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Share Name Share Symbol Market Type Share ISIN Share Description
Downing Two Vct Plc LSE:DP2F London Ordinary Share GB00B6ZS0J90 F SHS 0.1P
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Downing Two VCT Downing Two Vct Plc - Annual Financial Report

30/04/2020 4:30pm

UK Regulatory (RNS & others)


 
TIDMDP2F 
 
   DOWNING TWO VCT PLC 
 
   Report & Accounts for the year ended 31 December 2019 
 
 
 
   FINANCIAL HIGHLIGHTS 
 
 
 
 
                                         Unaudited  Audited  Audited 
                                           31 Mar    31 Dec   31 Dec 
                                            2020      2019     2018 
                                           Pence     Pence    Pence 
'F' Share pool 
Net asset value per 'F' Share                 21.6     24.7     28.7 
Cumulative distributions per 'F' Share        72.0     72.0     67.0 
                                         ---------  -------  ------- 
Total Return per 'F' Share                    93.6     96.7     95.7 
                                         =========  -------  ------- 
 
'G' Share pool 
Net asset value per 'G' Share                 36.0     48.1     60.9 
Cumulative distributions per 'G' Share        51.5     51.5     37.5 
                                         ---------  -------  ------- 
Total Return per 'G' Share                    87.5     99.6     98.4 
                                         =========  =======  ======= 
 
'K' Share pool 
Net asset value per 'K' Share                 50.3     58.2     91.3 
Cumulative distributions per 'K' Share           -        -        - 
                                         ---------  -------  ------- 
Total Return per 'K' Share                    50.3     58.2     91.3 
                                         =========  =======  ======= 
 
 
 
 
 
   Proposed dividends 
 
 
 
 
'G' Shares -- Interim dividend in respect of the year  Payable 19 May     2.0p 
 ended 31 Dec 2019                                     2020 
'K' Shares -- Interim dividend in respect of the year  Payable 19 May     7.5p 
 ended 31 Dec 2019                                     2020 
 
 
 
 
   CHAIRMAN'S STATEMENT 
 
   I write this statement during a time when the world is experiencing 
unprecedented conditions as a result of the coronavirus pandemic. At 
this time, it is not clear exactly what the full extent of the impact on 
the UK and global economies will be, although it is inevitable that it 
will be substantial. 
 
   In line with its strategy, your Company has built investment portfolios 
focused around a number of sectors including leisure and hospitality. It 
is clear that many of the businesses in these sectors will be badly 
affected by the Coronavirus pandemic lockdown in the UK. Unfortunately, 
this will result in reduced investment valuations and increased 
challenges in exiting from these investments. 
 
   This report includes the audited results for the year ended 31 December 
2019, a period prior to the coronavirus pandemic. In order to provide 
Shareholders with a more up to date picture, the Company has also 
prepared unaudited investment valuations to 31 March 2020, based of the 
best information the Board and Manager have at the current time. 
 
   A brief summary of each share pool is provided below. More detailed 
reviews are provided in the Investment Manager's Report and Review of 
Investments. 
 
   'F' Share pool 
 
   The 'F' Share pool was launched in 2012 and now holds a portfolio of 
nine investments with a total value of GBP2.4 million. 
 
   At 31 December 2019, the 'F' Share NAV stood at 24.7p, which represents 
an increase of 3.5% over the year after adjusting for the dividends of 
5.0p per share paid in the year. Dividends paid to date total 72.0p per 
share such that Total Return (NAV plus cumulative dividends to date) is 
now 96.7p, compared to the initial cost to original subscribers net of 
income tax relief of 70.0p. 
 
   At 31 March 2020, the unaudited net asset value has fallen to 21.6p per 
share, resulting in a Total Return of 93.6p per share. The 'F' Share 
pool has commenced the process of realising its investments and 
returning funds to investors. Plans for further realisation have however 
been severely disrupted by the pandemic. The Company will update 'F' 
Shareholders when there is firm news to report. 
 
   'G' Share pool 
 
   The 'G' Share pool was launched in 2013 and has now started to realise 
its investments, in order to return funds to Shareholders. At 31 
December 2019, the pool held 12 investments with a total value of 
GBP10.9 million. 
 
   At 31 December 2019, the 'G' Share NAV stood at 48.1p, which represents 
an increase over the year of 2.0% after adjusting for the dividends of 
14.0p per share paid in the year. Total Return (NAV plus cumulative 
dividends to date) was 99.6p per share, compared to the initial NAV, 
before income tax relief, of 100.0p (or original cost, net of income tax 
relief, which was typically between 70.0p and 75.0p, depending on 
costs). 
 
   With this share class heavily exposed to the pub and hospitality sector, 
the effects of the coronavirus pandemic after the year end have been 
significant. And provisions have been made against many of the remaining 
investments. At 31 March 2020, the unaudited net asset value was 36.0p 
per share, resulting in a Total Return of 87.5p per share. 
 
   The 'G' Share pool has also commenced the process of realising its 
investments and returning funds to investors. Plans for further 
realisations have however been severely disrupted by the pandemic. The 
disposal of a pub investment was completed prior to the lockdown. These 
proceeds are being distributed by way of a dividend of 2.0p per share 
which will be paid to  'G' Shareholders on 19 May 2020 who are on the 
register at 24 April 2020. This will be paid as an interim dividend in 
respect of the year ended 31 December 2019. 
 
   The Company will update 'G' Shareholders when there is firm news to 
report of further disposals. 
 
   'K' Share pool 
 
   The 'K' Share pool raised the majority of its funds in the 2015/16 tax 
year. At 31 December 2019, the pool held 15 investments with a total 
value of GBP5.5 million. 
 
   The 'K' Share pool suffered from some major problems in a number of 
portfolio companies towards the end of 2019 resulting in the NAV and 
Total Return falling to 58.2p per share at 31 December 2019, compared to 
the initial NAV before income tax relief, of 100.0p (or original cost, 
net of income tax relief, which was typically between 70.0p and 75.0p, 
depending on costs). 
 
   Much of the share pool's value is now held in businesses in the 
hospitality sector and a children's nursery. The pandemic has created 
significant uncertainty for these businesses. At 31 March 2020, the 
unaudited NAV and Total Return was 50.3p per share. 
 
