewables Limited 545 317 - 6.6%
Mosaic Spa and Health Clubs Limited 142 67 (16) 1.4%
Fubar Stirling Limited 95 20 - 0.4% ------------------------------------- 1,914 1,398 (16) 29.1% ------- ------------
Cash at bank and in hand 3,390 70.9%
----------- ---------- Total investments 4,788 100.0% ----------- ----------
SUMMARY OF INVESTMENT MOVEMENTS DP2011 STRUCTURED SHARE POOL for the period ended 30 September 2017 Total gain/(loss) Realised Valuation at Disposal against gain/(loss) in Disposals Cost 31/03/2017 proceeds cost period
£000 £000 £000 £000 £000
Vulcan Renewables 1,305 1,305 1,530 225 225 Limited
Avon Solar Energy 336 412 422 86 10 Limited
Westcountry Solar 400 347 356 (44) 9 Solutions Limited
Mosaic Spa & 543 386 386 (157) - Health Clubs Limited
City Falkirk 220 189 259 39 70 Limited
Fubar Stirling 178 161 167 (11) 6 Limited
Cheers Dumbarton 18 18 15 (3) (3) Limited
Lochrise Limited - - 8 8 8 --------------------------------------------------------------- 3,000 2,818 3,143 143 325 ---------------------------------------------------------------
INVESTMENT MANAGER'S REPORT DP2011 LOW CARBON SHARE POOL Portfolio activity As at 30 September 2017, the DP2011 Low Carbon Share Pool had a portfolio of four investments with a value of £2.9m.
Net asset value and results The net asset value ('NAV') per DP2011 Low Carbon Ordinary Share at 30 September 2017 stood at 39.1p, a decrease of 3.9p over the period. Total Return stands at 107.5p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per share. The Total Return figure is stated net of the estimated performance fee.
We have reviewed and recalculated the estimated performance fee that we expect to become payable to Low Carbon Investors Limited and Downing LLP should the remaining investments be exited at their current valuations. This now stands at 5.5p per share. (We identified a computation error in the calculation at the previous year end when the estimate was stated as 2.5p per share.)
The loss on ordinary activities after taxation for the period was £303,000 comprising a revenue profit of £82,000 and a capital loss of £385,000.
Portfolio valuation One uplift and three reductions in value were recognised in the period, generating a net value reduction of £303,000. The valuation changes have been processed in order to bring the portfolio valuations in line with the proceeds the Manager expects to realise on exit.
Dividends As with the other DP2011 share pools, the process of returning funds to investors commenced in 2016. In respect of the Low Carbon pool, the Manager is working on transactions to realise the remaining investments and we believe that a final distribution should be made to Shareholders in early 2018.
Outlook The focus for the pool is now on realising investments, in order to return funds to Shareholders. We anticipate that there will be an update for Shareholders early in the new year, once the remaining investments have been realised.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO DP2011 LOW CARBON SHARE POOL as at 30 September 2017
Unrealised % of gain/(loss) portfolio Cost Valuation in period by value
£000 £000 £000
Venture Capital investments
21(st) Century Energy Limited 708 762 54 27.8%
UK Renewable Power Limited 780 686 (94) 25.0%
Clean Electricity Limited 710 686 (23) 25.0%
Progressive Power Generation Limited 800 560 (240) 20.4% -------------------------------------- Total 2,998 2,694 (303) 98.2% ------- -------------
Cash at bank and in hand 45 1.8%
----------- ---------- Total investments 2,739 100.0% ----------- ---------- There were no disposals or additions during the period.
INVESTMENT MANAGER'S REPORT - GENERALIST SHARE POOL
Portfolio activity Seven new and two follow on investments totalling £13.1m were made during the year, as we start to build the portfolio of the Generalist Share pool.
VCT Qualifying Investments A further £250,000 was invested in Xupes Limited, an online retailer of pre- owned luxury goods including designer watches, handbags, jewellery and antiques. The management team has built a profitable business with a strong brand selling high-quality products, centred on exceptional customer service.
£250,000 was invested in Empiribox Limited, a company which provides equipment, lesson plans and CPD-accredited support for teachers to deliver engaging and practical science lessons to UK primary school children. The company has seen strong growth and now supplies to more than 20,000 pupils across 150 schools in the UK.
£394,000 was invested in BridgeU, a company founded in 2014 to provide schools with a smart, modern university and careers guidance service. The platform provides intelligent university and course matching tailored to each student, helps teachers to support and manage the creation of compelling applications and provides senior leaders in schools with powerful analytics and reporting tools.
£500,000 was invested in Destiny Pharma PLC, an innovative biotech company developing treatments for antibiotic-resistant bacteria (also known as superbugs). The investment was made in collaboration with BioScience Managers.
£567,000 was invested in Volo Commerce Limited, a leading provider of multichannel e-commerce technology. The company enables brands and retailers to efficiently and rapidly grow their e-commerce businesses by automating the sales process and providing valuable analytics to improve profitability and growth.
Non-Qualifying Investments In order to utilise fundraising proceeds in the short term, £4.1m was invested in Downing Strategic Micro-Cap Investment Trust PLC and a follow on investment of £3m was made in the MI Downing UK Micro-cap Growth Fund. Both companies hold concentrated portfolios of UK listed companies, predominantly with market capitalisations of below £150m at the time of investment.
Further to this, £1.5m was invested in the MI Downing Monthly Income Fund, which targets a premium yield to the UK equity income sector.
