TIDMDPV
Downing Planned Exit VCT 2 plc
Half-Yearly Report for the six months ended 31 July 2010
Performance summary
'C' Share pool 31 Jul 31 Jan 31 Jul
2010 2010 2009
pence pence pence
Net asset value per 'C' Share 90.0 95.9 94.6
Net asset value per 'A' Share 0.1 0.1 0.1
Cumulative distributions per 'C' Share 5.0 - -
---------------------------
Total return per 'C' Share and 'A' Share 95.1 96.0 94.7
'D' Share pool 31 Jul 31 Jan 31 Jul
2010 2010 2009
pence pence pence
Net asset value per 'D' Share 94.8 94.4 -
Net asset value per 'E' Share 0.1 0.1 -
---------------------------
Total return per 'D' Share and 'E' Share 94.9 94.5 -
Ordinary Share pool 31 Jul 31 Jan 31 Jul
2010 2010 2009
pence pence pence
Net asset value per Ordinary Share 0.1 0.1 9.4
Cumulative distributions per Ordinary Share 90.4 90.4 81.0
---------------------------
Total return per Ordinary Share 90.5 90.5 90.4
CHAIRMAN'S STATEMENT
Introduction
I present my report for the six months ended 31 July 2010. I am pleased to say
that it has been a busy period for the Company, in which substantial progress
has been made in investing both the 'C' Share Pool and 'D' Share Pool.
Throughout this report, the term "'C' Share(s)" has been used to refer to the
pool of assets allocated to the 'C' Shares and 'A' Shares combined. Similarly,
the term "'D' Share(s)" has been used to refer to the pool of assets allocated
to the 'D' Shares and 'E' Shares combined.
'C' Share pool
Portfolio activity
The 'C' Share pool continued to be an active investor over the period, making
two major new qualifying investments.
An investment of GBP930,000 was made into Future Biogas (SF) Limited. The company
is developing a renewable energy biogas plant in Norfolk which will benefit from
the Government's "feed-in tariff" scheme. The investment is partly
non-qualifying.
A follow-on investment of GBP200,000 was also made into Bijou Wedding Venues
Limited, which is developing its Botley's Mansion property into a dedicated
wedding venue.
The Board has reviewed the whole portfolio at the period-end and is satisfied
that there have not been any significant departures from plan to date which
impact on value. Accordingly, all investments continue to be held at valuations
equal to original cost.
Net Asset Value and results
At 31 July 2010, the NAV per 'C' Share stood at 90.0p and the NAV per 'A' Share
at 0.1p, producing a combined total of 90.1p. This is a small decrease of 0.9p
(0.9%) since the previous year end of 31 January 2010 (after adjusting for
dividends of 5.0p per 'C' Share paid during the period).
The loss on ordinary activities for the 'C' Shares after taxation for the period
was GBP63,000, relating wholly to a loss of GBP63,000 on the revenue account. No
interim dividend will be paid in respect of the 'C' or 'A' Shares.
'D' Share pool
The 'D' Share offer for subscription closed during the period, being fully
subscribed and raising net proceeds of GBP9.45 million.
Portfolio activity
The pool made one qualifying investment during the period and also took
advantage of a number of opportunities to make non-qualifying investments which
help the fund to reduce the "cash drag" which can arise when running costs
exceed the level of income that can be produced from holding a substantial
proportion of the pool's funds as cash deposits.
The main investments completed in the period are summarised as follows:
Aminghurst Limited:
GBP2,000,000 loan to a company undertaking a residential and hotel development in
Devon.
Woolmer Properties Limited
Short-term loan of GBP828,000 to fund the redevelopment of a residential property
in Chelsea.
Lullingstone Limited
Short-term loan of GBP528,000 to fund the redevelopment of a residential property
in Kensington.
Fenkle Street LLP
A bridging loan of GBP635,000 to a partnership which is converting an office
building into a hotel in Newcastle.
Ridgeway Pub Company Limited
A partly qualifying investment of GBP154,000 in a business which has acquired two
pubs in Oxfordshire.
All investments have been made very recently and have experienced no negative
deviations from plan and so have all been held at the period end at values equal
to original cost.
'D' Share pool
Net Asset Value, results and dividends
At 31 July 2010, the NAV per 'D' Share stood at 94.8p and the NAV per 'E' Share
at 0.1p, producing a combined total of 94.9p. This is a small increase of 0.4p
(0.4%) on the initial NAV net of fundraising costs.