   The VCT regulations have effectively prevented the 'K' Share pool from 
paying any dividends in its initial three years. This period has now 
expired and so the 'K' Share pool will pay its first dividend of 7.5p 
per 'K' Share on 19 May 2020 to shareholders on the register at 24 April 
2020. This will be paid as an interim dividend in respect of the year 
ended 31 December 2019. 
 
   Share buybacks 
 
   As announced in June 2019, the Company is now unlikely to make any 
further purchases of any of its shares as the process of returning funds 
to all groups of shareholders is progressing. 
 
   No share buybacks in respect of any share class were undertaken during 
the period. A resolution to renew the buyback authority will however be 
proposed at the next Annual General Meeting to ensure the Company has 
flexibility. 
 
   Annual General Meeting ("AGM") 
 
   As Shareholders will be aware, there are currently major challenges to 
holding physical Annual General Meetings under the effective lockdown 
conditions.  The Board is aware that this topic is being discussed by 
the various relevant authorities and believes that practical solutions 
will become clear in due course. The Board will monitor developments and 
will make arrangements to hold this year's AGM once it is practical to 
do so.  The Company will send a notice of the AGM to all Shareholders at 
that time. 
 
   Future of the Company 
 
   As a planned exit VCT, the Board notes that the existing share classes 
are working towards returning funds to Shareholders and there are no 
plans for the Company to raise new funds or create any new share 
classes. The Board is therefore reviewing the future plans of the 
Company and may consider taking advantage of the VCT Winding Up 
Regulations, which involve the Company going into voluntary liquidation. 
This would allow the Company to reduce running costs while it works on 
exiting from investments. Any developments to this end will be 
communicated with Shareholders in due course and would require 
Shareholder approval. 
 
   Outlook 
 
   As with so many businesses, the coronavirus pandemic has created major 
challenges and uncertainty for many of our portfolio companies, 
especially as the Company typically invests in sectors which are 
particularly heavily exposed to the effects of the lockdown. The 
Investment Manager is working to support and assist all the businesses 
to ensure that they all take advantage of Government support that has 
been made available and make sensible business decisions in this 
stressful time. We aim to have the businesses as well placed as they can 
be to survive these extreme conditions and recover when the effects of 
the pandemic start to subside. 
 
   There is however downside risk in many of the investment valuations, and 
the timing of exits from any investments cannot be reliably estimated at 
this time. 
 
   I will update Shareholders on progress in my statement with the Half 
Yearly Report to 30 June 2020. 
 
   Hugh Gillespie 
 
   Chairman 
 
   30 April 2020 
 
   INVESTMENT MANAGER'S REPORT- 'F' SHARE POOL 
 
   Introduction 
 
   The 'F' Share pool holds nine investments and is fully invested in a 
portfolio focussed on asset backed businesses and those with predictable 
revenue streams. The focus for the year continues to be on realisations 
and maximising Shareholder returns. 
 
   Net asset value and results 
 
   At 31 December 2019, the 'F' Share NAV stood at 24.7p. This represents a 
net increase of 1.0p per share over the year (after adjusting for 
dividends paid during the year of 5.0p per Share), equivalent to an 
increase of 3.5%. Total Return (NAV plus cumulative dividends to date) 
for Shareholders who invested in the original share offer is now 96.7p. 
 
   The gain on ordinary activities for the 'F' Share pool for the year was 
GBP110,000 (2018: loss of GBP424,000), being a revenue gain of GBP10,000 
(2018: GBP6,000) and a capital gain of GBP100,000 (2018: loss of 
GBP430,000). 
 
   'F' Share pool - Investment activity 
 
   During the year, total proceeds of GBP716,000 were received from one 
full exit in Lambridge Solar Limited, the owner of commercial solar 
arrays in Lincolnshire. The exit generated a total gain over opening 
value of GBP111,000. As the pool is in its realisation phase, there were 
no new investments made during the period. 
 
   Plans were in place for the exit of the remaining portfolio companies. 
However, Shareholders should note that due to current market conditions 
and the global pandemic, this may now take longer than originally 
anticipated. 
 
   'F' Share pool -- Portfolio valuation 
 
   The majority of investments remain valued at or above cost and there 
were several valuation movements in the period. This generated a small 
decrease in valuation over opening value of GBP11,000. 
 
   The most notable increase in the period related to Baron House 
Developments LLP, a company created to fund the purchase of a property 
outside Newcastle station, which qualifies under the BPRA scheme. At the 
period end, the investment value was uplifted by GBP192,000 following 
improved trading and an uplift in the value of the hotel site. 
 
   There were a number of small write downs at the period end that 
contributed to the valuation decrease during the period. 
 
   The largest decreases in valuation related to the Antic portfolio of 
investments, including, Pearce and Saunders Limited, Pearce and Saunders 
DevCo Limited and Atlantic Dogstar Limited. 
 
   Pearce and Saunders Limited, the owner of freehold pubs in south east 
London, and Pearce and Saunders DevCo Limited, the owner of development 
land at the rear of one of the freehold pub sites owned by Pearce and 
Saunders Limited, were decreased by GBP121,000 and GBP44,000 
respectively, in line with expected exit proceeds. 
 
   Apex Energy Limited, the developer of a standby electricity generation 
plant in the East Midlands, was further reduced in value by GBP83,000 in 
line with preliminary exit proceeds. 
 
   Outlook 
 
   Focus for the 'F' Share pool remains on the realisation of its 
investments, with plans for the exit of the final investments now being 
delayed due to the coronavirus pandemic. Shareholders should note, as a 
result of the current global economy and effective lockdown in the UK, 
valuations post year end have been impacted and a number of provisions 
have been made. At 31 March 2020, the unaudited net asset value has 
fallen to 21.6p, resulting in a total return of 93.6p. We shall look to 
provide as much support as possible during this time to all investee 
companies and suggest, where possible, the extensive government schemes 
that are available. 
 