£1.8m was also invested in the MI Downing Diversified Global Managers Fund, which invests in a global portfolio of specialised funds to provide access to a variety of asset classes and fund strategies.
Net asset value and results At 30 September 2017, the NAV of a Generalist share stood at 98.7p, a decrease of 1.2p for the period, resulting from the initial 'cash drag' of holding uninvested funds.
The loss on ordinary activities after taxation for the period was £340,000 comprising a revenue loss of £181,000 and a capital loss of £159,000.
Portfolio valuation The carrying values of the liquidity investments have been adjusted to reflect their quoted prices as at 30 September 2017. With the exception of Destiny Pharma plc, which has been revalued to the prevailing bid price as at 30 September 2017, the venture capital portfolio continues to be held at cost, due to these investments being in an early stage.
Outlook The task of building the Generalist Share portfolio is underway and we will continue to seek investment opportunities as we develop the investment portfolio.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO GENERALIST SHARE POOL as at 30 September 2017
The following investments were held at 30 September 2017: Unrealised (loss)/gain % of Cost Valuation in period portfolio
£'000 £'000 £'000
Venture Capital investments
Volo Commerce Limited 567 567 - 1.9%
Destiny Pharma plc** 500 494 (6) 1.6%
Xupes Limited 450 450 - 1.5%
BridgeU Corporation 394 394 - 1.3%
Empiribox Limited 250 250 - 0.8% --------------------------------------- 2,161 2,155 (6) 7.1%
Liquidity investments
Downing Strategic Micro-Cap Investment 4,100 4,059 (41) 13.4% Trust plc*
MI Downing UK Micro-Cap Growth Fund* 3,025 3,011 (14) 9.9%
MI Downing Diversified Global Managers 1,800 1,779 (21) 5.9% Fund*
MI Downing Monthly Income Fund* 1,500 1,558 58 5.1% --------------------------------------- 10,425 10,407 (18) 34.3%
--------------------------------------- Total 12,586 12,562 (24) 41.4% -------- -------------
Cash at bank and in hand 17,732 58.6% ----------- ----------
Total investments 30,294 100.0% ----------- ---------- *non-qualifying investment **listed and traded on the Main Market of the London Stock Exchange All VCT Qualifying Investments are incorporated in England and Wales.
INVESTMENT MANAGER'S REPORT - HEALTHCARE SHARE POOL
Portfolio activity
One follow on and four new investments totalling £2.7m were made during the period, as we start to build the portfolio of the Healthcare Share pool.
VCT Qualifying Investments £750,000 was invested in Destiny Pharma PLC, an innovative biotech company developing treatments for antibiotic-resistant bacteria (also known as superbugs). The investment was made in collaboration with BioScience Managers, a global leader in healthcare and life sciences and investment partner to the Healthcare Share Class.
Non-Qualifying Investments In order to utilise fundraising proceeds in the short term, £700,000 was invested in Downing Strategic Micro-Cap Investment Trust PLC and a further £800,000 was invested in the MI Downing UK Micro-Cap Growth Fund. Both companies hold concentrated portfolios of UK listed companies, predominantly with market capitalisations of below £150m at the time of investment.
Further to this, £600,000 was invested in the MI Downing Monthly Income Fund, which targets a premium yield to the UK equity income sector.
£500,000 was also invested in the MI Downing Diversified Global Managers Fund, which invests in a global portfolio of specialised funds to provide access to a variety of asset classes and fund strategies.
Net asset value and results At 30 September 2017, the NAV of a Healthcare share stood at 98.6p, a decrease of 1.1p for the period, resulting from the initial 'cash drag' of holding uninvested funds.
The loss on ordinary activities after taxation for the period was £100,000, comprising a revenue loss of £49,000 and a capital loss of £51,000.
Portfolio valuation The carrying values of all investments have been adjusted to reflect their quoted prices as at 30 September 2017.
Outlook The task of building the Healthcare Share portfolio is underway and we will continue to seek investment opportunities as we develop the investment portfolio.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO HEALTHCARE SHARE POOL as at 30 September 2017 The following investments were held at 30 September 2017: Unrealised (loss)/gain % of Cost Valuation in period portfolio
£'000 £'000 £'000
Venture Capital investments
Destiny Pharma plc** 750 740 (10) 8.2% ---------------------------------------- 750 740 (10) 8.2%
Liquidity investments
MI Downing UK Micro-Cap Growth Fund* 825 816 (9) 9.1%
Downing Strategic Micro-Cap Investment 700 693 (7) 7.7% Trust plc*
MI Downing Diversified Global Managers 600 593 19 6.6% Fund*
MI Downing Monthly Income Fund* 500 519 (7) 5.8% ---------------------------------------- 2,625 2,621 (4) 29.2%
---------------------------------------- Total 3,375 3,361 (14) 37.4% -------- --------------
Cash at bank and in hand 5,629 62.6% ----------- ----------
Total investments 8,990 100.0% ----------- ---------- * non-qualifying investment **listed and traded on the Main Market of the London Stock Exchange All VCT Qualifying Investments are incorporated in England and Wales.
