TIDMD1GO
Downing Planned Exit VCT 2011 plc
Final results for the year ended 30 November 2012
PERFORMANCE SUMMARY 30 Nov 30 Nov
2012 2011 Initial
General pool Pence Pence Pence
Net asset value per General Ordinary Share 80.3 87.1 88.4
Net asset value per General 'A' Share 6.3 6.9 6.1
Cumulative dividends paid per General Ordinary Share 7.5 - -
----------------------
Total return per General Ordinary Share and 'A' Share 94.1 94.0 94.5
----------------------
Structured pool
Net asset value per Structured Ordinary Share 81.9 82.5 88.4
Net asset value per Structured 'A' Share 6.5 6.5 6.1
Cumulative dividends paid per Structured Ordinary Share 7.5 - -
----------------------
Total return per Structured Ordinary Share and 'A' Share 95.9 89.0 94.5
----------------------
Low Carbon pool (per GBP1 invested) *
Net asset value per 1.0695 Low Carbon Ordinary Shares 86.0 93.2 94.5
Cumulative dividends paid per 1.0695 Low Carbon Ordinary 8.0 - -
Shares
----------------------
94.0 93.2 94.5
----------------------
* Low Carbon Ordinary Shares were originally issued at 93.5p per share. The
above figures have been expressed in terms of an original investment of GBP1 which
equates to a holding of 1.0695 shares.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Annual Report of Downing Planned Exit VCT 2011 plc
for the year ended 30 November 2012. It has been a steady year for each share
pool in terms of performance and one in which good progress has been made in
building the venture capital investment portfolios towards the 70% target needed
for VCT qualification by 30 November 2013. At date of this report, approximately
58% of the funds were employed in VCT qualifying investments.
General Share pool
At 30 November 2012, the net asset value ("NAV") per General Ordinary Share was
80.3p and per General 'A' Share was 6.3p. This represents an increase of 0.1p
(0.1%) over the year after adjusting for dividends paid.
Dividends totalling 7.5p per General Ordinary Share have been paid to date so
Total Return for a combined holding of one General Ordinary Share and one
General 'A' Share is 94.1p. This compares to the initial NAV of 94.5p (net of
issue costs) and the cost to Shareholders (net of income tax relief) of 70.0p.
The pool continued to build its VCT qualifying portfolio over the year, such
that approximately 45% of the pool was invested in qualifying investments at the
year end. Several non-qualifying investments are also expected to become
qualifying in due course.
The pool suffered a loss on one investment, Helcim Group, which encountered
major difficulties and was ultimately sold. There has also been a small write
down in value of an underperforming nightclub investment, City Falkirk. The
remainder of the portfolio has performed satisfactorily. While these losses of
value are disappointing, prospects for the remainder of the portfolio are
healthy. With many yielding investments within the portfolio, the capital losses
above have been offset by investment income received.
A full review of the General Share pool's activities is covered in the
Investment Manager's Report and Review of Investments on below.
Structured Share pool
At 30 November 2012, the net asset value ("NAV") per Structured Ordinary Share
was 81.9p and per Structured 'A' Share was 6.5p. This represents an increase of
6.9p (7.8%) over the year after adjusting for dividends paid.
Dividends totalling 7.5p per Structured Ordinary Share have been paid to date so
Total Return for a combined holding of one Structured Ordinary Share and one
Structured 'A' Share is 95.9p. This compares to the initial NAV of 94.5p (net of
issue costs) and the cost to Shareholders (net of income tax relief) of 70.0p.
As with the General Share pool, the Structured Share pool continued to build its
qualifying portfolio during the year, such that approximately 40% of the pool
was invested in qualifying investments at the year end. The Structured Product
portfolio benefitted from a significant number of redemptions. Two venture
capital investments held in common with the General Share Pool, Helcim Group and
City Falkirk, lost value, however these losses were more than offset by the
realised and unrealised gains arising from the Structured Product portfolio.
A full review of the Structured Share pool's activities is covered in the
Investment Manager's Report and Review of Investments on below.
Low Carbon pool
The net asset value ("NAV") per Low Carbon Ordinary Share at 30 November 2012
was 80.4p. This represents an increase of 0.8p (0.9%) over the year after
adjusting for dividends paid.
Dividends totalling of 7.5p per Low Carbon Ordinary Share have been paid to date
so Total Return per share is 87.9p. The Low Carbon Ordinary Shares were
originally issued at a price of 93.5p rather than the more usual price of GBP1.
Total Return based on an investment of GBP1 is therefore 94.0p. This compares to
the initial net asset value of an investment of GBP1 (net of issue costs) of
94.5p and the cost to Shareholders (net of income tax relief) of 70.0p.
The task of building the Low Carbon portfolio was completed early in the year.
This now comprises seven solar investments with a number of investment partners.
Unsurprisingly, against a backdrop of chaotically changing tariff legislation
during the investment period, there were some minor initial issues with some
projects, however, all projects are now fully operational, generating
electricity and earning Feed-in Tariffs. Assuming that the projects can deliver
the expected output levels, we expect to see the portfolio delivering a strong
income stream as well as capital growth.
Full details of the Low Carbon pool's activities are included in the Investment
Manager's Report and Review of Investments on below.
Dividends
It is the Company's intention to pay dividends of 5.0p per annum in respect of
each of the classes of Ordinary Shares.
Interim dividends of 2.5p were paid on 30 November 2012 in respect of each class
of Ordinary Shares and so a final dividend of 2.5p for each class of Ordinary
Shares is being proposed.
Subject to Shareholder approval at the AGM, the dividends will be paid on 17 May
2013 to Shareholders on the register at 19 April 2013.
Share buybacks
The Company operates a share buyback policy whereby, subject to certain
restrictions, it will buy in any of its own shares that become available in the
market for cancellation. In its initial years, the Company has a policy of,
subject to any regulatory and liquidity contracts, undertaking any buybacks at a
price approximately equal to the latest published NAV (i.e. at a nil discount).
During the year, the Company repurchased 20,125 General Ordinary Shares for an
aggregate consideration of GBP17,251 being an average price of 84.0p per share and
which represented 0.13% of the Company's issued General Ordinary Share capital.
