TIDMDPV9
Downing Protected VCT IX plc
Final Results for the period ended 31 December 2008
Financial Highlights
31 Dec 2008
Pence
Net asset value per Ordinary Share 93.9
Net asset value per 'A' Share 0.1
Total return per Ordinary Share and 'A' Share 94.0
CHAIRMAN'S STATEMENT
I am pleased to present the Company's first Annual Report and
Accounts and welcome the opportunity to update Shareholders on the
progress made to date in investing the funds.
Fundraising
The Company completed a successful fundraising in July 2008 and,
along with its sister company, Downing Protected VCT VIII plc, has
raised aggregate gross proceeds of approximately GBP17 million. Your
Company, Downing Protected VCT IX plc, issued 8.7 million Ordinary
and the same number of 'A' Shares under the offers for subscription
which produced net proceeds of GBP8.1 million after taking into account
the 5.5% issue costs.
'A' Shares
As set out in the prospectus, each investor under the Company's
offers for subscription was issued with one Ordinary Share and one
'A' Share for each GBP1 they subscribed.
The 'A' Shares provide a performance incentive for members of the
management team, who subscribed for 'A' Shares such that, at the
close of the offers, one third of the 'A' Shares were held by the
management team.
In the initial year of the Company's life, the Board expect the 'A'
Shares to have a Net Asset Value of 0.1p per share, being the same as
the subscription price. If, in due course, it appears that the
Company might meet the relevant performance target then the Net Asset
Value of the A Shares might increase.
Qualifying investments
The Company has been active in its first period and has invested a
good proportion of its funds. Four VCT-qualifying investments were
made at a total cost of GBP3.3 million. The Company needs to invest at
least 70% of its total funds in VCT-qualifying investments by the
deadline of 31 December 2010 to comply with the VCT regulation. With
approximately 40% invested to date, the Company comfortably is on
schedule to meet the target.
A detailed review of the investments is included in the Investment
Manager's Report and Review of Investments.
Non-qualifying VCT investments
As anticipated, the Manager has had a steady flow of good quality
non-qualifying property loan investment opportunities. Five such
investments were made in the period, one of which was redeemed at
par. At 31 December 2008 the Company held four such investments at a
cost and valuation of GBP2.1 million.
With bank base rates at historically low levels these investments
provide the Company with a better yield than would be achieved from
most sources. In addition, they are generally in businesses
well-known to the Manager and the loans are well-secured with
asset-backing.
Investment valuations
The Board has reviewed the investment portfolio in detail at the year
end, giving particular consideration to the current economic
climate. In the case of one investment, West Tower Holdings Limited,
the Board feels that the current fair value of the investment is a
little below original cost and has therefore made a provision of
GBP150,000. The Board is satisfied with the steps taken to improve the
performance of this investment and there remains a reasonable
prospect of full recovery.
The Board is satisfied that all other investments have performed
close enough to plan such that they should continue to be held at a
valuation equal to cost.
Net Asset Value
At 31 December 2008, the Company's Net Asset Value ("NAV") per
Ordinary Share stood at 93.9p and the NAV per 'A' Share at 0.1p. The
combined NAV of 94.0p is a decrease of 0.5p (0.5%) on the initial
combined NAV (after deducting issue costs) of 94.5p.
The Board feels that this is a satisfactory performance when viewed
against the background of sharply falling asset values that has
existed throughout the latter part of the period.
Results and dividend
The loss on Ordinary activities after taxation for the period was
GBP49,000 comprising a revenue return of GBP101,000 and a capital loss of
GBP150,000.
The Board is proposing to pay a revenue dividend of 1.0p and a
capital dividend of 1.5p per Ordinary Share on 5 June 2009 to
Shareholders on the register at the close of business on 15 May
2009.
Share buybacks
The Company has operated a policy, subject to certain restrictions,
of buying shares that become available in the market at a price
equivalent to a 10% discount to the Company's most recently published
NAV. No shares were purchased in the period for cancellation.