UNAUDITED INCOME STATEMENT for the six months ended 30 September 2017
Year Six months ended Six months ended ended 30 Sep 2017 30 Sep 2016 31 Mar 2017
Revenue Capital Total Revenue Capital Total Total
Company Total £000 £000 £000 £000 £000 £000 £000
Income 545 - 545 978 - 978 1,999
Net gains on investments - 1,440 1,440 - 1,165 1,165 1,980 ------------------------ ----------------------- ------- 545 1,440 1,985 978 1,165 2,143 3,979
Investment management (656) fees (317) (317) (634) (183) (184) (367)
Other expenses (246) - (246) (252) - (252) (515)
------------------------ ----------------------- ------- Return on ordinary activities before tax (18) 1,123 1,105 543 981 1,524 2,808
Tax on total comprehensive income and ordinary activities (14) - (14) 18 - 18 (151)
------------------------ ----------------------- ------- Return attributable to equity shareholders, being total comprehensive income for the year (32) 1,123 1,091 561 981 1,542 2,657 ------------------------ ----------------------- -------
Return per DSO B Share (0.4p) 0.5p 0.1p 0.3p 2.2p 2.5p 3.1p
Return per DSO C Share - - - - - - -
Return per DSO D Share 0.6p 4.3p 4.9p 0.4p 2.0p 2.4p 5.6p
Return per DP67 Share 0.5p 4.1p 4.6p 1.2p 4.2p 5.4p 9.7p
Return per DP2011 Gen 0.4p 3.4p 3.8p 1.1p 0.1p 1.2p 2.2p Ordinary Share
Return per DP2011 Gen A - - - - - - - Share
Return per DP2011 Struc 0.4p 2.7p 3.1p 1.3p (0.7p) 0.6p 0.7p Ordinary Share
Return per DP2011 Struc - - - - - - - A Share
Return per DP2011 Low 1.1p (5.0p) (3.9p) 0.4p (0.4p) 0.0p 1.4p Carbon Share
Return per Generalist (0.9p) (0.7p) (1.6p) - - - (2.0p) Share
Return per Healthcare (1.3p) (1.4p) (2.7p) - - - (2.5p) Share
UNAUDITED INCOME STATEMENT (ANALYSED BY SHARE POOL) Year Six months ended Six months ended ended 30 Sep 2017 30 Sep 2016 31 Mar 2017
Revenue Capital Total Revenue Capital Total Total
B Share pool £000 £000 £000 £000 £000 £000 £000
Income 15 - 15 98 - 98 270
Gains on investments - 121 121 - 458 458 494 ----------------------- ----------------------- -------- 15 121 136 98 458 556 764
Investment management (26) (26) (52) (19) (19) (38) (54) fees
Other expenses (61) - (61) (21) - (21) (55)
----------------------- ----------------------- -------- Return on ordinary activities before taxation (72) 95 23 58 439 497 655
Taxation (14) - (14) (7) - (7) (36)
----------------------- ----------------------- -------- Return attributable to equity shareholders (86) 95 9 51 439 490 619 ----------------------- ----------------------- --------
Revenue Capital Total Revenue Capital Total Total
D Share pool £000 £000 £000 £000 £000 £000 £000
Income 96 - 96 91 - 91 174
Gains on investments - 361 361 - 177 177 431 ----------------------- ----------------------- ------- 96 361 457 91 177 268 605
Investment management (22) (22) (44) (20) (21) (41) (86) fees
Other expenses (29) - (29) (37) - (37) (80)
----------------------- ----------------------- ------- Return/(losses) on ordinary activities before taxation 45 339 384 34 156 190 439
Taxation - - - (3) - (3) (2)
----------------------- ----------------------- ------- Return/(losses) attributable to equity shareholders 45 339 384 31 156 187 437 ----------------------- ----------------------- -------
Year Six months ended Six months ended ended 30 Sep 2017 30 Sep 2016 31 Mar 2017
Revenue Capital Total Revenue Capital Total Total
DP67 Share pool £000 £000 £000 £000 £000 £000 £000
Income 119 - 119 211 - 211 500
Gains on investments - 482 482 - 503 503 883 ----------------------- ------------------------ ------ 119 482 601 211 503 714 1,383
Investment management (25) (25) (50) (23) (23) (46) (94) fees
Other expenses (37) - (37) (36) - (36) (70)
----------------------- ------------------------ ------ Return on ordinary activities before taxation 57 457 514 152 480 632 1,219
Taxation - - - (15) - (15) (129)
----------------------- ------------------------ ------ Return attributable to equity shareholders 57 457 514 137 480 617 1,090 ----------------------- ------------------------ ------
Revenue Capital Total Revenue Capital Total Total
DP2011 General Share pool £000 £000 £000 £000 £000 £000 £000
Income 132 - 132 283 - 283 521
Gains on investments - 573 573 - 64 64 164 ----------------------- ------------------------ ------ 132 573 705 283 64 347 685
Investment management (36) (36) (72) (54) (54) (108) (194) fees
Other expenses (40) - (40) (68) - (68) (145)
----------------------- ------------------------ ------ Return/(losses) on ordinary activities before taxation 56 537 593 161 10 171 346
Taxation - - - 17 - 17 1
----------------------- ------------------------ ------ Return/(losses) attributable to equity shareholders 56 537 593 178 10 188 347 ----------------------- ------------------------ ------
