Source - GNW

Downing TWO VCT plc

Half-Yearly Report
for the six months ended 30 June 2016

Performance summary

'C' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'C' Share -   53.9   50.0
Net asset value per 'A' Share -   0.1   0.1
Cumulative distributions per 'C' Share 120.8   75.0   75.0
Adjusted for performance fee estimate -   (7.6)   (7.0)
Total return per 'C' Share and 'A' Share 120.8   121.4   118.1

'D' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'D' Share 34.8   51.8   73.1
Net asset value per 'E' Share 0.1   0.1   0.1
Cumulative distributions per 'D' Share 66.5   49.5   22.5
Total return per 'D' Share and 'E' Share 101.4   101.4   95.7

'F' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'F' Share 70.0   71.9   72.0
Cumulative distributions per 'F' Share 22.5   20.0   17.5
Total return per 'F' Share 92.5   91.9   89.5

'G' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'G' Share 85.4   86.3   88.5
Cumulative distributions per 'G' Share 17.5   15.0   12.5
Total return per 'G' Share 102.9   101.3   101.0

'K' Share pool30 Jun
2016
  

Initial
  Pence Pence
Net asset value per 'K' Share         99.7           100.0

CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Half-Yearly Report for the six months ended 30 June 2016. The period has seen the Company complete the process of returning capital to 'C' Shareholders and make a start in returning funds to investors in the 'D' Share pool. The Company has also made good progress in fundraising for the new 'K' Share pool.

Net asset values and overview
'C' Share pool
The task of returning funds to investors in the 'C' Share pool was completed with final dividends paid on 24 March 2016. The Total Return to Shareholders was 120.83p for a holding of one 'C' Share and one 'A' Share, compared to the cost net of income tax relief in 2009 of 70p.

The Company is now taking steps to cancel the 'C' Shares and 'A' Shares and will update relevant Shareholders on progress shortly.

'D' Share pool
The 'D' Share pool has now commenced the process of exiting from its investments. During the period sufficient realisations were completed to allow the payment of a dividend of 17.0p per 'D' Share in March 2016.

At 30 June 2016, the remaining net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 34.9p, the same value as at the period end after adjusting for the dividend payment of 17.0p per 'D' Share in the period. Total Return (NAV plus dividends paid to date) is now 101.4p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

'F' Share pool
The 'F' Share pool launched in 2012 and is scheduled to start exiting from investments in early 2018.

At 30 June 2016, the NAV for a holding of one 'F' Share was 70.0p, a net increase of 0.6p (0.8%) over the period (after adjusting for dividends paid during the period of 2.5p per 'F' Share). Total Return (NAV plus dividends paid to date) is now 92.5p, compared to the original cost, net of income tax relief, of 70p per share.

'G' Share pool
The 'G' Share pool raised funds in 2013 and has now completed its initial investment phase. The target date to start realising investments is late 2018.

At 30 June 2016, the NAV for a holding of one 'G' Share was 85.4p. This represents a net increase of 1.6p (1.9%) over the period (after adjusting for the dividends paid during the period of 2.5p per 'G' Share).  Total Return (NAV plus dividends paid to date) is now 102.9p, compared to the initial NAV of 100.0p and the original cost to investors (net of income tax relief) of between 70.4p and 76.2p (depending on initial costs).

'K' Share pool
The 'K' Share fundraising offer opened in December 2015 and has to date raised £15.4 million. A good start has been made to build the portfolio with a large proportion already invested. The closing date for the offer has now been extended to 30 September 2016.

At 30 June 2016 the NAV for a holding of one 'K' Share was 99.7p, compared to the initial NAV of 100.0p. The small deficit arises from holding a large proportion of funds as cash during the fundraising period. We expect this "cash drag" to reduce as the funds become invested.

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

'F' Shares              2.5p per share
'G' Shares             2.5p per share

Each of the above dividends will be paid on 16 December 2016 to Shareholders on the register at 18 November 2016.

No interim dividend is being declared in respect of the 'D' Shares as further return of capital dividends will be declared once further investment realisations have been completed.

Share buybacks
The Company has a general policy in the first five years after the launch of a share class, of buying in its own shares that become available in the market for cancellation. As a result, the Company will currently buy 'F' Shares, 'G' Shares and 'K' Shares that become available in the market and will, subject to liquidity and regulatory constraints, buy at prices approximately equal to net asset value i.e. with no discount.

No share buybacks in any share class were undertaken during the period.

Outlook
The Board is pleased to have delivered a good final outcome for 'C' Shareholders and the Manager's focus has now shifted to the exit process for the 'D' Share pool. Over the remainder of the year we expect to see significant progress in exiting from the remaining 'D' Share pool investments and hope to be in a position to declare a further dividend later in 2016 or early 2017. 'D' Shareholders should note that the exit process may well present some challenges which could result in the exit process taking some time to complete.