The profit on ordinary activities for the 'D' Shares, after taxation, for the
period was GBP37,000, comprising a revenue gain of GBP37,000.
In accordance with the policy set out in the 'D' Share prospectus, the Board
will pay an interim dividend of 2.5p per 'D' Share on 26 November 2010, to 'D'
Shareholders on the register at 5 November 2010.
Ordinary Share pool
As has been stated previously, although the Ordinary Shares still exist, the
task of returning funds to Ordinary Shareholders is complete and no further
dividends are likely to be paid to Ordinary Shareholders. Steps will be taken to
wind up this share class in due course.
Board Changes
Chris Kay has decided to step down as a non-executive director of the Company
with immediate effect to concentrate on his other business activities. I would
like to thank Chris for his valuable contribution since the Company's launch and
wish him all the best for the future.
As a replacement, Michael Robinson has agreed to join the Board as a
non-executive director with effect from today. Michael spent 25 years with 3i
Group plc and has extensive experience in the private equity sector. I welcome
Michael to the Board and look forward to working with him.
Share buybacks
In order to provide liquidity in the market for Shareholders who need to sell
all or part of their holdings, the Company operates a share buyback policy in
respect of its 'A' Shares, 'C' Shares, 'D' Shares and 'E' Shares. The current
policy is to undertake share buybacks at a price equivalent to 10% discount to
the latest NAV. However, the Board will review this discount level from time to
time.
The Company does not intend to buy in any further Ordinary Shares for
cancellation.
No share buybacks in any share class were undertaken during the period.
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 has reviewed the principal risks and uncertainties facing the Company
over the remainder of the financial period and concluded that the key risks are:
i) investment risk associated with investing in small and immature businesses;
and
ii) failure to maintain approval as a VCT.
In both cases the Board is satisfied with the Company's approach to these
risks. The strategy of, where possible, taking charges over assets to secure
its investments helps to limit any potential losses which could arise from the
failure of an investee business.
The Company continually monitors its compliance with the VCT regulations and
retains PricewaterhouseCoopers to provide regular reviews and advice in this
area. The Board considers that this approach reduces the risk of a breach of
the VCT regulations to a minimal level.
Outlook
The Investment Manger is seeing a welcome but as yet hesitant pick up in deal
flow and the Board expects to see further qualifying investments made by both
the 'C' Share pool and the newly raised 'D' Share pool over the remainder of the
year.
Hugh Gillespie
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 July 2010
31 Jul 2010 31 Jul 31 Jan
2009 2010
Total
'C' 'D' (incl Ord
Shares Shares Shares) Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Unquoted investments 5,209 4,906 10,120 4,198 4,309
Current assets
Debtors 29 92 121 44 70
Cash at bank and in hand 1,358 4,590 5,948 3,684 9,048
---------------------------------------
1,387 4,682 6,069 3,728 9,118
Creditors: amounts falling due
within one year (135) (96) (231) (469) (3,038)
---------------------------------------
Net current assets 1,252 4,586 5,838 3,259 6,080
Creditors: amounts falling due
after one year - - - - -
---------------------------------------
Net assets 6,461 9,492 15,958 7,457 10,389
Capital and reserves
Called up share capital 18 25 143 121 130
Capital redemption reserve 4 - 6 2 6
Special reserve 6,407 9,430 15,837 1,295 -
Share premium account - - - 6,489 10,225
Capital reserve - unrealised - - - (492) -
Capital reserve - realised - - - - -
Revenue reserve 32 37 (28) 42 (2)
---------------------------------------
Total equity shareholders' funds 6,461 9,492 15,958 7,457 10,389
Basic and diluted net asset value per:
Ordinary Share - - 0.1p 9.4p 0.1p
'C' Share 90.0p - - 94.6p 95.9p
'A' Share 0.1p - - 0.1p 0.1p
'D' Share - 94.8p - n/a 94.4p
'E' Share - 0.1p - n/a 0.1p
INCOME STATEMENT
for the six months ended 31 July 2010
Company Total Six months ended 31 Jul
2010
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 221 - 221
Gain/(loss) on investments - realised - - -
unrealised - - -