Year Six months ended Six months ended ended 30 Sep 2017 30 Sep 2016 31 Mar 2017
Revenue Capital Total Revenue Capital Total Total
DP2011 Structured Share £000 £000 £000 £000 £000 £000 £000 pool
Income 86 - 86 218 - 218 354
Gains/(losses) on - 309 309 - (37) (37) (57) investments ----------------------- ----------------------- ------ 86 309 395 218 (37) 181 297
Investment management fees (20) (20) (40) (38) (38) (76) (126)
Other expenses (23) - (23) (53) - (53) (100)
----------------------- ----------------------- ------ Return/(losses) on ordinary activities before taxation 43 289 332 127 (75) 52 71
Taxation - - - 9 - 9 1
----------------------- ----------------------- ------ Return/(losses) attributable to equity shareholders 43 289 332 136 (75) 61 72 ----------------------- ----------------------- ------
Revenue Capital Total Revenue Capital Total Total
DP2011 Low Carbon Share £000 £000 £000 £000 £000 £000 £000 pool
Income 112 - 112 77 - 77 179
(Losses)/gains on - (370) (370) 77 - 77 67 investments ----------------------- ----------------------- ------ 112 (370) (258) 77 - 77 246
Investment management fees (15) (15) (30) (29) (29) (58) (86)
Other expenses (15) - (15) (31) - (31) (65)
----------------------- ----------------------- ------ Return/(losses) on ordinary activities before taxation 82 (385) (303) 17 (29) (12) 95
Taxation - - - 17 - 17 12
----------------------- ----------------------- ------ Return/(losses) attributable to equity shareholders 82 (385) (303) 34 (29) 5 107 ----------------------- ----------------------- ------
Year Six months ended Six months ended ended 30 Sep 2017 30 Sep 2016 31 Mar 2017
Revenue Capital Total Revenue Capital Total Total
Generalist Share pool £000 £000 £000 £000 £000 £000 £000
Income 10 - 10 - - - -
Losses on investments - (24) (24) - - - - ----------------------- ----------------------- ------ 10 (24) (14) - - - -
Investment management fees (135) (135) (270) - - - (10)
Other expenses (56) - (56) - - - (1)
----------------------- ----------------------- ------ Return/(losses) on ordinary activities before taxation (181) (159) (340) - - - (11)
Taxation - - - - - - -
----------------------- ----------------------- ------ Return/(losses) attributable to equity shareholders (181) (159) (340) - - - (11) ----------------------- ----------------------- ------
Revenue Capital Total Revenue Capital Total Total
Healthcare Share pool £000 £000 £000 £000 £000 £000 £000
Income 1 - 1 - - - -
Losses on investments - (13) (13) - - - - ----------------------- ----------------------- ------ 1 (13) (12) - - - -
Investment management fees (38) (38) (76) - - - (6)
Other expenses (12) - (12) - - - -
----------------------- ----------------------- ------ Return/(losses) on ordinary activities before taxation (49) (51) (100) - - - (6)
Taxation - - - - - - -
----------------------- ----------------------- ------ Return/(losses) attributable to equity shareholders (49) (51) (100) - - - (6) ----------------------- ----------------------- ------
UNAUDITED BALANCE SHEET as at 30 September 2017 As at 30 September As at 30 September As at 31 2017 2016 March 2017
£'000 £'000 £'000
Fixed assets
Investments 31,939 26,760 27,095
Current assets
Debtors 1,180 1,114 1,709
Cash at bank and in hand 40,931 8,236 31,441 -------------------- -------------------- --------- 42,111 9,350 33,150
Creditors: amounts (338) (731) (833) falling due within one year -------------------- -------------------- ---------
Net current assets 41,773 8,619 32,317 -------------------- -------------------- ---------
Net assets 73,712 35,379 59,412 -------------------- -------------------- ---------
8BCapital and reserves
Called up Share capital 180 135 144
Capital redemption 31 31 31 reserve
Special reserve 29,203 33,272 30,620
Share premium account 39,846 - 10,074
Funds held in respect of 1,127 - 16,137 shares not yet allotted
Revaluation reserve (1,198) (2,412) (1,980)
Capital reserve - 4,668 2,621 3,331 realised
Revenue reserve (145) 1,732 1,055 -------------------- -------------------- ---------
Total equity 73,712 35,379 59,412 shareholders' funds -------------------- -------------------- ---------
Basic and diluted net asset value per Share:
DSO B Share 4.4p 20.0p 20.7p
DSO C Share 16.5p 0.1p 0.1p
DSO D Share 78.5p 75.5p 76.1p
DP67 Share 68.7p 63.9p 66.1p
DP2011 General Ordinary 15.0p 25.0p 15.0p Share
DP2011 General A Share 34.4p 30.3p 31.2p
DP2011 Structured 5.0p 14.9p 4.8p Ordinary Share
DP2011 Structured A Share 34.5p 31.8p 31.9p
DP2011 Low Carbon Share 39.1p 41.7p 43.0p
Generalist Share 98.7p N/A* 99.9p
Healthcare Share 98.6p N/A* 99.7p
*The comparative balance sheet as at 30 September 2016 includes only the Share Pools in existence at that date.
