TIDMDPV4
Downing Planned Exit VCT 4 plc
Half Yearly Report for the six months ended 31 May 2010
PERFORMANCE SUMMARY
31 May 2010 30 Nov 31 May
2009 2009
pence pence pence
Net asset value per Ordinary Share 38.1 87.2 89.3
Cumulative distributions per Ordinary Share 56.0 6.0 6.0
------------- -------- -------
Total return per Ordinary Share 94.1 93.2 95.3
CHAIRMAN'S STATEMENT
I present my report for the six months ended 31 May 2010.
Change of name
Following Shareholder approval at the AGM on 10 May 2010, the Company changed
its name to "Downing Planned Exit VCT 4 plc". The new name better describes the
Company's objectives and differentiates it from other Downing funds with
different strategies.
Portfolio review
Shareholders will be aware that the Company's objective is to seek to return
funds to Shareholders within approximately five years from April 2006, being the
date that the Company's fundraising closed. The Company has been continuing to
work on realising its investment portfolio although there are a number of
reasonably large investments which are not yet at a stage where exits are
possible on acceptable terms.
A number of realisations were achieved in the period generating proceeds of GBP1.7
million, although many of these were from investments that were undertaken as
short-term non-qualifying investments for the purpose of producing extra
investment income for the Company.
Two of the major remaining investments are Coast Constructors Limited and
Aminghurst Limited. Aminghurst Limited owns a plot of land in South Devon by
Coast Constructors Limited which is being built into apartments and a resort.
The project has undergone some significant changes to the original plan,
requiring revised planning permission and a refinancing. This has pushed back
the anticipated completion date which is now expected to be in approximately 12
months' time. As part of the refinancing, your Company made a further investment
of GBP169,000 in the period and is committed to a further short-term investment in
the coming months. Despite this departure from the original plan, the project is
now making good progress and the manager is optimistic that a satisfactory
outcome from both Coast Constructors Limited and Aminghurst Limited will
ultimately be achieved.
West Tower Holdings Limited is similar in that its original plan has been
substantially revised. The Company owns two venues in Lancashire, which have
recently been converted into a dedicated wedding venue and a Marco Pierre White
restaurant respectively. Both venues are in the process of establishing
themselves which should allow an exit at approximately original cost in due
course.
The Company holds investments in Hoole Hall Spa and Leisure Limited and Hoole
Hall Country Club Holdings Limited. Both companies operate facilities at the
site of a hotel in Chester, which has now been awarded the "Doubletree by
Hilton" badge. This rebranding is helping to increase occupancy at the hotel,
which, in turn is supporting the development of the leisure, banqueting and
wedding venue businesses. The manager anticipates that exits are likely to be
achieved through refinancing within the next 12 months.
Heyford Contracting (North) Limited is progressing satisfactorily and is in the
process of competing a residential development near Northampton. Since the end
of the period under review, it has been able to return GBP537,000 by redeeming
part of the loan stock investment.
Heyford Contracting (South) Limited has been undertaking two commercial office
development contracts. In one case, although the build is well advanced,
further work in needed by the developer to achieve sales. As a result, there is
currently some uncertainty as to when realisation of the investment might be
achieved.
In reviewing the valuation of the investments at the period end, the directors
have made one adjustment from the previous carrying value. As a result of the
good progress made in implementing the company's revised plan, a provision which
had been made previously against the investment in Aminghurst was released
producing an uplift of GBP186,000. The Board is satisfied that all other
investments remain fairly valued at their previous valuations.
Net Asset Value and results
At 31 May 2010, the Net Asset Value per share ("NAV") of the Company stood at
38.1p, an increase of 0.9p (1.0%) since the previous year end of 30 November
2009 (after adjusting for the total dividends of 50p per share paid during the
period). Total return (NAV plus cumulative dividend paid to date) now stands at
94.1p. Shareholders should note that no provision has been made for performance
incentives which could be payable as described in note 8.