15,000 General 'A' Shares were repurchased for an aggregate consideration of
GBP975 being an average price of 6.5p per share and which represented 0.03% of the
Company's issued General 'A' Share capital. 5,125 Structured Ordinary Shares
were repurchased for an aggregate consideration of GBP3,972 being an average price
of 77.5p per share and which represented 0.05% of the Company's issued General
'A' Share capital. These shares were subsequently cancelled.
A special resolution to continue this policy is proposed for the forthcoming
Annual General Meeting ("AGM").
Annual General Meeting
The Company will hold its second AGM on 7 May 2013 at 11:15 a.m. at 10 Lower
Grosvenor Place, London SW1W 0EN.
One item of special business is proposed in respect of share buybacks as
mentioned above.
Outlook
The Board is satisfied with the Company's performance to date. We are confident
that, over the coming year, the task of building the VCT qualifying portfolios
within the General and Structured Share pools will be completed. Although both
pools have suffered a couple of minor setbacks within their venture capital
portfolios, the majority of the investments are performing to plan and have the
potential to deliver solid results over the anticipated life of the Fund.
As the Low Carbon Share pool is already fully invested, investment activity
going forward is expected to be limited. The focus will be on establishing a
solid track record of electricity generation within the various projects in
order to help facilitate a smooth exit at an attractive price when that time
comes.
Sir Aubrey Brocklebank Bt.
Chairman
INVESTMENT MANAGER'S REPORT - GENERAL SHARE POOL
Introduction
The General Share pool holds investments in 21 companies and is expected to
become fully invested over the course of 2013. The majority of the General Share
pool's investments are performing to plan, although two investments faced
difficulties resulting in an unrealised loss of GBP131,000 and a realised loss of
GBP160,000.
Net asset value and results
The net asset value ("NAV") per General Ordinary Share at 30 November 2012 stood
at 80.3p and the NAV per General 'A' Share at 6.3p. Combined Total Return
(Combined NAV plus dividends paid to date) now stands at 94.1p, compared to the
original cost net of income tax relief of 70.0p.
The profit on ordinary activities after taxation for the period was GBP6,000,
comprising a revenue profit of GBP363,000 and a capital loss of GBP357,000.
Investment activity
The General Share pool began the year with GBP8.1 million of investments and ended
with GBP12.1 million spread across a portfolio of 21 companies. 10 of these
investments, with a value of GBP7.3 million, were VCT qualifying (or part
qualifying).
During the year, the pool made seven new VCT qualifying (or part qualifying)
investments with a total cost of GBP6.1 million. An overview of the largest of
these investments is detailed below.
The pool made an investment of GBP1.4 million in Tooting Tram and Social Limited,
alongside an established pub operator. The company owns and operates the Tooting
Tram and Social pub in Tooting, South London.
Three separate investments were made in City Falkirk Limited, Fubar Stirling
Limited and Cheers Dumbarton Limited totalling GBP1.2 million. Each of these
companies owns and operates a nightclub in Scotland. The clubs are managed by
Lochrise Limited, which is associated with the Castle Leisure Group, an
experienced operator in the region.
GBP815,000 was invested in Mosaic Spa and Health Clubs Limited, a spa and health
club management company which trades under the name of Fitness Express. The
company currently has approximately 30 management contracts to provide gym and
spa management to hotels, universities and corporate clients. In December 2011,
the Company also invested GBP360,000 in Mosaic Spa and Health Club (Shrewsbury)
Limited to back the Mosaic management team to purchase a freehold operating
health club known as Welti near Shrewsbury. In October 2012, the group was
reorganised such that Mosaic Spa and Health Club (Shrewsbury) Limited became a
subsidiary of Mosaic Spa and Health Clubs Limited and we now hold an investment
in one entity. At the same time, the group purchased a second freehold club in
Hereford, Holmer Park.
A further investment of GBP1,200,000 was made in South-Western Farms Solar
Limited. The company has installed solar PV panels on commercial rooftops in
Devon and earns Feed-in Tariffs ("FiTs") as a result. The additional funding was
used to expand the portfolios of PV panels. By the year end GBP400,000 worth of
the investment in South Western Farms Solar Limited had been disposed of.
An investment of GBP690,000 was made in Kidspace Adventures Holdings Limited. The
company is the holding company to an existing investment, Kidspace Adventures
Limited which owns and operates children's indoor play centres in Croydon and
Romford. The new investment has funded a new outdoor centre in Epsom,
Hobbledown, which opened for business in July 2012.
GBP600,000 was invested in Odysian (Holdings) Limited to support the purchase of
the freehold of the Cruise nightclub in Chester, which is owned and operated by
the company. The management team is highly experienced and has operated the club
for several years.
The share pool realised a number of investments, mostly non-qualifying, during
the year generating proceeds of GBP4.7 million. The proceeds were used for the new
qualifying investments above plus GBP2.8 million of new non-qualifying
investments.
Portfolio valuation
The majority of the investments have performed more or less to plan to date and
have been valued at levels equal to original cost as the year end. There have,
however, been two investments that have lost value, Helcim Group Limited and
City Falkirk Limited.
Helcim Group Limited organises and manages housing for vulnerable tenants by
working with local authorities and private landlords. The company failed to
fulfil its ambitious expansion plans and, after significant efforts to get the
business on track did not deliver results, the business was sold in October
2012, realising a loss of GBP160,000. Consideration for the disposal is deferred
and is scheduled to be received over the next three years.
As mentioned above, City Falkirk owns a large nightclub in Falkirk, Scotland.
The club was purchased out of administration in April 2012. Trading performance
of the nightclub to date has been behind forecast as it has become apparent that
the long period in administration has damaged the business as a result of poor
customer service, lack of maintenance etc. to a greater extent than had been
expected. Accordingly, a cautionary reduction in value of GBP131,000 was
recognised at the year end.
Outlook
The General Share pool now has a reasonably well diversified qualifying
portfolio, which includes investments in nightclubs, renewable energy projects,
pubs and health clubs. The difficult general economic conditions in the UK are
expected to continue throughout 2013. However, the continued lack of traditional
funding is likely to mean that the Manager will continue to see a steady flow of
potential investment opportunities for the Company. Identifying the strongest of
these opportunities which fit the Company's investment criteria will be key to
the overall success of the General Share pool. The Manager will continue to
focus on securing qualifying investments for the General Share pool as the share
pool continues to exit from some of the non-qualifying investments.