UNAUDITED BALANCE SHEET (ANALYSED BY SHARE POOL) as at 30 September 2017 DSO B Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 514 1,743 1,752
Current assets
Debtors 1 18 74
Cash at bank and in 3,717 2,379 2,475 hand --------------------- --------------------- --------- 3,718 2,397 2,549
Creditors: amounts falling due within one (72) (126) (151) year --------------------- --------------------- --------- Net current assets 3,646 2,271 2,398 --------------------- --------------------- --------- Net assets 4,160 4,014 4,150 --------------------- --------------------- ---------
Capital and reserves
Called up share capital 20 20 20 - B Shares
Called up share capital 30 30 30 - C Shares
Capital redemption 31 31 31 reserve
Special reserve 3,095 3,693 3,186
Share premium reserve - - -
Revaluation reserve (945) (1,742) (1,108)
Capital reserve - 1,729 1,711 1,705 realised
Revenue reserve 200 271 286 --------------------- --------------------- --------- Total equity 4,160 4,014 4,150 shareholders' funds --------------------- --------------------- ---------
DSO D Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 3,636 4,966 5,365
Current assets
Debtors 113 185 254
Cash at bank and in 2,479 860 435 hand --------------------- --------------------- --------- 2,592 1,045 689
Creditors: amounts falling due within one (51) (75) (62) year --------------------- --------------------- --------- Net current assets 2,541 970 627 --------------------- --------------------- --------- Net assets 6,177 5,936 5,992 --------------------- --------------------- ---------
Capital and reserves
Called up share capital 8 8 8
Capital redemption - - - reserve
Special reserve 6,205 6,659 6,598
Share premium reserve - (263) -
Revaluation reserve 281 - (9)
Capital reserve - (266) (510) (510) realised
Revenue reserve (51) 42 (95) --------------------- --------------------- --------- Total equity 6.177 5,936 5,992 shareholders' funds --------------------- --------------------- ---------
DP67 Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 4,890 5,515 5,047
Current assets
Debtors 621 3 392
Cash at bank and in hand 2,264 1,775 2,396 ---------------------- --------------------- --------- 2,885 1,778 2,788
Creditors: amounts falling due within one (55) (112) (404) year ---------------------- --------------------- --------- Net current assets 2,830 1,666 2,384 ---------------------- --------------------- --------- Net assets 7,720 7,181 7,431 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 11 11 11
Capital redemption - - - reserve
Special reserve 5,623 5,592 5,836
Share premium reserve - - -
Revaluation reserve 603 993 396
Capital reserve - 1,308 355 1,070 realised
Revenue reserve 175 230 118 ---------------------- --------------------- --------- Total equity 7,720 7,181 7,431 shareholders' funds ---------------------- --------------------- ---------
DP2011 General Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 2,884 7,284 7,385
Current assets
Debtors 205 479 585
Cash at bank and in hand 5,675 1,925 266 ---------------------- --------------------- --------- 5,880 2,404 851
Creditors: amounts falling due within one (76) (190) (143) year ---------------------- --------------------- --------- Net current assets 5,804 2,214 708 ---------------------- --------------------- --------- Net assets 8,688 9,498 8,093 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 16 34 16
Capital redemption 18 - 18 reserve
Special reserve - 9,177 -
Share premium reserve 7,489 - 7,805
Revaluation reserve (278) (740) (641)
Capital reserve - 956 466 466 realised
Revenue reserve 487 561 429 ---------------------- --------------------- --------- Total equity 8,688 9,498 8,093 shareholders' funds ---------------------- --------------------- ---------
DP2011 Structured Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 1,398 4,254 4,233
Current assets
Debtors 120 321 365
Cash at bank and in hand 3,390 1,155 28 ---------------------- --------------------- --------- 3,510 1,476 393
Creditors: amounts falling due within one (44) (139) (94) year ---------------------- --------------------- --------- Net current assets 3,466 1,337 299 ---------------------- --------------------- --------- Net assets 4,864 5,591 4,532 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 11 11 11 - Ordinary Shares
Called up share capital 13 13 13 - A Shares
Capital redemption - - - reserve
Special reserve 4,348 5,498 4,565
Share premium reserve - -
Revaluation reserve (514) (660) (682)
Capital reserve - 685 346 346 realised
Revenue reserve 321 383 279 ---------------------- --------------------- --------- Total equity 4,864 5,591 4,532 shareholders' funds ---------------------- --------------------- ---------
DP2011 Low Carbon Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 2,694 2,998 3,065
Current assets
Debtors 248 108 140
Cash at bank and in hand 45 142 116 ---------------------- --------------------- --------- 293 250 256
Creditors: amounts falling due within one (28) (89) (59) year ---------------------- --------------------- --------- Net current assets 265 161 197 ---------------------- --------------------- --------- Net assets 2,959 3,159 3,262 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 8 8 8
Capital redemption - - - reserve
Special reserve 2,624 2,653 2,639
Share premium reserve - - -
Revaluation reserve (303) - 67
Capital reserve - 253 253 253 realised
Revenue reserve 377 245 295 ---------------------- --------------------- --------- Total equity 2,959 3,159 3,262 shareholders' funds ---------------------- --------------------- ---------
Generalist Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 12,562 - 225
Current assets
Debtors 77 - -
Cash at bank and in hand 17,732 - 21,225 ---------------------- --------------------- --------- 17,809 - 21,225