The profit on ordinary activities after taxation for the period was GBP182,000,
comprising a revenue loss of GBP4,000 and a capital gain of GBP186,000.
Share buybacks
In view of the fact that the Company is now in the process of unwinding its
portfolio and returning proceeds to Shareholders, the Board is keen to see that
all investment proceeds are distributed across the whole Shareholder base and
that funds utilised for share buybacks at this stage in the Company's life are
minimal.
However, in order to provide some support for forced sellers, the Board will
from time to time consider making market purchases of its own shares; any such
purchases are likely to be undertaken at a substantial discount to the NAV.
The Board envisages that all Shareholders, other than those who may consider
themselves to be forced sellers, will continue to hold their shares and receive
the dividends from the Company which are expected to be paid as further
investment realisations are achieved as this effectively ensures that they exit
from the investment at NAV rather than suffering a discount.
No share buy backs were made in the six months to 31 May 2010.
Risk and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the
Company's half year results, to report on principal risks and uncertainties
facing the Company over the remainder of the financial year.
The Board has concluded that the key risks facing the Company over the remainder
of the financial period are as follows:
(i) investment risk associated with investing in small and immature businesses;
and
(ii) failure to maintain approval as a VCT.
In order to make VCT-qualifying investments, the Company has to invest in small
businesses which are often immature. The Investment 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
this approach reduces the investment risk as far as reasonably possible.
The Company's compliance with the VCT regulations is continually monitored by
the Administration Manager, who reports regularly to the Board on the current
position. The Company also retains PricewaterhouseCoopers to provide regular
reviews and advice in this area. The Board considers that this approach reduces
the risk of a breach of the VCT regulations to a minimal level.
Outlook
Economic conditions are clearly not ideal for a company seeking to realise an
unquoted investment portfolio at full value and in a timely manner. Having said
that, the Board is satisfied with the manager's progress and is pleased to note
that clear exit routes are now visible for most of the remaining investments.
The Board had hoped that the Company would be in a position to pay a further
dividend to investors later this calendar year. In view of the additional
short-term investment that will be needed in Coastal Constructors, the next
dividend might now not be paid until the first quarter of 2011, with later in
2011 being a realistic target for the return of the majority of the remaining
funds to Shareholders.
Hugh Gillespie
Chairman
UNAUDITED INCOME STATEMENT
for the six months ended 31 May 2010
Six months ended
31 May 2010
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 132 - 132
Gain/ (losses) on investments - 186 186
--------- --------- ------
132 186 318
Investment management fees (62) - (62)
Other expenses (71) - (71)
--------- --------- ------
Return/(loss) on ordinary activities before taxation (1) 186 185
Taxation (3) - (3)
--------- --------- ------
Return/(loss) attributable to equity shareholders (4) 186 182
Return/(loss) per share 0.0p 0.9p 0.9p
Six months ended Year
ended
31 May 2009 30
November
2009
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 469 - 469 888
Gain/ (losses) on investments - (1,020) (1,020) (1,657)
--------- --------- --------- --------
469 (1,020) (551) (769)
Investment management fees (102) - (102) (198)
Other expenses (83) - (83) (162)
--------- --------- --------- --------
Return/(loss) on ordinary activities 284 (1,020) (736) (1,129)
before taxation
Taxation (85) - (85) (158)
--------- --------- --------- --------
Return/(loss) attributable to equity 199 (1,020) (821) (1,287)
shareholders
Return/(loss) per share 0.9p (4.7p) (3.8p) (6.0p)
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement as noted above.