Downing LLP
Portfolio of investments
The following investments were held at 30 November 2012:
Valuation
movement % of
Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Tooting Tram and Social Limited* 1,440 1,440 - 10.5%
Mosaic Spa and Health Clubs Limited* 1,175 1,175 - 8.5%
South-Western Farms Solar Limited* 800 800 - 5.8%
Kidspace Adventures Holdings Limited* 690 690 - 5.0%
Westcountry Solar Solutions Limited 600 600 - 4.4%
Avon Solar Energy Limited 600 600 - 4.4%
Residential PV Trading Limited 600 600 - 4.4%
Odysian (Holdings) Limited 600 600 - 4.4%
City Falkirk Limited* 674 543 (131) 3.9%
Angel Solar Limited 300 300 - 2.2%
--------------------------------------
7,479 7,348 (131) 53.5%
--------------------------------------
Non-qualifying investments
West Tower Holdings Limited 1,320 1,320 - 9.6%
Hoole Hall Hotel Limited 1,200 1,200 - 8.7%
Kidspace Adventures Limited 810 810 - 5.8%
Fubar Stirling Limited 429 429 - 3.1%
Future Biogas (SF) Limited 350 350 - 2.5%
Antelope Pub Limited 300 300 - 2.2%
21(st) Century Energy Limited 120 120 - 0.9%
Cheers Dumbarton Limited 76 76 - 0.5%
Clean Electricity Limited 70 70 - 0.5%
UK Renewable Power Limited 55 55 - 0.4%
Lochrise Limited 20 20 - 0.2%
--------------------------------------
4,750 4,750 - 34.4%
--------------------------------------
12,229 12,098 (131) 87.9%
-------- -----------
Cash at bank and in hand 1,654 12.1%
----------- -----------
Total investments 13,752 100.0%
----------- -----------
* Part-qualifying investment
All venture capital investments above are incorporated in England and Wales.
Investment movements for the year ended 30 November 2012
ADDITIONS
GBP'000
VCT qualifying investments
Tooting Tram and Social Limited* 1,440
South-Western Farms Solar Limited* 1,200
Mosaic Spa and Health Clubs Limited* 815
Kidspace Adventures Holdings Limited* 690
City Falkirk Limited* 674
Odysian (Holdings) Limited 600
Mosaic Spa and Health Club (Shrewsbury) Limited 360
Residential PV Trading Limited* 339
--------
6,118
--------
Non-qualifying investments
Lullingstone Limited 1,792
Fubar Stirling Limited 429
21(st) Century Energy 160
Clean Electricity Limited 145
UK Renewable Power Limited 145
Helcim Group 82
Cheers Dumbarton Limited 76
Lochrise Limited 20
--------
2,849
--------
8,967
--------
DISPOSALS
Total
realised
Market Loss loss
value at Against during
Cost 01/12/11** Proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying investments
South-Western Farms Solar Limited* 400 400 400 - -
Angel Solar Limited 300 300 300 - -
Helcim Group* 300 192 32 (268) (160)
---------------------------------------------
1,000 892 732 (268) (160)
---------------------------------------------
Non-qualifying investments
Lullingstone Limited 1,792 1,792 1,792 - -
Manor Capital LLP 1,000 1,000 1,000 - -
West Tower Holdings Limited 780 780 780 - -
Westcountry Solar Solutions Limited 113 113 113 - -
UK Renewable Power Limited 90 90 90 - -
Clean Electricity Limited 75 75 75 - -
21(st) Century Energy Limited 40 40 40 - -
Residential PV Trading Limited 39 39 39 - -
Antelope Pub Limited 37 37 37 - -
---------------------------------------------
3,966 3,966 3,966 - -
---------------------------------------------
4,966 4,858 4,698 (268) (160)
---------------------------------------------
* Partially qualifying investment
** adjusted for additions during the year
INVESTMENT MANAGER'S REPORT - STRUCTURED SHARE POOL
Introduction
During the year the Structured Share pool has continued to make progress towards
having 70% of its funds in VCT qualifying investments. At the year end, the pool
held 14 venture capital investments and still held eight Structured Product
investments which form the non-qualifying portfolio.
The Structured Product portfolio had a very strong performance over the year,
while the venture capital portfolio experienced some small losses on two
investments.
Net asset value and results
At 30 November 2012, the net asset value ("NAV") per Structured Ordinary Share
stood at 81.9p and per Structured 'A' Share at 6.5p. Total Return (Combined NAV
plus dividends paid to date) now stands at 95.9p, compared to the original cost
net of income tax relief of 70.0p.
The profit on ordinary activities after taxation for the year was GBP730,000
comprising a revenue loss of GBP111,000 and a capital return of GBP841,000.
Venture capital investment activity
During the year, the Company made nine new VCT qualifying investments at a total
cost of GBP3.6 million. The pool also made four non-qualifying investments at a
cost of GBP891,000, which are expected to become qualifying in due course. An
overview of the largest new investments is detailed below.
GBP1,150,000 was invested in Odysian (Holdings) Limited to support the purchase of
the freehold of the Cruise nightclub in Chester, which is owned and operated by
the company. The management team is highly experienced and has operated the club
for several years.
Four separate investments were made in City Falkirk Limited, Fubar Stirling
Limited, Lochrise Limited and Cheers Dumbarton Limited totalling GBP801,000
million. Each of these companies owns and operates a nightclub in Scotland. The
clubs are managed by Lochrise Limited, which is associated with the Castle
Leisure Group, an experienced operator in the region.
GBP543,000 was invested in Mosaic Spa and Health Clubs Limited, a spa and health
club management company which trades under the name of Fitness Express. The
company currently has approximately 30 management contracts to provide gym and
spa management to hotels, universities and corporate clients. In December 2011,
the Company also invested GBP160,000 in Mosaic Spa and Health Club (Shrewsbury)
Limited to back the Mosaic management team to purchase a freehold operating
health club known as Welti near Shrewsbury. In October 2012, the group was
reorganised such that Mosaic Spa and Health Club (Shrewsbury) Limited became a
subsidiary of Mosaic Spa and Health Clubs Limited and we now hold an investment
in one entity. At the same time, the group purchased a second freehold club in
Hereford, Holmer Park.