Creditors: amounts (164) - (10) falling due within one year ---------------------- --------------------- --------- Net current assets 17,645 - 21,215 ---------------------- --------------------- --------- Net assets 30,207 - 21,440 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 38 - 7
Special reserve (140) - (5)
Share premium reserve 31,063 - 7,633
Revaluation reserve (24) - -
Funds held in respect of 566 - 14,012 shares not yet allotted
Revenue reserve (1,296) - (207) ---------------------- --------------------- --------- Total equity 30,207 - 21,440 shareholders' funds ---------------------- --------------------- ---------
Healthcare Shares As at 30 September As at 30 September As at 2017 2016 31 March 2017
£'000 £'000 £'000
Fixed assets
Investments 3,361 - 25
Current assets
Debtors - - -
Cash at bank and in hand 5,629 - 4,500 ---------------------- --------------------- --------- 5,629 - 4,500
Creditors: amounts - falling due within one (46) (7) year ---------------------- --------------------- --------- Net current assets 5,583 - 4,493 ---------------------- --------------------- --------- Net assets 8,944 - 4,518 ---------------------- --------------------- ---------
Capital and reserves
Called up share capital 9 - 2
Special reserve (41) - (3)
Share premium reserve 8,782 - 2,441
Revaluation reserve (13) - -
Funds held in respect of 561 - 2,125 shares not yet allotted
Revenue reserve (354) - (47) ---------------------- --------------------- --------- Total equity 8,944 - 4,518 shareholders' funds ---------------------- --------------------- ---------
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2017
Funds held in respect Called Capital of up Redempt- Share shares Revaluat- Capital Share ion Special premium not yet ion reserve- Revenue capital reserve reserve account allotted Reserve realised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 March 161 5 44,441 - - (2,645) 1,949 1,171 45,082 2016
Total - - - - - 599 1,321 737 2,657 comprehensive income
Transfer - - (13,772) - - 66 13,706 - - between reserves*
Unallotted - - - - 16,137 - - - 16,137 shares
Transactions with owners
Dividend paid - - - - - - (13,645) (608) (14,253)
Cancellation (26) 26 - - - - - - - of shares
Purchase of - - (49) - - - - - (49) own shares
Issue of 9 - - 10,074 - - - - 10,083 shares
Share issue - - - - - - - (245) (245) costs ------------------------------------------------------------------------------- At 31 March 144 31 30,620 10,074 16,137 (1,980) 3,331 1,055 59,412 2017
Total - - - - - 137 986 (32) 1,091 comprehensive income
Transfer - - (1,417) - - 645 772 - - between reserves*
Unallotted - - - - 14,798 - - - 14,798 shares
Transactions with owners
Dividend paid - - - - - - (421) - (421)
Cancellation - - - - - - - - - of shares
Purchase of - - - - - - - - - own shares
Issue of 36 - - 29,772 (29,808) - - - - shares
Share issue - - - - - - - (1,168) (1,168) costs ------------------------------------------------------------------------------- At 30 180 31 29,203 39,846 1,127 (1,198) 4,668 (145) 73,712 September 2017 ------------------------------------------------------------------------------- *A transfer of £645,000 (31 March 2017: £66,000) representing previously recognised realised gains on disposal of investments during the period has been made from the Revaluation Reserve to the Capital reserve-realised. A transfer of £1.4 million (31 March 2017: £13.8 million) representing realised gains on disposal of investments, less capital expenses and capital dividends in the period was made from Capital Reserve - realised to Special reserve.
UNAUDITED STATEMENT OF CASH FLOWS Six months ended 30 September 2017
DP2011 DP2011 DP2011 Health- DSO B DSO D DP67 Gen Struc LC care Share Share Share Share Share Share Generalist Share pool pool pool pool pool pool Share Pool Pool Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash flows from operating activities
Return on ordinary 23 384 514 593 332 (303) (340) (100) 1,105 activities before taxation
(Gains)/losses on (121) (361) (482) (573) (309) 370 24 13 (1,440) investments
Decrease/(increase) 35 141 (24) 380 244 (108) (77) - 591 in debtors
Increase/(decrease) 5 (24) (50) (48) (41) (24) 154 41 16 in creditors ------------------------------------------------------------------- Net cash (58) 140 (42) 352 226 (65) (239) (46) 268 inflow from operating activities
Corporation (58) 10 (505) (16) (7) (6) - - (582) tax ------------------------------------------------------------------- New cash generated from operating activities (116) 150 (547) 336 219 (71) (239) (46) (314) -------------------------------------------------------------------
Cash flow from investing activities
Purchase of investments - - - - - - (12,360) (3,350) (15,710)
Proceeds from disposal of investments 1,358 2,091 640 5,073 3,143 - - - 12,305 ------------------------------------------------------------------- Net cash inflow/(outflow) from investing activities 1,358 2,091 640 5,073 3,143 - (12,360) (3,350) (3,405) -------------------------------------------------------------------
Net cash inflow/(outflow) before financing 1,242 2,241 93 5,409 3,362 (71) (12,599) (3,396) (3,719)
Cash flows from financing activities
Repurchase of shares - - - - - - - - -
Issue of share capital - - - - - - 22,552 6,089 28,641
Unallotted shares - - - - - - (13,446) (1,564) (15,010)
Equity dividends paid - (197) (225) - - - - - (422) ------------------------------------------------------------------- Net cash (outflow)/inflow from financing activities - (197) (225) - - - 9,106 4,525 13,209 -------------------------------------------------------------------
Net movement in cash 1,242 2,044 (132) 5,409 3,362 (71) (3,493) 1,129 9,490
Cash and cash equivalents at start of year 2,475 435 2,396 266 28 116 21,225 4,500 31,441 ------------------------------------------------------------------- Cash and cash equivalents at end of year 3,717 2,479 2,264 5,675 3,390 45 17,732 5,629 40,931 -------------------------------------------------------------------