   Downing LLP 
 
   30 April 2020 
 
   REVIEW OF INVESTMENTS -- 'F' SHARE POOL 
 
   Portfolio of investments 
 
   The following investments, all of which are incorporated in England and 
Wales, were held at 31 December 2019: 
 
 
 
 
                                                        Valuation 
                                                         movement      % of 
  'F' Share pool                    Cost     Valuation   in year     portfolio 
                                  GBP'000    GBP'000     GBP'000 
 
  VCT qualifying and partially 
  qualifying investments 
  Downing Pub EIS One Limited         490          656         36        24.8% 
  Pearce and Saunders Limited         497          550      (121)        20.8% 
  Atlantic Dogstar Limited            200          258       (12)         9.8% 
  Fresh Green Power Limited           189          231         21         8.7% 
  Green Energy Production UK 
   Limited                            100           54          -         2.0% 
  Apex Energy Limited               1,000           17       (83)         0.6% 
                                    2,476        1,766      (159)        66.7% 
  Non-qualifying investments 
  Baron House Developments LLP        481          673        192        25.4% 
  Pearce and Saunders DevCo 
   Limited                             46            2       (44)         0.1% 
  London City Shopping Centre 
   Limited                             66            -          -         0.0% 
                                      593          675        148        25.5% 
 
                                    3,069        2,441       (11)        92.2% 
                                 ========               ========= 
 
  Cash at bank and in hand                         206                    7.8% 
                                           -----------             ----------- 
 
  Total investments                              2,647                  100.0% 
                                           ===========             =========== 
 
 
   Summary of investment movements 
 
   Disposals 
 
 
 
 
 
                                                        Gain 
                                           Disposal    against     Total realised 
                Cost     MV at 01/01/19    proceeds     cost     gain during the year 
              GBP'000      GBP'000        GBP'000     GBP'000          GBP'000 
VCT 
qualifying 
investments 
Lambridge 
 Solar 
 Limited          500               605         716        216                    111 
 
Total 'F' 
 Share pool       500               605         716        216                    111 
              =======  ================  ==========  =========  ===================== 
 
 
   INVESTMENT MANAGER'S REPORT- 'G' SHARE POOL 
 
   Introduction 
 
   The 'G' Share pool raised funds in 2013 and the task of realising its 
investments continues following the passing of the five-year anniversary 
of the close of the 'G' Share offer, with one significant distribution 
during the period of 14.0p. 
 
   Net asset value and results 
 
   At 31 December 2019, the 'G' Share NAV stood at 48.1p. This represents a 
net increase of 1.2p per Share over the year (after adjusting for 
dividends paid during the year of 14.0p per Share), equivalent to an 
increase of 2.0%. Total Return (NAV plus cumulative dividends to date) 
for Shareholders who invested in the original share offer is now 99.6p. 
 
   The gain on ordinary activities for the 'G' Share pool for the year was 
GBP303,000 (2018: loss of GBP2,180,000), being a revenue profit of 
GBP449,000 (2018: GBP631,000) and a capital loss of GBP146,000 (2018: 
GBP2.8 million). 
 
   'G' Share pool - Investment activity 
 
   With the pool being in the realisation phase, no new investments were 
made in the period. Two full exits completed during the period 
generating total proceeds GBP3.2 million. 
 
   Proceeds of GBP1.8 million were generated from the sale of Antelope Pub 
Limited, which owns a pub of the same name in Tooting, London. This 
represented a gain over cost of GBP51,000. 
 
   In addition, Hedderwick Limited, the owner of two freehold pubs located 
in Royston, Hertfordshire and Olney, Milton Keynes, was successfully 
exited during the year and generated proceeds of GBP1.4 million. This 
represented a gain over cost of GBP144,000. 
 
   'G' Share pool -- Portfolio valuation 
 
   The period to 31 December 2019 has seen a number of 
 
   valuation movements, resulting in an unrealised loss of GBP270,000. 
 
   The most notable write down in the period related to Ormsborough Limited, 
the owner of several pubs and restaurants in Yorkshire, which was 
written down by GBP350,000 to nil at the period end. The investment has 
been further reduced in value following the sale of the company that 
resulted in nil value for equity shareholders. The company has since 
gone into liquidation and as a result a full provision has been made. 
 
   Atlantic Dogstar Limited and Walworth House Pub Limited both form part 
of the Antic portfolio of investments. 
 
   Atlantic Dogstar Limited, which owns a group of London pubs, and 
Walworth House Pub Limited which owns a freehold pub in South London, 
were decreased in value by GBP204,000 and GBP106,000 respectively in 
line with expected exit proceeds. 
 
   The unrealised losses were partially offset by unrealised gains in the 
period totalling GBP508,000. 
 
   The most significant increase in the period related to Baron House 
Developments LLP, a company created to fund the purchase of a property 
outside Newcastle station, which qualifies under the BPRA scheme. At the 
period end, the investment value was uplifted by GBP437,000 following 
improved trading and an uplift in the value of the hotel site. 
 
   Outlook 
 
   Focus for the 'G' Share pool remains on the realisation of its 
investments with good progress being made prior to the global 
Coronavirus pandemic. Regrettably, the Coronavirus pandemic has hit 
valuations after the year end. Following a review of the portfolio, it 
is clear that adjustments have been required to the valuations of the 
pub and hospitality related investments. As at 31 March 2020, the 
unaudited net asset value has fallen to 36.0p per share, resulting in a 
total return of 50.3p per share. In addition, the plans for exiting the 
investments have been impacted and it is unclear currently when further 
exits will be achieved. We are providing as much support as possible to 
all investee companies during this difficult time, seeking to position 
them as well as we can to facilitate exits when conditions improve. 
 
   Downing LLP 
 
   30 April 2020 
 
   REVIEW OF INVESTMENTS -- 'G' SHARE POOL 
 
   Portfolio of investments 
 
   The following investments, all of which are incorporated in England and 
Wales, were held at 31 December 2019: 
 
 
 
 
                                                        Valuation 
                                                         movement      % of 
  'G' Share pool                    Cost     Valuation   in year     portfolio 
                                  GBP'000    GBP'000     GBP'000 
 
  VCT qualifying and partially 
  qualifying investments 
  Atlantic Dogstar Limited          3,500        4,521      (204)        40.2% 
  Walworth House Pub Limited        1,330        1,224      (106)        10.9% 
  Downing Pub EIS One Limited         980        1,311         71        11.7% 
  Quadrate Catering Limited         1,450        1,196          -        10.6% 
  Pearce and Saunders Limited         193          193          -         1.7% 
  Hermes Wood Pellets Limited       1,000          152          -         1.4% 
  Apex Energy Limited               1,300           22      (108)         0.2% 
  Zora Energy Renewables 
   Limited                            750           67       (10)         0.6% 
  Ormsborough Limited                 500            -      (350)         0.0% 
                                   11,003        8,686      (707)        77.3% 
  Non-qualifying investments 
  Baron House Developments LLP      1,093        1,530        437        13.6% 
  Quadrate Spa Limited              1,450          669          -         5.9% 
  London City Shopping Centre 
   Limited                            110            -          -         0.0% 
                                    2,653        2,199        437        19.5% 
 