We expect investment activity in the 'F' Share and 'G' Share pools to be reasonably low during the remainder of the year as we look to the portfolio companies to develop further ahead of their planned exit dates in 2018.

The 'K' Share pool has invested in a number of companies that are preparing to commence trading so these will require close monitoring as they start to establish businesses.

In terms of the general outlook for small businesses, the result of the EU Referendum appears to have created a period of uncertainty for the UK economy and some volatility in stock markets. With a large proportion of the Company's funds already invested, the Board believes that any possible negative impact on the Company's performance will be limited.  A weaker longer term economy could result in greater difficulty in exiting from investments at the appropriate time, however the Directors feel that this is not a major risk. The Board will, of course, continue to monitor developments closely.

I look forward to updating Shareholders in my statement with the Annual Report to 31 December 2016.

Hugh Gillespie
Chairman

INVESTMENT MANAGER'S REPORT
'C' SHARE POOL

The 'C' Share pool completed the task of realising its investments in January 2016, and on 24 March 2016, paid final dividends.

Net asset value and results
Over the life of their investment, investors in the 'C' Share pool received total dividends of 105.61p per 'C' Share and 15.22p per 'A' Share making a total return of 120.83p for an original investment of 100p (70p net of income tax relief). We believe that this represents a very good return to Shareholders and brings the investment by 'C' Shareholders to a close.

Investment activity in the period
The 'C' Share pool had two investments at the start of the period. Both Quadrate Spa Limited and Quadrate Catering Limited were sold generating gains over original cost of £160,000.

Outlook
We are very satisfied with the final performance of the 'C' Share pool. Following the payment of the final dividends on 24 March 2016, the 'C' Share pool had negligible value at the period end and, in line with the Articles of the Company, the Company is taking steps to cancel the share class.

Downing LLP

SUMMARY OF INVESTMENT MOVEMENTS
'C' SHARE POOL
for the six months ended 30 June 2016

Disposals
Cost
Market
value at
01/01/16
Disposal
proceeds
Gain
against
cost
 Total
 realised
 gain
 
£'000
£'000
£'000
£'000
£'000
VCT qualifying and partially qualifying investments          
Quadrate Spa Limited 258 381 381 123 -
Quadrate Catering Limited 330 367 367 37 -
           
  588 748 748 160 -

INVESTMENT MANAGER'S REPORT
'D' SHARE POOL

The 'D' Share pool is in the process of seeking to realise its investments in order to return funds to 'D' Shareholders.

Investment activity
During the period under review, there were three full disposals and four partial disposals which produced proceeds of £1.5 million and showed a gain against previous carrying value of £109,000.

At 30 June 2016, the pool held 11 investments with a valuation of £3.0 million. One minor valuation change was made at the period end resulting in a total valuation reduction of £58,000 in Mosaic Spa and Health Clubs Limited. The carrying values adopted at the end of the period are consistent with the values at which we believe the investments can be exited.

The majority of investments have performed to plan although a small number which have underperformed historically are yet to fully recover.

Realisation plans
There are exit plans in place for the remaining 11 investments. The significant holdings in Kidspace Adventures Holdings Limited, Westcountry Solar Solutions Limited and Avon Solar Energy Limited are expected to exit in the next few months.

Although Gara Rock Resort Limited, formerly Aminghurst Limited, was sold in March 2016, the timing of the loan repayments depends on when the underlying apartments are sold. We are exploring some options to draw the investment to a conclusion earlier than might otherwise be the case.

Net asset value and results
At 30 June 2016, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 34.9p. Total Return (NAV plus dividends paid to date) is now 101.4p for a combined holding.

The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £9,000, comprising a revenue loss of £42,000 and a capital profit of £51,000.

Outlook
The remainder of the year will be a busy period in terms of investment realisations and we expect the next major distribution to Shareholders to be made before the end of the year or early 2017.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'D' SHARE POOL
as at 30 June 2016

 
Cost
Valuation
Unrealised
 loss in
 period
% of
 portfolio by
 value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Kidspace Adventure Holdings Limited 375 465 -
12.9%
Mosaic Spa and Health Clubs Limited* 521 288 (58)
8.0%
Westcountry Solar Solutions Limited 250 250 -
7.0%
Avon Solar Energy Limited 210 218 -
6.1%
Future Biogas (Reepham Road) Limited 451 98 -
2.7%
Camandale Limited* 422 2 -
0.1%
Quadrate Spa Limited 144 - -
0.0%
       
 
Non-qualifying investments      
 
Gara Rock Resort Limited 1,322 1,322 -
36.8%
Fenkle Street LLP 122 220 -
6.1%
Future Biogas (SF) Limited 84 84 -
2.3%
Redmed Limited 21 19 -
0.5%
       
 
  3,922 2,966 (58)
82.5%
       
 
Cash at bank and in hand   629  
17.5%
       
 
Total   3,595  
100%

*    Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'D' SHARE POOL
for the six months ended 30 June 2016