Cash and cash equivalents comprise
Cash at bank and in hand 3,717 2,479 2,264 5,675 3,390 45 17,732 5,629 40,931 ------------------------------------------------------------------- Total cash and cash equivalents 3,717 2,479 2,264 5,675 3,390 45 17,732 5,629 40,931 -------------------------------------------------------------------
UNAUDITED STATEMENT OF CASH FLOWS Six months ended 30 September 2016
DP2011 DP2011 DP2011 Year DSO B DSO D DP67 Gen Struc LC ended Share Share Share Share Share Share 31 March pool pool pool pool pool pool Total 2017
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash flows from operating activities
Return on ordinary 491 190 632 171 52 (12) 1,524 2,808 activities before taxation
Losses/(gains) on (458) (177) (503) (64) 37 - (1,165) (1,980) investments
Decrease/(increase) 33 (22) 196 (87) (92) (63) (35) (325) in debtors
(Decrease)/increase (66) 19 4 24 15 7 3 (92) in creditors ------------------------------------------------------------ Net cash inflow from operating activities - 10 329 44 12 (68) 327 406
Corporation (80) (13) (7) (12) (8) (134) (408) tax paid (14) ------------------------------------------------------------ New cash generated from operating activities (80) (3) 322 32 4 (82) 193 (2) ------------------------------------------------------------
Cash flow from investing activities
Purchase of investments - - (700) - - - (700) (1,095)
Proceeds from 1,749 900 1,515 3,226 3,065 - 10,455 11,332 disposal of investments ------------------------------------------------------------ Net cash inflow/(outflow) from investing activities 1,749 900 815 3,226 3,065 - 9,755 10,237 ------------------------------------------------------------
Net cash inflow/(outflow) 1,669 897 1,137 3,258 3,069 (82) 9,948 10,235 before financing
Cash flows from financing activities
Repurchase - - (49) - - - (49) (49) of shares
Issue of - - - - - - - 9,838 share capital
Unallotted - - - - - - - 16,137 shares
Equity - (196) (224) (3,519) (3,470) (3,787) (11,196) (14,253) dividends paid ------------------------------------------------------------ Net cash (outflow)/inflow from financing activities 1,669 (196) (273) (3,519) (3,470) (3,787) (11,245) 11,673 ------------------------------------------------------------
Net increase/(decrease) in cash 1,669 701 864 (261) (401) (3,869) (1,297) 21,908
Cash and cash equivalents at start of year 710 159 911 2,186 1,556 4,011 9,533 9,533 ------------------------------------------------------------ Cash and cash equivalents at end of year 2,379 860 1,775 1,925 1,155 142 8,236 31,441 ------------------------------------------------------------
Cash and cash equivalents comprise
Cash at bank and in hand 2,379 860 1,775 1,925 1,155 142 8,236 31,441 ------------------------------------------------------------ Total cash and cash equivalents 2,379 860 1,775 1,925 1,155 142 8,236 31,441 ------------------------------------------------------------ *Comparative cash flows include only the DSO Share Pools in existence at those dates.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
General Information Downing FOUR 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.
Basis of accounting The unaudited half-yearly financial results cover the six months to 30 September 2017 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2017, which were prepared in accordance with the Financial Reporting Standard 102 ('FRS 102') and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' revised November 2014 ('SORP').
The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
The comparative figures are in respect of the six months ended 30 September 2016 and the year ended 31 March 2017 respectively.
Net asset value per share at the period end has been calculated on the number of shares in issue at the period end as follows:
DSO B Shares 19,911,070 DP2011 Structured Shares 10,678,725
DSO C Shares 29,926,070 DP2011 Structured A Shares 12,572,817
DSO D Shares 7,867,247 DP2011 Low Carbon Shares 7,575,419
DP67 Shares 11,239,785 Generalist Shares 37,504,899
DP2011 General Shares 15,644,066 Healthcare Shares 8,506,813
DP2011 General A Shares 18,418,614
Return per share for the period has been calculated on the average number of shares in issue in the period as follows:
DSO B Shares 19,911,070 DP2011 Structured Shares 10,678,725
DSO C Shares 29,926,070 DP2011 Structured A Shares 12,572,817
DSO D Shares 7,867,247 DP2011 Low Carbon Shares 7,575,419
DP67 Shares 11,239,785 Generalist Shares 21,210,366
DP2011 General Shares 15,644,066 Healthcare Shares 3,637,092
DP2011 General A Shares 18,418,614
Dividends Six months ended 30 September 2017
Revenue Capital Total
£000 £000 £000
Paid in period
DSO D Shares - 197 197 ----------- ----------- ---------
DP67 Shares - 225 225 ----------- ----------- ---------
Reserves 30 Sep 30 Sep 31 Mar 2017 2016 2017
£'000 £'000 £'000
Capital redemption reserve 31 31 31
Special reserve 29,203 33,272 30,620
Share premium account 39,846 - 10,074
Funds held in respect of shares not yet allotted 1,127 - 16,137
Capital reserve - realised (1,198) (2,412) (1,980)
Revaluation reserve 4,668 2,621 3,331
Revenue reserve (145) 1,732 1,055
--------- --------- -------- Total reserves 73,532 35,244 59,268 --------- --------- --------
The Revenue reserve, Special reserve and Capital reserve - realised are distributable reserves and are reduced by revaluation losses of £3.3 million. Distributable reserves at 30 September 2017 were £32.5 million.
Investments The fair value of investments is determined using the detailed accounting policy as shown in the audited financial statements for the year ended 31 March 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 (quoted companies, investment funds and fixed interest bonds); 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 (investments in unquoted shares and loan note investments).