                                   13,656       10,885      (270)        96.8% 
                                 ========               ========= 
 
  Cash at bank and in hand                         361                    3.2% 
                                           -----------             ----------- 
 
  Total investments                             11,246                  100.0% 
                                           ===========             =========== 
 
 
   Summary of investment movements 
 
   Disposals 
 
 
 
 
 
                                                           Gain/ 
                                              Disposal    against     Total realised 
                   Cost     MV at 01/01/19    proceeds     cost     gain during the year 
                 GBP'000      GBP'000        GBP'000     GBP'000          GBP'000 
VCT qualifying 
investments 
Antelope Pub 
 Limited           1,760             1,760       1,811         51                     51 
 
Non-qualifying 
investments 
Hedderwick 
 Limited           1,250             1,321       1,394        144                     73 
 
                   3,010             3,081       3,205        195                    124 
                 =======  ================  ==========  =========  ===================== 
 
 
   INVESTMENT MANAGER'S REPORT- 'K' SHARE POOL 
 
   Introduction 
 
   The 'K' Share pool closed its fundraising on 30 September 2016 having 
raised GBP16.2 million. At the period end, the 'K' Share pool held 15 
investments across a range of industries. It is disappointing to have to 
report that, several portfolio companies suffered substantial setbacks 
which have required significant provisions. 
 
   'K' Share pool - Net asset value and results 
 
   At 31 December 2019, the 'K' Share NAV and Total Return (NAV plus 
cumulative dividends to date) was 58.2p, a decrease of 33.1p per Share 
over the year, equivalent to a decrease of 36.3%. 
 
   The loss on ordinary activities for the 'K' Share pool for the year was 
GBP5.2 million (2018: GBP1.0 million), being a revenue loss of 
GBP122,000 (2018: GBP271,000) and a capital loss of GBP5.1 million 
(2018: loss of GBP729,000). 
 
   'K' Share pool - Investment activity 
 
   With the pool entering the VCT qualification test at the start of the 
period, no new investments were made in the period. 
 
   Proceeds of GBP61,000 were received from the exit of Snow Hill 
Developments LLP, representing a gain over opening value of GBP18,000. 
In addition, the residual holding in Mosaic Spa and Health Clubs Limited, 
the provider of gym and spa management services, was exited at the end 
of the summer, generating a minor loss over opening value of GBP13,000. 
 
   'K' Share pool -- Portfolio valuation 
 
   The period to 31 December 2019 has seen a number of disappointing 
developments, resulting in an unrealised loss of GBP5.1 million. 
 
   A significant portion of the unrealised loss for the year related to 
five investments. Further details on each is noted below. 
 
   The most notable decreases related to Jito Trading Limited and Yamuna 
Renewables Limited, which were written down by GBP1.5 million and GBP1.3 
million respectively. As noted in the half year accounts, Yamuna 
Renewables Limited, a wood pelleting plant in Gars am Kamp, Austria was 
reduced due to a number of factors. Consumer demand at the site 
substantially reduced following warmer than expected weather, in 
addition to two serious fires at the facility which resulted in a halt 
to production. As the company has some borrowings, it is difficult to 
recover any value and as a result the investment has been fully provided 
against. 
 
   The problems encountered at Yamuna have resulted in consequential 
problems with Jito Trading Limited, the operator of another wood 
pelleting plant in Weitra, Austria, who share the same management team. 
As a result, an advisor has been appointed to sell the business. However, 
as the company has borrowings, it is not expected that a sale based on 
the current offers would recover any value for the equity shareholders, 
including the 'K' Share pool. 
 
   Ormsborough Limited, the owner of several pubs and restaurants in 
Yorkshire, has been written down by GBP948,000 to nil at the period end 
following the sale of the company that resulted in nil value for equity 
shareholders. The company has since gone into liquidation and as a 
result a full provision has been made. 
 
   Indigo Generation Limited and Ironhide Generation Limited are both 
developing solar farms on adjacent land in India. Due to a combination 
of factors, each investment has been reduced in value at the period end. 
One of the main factors affecting the sites is the private Power 
Purchase Agreement ("PPA") market in this region of India that has been 
particularly affected by reductions in long term PPA terms, as a result 
of high inflation levels. Construction of the first phase of each site 
has now been completed at the year end and grid connections have been 
secured. However, the second phase of the build programme is currently 
behind schedule. As a result, a provision of GBP478,000 has been 
required against each investment. 
 
   Outlook 
 
   The falls in value experienced by the 'K' Share pool during the year are 
extremely disappointing. We have dedicated substantial resources to 
address the issues of each of the affected companies. 
 
   Since the year end, the Coronavirus pandemic has further impacted the 
portfolio. Businesses in the hospitality sector and children's nurseries 
are clearly businesses that are suffering heavily from the lockdown and 
provisions have been made accordingly. 
 
   The unaudited net asset value and Total Return as at 31 March 2020 was 
50.3p per share. 
 
   The process of realising all of the investments to return funds to 
investors is scheduled to commence towards the end of 2021. In the 
meantime, we will be working to support all portfolio companies, 
enduring that they benefit from Government aid that is available and 
take sensible decisions as they deal with these unprecedented 
conditions. 
 