A special resolution to continue this policy is proposed for the
forthcoming AGM.
Articles of Association
At the forthcoming AGM, the Board will seek Shareholder approval to
update the Company's Articles of Association. Resolution 10, which is
a special resolution, proposes the adoption of new Articles of
Association which incorporate a number of changes which are required
as a result of the implementation of the Companies Act 2006. An
explanation of the proposed changes is provided within the Report of
the Directors.
Annual General Meeting
The Company's first Annual General Meeting ("AGM") will be held at
Kings Scholars House, 230 Vauxhall Bridge Road, London SW1V 1AU at
11:20am on 3 June 2009.
Two items of special business, seeking approval for the Company to be
able to buy its own shares and to adopt the new Articles of
Association as described above, will be proposed.
Outlook
The Company will continue to be an active investor during its second
accounting period as it progresses towards the target of having at
least 70% its funds in VCT-qualifying investments. The stark
economic climate which Britain is now facing appears to have both
negative and positive aspects for your Company.
Businesses in general face greater challenges than they have for some
years, particularly in the case of smaller business with might not be
as resilient as their larger counterparts. However, the Manager
reports that it is seeing an increased flow of potential investment
opportunities, many arising from businesses which cannot now obtain
funding from other sources. While the quality of such opportunities
may be variable, careful selection should ensure that the Company
ends up with a portfolio that can deliver the target returns to
Shareholders.
Hugh Gillespie
Chairman
INVESTMENT MANAGER'S REPORT
The Company has been an active investor in its first period.
At the period end, the Company had achieved a level of more than half
of the target of having 70% of its funds in VCT-qualifying
investments before 31 December 2010.
Portfolio movements
The investment additions during the period are summarised as follows:
VCT-qualifying investments GBP'000
West Tower Holdings Limited 1,000
Thames Club Limited 968
Hoole Hall Spa and Leisure Club Limited 562
Hoole Hall Country Club Holdings Limited 750
Non-qualifying investments
Pocket Living (Bath Road) Limited 896
Bowman Care Homes Limited 600
Kings Gap Group Limited 400
Sanguine Hospitality Limited 250
5,426
All of the investments are comprised partly (or in some cases,
wholly) of loan stock, which are secured by charges over significant
assets.
Further details of each of the investments are included in the Review
of Investments in the Annual Report.
Valuations
Although, it is very early in the Company's life, so far all but one
of our investments have performed in line with expectation.
The one exception has been West Tower Holdings Limited. The Company
owns and operates two properties, the West Tower and The Swan, near
Ormskirk. Trading at The Swan was particularly poor which led to the
decision to close the site for a major refurbishment. The site
reopened in April as a larger pub restaurant with 13 bedrooms and
early trading is encouraging. Planning permission has also been
granted for extensions to both the main function room and the
restaurant at the West Tower, with this work scheduled for next
winter.
The management are planning to make some significant changes to
develop both venues; such that they can operate together and provide
more upmarket facilities with greater capacity. Both venues
currently remain in their original state while the development is in
its planning stage. Trading at the venues has been below budget,
particularly in the case of The Swan, which has now been closed ahead
of the development work.
We have agreed with your Board that a provision of GBP150,000 against
the original cost of GBP1 million is appropriate at this time, but we
remain confident that the development plans should provide a
satisfactory outcome in due course.
All other investments have performed satisfactorily to date and
justify being held at values equal to cost.
Outlook
Two new qualifying investments have been made since the year-end.
Depressed asset prices, combined with a shortage of funding from
other sources, continue to generate good investment opportunities for
the Company.
With approximately four years remaining before we will be seeking to
exit from VCT-qualifying investments, we are mindful that there is a
long way to go but are satisfied with the start that has been made.