Level a Level b Level c 30 Sep Level a Level Level c 31 Mar (ii) 2017 b (ii) 2017
£000 £000 £000 £000 £000 £000 £000 £000
Structured - - - - 598 - - 598 Products
Quoted equity 1,234 - - 1,234 - - - -
Liquidity 13,029 - - 13,029 - - - - Investments
Unquoted loan - - 7,432 7,432 - - 12,781 12,781 notes
Unquoted - - 10,244 10,244 - - 13,716 13,716 equity ----------------------------------- ------------------------------- 14,263 - 17,676 31,939 598 - 26,497 27,095 ----------------------------------- -------------------------------
Risk and uncertainties Under the Disclosure and Transparency Directive, the Board is required in the Company's half-year results to report on the principal risks and uncertainties facing the Company over the remainder of the financial year.
The Board has concluded that the key risks facing the Company over the remainder of the financial period are as follows:
- compliance risk of failure to maintain approval as a VCT; - market, liquidity and counterparty risk associated with Liquidity Investments; and - investment risk associated with investing in small and immature businesses.
The Company's compliance with the VCT regulations is continually monitored by the Manager, who reports regularly to the Board on the current position. The Company also retains Phillip Hare & Associates LLP ('Phillip Hare') to provide regular reviews and advice in this area. Philip Hare have confirmed that all relevant tests have been complied with for the period under review. The Board considers that this approach reduces the risk of a breach of the VCT regulations.
With this approach, the Board believes that these risks are reduced.
In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature. In addition, funds invested under the new VCT regulations in force from November 2015 provide greater restriction on, amongst other things, the age of the investments. 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 thebusiness. The Board is satisfied that this approach reduces the investment risk described in (iii) above as far as is reasonably possible.
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.
Statutory accounts 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 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:
- 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
- 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.
Copies of the Half-Yearly Report will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or can be downloaded from www.downing.co.uk.
PERFORMANCE INCENTIVE ARRANGEMENTS Performance incentive arrangements are in place for the each share pool except the DP67 pool. The various schemes are summarised as follows:
DSO B Shares The performance incentive in respect of the DSO B Shares is facilitated by holdings of DSO C Shares that are held by members of the management team (who subscribed for A Shares at 0.1p per share). An incentive is due to management when the hurdle is met as follows: - Shareholders receive total proceeds of at least 100p per DSO B Share/DSO C Share (excluding income tax relief); and - Shareholders achieve a tax-free compound return of at least 7% per annum (after allowing for income tax relief on investment).
After the above hurdle is met, management receive 3% of the proceeds on the first 100p of distributions and 20% thereafter. This is paid by dividends by virtue of the shareholdings of C Shares held by the management team.
The maximum performance incentive is limited to an amount equivalent to 1.25% of Net Assets attributable to DSO B Shares per annum. With a lower than usual ongoing management fee of 1.5%, the maximum management fees (including performance incentive) borne by investors is 2.75% of net assets per annum.
As at 30 September 2017, the estimated performance fee is 5.5p per DSO B Share.
DSO D Shares The Performance Incentive in respect of the DSO D Shares is structured as a simple fee when the hurdle is met. A fee is payable when: - Shareholders receive total proceeds of at least 100p per DSO D Share (excluding income tax relief); and - Shareholders achieve a tax-free compound return of at least 7% per annum (after allowing for income tax relief on investment).
If the hurdle is met, the fee will be 3p per DSO D Share plus 20% of shareholder proceeds above 100p per D Share. The maximum performance fee is limited to 7p per D Share.
As at 30 September 2017, the estimated performance fee is 4.2p per DSO B Share.
DP2011 General Shares/ DP2011 Structured Shares The performance incentive arrangements in respect of the DP2011 General and DP2011 Structured pools enable payments, by way of distributions of income, to members of the management team who subscribed for 15% of the DP2011 General A Shares and DP2011 Structured A Shares at 6.5p per share.
Once proceeds to Shareholders exceeds 70p per DP2011 General Ordinary Share/DP2011 Structured Ordinary Share a performance incentive of 15% becomes due to members of the management team. No further incentive is paid to management once Shareholder proceeds exceed 120p per DP2011 General Ordinary Share/DP2011 Structured Ordinary Share.
As at 30 September 2017, it been estimated that a performance incentive due to management in respect of the DP2011 General and Structured Share pools will be approximately 5.2p per DP2011 General Ordinary Share and 5.2p per DP2011 Structured Ordinary Share.
DP2011 Low Carbon Shares As no A Shares were issued in connection with the DP2011 Low Carbon Share pool, the performance incentive takes the form of an incentive fee payable to Downing LLP.
A fee will become payable equal to 15% of shareholder proceeds in excess of 70p per share. No further fees accrue after shareholder proceeds exceed 120p per share.
As at 30 September 2017, it been estimated that a performance incentive fee due in respect of the DP2011 Low Carbon Pool will be approximately equivalent to 5.5p per DP2011 Low Carbon Shares.
Generalist and Healthcare Share pools A performance incentive scheme is in place in respect of the Generalist and Healthcare Management Shares, which will represent 20% of the total number of Generalist and Healthcare Shares in issue. As part of the arrangement, in order to prevent dilution to the shareholders of the Generalist and Healthcare Shares, the management team will waive their voting rights granted by these Management Shares at any general meeting of the Company and income or capital distributions otherwise payable on these Management Shares will be waived unless the share class has achieved a Total Return (based on audited year end results) in excess of £1 per share for the years ended 31 March 2018, 31 March 2019 and 31 March 2020. For subsequent years, the Total Return hurdle increases by 3p per annum such that for the year ended 31 March 2021 the hurdle is £1.03, and for the year ended 31 March 2022 the hurdle is £1.06.
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 FOUR VCT plc via GlobeNewswire
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