   Downing LLP 
 
   30 April 2020 
 
   REVIEW OF INVESTMENTS -- 'K' SHARE POOL 
 
   Portfolio of investments 
 
   The following investments, all of which are incorporated in England and 
Wales, were held at 31 December 2019: 
 
 
 
 
                                                        Valuation 
                                                         movement      % of 
  'K' Share pool                    Cost     Valuation   in year     portfolio 
                                  GBP'000    GBP'000     GBP'000 
 
  VCT qualifying and partially 
  qualifying investments 
  Apprise Pubs Limited              1,300        1,300          -        14.4% 
  Garthcliff Shipping Limited       1,300        1,300          -        14.4% 
  Exclusive Events Venues 
   Limited                            500          500          -         5.5% 
  Walworth House Pub Limited          500          460       (40)         5.1% 
  Pilgrim Trading Limited             432          432          -         4.8% 
  SF Renewables (Solar) Limited       337          303       (85)         3.4% 
  Rockhopper Renewables Limited       591          295      (296)         3.3% 
  Ironhide Generation Limited         736          258      (478)         2.9% 
  Indigo Generation Limited           736          258      (478)         2.9% 
  Zora Energy Renewables 
   Limited                            350           32        (5)         0.3% 
  Yamuna Renewables Limited         1,300            -    (1,300)         0.0% 
  Jito Trading Limited              1,500            -    (1,500)         0.0% 
  Ormsborough Limited               1,400            -      (948)         0.0% 
                                   10,982        5,138    (5,130)        57.0% 
 
  Non-qualifying investments 
  Fenkle Street LLP                   287          317         23         3.5% 
  London City Shopping Centre 
   Limited                             15            -          -         0.0% 
                                 --------  -----------  ---------  ----------- 
                                      302          317         23         3.5% 
 
                                   11,284        5,455    (5,107)        60.5% 
 
  Cash at bank and in hand                       3,569                   39.5% 
                                           -----------             ----------- 
 
  Total investments                              9,024                  100.0% 
                                           ===========             =========== 
 
 
   Summary of investment movements 
 
   Disposals 
 
 
 
 
 
                                                           Gain 
                                              Disposal    against     Total realised 
                   Cost     MV at 01/01/19    proceeds     cost     gain during the year 
                 GBP'000      GBP'000        GBP'000     GBP'000          GBP'000 
VCT qualifying 
investments 
Mosaic Spa and 
 Health Clubs 
 Limited              24                26          13       (11)                   (13) 
 
Non-qualifying 
investments 
Snow Hill 
 Developments 
 LLP                  43                43          61         18                     18 
 
Total 'K' Share 
 pool                 67                69          74          7                      5 
                 =======  ================  ==========  =========  ===================== 
 
   Directors' responsibilities statement 
 
   The Directors are responsible for preparing the Report of the Directors, 
the Directors' Remuneration Report, the Strategic 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 Conduct 
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), including Financial Reporting Standard 
102, the financial reporting standard applicable in the UK and Republic 
of Ireland (FRS 102). 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 year. 
 
   In preparing these financial statements the Directors are required to: 
 
   - select suitable accounting policies and then apply them consistently; 
 
   - make judgements 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. 
 
   In addition, each of the Directors considers that the Annual Report, 
taken as a whole, is fair, balanced and understandable and provides the 
information necessary for Shareholders to assess the Company's position 
and performance, business model and strategy. 
 
   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. 
 
   Statement as to disclosure of information to Auditor 
 
   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 Auditor is 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. 
 
   INCOME STATEMENT 
 
   for the year ended 31 December 2019 
 
 
 
 
                                                          Year ended 31 December      Year ended 31 December 
                                                                   2019                        2018 
 
                                                        Revenue  Capital   Total    Revenue  Capital   Total 
                                                        GBP'000  GBP'000  GBP'000   GBP'000  GBP'000  GBP'000 
 
Income                                                    1,182       16     1,198    1,590       31     1,621 
 
(Loss)/gain on investments                                    -  (5,148)   (5,148)        -  (4,001)   (4,001) 
                                                        -------  -------  --------  -------  -------  -------- 
                                                          1,182  (5,132)   (3,950)    1,590  (3,970)   (2,380) 
 
Investment management fees                                (551)        -     (551)    (711)        -     (711) 
 
Other expenses                                            (244)        -     (244)    (254)        -     (254) 
                                                        -------  -------  --------  -------  -------  -------- 
 
(Loss)/return on ordinary activities before tax             387  (5,132)   (4,745)      625  (3,970)   (3,345) 
 
Tax on total comprehensive income and 
 ordinary activities                                       (50)        -      (50)    (259)        -     (259) 
                                                        -------  -------  --------  -------  -------  -------- 
 
(Loss)/return for the year attributable to equity 
 shareholders                                               337  (5,132)   (4,795)      366  (3,970)   (3,604) 
                                                        =======  =======  ========  =======  =======  ======== 
 
Basic and diluted (loss)/return per: 
'F' Share                                                  0.1p     0.9p      1.0p     0.1p   (4.0p)    (3.9p) 
'G' Share                                                  1.8p   (0.6p)      1.2p     2.5p  (11.1p)    (8.6p) 
'K' Share                                                (0.8p)  (32.4p)   (33.2p)   (1.7p)   (4.6p)    (6.3p) 
 
 
   All Revenue and Capital items in the above statement are derived from 
continuing operations. No operations were acquired or discontinued 
during the year. The total column within the Income Statement represents 
the Statement of Total Comprehensive Income of the Company prepared in 
accordance with Financial Reporting Standards ("FRS 102"). The 
supplementary revenue and capital return columns are prepared in 
accordance with the Statement of Recommended Practice issued in November 
2014 and updated February 2018 by the Association of Investment 
Companies ("AIC SORP"). 
 
   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. 
 
   INCOME STATEMENT (ANALYSED BY SHARE POOL) 
 
   for the year ended 31 December 2019 
 
   'F' Share pool 
 
 
 
 
                 Year ended 31 December 2019  Year ended 31 December 2018 
 
                 Revenue  Capital    Total    Revenue   Capital    Total 
                 GBP'000  GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
 
Income               105         -       105       177         -       177 
(Loss)/gain on 
 investments           -       100       100         -     (430)     (430) 
                 -------  --------  --------  --------  --------  -------- 
                     105       100       205       177     (430)     (253) 
Investment 
 management 
 fees               (49)         -      (49)      (97)         -      (97) 
Other expenses      (39)         -      (39)      (43)         -      (43) 
                 -------  --------  --------  --------  --------  -------- 
(Loss)/return 
 on ordinary          17       100       117        37     (430)     (393) 
 activities 
 before tax 
Tax on total 
 comprehensive       (7)         -       (7)      (31)         -      (31) 
 income and 
 ordinary 
 activities 
                 -------  --------  --------  --------  --------  -------- 
(Loss)/return 
 attributable         10       100       110         6     (430)     (424) 
 to equity 
 shareholders 
                 =======  ========  ========  ========  ========  ======== 
 