An investment of GBP460,000 was made in Kidspace Adventures Holdings Limited. The
company is the holding company to an existing investment, Kidspace Adventures
Limited, which owns and operates children's indoor play centres in Croydon and
Romford. The new investment has funded a new outdoor centre in Epsom,
Hobbledown, which opened for business in July 2012.
An investment of GBP400,000 was made in South-Western Farms Solar Limited. The
company has installed solar PV panels on commercial rooftops in Devon and earns
Feed-in Tariffs ("FiTs") as a result. The new funding was used to expand the
portfolios of PV panels. A follow-on investment of GBP226,000 was also made into
an existing renewable energy investment, Residential PV Trading Limited. The
company has installed a portfolio of solar PV panel on domestic rooftops which
also earn FiTs. By the year end GBP26,000 worth of the investment in Residential
PV Trading Limited had been disposed of.
The pool made an investment of GBP160,000 in Tooting Tram and Social Limited,
alongside an established pub operator. The company owns and operates the Tooting
Tram and Social pub in Tooting, South London.
Venture capital portfolio valuation
The majority of the investments have performed more or less to plan to date and
have been valued at levels equal to original cost as the year end. There have,
however, been two investments that have lost value, Helcim Group Limited and
City Falkirk Limited.
Helcim Group Limited organises and manages housing for vulnerable tenants by
working with local authorities and private landlords. The company failed to
fulfil its ambitious expansion plans and, after significant efforts to get the
business on track, did not deliver results. The business was sold in October
2012, realising a loss for the year of GBP106,000. Consideration for the disposal
is deferred and is scheduled to be received over the next three years.
As mentioned above, City Falkirk owns a large nightclub in Falkirk, Scotland.
The club was purchased out of administration in April 2012. Trading performance
of the nightclub to date has been behind forecast as it has become apparent that
the long period in administration has damaged the business as a result of poor
customer service, lack of maintenance etc. to a greater extent than had been
expected. Accordingly, a cautionary reduction in value of GBP87,000 was recognised
at the year end.
Structured Product portfolio
The Company's defensive approach to Structured Product investing produced good
rewards over the year as the portfolio generated unrealised gains of GBP650,000
and realised gains of GBP427,000.
A significant number of Structured Products matured during the year which, along
with two sales, produced proceeds of GBP4.1 million and provided funds for the new
qualifying venture capital investments described above.
The Structured Product portfolio now comprises eight investments. In line with
the pool's strategy, the portfolio will continue to reduce in size as more
investments mature or are sold to fund further qualifying investments over the
next year. We expect to see continued steady performance from the existing
structured product portfolio.
Details of the Structured Share pool portfolio and investment activity during
the period is shown below.
Outlook
The ongoing lack of traditional sources of funding is continuing to provide a
steady flow of potential investment opportunities. We therefore expect to
comfortably complete the task of building the Structured Share pool's venture
capital portfolio during the next year.
In the current economic conditions, close monitoring of the investments within
both the venture capital and Structured Product portfolios will be the focus of
our work to ensure that any issues are addressed at the earliest stage and full
value can ultimately be extracted.
Downing LLP
REVIEW OF INVESTMENTS - STRUCTURED SHARE POOL
Portfolio of investments
The following investments were held at 30 November 2012:
Valuation movement
in period % of portfolio
Cost Valuation
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Mosaic Spa and Health Clubs 703 703 - 7.3%
Limited*
Kidspace Adventures Holdings 460 460 - 4.8%
Limited*
Avon Solar Energy Limited 400 400 - 4.1%
Odysian (Holdings) Limited 400 400 - 4.1%
Residential PV Trading Limited 400 400 - 4.1%
South-Western Farms Solar 400 400 - 4.1%
Limited
Westcountry Solar Solutions 400 400 - 4.1%
Limited
City Falkirk Limited* 450 362 (87) 3.8%
Angel Solar Limited 200 200 - 2.1%
Tooting Tram and Social 160 160 - 1.7%
Limited
--------------------------------------------------
3,973 3,885 (87) 40.2%
--------------------------------------------------
Non-qualifying investments
Kidspace Adventures Limited 540 540 - 5.6%
Fubar Stirling Limited 286 286 - 3.0%
Cheers Dumbarton Limited 51 51 - 0.5%
Lochrise Limited 14 14 - 0.1%
--------------------------------------------------
891 891 - 9.2%
--------------------------------------------------
Structured products
investments
Barclays 10% FTSE/S&P Worst of 501 590 116 6.1%
Defensive AC
Goldman Sachs 10.5% Defensive 501 564 116 5.9%
FTSE
Elders Cap Accumulation II 502 559 106 5.8%
16A (Rollover)
Credit Suisse 7.25% FTSE 501 555 60 5.7%
Autocall
JPMorgan 7% Defensive FTSE AC 501 553 65 5.7%
Morgan Stanley 11% Defensive 352 403 93 4.2%
FTSE
RBS 6 Yr Dual Index Synthetic 251 294 82 3.1%
Zero 10.16%
BNP Paribas Harewood Abs 253 254 12 2.7%
Progression 2
--------------------------------------------------
3,362 3,772 650 39.2%
--------------------------------------------------
8,226 8,548 563 88.6%
------- --------------------
Cash at bank and in hand 1,096 11.4%
----------- ---------------
Total investments 9,644 100.0%
----------- ---------------
* Part-qualifying investment
All venture capital investments are incorporated in England and Wales.