Disposals
Cost
 
Market
value at
01/01/16
Disposal
proceeds
Gain/
(loss)
against
cost
 Total
 realised
gain
 
£'000
£'000
£'000
£'000
£'000
VCT qualifying and partially
qualifying
investments
         
Quadrate Catering Limited 441 539 581 140 42
Future Biogas (Reepham Road) Limited 130 97 130 - 33
Liverpool Nurseries (Holdings) Limited - - 11 11 11
Quadrate Spa Limited 352 520 520 168 -
           
Non-qualifying investments          
Future Biogas (SF) Limited 85 85 102 17 17
Kilmarnock Monkey Bar Limited - - 6 6 6
Commercial Street Hotel Limited 100 100 100 - -
Redmed Limited 6 5 5 (1) -
           
  1,114 1,346 1,455 341 109

* Adjusted for additions in the year

INVESTMENT MANAGER'S REPORT
'F' SHARE POOL

The 'F' Share pool is fully invested in a portfolio focussed on asset backed businesses and those with predictable revenue streams. The 'F' Share pool is scheduled to start realising investments in 2017 in order to return funds to shareholders in 2018.

Investment activity
Four new investments were made in the period totalling £700,000. £300,000 was invested into Vectis Power Generation Limited which is seeking to build and develop renewable energy plants; £150,000 was invested into Brownfields Energy Limited which is seeking to develop small-scale waste disposal projects; £125,000 was invested into both Rhodes Renewables Limited and Morava Renewables Limited which are both exploring opportunities in the wood refinery sector.

One full exit was completed in the period for Grasshoppper 2007 Limited, the company that owns The Grasshopper Inn, a public house near Westerham, Kent which was sold and generated proceeds equivalent to the original cost of £378,000.

One notable partial divestment took place in the period being the part repayment of a non-qualifying loan to Gara Rock Resort Limited, formerly Aminghurst Limited, which generated proceeds of £494,000.

The majority of investments remain valued at or above cost and there was one small valuation movement in the period on Atlantic Dogstar Limited. The company owns a group of London pubs which are performing to plan and as such the valuation has been increased by £18,000.

Net asset value, results and dividend
At 30 June 2016, the net asset value ("NAV") for a holding of one 'F' Share was 70.0p, an increase of 0.6p (0.8%) over the period. Total Return (NAV plus dividends paid to date) is now 92.5p for a combined holding.

The gain on ordinary activities for the 'F' Shares, after taxation, for the period was £69,000, comprising a revenue profit of £51,000 and a capital gain of £18,000.

The Company will pay an interim dividend of 2.5p per 'F' Share, on 16 December 2016 to 'F' Shareholders on the register at 18 November 2016.

Outlook
The focus now for the 'F' Share portfolio is on close monitoring and support of the portfolio companies to ensure that prospects for growth are optimised in the period until the realisation process commences in 2017.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2016

 
Cost
Valuation
Unrealised
 gain
in period
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying
investments
     
 
Apex Energy Limited 1,000 1,000 -
13.3%
Vulcan Renewables Limited 653 778 -
10.3%
Goonhilly Earth Station Limited 760 760 -
10.1%
Lambridge Solar Limited 500 543 -
7.2%
Merlin Renewables Limited 500 500 -
6.6%
Augusta Pub Company Limited 290 324 -
4.3%
Kidspace Adventures Holdings Limited 250 310 -
4.1%
Vectis Power Generation Limited 300 300 -
4.0%
Pearce and Saunders Limited 497 248 -
3.3%
Pabulum Pubs Limited 200 229 -
3.0%
Atlantic Dogstar Limited 200 218 18
2.9%
Fresh Green Power Limited 200 200 -
2.7%
City Falkirk Limited 422 177 -
2.3%
Fubar Stirling Limited 268 169 -
2.2%
Brownfields Energy Limited 150 150 -
2.0%
Rhodes Renewables Limited 125 125 -
1.7%
Morava Renewables Limited 125 125 -
1.7%
Green Energy Production UK Limited 100 100 -
1.3%
Cheers Dumbarton Limited 48 17 -
0.2%
Redmed Limited* 13 11 -
0.1%
Lochrise Limited 13 - -
0.0%
       
 
Non-qualifying investments      
 
Baron House Developments LLP 481 481 -
6.4%
Gara Rock Resort Limited 345 345 -
4.6%
London City Shopping Centre Limited 66 66 -
0.9%
Pearce and Saunders DevCo Limited 46 46 -
0.6%
Southampton Hotel Development Limited 298 - -
0.0%
       
 
  7,850 7,222 18
95.8%
       
 
Cash at bank and in hand   312  
4.2%
       
 
Total   7,534  
100.0%

*    Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Vectis Power Generation Limited 300
Brownfields Energy Limited 150
Rhodes Renewables Limited 125
Morava Renewables Limited 125
Total 700