 
   'G' Share pool 
 
 
 
 
                                          Year ended 31 December 
                                                   2019             Year ended 31 December 2018 
 
                                        Revenue  Capital   Total    Revenue  Capital    Total 
                                        GBP'000  GBP'000  GBP'000   GBP'000  GBP'000   GBP'000 
 
Income                                      941        -       941    1,307         -     1,307 
(Loss)/gain on investments                    -    (146)     (146)        -   (2,811)   (2,811) 
                                        -------  -------  --------  -------  --------  -------- 
                                            941    (146)       795    1,307   (2,811)   (1,504) 
Investment management fees                (288)        -     (288)    (369)         -     (369) 
Other expenses                            (110)        -     (110)    (129)         -     (129) 
                                        -------  -------  --------  -------  --------  -------- 
(Loss)/return on ordinary activities 
 before tax                                 543    (146)       397      809   (2,811)   (2,002) 
Tax on total comprehensive income and 
 ordinary activities                       (94)        -      (94)    (178)         -     (178) 
                                        -------  -------  --------  -------  --------  -------- 
(Loss)/return attributable to equity 
 shareholders                               449    (146)       303      631   (2,811)   (2,180) 
                                        =======  =======  ========  =======  ========  ======== 
 
 
   'K' Share pool 
 
 
 
 
                 Year ended 31 December 2019  Year ended 31 December 2018 
 
                 Revenue  Capital    Total    Revenue   Capital    Total 
                 GBP'000  GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
 
Income               136        16       152       106        31       137 
(Loss)/gain on 
 investments           -   (5,102)   (5,102)         -     (760)     (760) 
                 -------  --------  --------  --------  --------  -------- 
                     136   (5,086)   (4,950)       106     (729)     (623) 
Investment 
 management 
 fees              (214)         -     (214)     (245)         -     (245) 
Other expenses      (95)         -      (95)      (82)         -      (82) 
                 -------  --------  --------  --------  --------  -------- 
(Loss)/return 
 on ordinary 
 activities 
 before tax        (173)   (5,086)   (5,259)     (221)     (729)     (950) 
Tax on total 
 comprehensive        51         -        51      (50)         -      (50) 
 income and 
 ordinary 
 activities 
                 -------  --------  --------  --------  --------  -------- 
(Loss)/return 
 attributable      (122)   (5,086)   (5,208)     (271)     (729)   (1,000) 
 to equity 
 shareholders 
                 =======  ========  ========  ========  ========  ======== 
 
 
   BALANCE SHEET 
 
   as at 31 December 2019 
 
 
 
 
                                                         2019     2018 
                                                        GBP'000  GBP'000 
 
Fixed assets 
Investments                                              18,781   27,925 
 
Current assets 
Debtors                                                   1,374    1,328 
Cash at bank and in hand                                  4,136    4,055 
                                                  -------------  ------- 
                                                          5,510    5,383 
 
Creditors: amounts falling due within one year            (306)    (448) 
                                                  -------------  ------- 
 
Net current assets                                        5,204    4,935 
 
Net assets                                               23,985   32,860 
                                                  =============  ======= 
 
Capital and reserves 
Called up share capital                                      52       52 
Capital redemption reserve                                  149      149 
Special reserve                                          34,938   38,471 
Revaluation reserve                                     (4,585)  (3,911) 
Capital reserve -- realised                             (7,105)  (2,250) 
Revenue reserve                                             536      349 
                                                  -------------  ------- 
 
 
  Total equity shareholders' funds                       23,985   32,860 
                                                  =============  ======= 
 
Basic and diluted net asset value per Share: 
'F' Share                                                 24.7p    28.7p 
'G' Share                                                 48.1p    60.9p 
'K' Share                                                 58.2p    91.3p 
 
   Hugh Gillespie 
 
   Chairman 
 
   Company number: 5334418 
 
   BALANCE SHEET (ANALYSED BY SHARE POOL) 
 
   as at 31 December 2019 
 
   'F' Shares 
 
 
 
 
                                                      2019   2018 
                                                    GBP000  GBP000 
Fixed assets 
Investments                                          2,441    3,057 
Current assets 
Debtors                                                 69       53 
Cash at bank and in hand                               206       60 
                                                  --------  ------- 
                                                       275      113 
Creditors: amounts falling due within one year        (43)     (68) 
                                                  --------  ------- 
Net current assets                                     232       45 
                                                  --------  ------- 
Net assets                                           2,673    3,102 
                                                  ========  ======= 
 
Capital and reserves 
Called up share capital                                 11       11 
Capital redemption reserve                             149      149 
Special reserve                                      3,949    4,274 
Revaluation reserve                                  (810)    (761) 
Capital reserve -- realised                        (1,099)  (1,033) 
Revenue reserve                                        473      462 
                                                  --------  ------- 
Total equity shareholders' funds                     2,673    3,102 
                                                  ========  ======= 
 
 
   'G' Shares 
 
 
 
 
                                                      2019   2018 
                                                    GBP000  GBP000 
Fixed assets 
Investments                                         10,885   14,237 
Current assets 
Debtors                                              1,140    1,162 
Cash at bank and in hand                               361      324 
                                                  --------  ------- 
                                                     1,501    1,486 
Creditors: amounts falling due within one year       (218)    (317) 
                                                  --------  ------- 
Net current assets                                   1,283    1,169 
                                                  --------  ------- 
Net assets                                          12,168   15,406 
                                                  ========  ======= 
 
Capital and reserves 
Called up share capital                                 25       25 
Special reserve                                     14,804   17,999 
Revaluation reserve                                (2,161)  (2,429) 
Capital reserve -- realised                        (1,831)  (1,221) 
Revenue reserve                                      1,331    1,032 
                                                  --------  ------- 
Total equity shareholders' funds                    12,168   15,406 
                                                  ========  ======= 
 
 
   'K' Shares 
 
 
 