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 May 2010
31 May 2010 31 May 2009 30 Nov 2009
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 8,071 19,094 9,392
Current assets
Debtors 164 121 205
Cash at bank and in hand 75 240 9,319
------------- ------------- ------------
239 361 9,524
Creditors: amounts falling due within one (122) (198) (185)
year
------------- ------------- ------------
Net assets less current liabilities 8,188 19,257 9,339
Creditors: amounts falling due after
more than one year (21) (21) (21)
------------- ------------- ------------
Net assets 8,167 19,236 18,710
Capital and reserves
Called up share capital 215 216 215
Capital redemption reserve 2 1 2
Special reserve 9,910 20,160 20,099
Capital reserve - realised 2 (60) 3
Capital reserve - unrealised (1,937) (1,424) (2,124)
Revenue reserve (25) 343 515
------------- ------------- ------------
Equity shareholders' funds 8,167 19,236 18,710
Net asset value per share 38.1p 89.3p 87.2p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 May 2010 31 May 2009 30 Nov 2009
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 18,710 20,643 20,643
Purchase of own shares - (45) (106)
Dividends paid (10,725) (540) (540)
Total recognised gains for the period 182 (822) (1,287)
------------- ------------- ------------
Closing shareholders' funds 8,167 19,236 18,710
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 May 2010
31 May 2010 31 May 2009 30 Nov 2009
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating
activities and returns on 1
investments 41 305 483
------------- ------------- ------------
Taxation
Corporation tax paid (68) (131) (235)
------------- ------------- ------------
Capital expenditure
Purchase of investments (169) (1,853) (4,066)
Proceeds from disposal of 1,677 1,625 12,904
investments
------------- ------------- ------------
Net cash (outflow)/inflow
from capital expenditure 1,508 (228) 8,838
------------- ------------- ------------
Equity dividends paid (10,725) (540) (540)
------------- ------------- ------------
Net cash (outflow)/inflow (9,244) (594) 8,546
before financing
Financing
Shares repurchased - (45) (106)
------------- ------------- ------------
Net cash outflow from - (45) (106)
financing
------------- ------------- ------------
Increase in cash 2 (9,244) (639) 8,440
Notes to the cash flow
statement:
1 Cash inflow from operating
activities and returns on
investments
Net (loss)/gain before 185 (736) (1,129)
taxation
(Gains)/ losses on (186) 1,020 1,657
investments
Decrease/ (increase) in 41 44 (40)
other debtors
(Decrease)/increase in other 1 (23) (5)
creditors
------------- ------------- ------------
Net cash inflow from 41 305 483
operating activities
2 Analysis of net funds
Beginning of period 9,319 879 879
Net cash (outflow)/inflow (9,244) (639) 8,440
------------- ------------- ------------
End of period 75 240 9,319
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 May 2010
Unrealised
gain/(loss) % of
Cost Valuation in the period portfolio
Venture Capital Investments GBP'000 GBP'000 GBP'000 by value
VCT-Qualifying
West Tower Holdings Limited 1,750 1,750 - 21.5%
Heyford Contracting (South) Limited 1,500 1,350 - 16.6%
Hoole Hall Spa and Leisure Club Limited 1,000 1,000 - 12.3%
Heyford Contracting (North) Limited 1,038 990 - 12.2%
Hoole Hall Country Club Holdings 10.7%
Limited 875 875 -
Future Films Production Services 4.6%
Limited 373 373 -
Coast Constructors Limited (Formerly
Richstone Contracting Limited) 1,119 169 - 2.1%
-----------------------------------------
7,655 6,507 - 80.0%
-----------------------------------------
Non-VCT Qualifying
Aminghurst Limited 993 993 186 12.2%
Sanguine Hospitality Limited 243 243 - 3.0%
Heyford Contracting (South) Limited 150 150 - 1.8%
Chapel Street Hotel (2008) LLP 63 126 - 1.5%
Vermont Developments Limited 902 50 - 0.6%
Chapel Street Hotel Limited 2 2 - 0.0%
-----------------------------------------
2,353 1,564 186 19.1%
-----------------------------------------
Total 10,008 8,071 186 99.1%
Cash at bank 75 0.9%
----------- ----------
Total investments 8,146 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 May 2010
Addition
GBP'000
VCT Qualifying investment
Coast Constructor Limited
(formerly Richstone Contracting Limited) 169
Disposals
Cost Proceeds Profit/(loss)
GBP'000 GBP'000 GBP'000
VCT Qualifying investments
Bowman Care Homes Limited 600 600 -
East Dulwich tavern Limited 319 319 -
Westow House Limited 281 281 -
Atlantic Dogstar Limited 150 150 -
Heyford Homes VCT Limited 150 150 -
Hoi Polloi Pub Company Limited 100 100 -
Future Films Production Services Limited 77 77 -
Vermont Developments Limited 1 - -
------- ---------- -------------
1,678 1,677 -
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months to 31 May
2010 and have been prepared in accordance with the accounting policies set out
in the statutory accounts for the year ended 30 November 2009, which were
prepared under UK Generally Accepted Accounting Practice ("UK GAAP") and in
accordance with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies" revised December 2005 ("SORP").