Disposals
Cost
Market
value at
01/01/16
Disposal
proceeds
Loss
against
cost
 Total
 realised
 gain
 
£'000
£'000
£'000
£'000
£'000
 
 
 
 
 
 
VCT qualifying and partially
qualifying investments
 
 
 
 
 
Grasshoppper 2007 Limited
378
378
378
-
-
Redmed Limited
5
3
3
(2)
-
           
Non-qualifying investments          
Gara Rock Resort Limited 494
494
494 - -
           
  877
875
875 (2) -

* adjusted for purchases made in the period

INVESTMENT MANAGER'S REPORT
'G' SHARE POOL

The 'G' Share pool raised funds in 2013 and is planning to start realising investments in 2018. The task of building the initial VCT qualifying portfolio is now complete and the fund is fully qualifying as at 30 June 2016.

Investment activity
Two new qualifying investments were made in the period. £1.45 million was invested into Quadrate Catering Limited which operates a restaurant in the iconic Cube Complex in Birmingham and £1 million was invested into Hermes Renewables Limited which is preparing to build and operate a wood pelleting plant.

One non-qualifying investment was made in Quadrate Spa Limited for £1.45 million which owns and operates a health club business in The Cube complex in Birmingham. 

In the period, total proceeds of £2.3 million were received. Grasshoppper 2007 Limited, the company that owns The Grasshopper Inn, a public house near Westerham, Kent was sold and generated proceeds equivalent to cost of £1.1m.

Two non-qualifying loans were repaid in full in the period. Pub People Limited, the public house operator in the East Midlands, repaid £873,000 and Ludlow Taverns Limited repaid £387,000. 

The majority of investments remain valued at or above cost and there was one small valuation uplift in the period on Atlantic Dogstar Limited. The company owns a group of London pubs which are performing to plan and as such the valuation has been increased by £306,000.

Net asset value
At 30 June 2016, the net asset value ("NAV") for a holding of one 'G' Share was 85.4p which represents a net increase of 1.6p (1.9%) over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 102.9p.

Results and dividend
The profit on ordinary activities for the 'G' Shares, after taxation, for the period was £406,000, comprising a revenue profit of £100,000 and a capital profit of £306,000.

The Company will pay an interim dividend of 2.5p per 'G' Share, on 16 December 2016 to 'G' Shareholders on the register at 18 November 2016.

Outlook
The 'G' Share pool is fully qualifying and therefore our focus has now shifted to close monitoring and support of the portfolio companies in order to nurture growth before the ultimate exit date.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'G' SHARE POOL
as at 30 June 2016

 
Cost
Valuation
Unrealised
 gain in
 period
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially
qualifying investments
     
 
Atlantic Dogstar Limited 3,500 3,806 306
17.6%
Kidspace Adventure Holdings Limited 1,977 1,977 -
9.2%
Antelope Pub Limited 1,760 1,760 -
8.2%
Goonhilly Earth Station Limited 1,710 1,710 -
7.9%
Quadrate Catering Limited 1,450 1,450 -
6.7%
Apex Energy Limited 1,300 1,300 -
6.0%
Hedderwick Limited 1,250 1,250 -
5.8%
Hermes Renewables Limited 1,000 1,000 -
4.6%
Augusta Pub Company Limited 580 648 -
3.0%
Pabulum Pubs Limited 400 458 -
2.1%
Oak Grove Renewables Limited 420 315 -
1.5%
Redmed Limited* 26 22 -
0.1%
       
 
 Non-qualifying investments      
 
Quadrate Spa Limited 1,450 1,450 -
6.7%
Hobblers Health Limited 1,324 1,324 -
6.1%
Baron House Developments LLP 1,093 1,093 -
5.1%
Gara Rock Resort Limited 801 801 -
3.7%
Pearce and Saunders Limited 193 193 -
0.9%
London City Shopping Centre Limited 110 110 -
0.5%
Craft Beer Pub Co Limited 92 92 -
0.4%
       
 
  20,436 20,759 306
96.1%
       
 
Cash at bank and in hand   832  
3.9%
       
 
Total   21,591  
100%

SUMMARY OF INVESTMENT MOVEMENTS
'G' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Quadrate Catering Limited 1,450
Hermes Renewables Limited 1,000
   
Non-qualifying investments  
Quadrate Spa Limited 1,450
Total 3,900

Disposals
Cost
Market
value at
01/01/16
Disposal
proceeds
Loss
against
cost
 Total
 realised
 gain
 
£'000
£'000
£'000
£'000
£'000
           
VCT qualifying and partially
qualifying investments
         
Grasshoppper 2007 Limited 1,050 1,050 1,050 - -
Redmed Limited 10 6 6 (4) -
           
Non-qualifying investments          
Pub People Limited 873 873 873 - -
Ludlow Taverns Springhill Limited 387 387 387 - -
           
  2,320 2,316 2,316 (4) -

INVESTMENT MANAGER'S REPORT
'K' SHARE POOL

The 'K' Share pool is currently in the fundraising process with the offer currently open until 30 September 2016.