ADDITIONS
GBP'000
VCT qualifying investments
Odysian (Holdings) Limited* 1,150
Mosaic Spa and Health Clubs Limited* 543
Kidspace Adventures Holdings Limited* 460
City Falkirk Limited* 450
South-Western Farms Solar Limited 400
Residential PV Trading Limited* 226
Mosaic Spa and Health Club (Shrewsbury) Limited 160
Tooting Tram and Social Limited 160
Helcim Group Limited* 54
--------
3,603
--------
Non-qualifying investments
Kidspace Adventures Limited 540
Fubar Stirling Limited 286
Cheers Dumbarton Limited 51
Lochrise Limited 14
--------
891
--------
4,494
--------
DISPOSALS
Total
realised
Market (Loss)/ (loss)/
value at gain gain
01/12/11 against during
Cost ** Proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying investments
Angel Solar Limited 200 200 200 - -
Helcim Group* 199 127 21 (178) (106)
--------------------------------------------
399 327 221 (178) (106)
--------------------------------------------
Non-qualifying investments
Odysian (Holdings) Limited 750 750 750 - -
Westcountry Solar Solutions Limited 75 75 75 - -
Residential PV Trading Limited 26 26 26 - -
--------------------------------------------
851 851 851 - -
--------------------------------------------
Structured Products
Morgan Stanley 10% Def FTSE Autocall 519 497 550 31 53
HSBC 6Y W/O FTSE/S&P Auto-Call (303) 516 489 550 34 61
Goldman Sachs GB86 9.6% Res Auto- 504 487 566 62 79
Call
Elders (Merrill Lynch) 10% Defensive 501 497 550 49 53
FTSE Autocall
CreditSuisse 7.25% FTSE Autocall 501 495 522 21 27
JPMorgan 7% Defensive FTSE AC 501 488 516 15 28
SocGen 9.6% Def FTSE Auto-Call (258) 499 468 560 61 92
RBS Dual Index Defensive Autocall 249 257 291 42 34
--------------------------------------------
3,790 3,678 4,105 315 427
--------------------------------------------
5,040 4,856 5,177 137 321
--------------------------------------------
* Part-qualifying investment
** adjusted for additions during the year
INVESTMENT MANAGER'S REPORT - LOW CARBON SHARE POOL
Introduction
With key deadlines in respect of the Feed-in Tariff ("FiTs") regime and its
interaction with VCT regulations passing during the year, we are pleased to
report that the Low Carbon Share pool completed the task of investing its funds
before the main changes in the regulations took effect. The pool now holds a
portfolio of seven investments which, we believe, has excellent prospects for
delivering attractive returns to Shareholders.
Net asset value and results
The net asset value ("NAV") per Low Carbon Ordinary Share at 30 November 2012
stood at 80.4p. Total Return (NAV plus dividends paid to date) now stands at
87.9p, compared to the original cost net of income tax relief of 61.9p.
The profit on ordinary activities after taxation for the year was GBP62,000,
comprising a revenue profit of GBP93,000 and a capital loss of GBP31,000.
Investment activity and valuation
At 30 November 2012, the Low Carbon portfolio comprised investment in seven
companies, each of which is VCT-qualifying or part qualifying, and had a
valuation of GBP6.5 million. All of the investments within the portfolio receive
FiTs from the production of electricity from solar PV panels. The investments
are well spread across five different operators/installers and the panels are on
a mix of commercial and residential rooftops.
During the year, the pool made four new investments and one follow-on investment
at a total cost of GBP4.4 million. There were also four small disposals in the
form of loan stock redemptions from surplus funds that were not utilised by
investee companies, totalling GBP448,000. An overview of the largest new
qualifying, investments is detailed below.
In December 2011 a GBP1.0 million investment was made into PV Generation Limited
which owns a portfolio of solar panels on the rooftops of domestic properties in
the UK.
In February 2012 a GBP925,000 investment was made in UK Renewable Power Limited
and a second GBP925,000 was invested in Clean Electricity Limited both companies
own a portfolio of Commercial Solar panels on the roofs of chicken sheds in
Norfolk and Lincolnshire. By the year end GBP145,000 worth of the investments in
both UK Renewable Power Limited and Clean Electricity Limited had been disposed
of.
A GBP720,000 investment in 21st Century Energy Limited was made in March 2012. The
company owns a portfolio of Commercial Solar panels. By the year end GBP142,000
worth of the investment in 21(st) Century Energy Limited had been disposed of.
Each of the investee companies' projects has received accreditation for FiTs,
however, it is still relatively early days in terms of establishing whether the
projects will produce the anticipated levels of power and resulting income. At
the current time, all investments have therefore been valued at original cost.
Shareholders may be aware of the defeat in March 2011 of the Government's
attempt to enforce lower FiTs from 12 December 2011. Following the rejection of
the Government appeal, higher tariffs will be paid on projects accredited up to
3 March 2012. This will have a positive impact on a number of our investments
which were modelled so as to be viable based on the lower tariff but will
ultimately receive the higher tariff.
Each of the investee companies' projects has received accreditation for FiTs
and, although there have been some minor teething problems, all are progressing
to plan. It is still relatively early days in terms of establishing whether the
projects will produce the anticipated levels of power and resulting income. At
the current time, all investments have therefore been valued at original cost.
Outlook
With the job of building the investment portfolio now complete, our focus is on
close monitoring of the various projects to ensure that they perform in line
with expectations.
Assuming that the pool's investments are able to generate electricity at the
anticipated levels, in due course we expect to see growth in NAV as a result of
uplifts in the investment valuations.
Downing LLP
REVIEW OF INVESTMENTS - LOW CARBON SHARE POOL
Portfolio of investments
Valuation movement
in period % of portfolio
Cost Valuation
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Progressive Energies Limited* 1,400 1,400 - 21.2%
PV Generation Limited 1,000 1,000 - 15.1%
Green Electricity Generation 1,000 1,000 - 15.1%
Limited
Progressive Power Generation 934 934 - 14.1%
Limited*
UK Renewable Power Limited 780 780 - 11.8%
Clean Electricity Limited 780 780 - 11.8%
21(st) Century Energy Limited 578 578 - 8.8%
--------------------------------------------------
6,472 6,472 - 97.9%
------- --------------------
Cash at bank and in hand 138 2.1%
----------- ---------------
Total investments 6,610 100.0%
----------- ---------------
* Part-qualifying investment
All venture capital investments are incorporated in England and Wales.