Downing Protected Managers IX Limited
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments, all of which are incorporated in England
and Wales and were purchased during the period, were held at 31
December 2008:
Valuation
movement
Cost Valuation in period % of
GBP'000 GBP'000 GBP'000 portfolio
VCT-Qualifying investments
Thames Club Limited 968 968 - 11.8%
West Tower Holdings Limited 1,000 850 (150) 10.4%
Hoole Hall Country Club Holdings 750 750 - 9.2%
Limited
Hoole Hall Spa and Leisure Club 562 562 - 6.9%
Limited
Non-Qualifying VCT investments
Pocket Living (Bath Road) 896 896 - 11.0%
Limited
Bowman Care Homes Limited 600 600 - 7.3%
Kings Gap Group Limited 400 400 - 4.9%
Sanguine Hospitality Limited 250 250 - 3.1%
5,426 5,276 (150) 64.6%
Cash at bank and in hand 2,892 35.4%
Total investments 8,168 100.0%
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual 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). The financial statements are required
to 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 estimates that are reasonable and
prudent;
* state whether applicable 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 confirm that they have complied with the above
requirements in preparing the financial statements. They also confirm
that the annual report includes a fair review of the development and
performance of the business together with a description of the
principal risks and uncertainties faced by the Company. The Directors
of the Company as at 31 December 2008 are shown on page 11 of the
Annual Report and Accounts.
The Directors are responsible for ensuring that the Company keeps
proper accounting records that disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act
1985. 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 Manager'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.
Statement as to disclosure of information to Auditors
The Directors in office at the date of the report have confirmed, as
far as they are aware, that there is no relevant audit information of
which the Auditors are unaware. Each of the Directors has confirmed
that they have taken all the steps that they ought to have taken as
Directors in order to make themselves aware of any relevant audit
information and to establish that it has been communicated to the
Auditor.
By Order of the Board
Grant Whitehouse
Secretary
INCOME STATEMENT
for the period ended 31 December 2008
Period ended 31 December 2008
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 392 - 392
Losses on investments - (150) (150)
392 (150) 242
Investment management fees (82) - (82)
Other expenses (171) - (171)
Return on ordinary activities
before tax 139 (150) (11)
Tax on ordinary activities (38) - (38)
Return attributable to equity
shareholders 101 (150) (49)
Basic and diluted return per share:
Ordinary Share 1.2p (1.7p) (0.5p)
'A' Share - - -
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.
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 Income Statement, there were no differences between
the return/deficit as stated above and historical cost.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Period ended
31 December 2008
GBP'000
Opening shareholders' funds -
Proceeds from share issue 8,665
Share issue costs (476)
Total recognised losses for the year (49)
Closing shareholders' funds 8,140
BALANCE SHEET
as at 31 December 2008
2008
GBP'000 GBP'000
Fixed assets
Investments 5,276
Current assets
Debtors 99
Cash at bank and in hand 2,892
2,991
Creditors: amounts falling due within one year (127)
Net current assets 2,864
Net assets 8,140
Capital and reserves
Called up Ordinary share capital 9
Called up 'A' Share capital 13
Deferred Share capital 3
Special reserve 8,164
Investment holding losses (150)
Revenue reserve 101
Total equity shareholders' funds 8,140
Basic and diluted net asset value per share
Ordinary Share 93.9p
'A' Share 0.1p
CASH FLOW STATEMENT
for the period ended 31 December 2008
Period
ended
31 Dec
2008
GBP'000
Net cash inflow from operating activities 129
Capital expenditure
Purchase of investments (5,426)
Net cash outflow from capital expenditure (5,426)
Net cash outflow before financing (5,297)
Financing
Proceeds from Ordinary Share issue 8,649
Proceeds from 'A' Share issue 16
Proceeds from preference share issue 50
Redemption of preference shares (50)
Share issue costs (476)
Net cash inflow from financing 8,189
Increase in cash 2,892
NOTES
for the period ended 31 December 2008
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 financial statements are prepared under the historical cost
convention as modified by the revaluation of certain financial
instruments and on the basis that it is not necessary to prepare
consolidated accounts as explained in note 10 in the financial
statements.