Investment activity
During the last six months, ten qualifying investments have been made totalling £9.5 million as we start to build the qualifying portfolio of the 'K' Share pool.

The qualifying investments include a £1 million investment in Vectis Power Generation Limited which is seeking to build and develop renewable energy plants.

£1 million in Brownfields Energy Limited which is seeking to develop small-scale waste disposal projects.

£1.3 million was invested in Yamuna Renewables Limited which is seeking investment opportunities in the wood refinery sector.

£736,000 was invested into both Ironhide Generation Limited and Indigo Generation Limited. £591,000 was invested in  Rockhopper Renewables Limited and £337,000 in SF Renewables (Solar) Limited which are all in the process of acquiring land in India to build and operate 15MW ground mounted solar arrays.

Jito Renewables Limited, Rhodes Renewables Limited and Morava Renewables Limited are all exploring opportunities in the wood refinery sector following investments of £1.5 million, £1.25 million and £1.1 million respectively.

No valuation adjustments have been made in the period with all investments remaining at cost.

Net asset value, results and dividend
At 30 June 2016, the net asset value ("NAV") for a holding of one 'K' Share was 99.7p compared to the initial NAV of 100.0p.

The loss on ordinary activities for the 'K' Shares, after taxation, for the period was £31,000, being wholly related to revenue.

Outlook
We will continue to seek investment opportunities and develop the current investment portfolio over the remainder of the period and look forward to updating 'K' Shareholders further in the annual report to 31 December 2016.

Downing LLP

SUMMARY OF INVESTMENT MOVEMENTS
'K' SHARE POOL
as at 30 June 2016

 
Cost
Valuation
Unrealised
 gain in
 period
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Jito Renewables Limited 1,500 1,500 -
11.5%
Yamuna Renewables Limited 1,300 1,300 -
10.0%
Rhodes Renewables Limited 1,250 1,250 -
9.6%
Morava Renewables Limited 1,100 1,100 -
8.4%
Brownfields Energy Limited 1,000 1,000 -
7.7%
Vectis Power Generation Limited 1,000 1,000 -
7.7%
Ironhide Generation Limited 736 736 -
5.7%
Indigo Generation Limited 736 736 -
5.7%
Rockhopper Renewables Limited 591 591 -
4.5%
SF Renewables (Solar) Limited 337 337 -
2.6%
       
 
  9,550 9,550 -
73.4%
       
 
Cash at bank and in hand   3,469  
26.6%
       
 
Total   13,019  
100%


SUMMARY OF INVESTMENT MOVEMENTS
'K' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Jito Renewables Limited 1,500
Yamuna Renewables Limited 1,300
Rhodes Renewables Limited 1,250
Morava Renewables Limited 1,100
Brownfields Energy Limited 1,000
Vectis Power Generation Limited 1,000
Ironhide Generation Limited 736
Indigo Generation Limited 736
Rockhopper Renewables Limited 591
SF Renewables (Solar) Limited 337
   
Total 9,550

UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2016

   

30 Jun 2016
 30 Jun
2015
 31 Dec
2015

 

 

'C'
Shares
 

'D'
Shares
 

'F' Shares
 

'G' Shares
 

'K'
Shares
 

 

Total
  

 

Total
  

 

Total

 

£'000£'000£'000£'000£'000£'000 £'000 £'000

 

                   
Fixed assets                    
Unquoted investments  

-
 

2,966
 

7,222
 

20,759
 

9,550
 

40,497
   

33,882
   

31,365
                     
Current assets                    
Debtors - (3) 154 332 1 484   727   879
Cash at bank and in hand  

65
 

629
 

312
 

832
3,469 5,307   7,112   7,021
  65 626 466 1,164 3,470 5,791   7,839   7,900
                     
Creditors: amounts falling due within one year  

(61)
 

(96)
 

(108)
 

(232)
 

(1,096)
 

(1,593)
 
(534)
   

(532)
                     
Net current assets 4 530 358 932 2,374 4,198   7,305   7,368
                     
Net assets 4 3,496 7,580 21,691 11,924 44,695   41,187   38,733
                     
Capital and reserves                    
Called up share capital 18 25 11 25 12 91   79   79
Capital redemption reserve 106 - - - - 106   106   106
Special reserve - 3,845 8,886 22,341 - 35,072   43,011   40,086
Share premium account - - - - 12,237 12,237   -   -
Revaluation reserve (105) (956) (627) 322 - (1,366)   (1,431)   (1,248)
Capital reserve - realised - - (1,033) (1,221) - (2,254)   (1,965)   (2,252)
Revenue reserve (15) 582 343 224 (325) 809   1,387   1,962
Total equity shareholders' funds  