 
                                                      2019   2018 
                                                    GBP000  GBP000 
Fixed assets 
Investments                                          5,455   10,631 
Current assets 
Debtors                                                165      113 
Cash at bank and in hand                             3,569    3,671 
                                                  --------  ------- 
                                                     3,734    3,784 
Creditors: amounts falling due within one year        (45)     (63) 
                                                  --------  ------- 
Net current assets                                   3,689    3,721 
                                                  --------  ------- 
Net assets                                           9,144   14,352 
                                                  ========  ======= 
 
Capital and reserves 
Called up share capital                                 16       16 
Special reserve                                     16,185   16,198 
Revaluation reserve                                (1,614)    (721) 
Revenue reserve                                    (1,268)  (1,145) 
Capital reserve realised                           (4,175)        4 
                                                  --------  ------- 
Total equity shareholders' funds                     9,144   14,352 
                                                  ========  ======= 
 
   STATEMENT OF CHANGES IN EQUITY 
 
   for the year ended 31 December 2019 
 
 
 
 
                                      Capital              Share                     Capital 
                       Called up     redemption  Special  premium   Revaluation      reserve      Revenue 
                      share capital   reserve    reserve  reserve     reserve       - realised    reserve     Total 
                        GBP'000       GBP'000    GBP'000  GBP'000     GBP'000       GBP'000      GBP'000    GBP'000 
 
At 31 December 2017              77         124   28,313    16,170          815        (2,252)        438     43,685 
Total comprehensive 
 income                           -           -        -         -      (4,866)            896        366    (3,604) 
Share premium 
 cancellation                     -           -   16,170  (16,170)            -              -          -          - 
Transactions with 
 owners 
Purchase of own 
 shares                           -           -        -         -            -              -       (55)       (55) 
Transfers between 
 reserves*                        -           -  (6,012)         -          140          5,872          -          - 
Dividends paid                    -           -        -         -            -        (6,766)      (400)    (7,166) 
Cancellation of 
 shares                        (25)          25        -         -            -              -          -          - 
                     --------------  ----------  -------  --------  -----------  -------------  ---------  --------- 
At 31 December 2018              52         149   38,471         -      (3,911)        (2,250)        349     32,860 
                     ==============  ==========  =======  ========  ===========  =============  =========  ========= 
Total comprehensive 
 income                           -           -        -         -      (5,388)            256        337    (4,795) 
Realisation of 
 impaired 
 valuations                       -           -        -         -        4,891        (4,891)          -          - 
Transactions with 
 owners                           -           -        -         -            -              -          -          - 
Purchase of own 
shares                            -           -        -         -            -              -          -          - 
Transfers between 
 reserves*                        -           -  (3,533)         -        (177)          3,710          -          - 
Dividends paid                    -           -        -         -            -        (3,930)      (150)    (4,080) 
Cancellation of 
shares                            -           -        -         -            -              -          -          - 
 
At 31 December 2019              52         149   34,938         -      (4,585)        (7,105)        536     23,985 
                     ==============  ==========  =======  ========  ===========  =============  =========  ========= 
 
 
 
   * A transfer of GBP177,000 (2018: GBP140,000) representing previously 
recognised unrealised gains/losses on disposal of investments during the 
year ended 31 December 2019 has been made from the Revaluation Reserve 
to the Capital Reserve-realised. A transfer of GBP3.7 million (2018: 
GBP5.9 million) representing realised gains on disposal of investments, 
less capital expenses and capital dividends in the year was made from 
Capital Reserve -- realised to Special reserve. 
 
   CASH FLOW STATEMENT 
 
   for the year ended 31 December 2019 
 
 
 
 
                                           Year ended 31 December 2019 
                                          'F'      'G'      'K' 
                                         Share    Share    Share 
                                          pool     pool     pool     Total 
                                        GBP'000  GBP'000  GBP'000  GBP'000 
 
Net cash (outflow)/inflow from 
 operating activities                      (29)      371    (176)      166 
                                        -------  -------  -------  ------- 
 
Cash flows from investing activities 
Proceeds from sale of investments           716    3,205       74    3,995 
                                        -------  -------  -------  ------- 
Net cash inflow from investing 
 activities                                 716    3,205       74    3,995 
                                        -------  -------  -------  ------- 
 
  Net cash inflow/(outflow) before 
   financing activities                     687    3,576    (102)    4,161 
 
Cash flows from financing activities 
Equity dividends paid                     (541)  (3,539)        -  (4,080) 
  Net cash (outflow) from financing 
   activities                             (541)  (3,539)        -  (4,080) 
                                        -------  -------  -------  ------- 
 
(Decrease)/increase in cash                 146       37    (102)       81 
Cash and cash equivalents at start of 
 year                                        60      324    3,671    4,055 
                                        -------  -------  -------  ------- 
Cash and cash equivalents at end of 
 year                                       206      361    3,569    4,136 
                                        =======  =======  =======  ======= 
 
Cash and cash equivalents comprise 
Cash at bank and in hand                    206      361    3,569    4,136 
                                        -------  -------  -------  ------- 
Total cash and cash equivalents             206      361    3,569    4,136 
                                        =======  =======  =======  ======= 
 
 
 
 
 
 
 
                                           Year ended 31 December 2018 
                                          'F'      'G'      'K' 
                                         Share    Share    Share 
                                          pool     pool     pool     Total 
                                        GBP'000  GBP'000  GBP'000  GBP'000 
 
Net cash (outflow)/inflow from 
 operating activities                       (5)      120    (288)    (173) 
                                        -------  -------  -------  ------- 
 
Cash flows from investing activities 
Proceeds from sale of investments         1,964    2,892    1,004    5,860 
                                        -------  -------  -------  ------- 
Net cash inflow from investing 
 activities                               1,964    2,892    1,004    5,860 
                                        -------  -------  -------  ------- 
 
  Net cash inflow before financing 
   activities                             1,959    3,012      716    5,687 
 
Cash flows from financing activities 
Equity dividends paid                   (4,000)  (3,166)        -  (7,166) 
Purchase of own shares                        -     (38)     (17)     (55) 
                                        -------  -------  -------  ------- 
  Net cash (outflow) from financing 
   activities                           (4,000)  (3,204)     (17)  (7,221) 
                                        -------  -------  -------  ------- 
 
(Decrease)/increase in cash             (2,041)    (192)      699  (1,534) 
Cash and cash equivalents at start of 
 year                                     2,101      516    2,972    5,589 
                                        -------  -------  -------  ------- 
Cash and cash equivalents at end of 
 year                                        60      324    3,671    4,055 
                                        =======  =======  =======  ======= 
 
Cash and cash equivalents comprise 
Cash at bank and in hand                     60      324    3,671    4,055 
                                        -------  -------  -------  ------- 
Total cash and cash equivalents              60      324    3,671    4,055 
                                        =======  =======  =======  ======= 
 
 
   NOTES TO THE ACCOUNTS 
 
   for the year ended 31 December 2019 
 
   1. General information 
 
   Downing TWO VCT plc ("the Company") is a venture capital trust 
established under the legislation introduced in the Finance Act 1995 and 
is domiciled in the United Kingdom and incorporated in England and 
Wales. Its registered office is St. Magnus House, 3 Lower Thames Street, 
London EC3R 6HD. 
 