--------- --------- -------
221 - 221
Investment management fees (104) - (104)
Provision against loan stock interest previously (53) - (53)
recognised
Other expenses (90) - (90)
--------- --------- -------
Return on ordinary activities before (26) - (26)
taxation
Taxation - - -
--------- --------- -------
Return attributable to equity shareholders (26) - (26)
Basic and diluted return
'C' Share (0.9p) - (0.9p)
'A' Share - - -
'D' Share 0.3p - 0.3p
'E' Share 0.1p - 0.1p
Company Total Six months ended 31 Jul Year ended
2009 31 Jan 2010
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 79 - 79 307
Gain/(loss) on investments - realised - 48 48 (26)
unrealised - (124) (124) (24)
--------- --------- ------------------
79 (76) 3 257
Investment management fees (38) - (38) (69)
Provision against loan stock interest - - - -
previously
recognised
Other expenses (78) (500) (578) (677)
--------- --------- ------------------
Return on ordinary activities before (37) (576) (613) (489)
taxation
Taxation 6 - 6 (16)
--------- --------- ------------------
Return attributable to equity shareholders (31) (576) (607) (505)
Basic and diluted return
'C' Share 0.1p - 0.1p 1.5p
'A' Share - - - 0.1p
'D' Share n/a n/a n/a n/a
'E' Share n/a n/a n/a n/a
'C' Shares Six months ended 31 Jul
2010
Revenue Capital Total
Income GBP'000 GBP'000 GBP'000
Net loss on investments - realised - - -
- unrealised - - -
--------- --------- ------
82 - 82
Investment management fees (46) - (46)
Provision against loan stock interest previously (53) - (53)
recognised
Other expenses (46) - (46)
--------- --------- ------
Return on ordinary activities before taxation (63) - (63)
Taxation - - -
--------- --------- ------
Return attributable to equity shareholders (63) - (63)
'C' Shares Six months ended 31 Jul Year
2009 ended
31 Jan
2010
Revenue Capital Total Total
Income GBP'000 GBP'000 GBP'000 GBP'000
Net loss on investments - realised - - - -
- unrealised - - - -
--------- --------- -------------
58 - 58 276
Investment management fees (25) - (25) (59)
Provision against loan stock interest - - - -
previously
recognised
Other expenses (24) - (24) (100)
--------- --------- -------------
Return on ordinary activities before taxation 9 - 9 117
Taxation (3) - (3) (16)
--------- --------- -------------
Return attributable to equity shareholders 6 - 6 101
'D' Shares Six months ended 31 Jul
2010
Revenue Capital Total
Income GBP'000 GBP'000 GBP'000
Net loss on investments - realised - - -
- unrealised - - -
--------- --------- ------
139 - 139
Investment management fees (58) - (58)
Provision against loan stock interest previously - - -
recognised
Other expenses (44) - (44)
--------- --------- ------
Return on ordinary activities before taxation 37 - 37
Taxation - - -
--------- --------- ------
Return attributable to equity shareholders 37 - 37
'D' Shares Six months ended 31 Jul Year
2009 ended
31 Jan
2010
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income n/a n/a n/a n/a
Net loss on investments - realised n/a n/a n/a n/a
--------- --------- -------------
- unrealised n/a n/a n/a n/a
n/a n/a n/a n/a
Investment management fees n/a n/a n/a n/a
Provision against loan stock interest n/a n/a n/a n/a
previously recognised
--------- --------- -------------
Other expenses n/a n/a n/a n/a
Return on ordinary activities before taxation
n/a n/a n/a n/a
--------- --------- -------------
Taxation n/a n/a n/a n/a
Return attributable to equity shareholders
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains/losses are recognised in the Income Statement as noted above
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 July 2010 31 Jul 31 Jan
2009 2010
'C' 'D' Total
Shares Shares (incl Ord
Shares) Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening shareholders' funds 6,883 3,501 10,389 6,283 6,283
Issue of shares - 6,301 6,301 4,105 8,090
Share issue costs - (347) (347) (225) (435)
Purchase of own shares - - - - (3)
Total recognised (losses)/gains (63) 37 (26) (607) (505)
for the year
Distributions (359) - (359) (2,099) (3,041)
----------------------------------------
Closing shareholders' funds 6,461 9,492 15,958 7,457 10,389
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 July 2010
Six
Notes Six months ended months Year
31 Jul 2010 ended ended
31 Jul 31 Jan
2009 2010
'C' 'D' Total
Shares Shares (incl. Ord Total Total
Shares)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash inflow from operating 1 (1) 41 40 (434) (703)