4
 

3,496
 

7,580
 

21,691
 

11,924

44,695
   

41,187
   

38,733
                     
 Basic and diluted net asset value per:      
'C' Share -           50.0p 53.9p
'A' Share -           0.1p 0.1p
'D' Share   34.8p           73.1p 51.8p
'E' Share   0.1p           0.1p 0.1p
'F' Share     70.0p         72.0p 71.9p
'G' Share       85.4p       88.5p 86.3p
'K' Share         99.7p        

STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2016

Called
 up
share
 capital
Capital redemption ReserveSpecial ReserveShare Premium ReserveRevaluation
reserve
Capital reserve
realised
Revenue reserveTotal
 £'000£'000£'000£'000£'000£'000£'000£'000
                 
At 1 January 2015 79 106 47,161 - (289) (2,255) 548 45,350
(Loss)/gain on investments  

-
-  

-
 

-
 

(8)
 

49
 

-
 

41
Purchase of own shares  

-
 

-
 

-
 

-
 

-
 

-
 

(44)
(44)
Returned revenue - - - - - - 1,458 1,458
Transfer between reserves  

-
-  

(7,075)
 

-
 

(951)
 

8,026
 

-
-
Dividends paid - - - - - (8,072) - (8,072)
At 31 December 2015 79 106 40,086 - (1,248) (2,252) 1,962 38,733
Issue of Shares 12 - - 12,237 - - - 12,249
Share issue costs - - - - - - (294) (294)
Gain on investments - - - - 266 109 - 375
Returned revenue - - - - - - 51 51
Transfer between reserves - -  

(5,014)
-  

(384)
 

6,308
 

(910)
-
Dividends paid - - - - - (6,419) - (6,419)
At 30 June 2016 91 106 35,072 12,237 (1,366) (2,254) 809 44,695

INCOME STATEMENT
for the six months ended 30 June 2016

Company Total

  

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 634 - 634   1,439 - 1,439   2,663
                   
Gains/(losses)
on investments
               
- realised - 266 266   - (362) (362)   49
- unrealised - 109 109   - (172) (172)   (8)
  634 375 1,009   1,439 (534) 905   2,704
                   
Investment management fees (409) - (409)   (383) - (383)   (753)
Other expenses (174) - (174)   (126) - (126)   (251)
                   
Return/(loss) on ordinary activities before taxation 51 375 426   930 (534) 396   1,700
                   
Tax on total comprehensive income and ordinary activities - - -   (80) - (80)   (201)
                   
Return/(loss) attributable to equity shareholders 51 375 426   850 (534) 316   1,499
                   
Return per 'C' Share (0.4p) - (0.4p)   7.9p (6.5p) 1.4p   5.2p
Return per 'A' Share - - -   - - -   -
Return per 'D' Share (0.4p) 0.5p 0.1p   1.2p 0.4p 1.6p   7.2p
Return per 'E' Share - - -   - - -   -
Return per 'F' Share 0.5p 0.2p 0.7p   0.4p (1.7p) (1.3p)   1.1p
Return per 'G' Share 0.4p 1.2p 1.6p   0.5p 0.3p 0.8p   1.1p
Return per 'K' Share (0.4p) - (0.4p)   - - -   -

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.

INCOME STATEMENT
for the six months ended 30 June 2016

'C' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 6 - 6   621 - 621   818
                   
Gains/(losses) on investments                
- realised - - -   - (412) (412)   (340)
- unrealised - - -   - (53) (53)   25
  6 - 6   621 (465) 156   503
                   
Investment management fees (9) - (9)   (31) - (31)   (57)
Other expenses (31) - (31)   (18) - (18)   (35)
                   
Return/(loss) on ordinary activities before taxation (34) - (34)   572 (465) 107   411
                   
Tax on total comprehensive income and ordinary activities 7 - 7   (12) - (12)   (39)
                   
Return/(loss) attributable to equity shareholders (27) - (27)   560 (465) 95   372

INCOME STATEMENT
for the six months ended 30 June 2016

'D' Shares 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income (14) - (14)   227 - 227   560
                   
Gains/(losses) on investments                  
- realised - 109 109   - 50 50   297
- unrealised - (58) (58)   - (11) (11)   87
  (14) 51 37   227 39 266   944
                   
Investment management fees (27) - (27)   (49) - (49)   (97)
Other expenses (19) - (19)   (24) - (24)   (44)
                   
Return/(loss) on ordinary activities before taxation (60) 51 (9)   154 39 193   803
                   
Tax on total comprehensive income and ordinary activities 18 - 18   (32) - (32)   (80)
                   
Return/(loss) attributable to equity shareholders (42) 51 9   122 39 161   723

INCOME STATEMENT
for the six months ended 30 June 2016

'F' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 170 - 170   153 - 153   409
                   
Gains/(losses) on investments                  
- realised - - -   - - -   79
- unrealised - 18 18   - (179) (179)   (136)
  170 18 188   153 (179) (26)   352
                   