Investment movements for the year ended 30 November 2012
ADDITIONS GBP'000
VCT qualifying investments
PV Generation Limited 1,000
UK Renewable Power Limited* 925
Clean Electricity Limited* 925
Progressive Power Generation Limited* 806
21(st) Century Energy Limited* 720
--------
4,376
--------
DISPOSALS Total
Gain realised
Market against gain
value at cost during the
Cost 01/12/11 Proceeds year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying investments
21(st) Century Energy Limited* 142 142 142 - -
----------------------------------------------
142 142 142 - -
----------------------------------------------
Non-qualifying investments
UK Renewable Power Limited 145 145 145 - -
Clean Electricity Limited 145 145 145 - -
Progressive Power Generation 16 16 16 - -
Limited
----------------------------------------------
306 306 306 - -
----------------------------------------------
448 448 448 - -
----------------------------------------------
*Partially qualifying investment
Statement of Directors' responsibilities
The Directors are responsible for preparing the Report of the Directors, the
Directors' Remuneration Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period. In
preparing these financial statements the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions, to disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of the financial
statements and other information included in annual reports may differ from
legislation in other jurisdictions.
Directors' statement pursuant to the Disclosure and Transparency Rules
Each of the Directors confirms that, to the best of each person's knowledge:
the financial statements, which have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
the management report within the Report of the Directors, Chairman's Statement,
Investment Manager's Report and the Review of Investments includes a fair review
of the development and performance of the business and the position of the
Company together with a description of the principal risks and uncertainties
that it faces.
By order of the Board
Grant Whitehouse
Secretary of Downing Planned Exit VCT 2011 plc
INCOME STATEMENT for the year ended 30 November 2012
Year ended 30 November 13 months to 30 November
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 1,192 - 1,192 473 - 473
Net gain/(loss) on - 593 593 - (506) (506)
investments
------------------------- --------------------------
1,192 593 1,785 473 (506) (33)
Investment management fees (417) (140) (557) (297) (99) (396)
Other expenses (338) - (338) (312) - (312)
------------------------- --------------------------
Return/(Loss) on ordinary 437 453 890 (136) (605) (741)
activities before tax
Tax on ordinary activities (92) - (92) - - -
------------------------- --------------------------
Return/(Loss) attributable
to equity shareholders 345 453 798 (136) (605) (741)
------------------------- --------------------------
Basic and diluted return per
share:
General Ordinary Share 2.3 (2.3) - 0.6 (1.0) (0.4)
General 'A' Share - - - - - -
Structured Ordinary Share (1.0) 7.9 6.9 (1.4) (4.1) (5.5)
Structured 'A' Share - - - - - -
Low Carbon Ordinary Share 1.1 (0.4) 0.7 (1.0) (0.3) (1.3)
All Revenue and Capital items in the above statement derive from continuing
operations. The total column within the Income Statement represents the profit
and loss account of the Company. No operations were acquired or discontinued
during the year.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement noted above.
Other than revaluation movements arising on investments held at fair value
through the profit and loss, there were no differences between the return/
(loss) as stated above and historical cost.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended 30 November 2012 13 months to 30 November 2011
Low Low
General Structured Carbon General Structured Carbon
Share Share Share Share Share Share
pool pool pool Total pool pool pool Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening 14,950 9,665 7,062 31,677 - - - -
Shareholders
funds
Proceeds from - - - - 15,885 10,838 7,582 34,305
share issue
Share issue - - - - (874) (596) (417) (1,887)
costs
Dividends (1,177) (803) (608) (2,588) - - - -
paid
Shares bought (18) (4) - (22) - - - -
back
Total 6 730 62 798 (61) (577) (103) (741)
return/(loss)
for the year
------------------------------------ -----------------------------------
Closing 13,761 9,588 6,516 29,865 14,950 9,665 7,062 31,677
Shareholders
funds
------------------------------------ -----------------------------------
INCOME STATEMENT (ANALYSED BY SHARE POOL) for the year ended 30 November 2012
General Share pool Year ended 30 November 13 months to 30 November
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 787 - 787 378 - 378
Net loss on investments - (291) (291) - (109) (109)
------------------------- --------------------------
787 (291) 496 378 (109) 269
Investment management fees (197) (66) (263) (138) (46) (184)
Other expenses (161) - (161) (146) - (146)
------------------------- --------------------------
Return/(loss) on ordinary 429 (357) 72 94 (155) (61)
activities before tax
Tax on ordinary activities (66) - (66) - - -
------------------------- --------------------------
Return/(loss) attributable
to equity shareholders 363 (357) 6 94 (155) (61)
------------------------- --------------------------
Structured Share pool Year ended 30 November 13 months to 30 November
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 124 - 124 42 - 42
Net gain/(loss) on - 884 884 - (397) (397)
investments
------------------------- --------------------------
124 884 1,008 42 (397) (355)
Investment management fees (128) (43) (171) (93) (31) (124)
Other expenses (107) - (107) (98) - (98)
------------------------- --------------------------
(Loss)/return on ordinary (111) 841 730 (149) (428) (577)
activities before tax
Tax on ordinary activities - - - - - -
------------------------- --------------------------
(Loss)/return attributable
to equity shareholders (111) 841 730 (149) (428) (577)
------------------------- --------------------------
Low Carbon Share pool Year ended 30 November 13 months to 30 November
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 281 - 281 53 - 53
Net gain on investments - - - - - -
----------------------------------------------------
281 - 281 53 - 53
Investment management fees (92) (31) (123) (66) (22) (88)
Other expenses (70) - (70) (68) - (68)
----------------------------------------------------
Return/(Loss) on ordinary 119 (31) 88 (81) (22) (103)
activities before tax
Tax on ordinary activities (26) - (26) - - -
----------------------------------------------------
Return/(Loss) attributable
to equity shareholders 93 (31) 62 (81) (22) (103)
----------------------------------------------------
BALANCE SHEET as at 30 November 2012
Year ended 30 November 2012 13 months to 30 November 2011
Low Low
General Structured Carbon General Structured Carbon
Shares Shares Shares Total Shares Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 12,098 8,548 6,472 27,118 8,120 8,347 2,544 19,011
Current
assets
Debtors 237 51 2 290 444 208 12 664
Cash at bank 1,654 1,096 138 2,888 6,553 1,223 4,586 12,362
and in hand
----------------------------------- ----------------------------------
1,891 1,147 140 3,178 6,997 1,431 4,598 13,026
Creditors:
amounts (228) (107) (96) (431) (167) (113) (80) (360)
falling due
within one
year