The Company implements new Financial Reporting Standards ("FRS")
issued by the Accounting Standards Board when required. The
Association of Investment Companies issued a new SORP in January 2009
which has been adopted for these financial statements. No
comparative restatements have been required as a result of the
implementation of the new SORP.
Presentation of Income Statement
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the Association of
Investment Companies ("AIC"), supplementary information which
analyses the Income Statement between items of a revenue and capital
nature has been presented alongside the Income Statement. The net
revenue 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
Venture capital investments are designated as "fair value through
profit or loss" assets and are measured at fair value. A financial
asset is designated within this category if it is both acquired and
managed, 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.
Listed fixed income investments are measured using bid prices in
accordance with the IPEV.
In respect of unquoted instruments, fair value is established by
using the IPEV. 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;
* Earnings multiple;
* 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.
Where an investee company has gone into receivership or liquidation
the loss on the investment, although not physically disposed of, is
treated as being realised.
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 expensed.
It is not the Company's policy to exercise either significant or
controlling influence over investee companies. Therefore the results
of these companies are not incorporated into the Revenue Account
except to the extent of any income accrued.
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 timely basis, by reference to the
principal outstanding and at the effective interest rate applicable
and only where there is reasonable certainty of collection.
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 100% of the Investment
Management fees to the revenue account in order to reflect the
current investment strategy of investing in yielding investments with
limited downside risks.
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 period.
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 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.
Issue costs
Issue costs in relation to the shares issued have been deducted from
the share premium account.
2. Return per share
Ordinary Shares 'A' Shares
Return per share based on:
Net revenue after taxation for the 101 -
financial year (GBP'000)
Weighted average number of shares in issue 8,575,470 12,904,456
Capital return per share based on:
Net capital loss for the financial year (150) -
(GBP'000)
Weighted average number of shares in issue 8,575,470 12,904,456
As the Company has not issued any convertible securities or share
options, there is no dilutive effect on the return per Ordinary or
'A' Share. The return per share disclosed therefore represents both
basic and diluted return per Ordinary and 'A' Share.
3. Net asset value per share
2008
Shares in issue Net asset value
Pence GBP'000
Ordinary Shares 8,657,673 93.9 8,132
'A' Shares 12,986,657 0.1 8
94.0 8,140
The Directors allocate the assets and liabilities of the Company
between the Ordinary Shares and 'A' Shares such that each share class
has sufficient net assets to represent its dividend and return of
capital rights.
As the Company has not issued any convertible securities or share
options, there is no dilutive effect on net asset per share. The net
asset value per share disclosed therefore represents both basic and
diluted return per share.
4 Principal financial risks
As a VCT, the majority of the Company's assets are represented by
financial instruments which are held as part of the investment
portfolio. In order to ensure continued compliance with relevant VCT
regulation and to be in a position to deliver the long term capital
growth, which is part of the Company's investment objective, the
Board is very much aware of the need to manage and mitigate the risks
associated with the financial instruments held within the investment
portfolio.
The management of these risks starts with the application of a clear
investment strategy which has been developed by the Board who are
experienced investment professionals. Furthermore, the Board has
appointed an experienced investment manager to whom they have
communicated the Company's investment objectives and whose
remuneration is linked to the achievement of those objectives. The
Investment Manager reports regularly to the Board on performance, and
to facilitate the direct Board involvement with key decisions, on
whether or not to invest, disinvest and the nature, terms and the
security of investments being made.
In assessing the risk profile of its investment portfolio, the Board
has identified one principal class of financial instrument which is
analysed within note 9. All financial instruments are "fair value
through the profit and loss account" and are recognised as such on
initial recognition.
In addition to its investment portfolio, the VCT maintains a cash
position. Cash is mainly held by Bank of Scotland plc and Royal Bank
of Scotland plc which are an A+/A-1-rated financial institutions. The
Directors consider that the risk profile associated with cash
deposits is low and thus the carrying value in the financial
statements is a close approximation of the fair value.