Investment management fees (70) - (70)   (73) - (73)   (144)
Other expenses (40) - (40)   (37) - (37)   (74)
                   
Return/(loss) on ordinary activities before taxation 60 18 78   43 (179) (136)   134
                   
Tax on total comprehensive income and ordinary activities (9) - (9)   (4) - (4)   (16)
                   
Return/(loss) attributable to equity shareholders 51 18 69   39 (179) (140)   118

INCOME STATEMENT
for the six months ended 30 June 2016

'G' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 413 - 413   438 - 438   876
                   
Gains on investments                  
- realised - - -   - - -   13
- unrealised - 306 306   - 71 71   16
  413 306 719   438 71 509   905
                   
Investment management fees (219) - (219)   (230) - (230)   (455)
Other expenses (70) - (70)   (47) - (47)   (98)
                   
Return on ordinary activities before taxation 124 306 430   161 71 232   352
                   
Tax on total comprehensive income and ordinary shares (24) - (24)   (32) - (32)   (66)
                   
Return attributable to equity shareholders 100 306 406   129 71 200   286

INCOME STATEMENT
for the six months ended 30 June 2016

'K' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 59 - 59   - - -   -
                   
Gains on investments                  
- realised - - -   - - -   -
- unrealised - - -   - - -   -
  59 - 59   - - -   -
                   
Investment management fees (84) - (84)   - - -   -
Other expenses (14) - (14)   - - -   -
                   
Loss on ordinary activities before taxation (39) - (39)   - - -   -
                   
Tax on total comprehensive income and ordinary shares 8 - 8   - - -   -
                   
Loss attributable to equity shareholders (31) - (31)   - - -   -

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2016

 

 
  

30 Jun 2016
 30 Jun 2015 31 Dec 2015
  

'C'
Shares
 

'D'
Shares
 

'F'
Shares
 

'G'
Shares
 

'K'
Shares
 

 

Total
  

 

Total
  

 

Total
Note£'000£'000£'000£'000£'000£'000 £'000 £'000
                     
Net cash inflow from operating activities 

1
 

136
 

207
 

15
 

84
 

1,064
 

1,506
   

725
   

1,178
                     
Cash flows from investing
activities

 
                   
Purchase of investments - - (700) (3,900) (9,550) (14,150)   (4,542)   (14,043)
Sale of investments 748 1,455 875 2,316    - 5,394   5,361   17,955
Net cash inflow/
(outflow)
from investing
activities
748 1,455 175 (1,584) (9,550) (8,756)  
819
  3,912
                     
Net cash inflow/
(outflow) before
financing activities

 

 

 

 

before financing activities
 

884
 

1,662
 

190
 

(1,500)
 

(8,486)
 

(7,250)

 
   

1,544
   

5,090
                     
Cash flows from
financing activities
 

 
 

 
 

 
 

 
 

 
 

 
   

 
 

 
 

 
Proceeds from share issue - - - - 12,249 12,249   -   -
Share issue costs - - - - (294) (294) - -   -
Equity dividend paid (3,814) (1,700) (270) (635) - (6,419)   (4,468)   (8,072)
Purchase of own shares - - - - - -   (11)   (44)
Net cash (outflow)/
inflow from
financing activities
 

(3,814)
 

(1,700)
 

(270)
 

(635)
 

11,955
 

5,536

 
   

(4,479)
   

(8,116)
(Decrease)/increase 
 in cash                             2
 

(2,930)

 

 
 

(38)
 

(80)
 

(2,135)
 

3,469
 

(1,714)
   

(2,935)
   

(3,026)

NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2016

 

 

 30 Jun 2016 30 Jun
 2015
 31 Dec 2015

 

'C'
Shares
'D'
Shares
'F'
Shares
'G'
Shares
'K'
Shares
 

Total
  

Total
  

Total

 

£'000£'000£'000£'000£'000£'000 £'000 £'000
                     
1Cash inflow from operating activities        
Return/(loss) on ordinary activities before taxation (34) (9) 78 430
(39)
426   396   1,700
Corporation tax 4 6 1 1 - 12   -   (160)
Losses/(gains) on investments - (51) (18) (306) - (375)    534   (41)
Decrease/(increase) in other
debtors
175 286 (23) (42)  

(1)
395   (93)   (243)
(Decrease)/increase in other
creditors
(9) (25) (23) 1  

1,104
1,048   (112)   (78)
Net cash inflow from operating
activities
136 207 15 84  

 

1,064
1,506    725   1,178
                     
2 Analysis of net funds                    
Beginning of period 2,995 667 392 2,967 - 7,021   10,047   10,047
Net cash (outflow)/inflow (2,930) (38) (80) (2,135) 3,469 (1,714)   (2,935)   (3,026)
End of period 65 629 312 832 3,469 5,307   7,112   7,021

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1.   General information
Downing Two VCT plc ("The Company") is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales.