----------------------------------- ----------------------------------
Net current 1,663 1,040 44 2,747 6,830 1,318 4,518 12,666
assets
----------------------------------- ----------------------------------
Net assets 13,761 9,588 6,516 29,865 14,950 9,665 7,062 31,677
----------------------------------- ----------------------------------
Capital and
reserves
Called up
Ordinary 16 11 8 35 16 11 8 35
Share capital
Called up 'A' 18 13 - 31 18 13 - 31
Share capital
Special 13,893 9,158 6,496 29,547 - - - -
reserve
Share premium - - - - 14,977 10,218 7,157 32,352
account
Revaluation (131) 321 - 190 (109) (428) - (537)
reserve
Capital - 344 - 344 (46) - (22) (68)
reserve -
realised
Revenue (35) (259) 12 (282) 94 (149) (81) (136)
reserve
----------------------------------- ----------------------------------
Total equity 13,761 9,588 6,516 29,865 14,950 9,665 7,062 31,677
shareholders'
funds
----------------------------------- ----------------------------------
Basic and
diluted net
asset value
per share
Ordinary 80.3p 81.9p 80.4p 87.1p 82.5p 87.1p
Share
'A' Share 6.3p 6.5p n/a 6.9p 6.5p n/a
CASH FLOW STATEMENT for the year ended 30 November 2012
Year ended 30 November 2012 13 months to 30 November 2011
Low Low
General Structured Carbon General Structured Carbon
Shares Shares Shares Total Shares Shares Shares Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash 265 (203) 88 150 (230) (274) (35) (539)
inflow/(outflow)
from operating
activities
Taxation
Corporation tax - - - - - - - -
paid
Capital expenditure
Purchase of (8,667) (4,294) (4,376) (17,337) (12,862) (9,274) (2,544) (24,680)
investments
Proceeds from 4,698 5,177 448 10,323 4,633 530 - 5,163
disposal of
investments
------------------------------------- -------------------------------------
Net cash (3,969) 883 (3,928) (7,014) (8,229) (8,744) (2,544) (19,517)
(outflow)/inflow
from capital
expenditure
------------------------------------- -------------------------------------
Equity dividends (1,177) (803) (608) (2,588) - - - -
paid
------------------------------------- -------------------------------------
Net cash outflow (4,881) (123) (4,448) (9,452) (8,459) (9,018) (2,579) (20,056)
before financing
Financing
Proceeds from - - - - 14,685 10,018 7,582 32,285
Ordinary Share
issue
Proceeds from 'A' - - - - 1,201 819 - 2,020
Share issue
Proceeds from - - - - 13 - - 13
Preference Share
issue
Redemption of - - - - (13) - - (13)
Preference Shares
Share issue costs - - - - (874) (596) (417) (1,887)
Shares bought back (18) (4) - (22)
------------------------------------- -------------------------------------
Net cash (outflow)/ (18) (4) - (22) 15,012 10,241 7,165 32,418
inflow from
financing
------------------------------------- -------------------------------------
(Decrease)/Increase (4,899) (127) (4,448) (9,474) 6,553 1,223 4,586 12,362
in cash
------------------------------------- -------------------------------------
NOTES TO THE ACCOUNTS
for the year ended 30 November 2012
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" revised January 2009 ("SORP"). The comparative
information is for the 13 month period ended 30 November 2011.
The financial statements are prepared under the historical cost convention
except for certain financial instruments measured at fair value.
The Company implements new Financial Reporting Standards ("FRS") issued by the
Financial Reporting Council when required.
Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust and in
accordance with the SORP, supplementary information which analyses the Income
Statement between items of a revenue and capital nature has been presented
alongside the Income Statement. The revenue return is the measure the Directors
believe appropriate in assessing the Company's compliance with certain
requirements set out in Part 6 of the Income Tax Act 2007.
Investments
All investments are designated as "fair value through profit or loss" assets due
to investments being managed and performance evaluated on a fair value basis. A
financial asset is designated within this category if it is both acquired and
managed on a fair value basis, with a view to selling after a period of time, in
accordance with the Company's documented investment policy. The fair value of an
investment upon acquisition is deemed to be cost. Thereafter, investments are
measured at fair value in accordance with the International Private Equity and
Venture Capital Valuation Guidelines ("IPEV") together with FRS26.
For unquoted investments, fair value is established by using the IPEV
guidelines. The valuation methodologies for unquoted entities used by the IPEV
to ascertain the fair value of an investment are as follows:
Price of recent investment;
Multiples;
Net assets;
Discounted cash flows or earnings (of underlying business);
Discounted cash flows (from the investment); and
Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and circumstances of
the individual investment and uses reasonable data, market inputs, assumptions
and estimates in order to ascertain fair value.
Gains and losses arising from changes in fair value are included in the Income
Statement for the year as a capital item and transaction costs on acquisition or
disposal of the investment are expensed.
It is not the Company's policy to exercise significant influence over investee
companies. Therefore, the results of these companies are not incorporated into
the Income Statement except to the extent of any income accrued. This is in
accordance with the SORP that does not require portfolio investments to be
accounted for using the equity method of accounting.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex-dividend date.
Interest income is accrued on a time apportionment basis, by reference to the
principal sum outstanding and at the effective rate applicable and only where
there is reasonable certainty of collection in the foreseeable future.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Income
Statement, all expenses have been presented as revenue items except as follows:
Expenses which are incidental to the disposal of an investment are deducted from
the disposal proceeds of the investment.
Expenses are split and presented partly as capital items where a connection with
the maintenance or enhancement of the value of the investments held can be
demonstrated. The Company has adopted a policy of charging 75% of the investment
management fees to the revenue account and 25% to the capital account to reflect
the Board's estimated split of investment returns which will be achieved by the
company over the long term.
Expenses and liabilities not specific to Share class are generally allocated pro
rata to the net assets.
Taxation
The tax effects on different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate, using the Company's effective rate of tax for the accounting year.
Due to the Company's status as a Venture Capital Trust and the continued
intention to meet the conditions required to comply with Part 6 of the Income
Tax Act 2007, no provision for taxation is required in respect of any realised
or unrealised appreciation of the Company's investments which arises.
Deferred taxation, which is not discounted, is provided in full on timing
differences that result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
accounts.
A net deferred tax asset is regarded as recoverable and therefore recognised
only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be
deducted.