The Board has reviewed the Company's financial risk profile. Despite
the fact that there has been a clear deterioration in the economic
climate, the Board has concluded that, as a result of the manner in
which the Company structures its investments so as to try to reduce
downside risk, the Company's exposure to financial risk has not
changed significantly since the previous year.
A review of the specific financial risks faced by the Company is
presented below.
Market risks
Market risk arises from uncertainty about fair values or future cash
flows of financial instruments because of changes in market prices.
The Company's investment portfolio is comprised of variable rate,
floating rate and fixed rate financial instruments, the fair values
of which are influenced by differing degrees by changes in market
price. Generally, unless the risk profile attaching to the loan note
changes, the fair value of variable and floating rate investments is
unlikely to alter materiality. The fair value of fixed rate
investments would, theoretically, increase as base rates fall.
However, as a result of the structuring of the Company's investments,
the fixed rate investments (loan notes) have strict redemption and
transferability conditions and, therefore, any theoretical uplift in
fair value would not be a fair reflection of the realisable value of
this class of investment.
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's financial assets that are exposed to
credit risk are summarised as follows:
2008
GBP'000
Fair value through profit or loss assets
Investments in loan stocks 4,360
Loans and receivables
Cash and cash equivalents 2,892
Interest and other receivables 96
7,348
Investments in loan stocks comprise a fundamental part of the
Company's venture capital investments and are managed within the main
investment management procedures.
Cash is mainly held by Bank of Scotland plc, which is an A+ rated
financial institution and, consequently the Directors consider that
the risk profile associated with cash deposits is low and thus the
carrying value in the financial statements is a close approximation
of its fair value.
Interest, dividends and other receivables are predominantly covered
within the investment management procedures.
Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties
in meeting obligations associated with its financial liabilities. As
the Company only ever has a very low level of creditors and has no
borrowings, the Board believes that the Company's exposure to
liquidity risk is minimal.
5. Contingencies, guarantees and financial commitments
At 31 December 2008, the Company had no contingencies, guarantees or
financial commitments.
6. Related party transactions
The Company has appointed Downing Protected Managers IX Limited ("DPM
IX") as its investment manager. Details of the agreement with DPM IX
are included in note 3. During the period ended 31 December 2008
GBP82,000, was payable to DPM IX. Additionally, the Company has
appointed DPM IX to provide accounting, secretarial and
administrative services for an annual fee of GBP40,000 (plus VAT and
RPI) per annum. During the period ended 31 December 2008, GBP43,000 was
due in respect of administration fees. At the year end a balance of
GBP38,000 was outstanding and payable to DPM IX.
In accordance with the prospectus dated 17 October 2007, the Company
paid GBP476,000 to Downing Corporate Finance Limited, a company in
which Nicholas Lewis is a director and shareholder, in respect of
capital raising fees. Out of these fees, Downing Corporate Finance
Limited has paid costs incidental to the Offers, including
application for admission of the Shares to the Official List and
commission to the authorised financial advisers. No amounts were
outstanding at the period end.
In accordance with the Equalisation Agreement dated 17 October 2007
between the Company and Downing Protected VCT VIII plc ("DPV VIII"),
at the close of the offer on 17 July 2008, the running costs of the
Company were increased and the income of DPV VIII was increased by
the amount of GBP52,000 which resulted in both the Company and DPV IX
having the same net asset value per share on the closing date of the
companies' offers for subscription. At the year end a balance of
GBP8,000 was due to DPV VIII.
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 period ended 31 December
2008, but has been extracted from the statutory financial statements
for the period ended 31 December 2008, which were approved by the
Board of Directors on 29 April 2009 and will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. 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.
A copy of the full annual report and financial statements for the
year ended 31 December 2008 will be printed and posted to
shareholders shortly. Copies will also be available to the public at
the registered office of the Company at Kings Scholars House, 230
Vauxhall Bridge Road, London SW1V 1AU and will be available for
download from www.downing.co.uk.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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