2.   Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2016 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2015, which were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland (FRS102).

3.   All revenue and capital items in the Income Statement derive from continuing operations.

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

5.   The comparative figures are in respect of the six month period ended 30 June 2015 and the year ended 31 December 2015 respectively.

6.   Dividends

    

Six months ended
30 June 2016
 Year to
31 Dec 2015
 Per share RevenueCapitalTotal Total
Paid in periodpence £'000£'000£'000 £'000
               
'C' Shares              
Special 'C' 2016 30.6p   - 2,182 2,182   -
Special 'A' 2016 15.2p   - 1,632 1,632   -
Y/E Dec 2014 Final 50.0p   - - -   3,562
      - 3,814 3,814   3,562
               
'D' Shares              
Y/E Dec 2015 Final 17.0p   - 1,700 1,700   -
Y/E Dec 2015 Interim 27.0p   - - -   2,700
      - 1,700 1,700   2,700
               
'F' Shares              
Y/E Dec 2015 Final 2.5p   - 270 270   -
Y/E Dec 2015 Interim 2.5p   - - -   270
Y/E Dec 2014 Final 2.5p   - - -   270
      - 270 270   540
               
'G' Shares              
Y/E Dec 2015 Final 2.5p   - 635 635   -
Y/E Dec 2015 Interim 2.5p   - - -   635
Y/E Dec 2014 Final 2.5p   - - -   635
      - 635 635   1,270

No dividends have been paid or declared in respect of the 'E' Shares or 'K' Shares.

7.   Basic and diluted return per share

 

Weighted average
number of
shares in issue
  

Revenue
return/(loss)
  

Capital
return
    

£'000
Per
share
  

£'000
Per
share
             

'C' Shares

7,126,194   (27) (0.4p)   - -

'A' Shares

10,724,029   - -   - -

'D' Shares

10,000,000   (42) (0.4p)   51 0.5p

'E' Shares

14,950,000   - -   - -

'F' Shares

10,822,154   51 0.5p   18 0.2p

'G' Shares

25,528,996   100 0.4p   306 1.2p

'K' Shares

6,877,568   (31) (0.4p)   - -

 

    51     375  

8. Net asset value per share

 

Shares in issue Net asset value
  

£'000
 Per
share

 

 

       

'C' Shares

7,126,194

  4   -

'A' Shares

10,724,029

  -        -

'D' Shares

10,000,000

  3,481   34.8p

'E' Shares

14,950,000

  15       0.1p

'F' Shares

10,822,154

  7,580   70.0p

'G' Shares

25,386,546

  21,691   85.4p

'K' Shares

11,954,428

  11,924   99.7p

 

 

  44,695    

9. Reserves

 

 
Period  ended
30 Jun 2016
 Year ended
30 Dec 2015
 £'000 £'000
    
Capital redemption reserve 106   106
Special reserve 35,072   40,086
Share premium reserve 12,237   -
Revaluation reserve (1,366)   (1,248)
Capital reserve- realised (2,254)   (2,252)
Revenue reserve 809   1,962
  44,604   38,654

The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £2,302,000 which are included in the calculation of distributable reserves. Total distributable reserves are £31,325,000 (31 Dec 2015: £37,759,000).

  1. The fair value of investments is determined using the detail accounting policy set out in the statutory accounts for the year ended 31 December 2015.

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level a Reflects financial instruments quoted in an active market;
Level b Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level c i) Reflects financial instruments that use valuation techniques that are based on observable market date.
ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

   

 

Level a
 

 

Level b
 

 

Level c (ii)
Period
ended
 30 June
 2016
  

 

Level
a
 

 

Level
 b
 

 

Level c (ii)
Year ended 31 Dec 2015
  £'000£'000£'000£'000 £'000£'000£'000£'000
                   
Loan notes - - 12,156 12,156   - - 15,394 15,394
Unquoted equity  

-
 

-
 

28,341
 

28,341
   

-
 

-
 

15,971

15,971
  - - 40,497 40,497   - - 31,365 31,365

11. The unaudited condensed financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2015 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

12. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

13. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board concluded that the key risks facing the Company over the remainder of the financial period are as follows:

(i)   Compliance risk of failure to maintain approval as a VCT; and
(ii)  Investment risk associated with investing in small and immature businesses.

The Company's compliance with the VCT regulations is continually monitored by the Manager, who reports regularly to the Board on the current position. The Company has also reappointed Philip Hare and Associates LLP to provide regular reviews and advice in this area.

In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature. It also has a limited period in which it must invest the majority of its funds. The Manager follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible and, after an investment is made, closely monitoring the business.

The Board is satisfied that these approaches provide satisfactory management of the key risks.

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

The Board confirms that it is satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, the Board believes that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

  1. Copies of the unaudited half-yearly report will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or will be available for download from www.downing.co.uk.



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

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