Other debtors, other creditors and loan notes
Other debtors (including accrued income), other creditors and loan notes are
included within the accounts at amortised cost.
Issue costs
Issue costs in relation to the shares issued for each share class have been
deducted from the share premium account.
2. Basic and diluted return per share
Return per share is calculated on the following:
Weighted average Revenue return/(loss) Capital
number of shares GBP'000 return/ (loss)
in issue GBP'000
General Ordinary 15,696,581 363 (357)
Shares
General 'A' Shares 18,468,907 - -
Structured Ordinary 10,713,674 (111) 841
Shares
Structured 'A' Shares 12,605,294 - -
Low Carbon Ordinary 8,109,363 93 (31)
Shares
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on return per share for any of the share classes. The
return per share disclosed therefore represents both the basic and diluted
return per share for all share classes.
3. Basic and diluted net asset value per share
Shares in issue 2012 2011
Pence per Pence per
2012 2011 share GBP'000 share GBP'000
General Ordinary 15,684,891 15,705,016 80.3 12,588 87.1 13,677
Shares
General 'A' 18,461,489 18,476,489 6.3 1,173 6.9 1,273
Shares
Structured 10,709,375 10,714,500 81.9 8,770 82.5 8,841
Ordinary Shares
Structured 'A' 12,605,294 12,605,294 6.5 818 6.5 824
Shares
Low Carbon 8,109,363 8,109,363 80.4 6,516 87.1 7,062
Ordinary Shares
-------- -------
Net assets per 29,864 31,677
Balance Sheet
-------- -------
4. Principal Risks
The Company's investment activities expose the Company to a number of risks
associated with financial instruments and the sectors in which the Company
invests. The principal financial risks arising from the Company's operations
are:
Market risks
Credit risk
Liquidity risk
The Board regularly reviews these risks and the policies in place for managing
them. There have been no significant changes to the nature of the risks that the
Company is exposed to over the year and there have also have been no significant
changes to the policies for managing those risks during the year.
The risk management policies used by the Company in respect of the principal
financial risks and a review of the financial instruments held at the year end
are provided below:
Market risks
As a VCT, the Company is exposed to market risks in the form of potential losses
and gains that may arise on the investments it holds in accordance with its
investment policy. The management of these market risks is a fundamental part of
investment activities undertaken by the Investment Manager and overseen by the
Board. The Manager monitors investments though regular contact with management
of investee companies, regular review of management accounts and other financial
information and attendance at investee company board meetings. This enables the
Manager to manage the investment risk in respect of individual investments.
Market risk is also mitigated by holding a diversified portfolio spread across
various business sectors and asset classes.
The key market risks to which the Company is exposed are:
Market price risk
Interest rate risk
Market price risk
Market price risk arises from uncertainty about the future prices and valuations
of financial instruments held in accordance with the Company's investment
objectives. It represents the potential loss that the Company might suffer
through market price movements in respect of quoted investments and also changes
in the fair value of unquoted investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on floating-rate financial
assets through the effect of changes in prevailing interest rates. The Company
receives interest on its cash deposits at a rate agreed with its bankers.
Investments in loan stock attract interest predominately at fixed rates. A
summary of the interest rate profile of the Company's investments is shown
below.
There are four categories in respect of interest which are attributable to the
financial instruments held by the Company as follows:
"Fixed rate" assets represent investments with predetermined yield targets and
comprise certain loan note investments and Preference Shares.
"Variable rate" assets represent investments with predetermined interest rates
that vary at set dates in accordance with loan agreements.
"Floating rate" assets predominantly bear interest at rates linked to Bank of
England base rate or LIBOR and comprise cash at bank and certain loan note
investments.
"No interest rate" assets do not attract interest and comprise equity
investments, certain loan note investments, loans and receivables (excluding
cash at bank) and other financial liabilities.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument is unable
to discharge a commitment to the Company made under that instrument. The Company
is exposed to credit risk through its holdings of loan stock in investee
companies, structured products, cash deposits and debtors. Credit risk relating
to loan stock investee companies is considered to be part of market risk.
The Manager manages credit risk in respect of loan stock with a similar approach
as described under Investment risks above. In addition the credit risk is
partially mitigated by registering floating charges over the assets of certain
investee companies. The strength of this security in each case is dependent on
the nature of the investee company's business and its identifiable assets. The
level of security is a key means of managing credit risk. Similarly, the
management of credit risk associated interest, dividends and other receivables
is covered within the investment management procedures.
Cash is mainly held by The Co-operative Bank plc and Royal Bank of Scotland plc,
both of which are A-rated financial institutions and Royal Bank of Scotland plc
is also ultimately part-owned by the UK Government. Consequently, the Directors
consider that the credit risk associated with cash deposits is low.
There have been no changes in fair value during the year that are directly
attributable to changes in credit risk.
Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting
obligations associated with its financial liabilities. Liquidity risk may also
arise from either the inability to sell financial instruments when required at
their fair values or from the inability to generate cash inflows as required. As
the Company has a relatively low level of creditors ( GBP431,000) and has no
borrowings, the Board believes that the Company's exposure to liquidity risk is
low. The Company always holds sufficient levels of funds as cash in order to
meet expenses and other cash outflows as they arise. For these reasons the Board
believes that the Company's exposure to liquidity risk is minimal.
The Company's liquidity risk is managed by the Investment Manager in line with
guidance agreed with the Board and is reviewed by the Board at regular
intervals.
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not constitute the
Company's statutory financial statements in accordance with section 434
Companies Act 2006 for the year ended 30 November 2012, but has been extracted
from the statutory financial statements for the year ended 30 November 2012
which were approved by the Board of Directors on 15 March 2013 and will be
delivered to the Registrar of Companies. The Independent Auditor's Report on
those financial statements was unqualified and did not contain any emphasis of
matter nor statements under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the period ended 30 November 2011 have been delivered
to the Registrar of Companies and received an Independent Auditors report which
was unqualified and did not contain any emphasis of matter nor statements under
s 498(2) and (3) of the Companies Act 2006.
A copy of the full annual report and financial statements for the year ended 30
November 2012 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at 10
Lower Grosvenor Place, London, SW1W 0EN and will be available for download from
www.downing.co.uk.
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 2011 plc via Thomson Reuters ONE
[HUG#1685782]
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