activities
Taxation
Corporation tax paid - - - 1 (54)
Capital expenditure
Purchase of investments (1,233) (4,906) (6,139) (4,505) (7,347)
Sale of investments 327 - 327 4,032 6,789
---------------------------------------------
Net cash inflow/(outflow) from (906) (4,906) (5,812) (473) (558)
capital expenditure
---------------------------------------------
Equity dividends paid (359) - (359) (2,099) (3,041)
Net cash inflow/(outflow) (1,266) (4,865) (6,131) (3,005) (4,356)
before financing
Financing
Proceeds from share issue - 3,449 3,449 4,096 10,946
Share issue costs - (418) (418) (225) (373)
Purchase of own shares/loan - - - (20) (7)
notes
---------------------------------------------
Net cash inflow from financing - 3,031 3,031 3,851 10,566
---------------------------------------------
Increase/(decrease) in cash 2 (1,266) (1,834) (3,100) 846 6,210
Notes to the cash flow statement:
1 Cash inflow from operating activities
and returns on investments
Return on ordinary activities (63) 37 (26) (613) (505)
before
taxation
Losses on investments - - - 76 50
Decrease/(increase) in other 41 (92) (51) (3) (39)
debtors
Increase/(decrease) in other 21 96 117 106 (209)
creditors
-------------------------------------------
Net cash inflow from operating (1) 41 40 (434) (703)
activities
2 Analysis of net funds
Beginning of period 2,624 6,424 9,048 2,838 2,838
Net cash inflow/(outflow) (1,266) (1,834) (3,100) 846 6,210
-------------------------------------------
End of period 1,358 4,590 5,948 3,684 9,048
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 July 2010
'C' Share pool
Unrealised % of
gain/(loss) portfolio by
Cost Valuation in period value
Venture capital investments GBP'000 GBP'000 GBP'000 GBP'000
Bijou Wedding Venues Limited** 1,215 1,215 - 18.5%
Hoole Hall Country Club Holdings 1,206 1,206 - 18.4%
Limited*
Future Biogas (SF) Limited** 930 930 - 14.1%
The Thames Club Limited* 500 500 - 7.6%
East Dulwich Tavern Limited 344 344 - 5.2%
Westow House Limited 304 304 - 4.6%
Uno Developments Limited* 182 182 - 2.8%
Honeycombe Pubs VCT Limited* 175 175 - 2.7%
Atlantic Dogstar Limited 162 162 - 2.5%
Chapel Street Hotel (2008) LLP* 63 63 - 1.0%
Chapel Street Food and Beverage 50 50 - 0.8%
Limited
Chapel Street Services Limited 50 50 - 0.8%
Vermont Developments Limited* 25 25 - 0.4%
Chapel Street Hotel Limited* 3 3 - 0.0%
5,209 5,209 - 79.4%
Cash at bank and in hand 1,358 20.6%
'C' Share pool - Total 6,567 100%
'D' Share pool
Unrealised % of portfolio by
gain/(loss) value
Cost Valuation in period
Venture capital investments GBP'000 GBP'000 GBP'000 GBP'000
Aminghurst Limited* 2,000 2,000 - 21.1%
Woolmer Properties Limited* 828 828 - 8.7%
Fenkle Street LLP* 635 635 - 6.7%
Lullingstone Limited* 528 528 - 5.6%
Edison House Limited* 329 329 - 3.5%
Looe Road Student 168 168 - 1.8%
Accommodation*
Retallack Surfpods Limited* 164 164 - 1.7%
Ridgeway Pub Company 154 154 - 1.6%
Limited**
Hoi Polloi Pub Co Limited* 100 100 - 1.1%
4,906 4,906 - 51.8%
Cash at bank and in hand 4,590 48.2%
'D' Share pool - Total 9,496 100%
*Non qualifying investment
**Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 July 2010
Additions
'C' 'D'
Share Share
pool pool
GBP'000 GBP'000
'C' Share pool
Future Biogas (SF) Limited** 930 -
Bijou Wedding Venues Limited** 200 -
Chapel Street Food and Beverage Limited 50 -
Chapel Street Services Limited 50 -
Chapel Street Hotel Limited* 3 -
'D' Share pool
Aminghurst Limited* - 2,000
Woolmer Properties Limited* - 828
Fenkle Street LLP* - 635
Lullingstone Limited* - 528
Edison House Limited* - 329
Looe Road Student Accommodation* - 168
Retallack Surfpods Limited* - 164
Ridgeway Pub Company Limited** - 154
Hoi Polloi Limited* - 100
--------- --------
1,233 4,906
Disposals
Gain/ Total
Market (loss) realised
value at Disposal against gain/
Cost 01/02/10 Proceeds cost (loss)
'C' Share pool GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Lilliput Development LLP* 328 328 328 - -
-----------------------------------------
Total 'C' and 'D' Share pools 328 328 328 - -
*Non qualifying investment
**Partially qualifying investment
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly results cover the six months to 31 July 2010 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 ("SORP") and in accordance with the accounting policies set
out in the statutory accounts for the year ended 31 January 2010, which were
prepared under UK Generally Accepted Accounting Practice ("UK GAAP").