2. All revenue and capital items in the Income Statement derive from continuing
operations.
3. The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
4. The comparative figures were in respect of the six-month period ended 31 May
2009 and the year ended 30 November 2009 respectively.
5. Return per share for the period has been calculated on 21,450,413 shares,
being the weighted average number of shares in issue during the period.
6. Dividends paid
31 May 2009 30 Nov 2009
31 May 2010
Revenue Capital Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Paid in
period/year
2010 Interim - 8,580 8,580 - -
(40.0p paid 1 March
2010)
2009 Final 536 1,609 2,145 - -
(10.0p paid 6 January
2010)
2007 Final - - - 540 540
(2.5p paid 25 April
2008)
---------------- --------- -------- ------------- ------------
536 10,189 10,725 540 540
7. Reserves
Capital Investment
Capital redemption Special reserve - holding Revenue
reserve reserve realised losses reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 December 2009 2 20,099 3 (2,124) 515 18,495
Gains/(losses) on - - - 186 - 186
investments
Dividends paid - (10,189) - - (536) (10,725)
Share buybacks - - - - - -
Retained revenue - - - - (4) (4)
Transfer - - (1) 1 - -
-----------------------------------------------------------------------
At 31 2 9,910 2 (1,937) (25) 7,952
May 2010
The Special Reserve is available to the Company to enable the purchase of its
own shares in the market without affecting its ability to pay capital
distributions. The Special Reserve and Revenue Reserve are both distributable
reserves.
8. Contingent liability re. performance incentive fees
The Company may be liable to pay performance incentive fees by way of additional
interest on the loan notes issued to the Management Team and Directors. The
amount of additional interest, if any, is dependent on the level of
distributions made to Shareholders before 5 April 2012. The maximum amount
payable under these arrangements is summarised as follows:
(i) 10% of the net proceeds paid to Shareholders before 5 April 2010, and
(ii) 5% of the net proceeds paid to Shareholders between 6 April 2010 and 5
April 2011, and
(iii) 2.5% of the net proceeds paid to Shareholders between 6 April 2011 and 5
April 2012.
No performance fee is payable unless Shareholders (who invested at the launch of
the Company) have received proceeds of at least 80p per share and achieved a
compound return on their investment in excess of 8% per annum.
If the Company's assets and liabilities were realised at the current carrying
values and the compound return and other targets met, the maximum level of
performance fees payable would be approximately GBP1.5 million (equivalent to
7.1p per share). In view of the significant uncertainties as to what extent the
targets will actually be met, the Directors are unable to make a reliable
estimate of the performance fees (if any) that will ultimately be payable.
Other than as described above, at 31 May 2010, the Company had no contingencies,
guarantees or financial commitments.
9. The unaudited financial statements set out herein do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985 and have
not been delivered to the Registrar of Companies.
10. The Directors confirm that, to the best of their knowledge, the half-yearly
financial statements have been prepared in accordance with the "Statement:
Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and
the half-yearly financial report includes a fair review of the information
required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period, and any changes in the related
party transactions described in the last annual report that could do so.
11. Copies of the half yearly report will be sent to Shareholders shortly.
Further copies can be obtained from the Company's registered office or can be
downloaded from www.downing.co.uk.
[HUG#1435169]
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 4 plc via Thomson Reuters ONE
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