2. All revenue and capital items in the Income Statement derive from continuing
operations.
3. The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
4. The comparative figures are in respect of the six-month period ended 31 July
2009 and the year ended 31 January 2010 respectively.
5. Dividends
Six months ended Year ended
31 July 2010 31 Jan 2010
Date Per Revenue Capital Total Total
share
pence GBP'000 GBP'000 GBP'000 GBP'000
Paid in year
Ordinary Shares
2010 Interim 13 Mar 09 21.0p - - - 2,099
2010 Interim 28 Aug 09 8.0p - - - 800
2010 Interim 13 Jan 10 1.417p - - - 142
'C' Shares
2010 Final 30 Jul 10 5.0p - 359 359 -
------------------------------------
- 359 359 3,041
'D' Shares
2011 Proposed 26 Nov 10 2.5p - 500 -
interim
No dividends have been paid or declared in respect of the 'A' Shares or 'E'
Shares
6. Basic and diluted return per share
'C' 'A' 'D' 'E'
Shares Shares Shares Shares
Revenue return per share based on:
Net revenue after taxation ( GBP'000) (63) - 29 8
Weighted average number of ordinary
shares in issue 7,166,806 10,754,329 8,431,525 13,431,525
Capital return/(loss) per share based
on:
Net capital gain for the financial - - - -
year ( GBP'000)
Weighted average number of ordinary
shares in issue 7,166,806 10,754,329 8,431,525 13,431,525
7. Net asset value per Share
Shares in Issue Net asset value
per GBP'000
share
Ordinary Shares 9,994,968 0.1p 5
'C' Shares 7,166,806 90.0p 6,450
'A' Shares 10,754,329 0.1p 11
'D' Shares 10,000,000 94.8p 9,477
'E' Shares 15,000,000 0.1p 15
---------
15,958
8. Reserves
Capital Capital Investment
redemption Special Share Revenue reserve - holding
reserve reserve premium reserve realised losses
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2010 6 - 10,255 (2) - -
Issue of shares - - 6,288 - - -
Share issue costs - - (347) - - -
Net gains/(losses) on
investments - - - - - -
Expenses capitalised - - - - - -
Distributions paid - (359) - - - -
Transfer between
reserves - 16,196 (16,196) - - -
Retained net revenue
for the year - - - (26) - -
----------------------------------------------------------
At 31 July 2010 6 15,837 - (28) - -
The Special reserve, Capital reserve-realised, Investment holding losses reserve
and Revenue reserve are all distributable reserves.
Reserves available for distribution at the period end amounted to GBP15,809,000.
9. The unaudited condensed financial statements set out herein do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006
and have not been delivered to the Registrar of Companies. The figures for the
year ended 31 January 2010 have been extracted from the financial statements for
that year, which have been delivered to the Registrar of Companies; the
auditors' report on those financial statements was unqualified.
10. The Directors confirm that, to the best of their knowledge, the half-yearly
financial statements have been prepared in accordance with the "Statement:
Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and
the half-yearly financial report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period, and any changes in the related
party transactions described in the last annual report that could do so.
11. 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.
[HUG#1448109]
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Downing Planned Exit VCT 2 PLC via Thomson Reuters ONE
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