   2. Accounting policies 
 
   Basis of accounting 
 
   The Company has prepared its financial statements under FRS 102 'The 
Financial Reporting Standard applicable in the UK and Republic of 
Ireland' and in accordance with the Statement of Recommended Practice 
("SORP") for investment trust companies and venture capital trusts 
issued by the Association of Investment Companies ("AIC") in November 
2014 and updated February 2018 as well as the Companies Act 2006. 
 
   The financial statements are presented in Sterling (GBP) and rounded to 
thousands. 
 
   Going concern 
 
   After reviewing the Company's forecasts and projections, the Directors 
have a reasonable expectation that the major cash outflows of the 
Company (most notably investments, share buybacks and dividends) are 
within the Company's control and therefore the Company has sufficient 
cash to meet its expenses and liabilities when they fall due. As such, 
the Board confirms that the Company has adequate resources to continue 
in operational existence for at least 12 months from the date of 
approval of the financial statements. The Company therefore continues to 
adopt the going concern basis in preparing its financial statements. 
 
   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 return on ordinary 
activities 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 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 
FRS 102 sections 11 and 12. 
 
   For unquoted investments, fair value is established 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. 
 
   All investments are held at the price of recent investment for an 
appropriate period where there is considered to have been no change in 
fair value. Where this basis is no longer considered appropriate, the 
following factors will be considered: 
 
   - Where a value is demonstrated by a material arms-length transaction by 
an independent third party in the shares of a company, this value may be 
used; 
 
   - In the absence of the above, depending on each of the subsequent 
trading performance and investment structure of an investee company, the 
valuation basis will likely move to either: 
 
   i) an earnings multiple basis; or 
 
   ii) where a company's underperformance against plan indicates a 
diminution in the value of the investment, provision against cost is 
made, as appropriate. 
 
   - Premiums on loan stock investments are accrued at fair value when the 
Company receives the right to the premium and when considered 
recoverable; 
 
   - Where an earnings multiple or cost less impairment basis is not 
appropriate and overriding factors apply, discounted cash flow, a net 
asset valuation, or industry specific valuation benchmarks may be 
applied. 
 
   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. Where an 
investee company has gone into receivership, liquidation or 
administration (where there is little likelihood of recovery), the loss 
on the investment, although not physically disposed of, is treated as 
being realised. 
 
   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 and FRS 102 sections 
14 and 15 that does not require portfolio investments, where the 
interest held is greater than 20%, 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. 
 
   Distributions from investments in limited liability partnerships 
("LLPs") are recognised as they are paid to the Company. Where such 
items are considered capital in nature they are recognised as capital 
profits. 
 
   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 the policy 
of allocating Investment Manager's fees 100% as revenue. 
 
   - Expenses and liabilities not specific to a share class are generally 
allocated pro rata to the net assets. 
 
   - Performance incentive fees arising from the disposal of investments 
are deducted as a capital item. 
 
   Dividends payable 
 
   Dividends payable are recognised as distributions in the financial 
statements when the Company's liability to make payment has been 
established, normally the record date. 
 
   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 arise. 
 
   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 years different from those in 
which they are included in the financial statements. Deferred taxation 
is not discounted. 
 
   Other debtors and other creditors 
 
   Other debtors (including accrued income) and other creditors 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 revenue reserve account for the relevant share 
class. 
 
   Significant estimates and judgements 
 
   Disclosure is required of judgements and estimates made by management in 
applying the accounting policies that have a significant effect on the 
financial statements. The area involving a higher degree of judgement 
and estimates is the valuation of unquoted investments as explained in 
the investment accounting policy. 
 
   3. Basic and diluted return per share 
 
 
 
 
                                        'F' Shares  'G' Shares  'K' Shares 
 
 
Revenue return/(loss) (GBP'000)                 10         449       (122) 
Per share (pence)                             0.1p        1.8p      (0.8p) 
                                        ==========  ==========  ========== 
 
Net capital gain/(loss) for the year 
 (GBP'000)                                     100       (146)     (5,086) 
Per share (pence)                             0.9p      (0.6p)     (32.4p) 
                                        ==========  ==========  ========== 
 
   Total gain/(loss) after taxation 
    (GBP'000)                                  110         303     (5,208) 
   Per share (pence)                          1.0p        1.2p     (33.2p) 
                                        ==========  ==========  ========== 
 
   Weighted average number of shares 
    in issue                            10,810,859  25,281,571  15,718,154 
                                        ==========  ==========  ========== 
 
 
   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. 
 
   4. Basic and diluted net asset value per share 
 
 
 
 
                                                 2019             2018 
                                            Net asset 
                  Shares in issue               value  Net asset value 
                 31 Dec      31 Dec      per              per 
                  2019        2018     share  GBP'000   share  GBP'000 
 
      'F' 
       Shares  10,810,859  10,810,859  24.7p    2,673   28.7p    3,102 
      'G' 
       Shares  25,281,571  25,281,571  48.1p   12,168   60.9p   15,406 
      "K' 
       Shares  15,718,154  15,718,154  58.2p    9,144   91.3p   14,352 
                                               23,985           32,860 
                                              =======          ======= 
 
 
   The 'F' Share pool, 'G' Share pool and 'K' Share pool are treated as 
separate investment pools. 
 
   5. Principal risks 
 
   The Company's financial instruments comprise investments held at fair 
value through profit and loss, being equity and loan stock investments 
in unquoted companies, loans and receivables consisting of short term 
debtors, cash deposits and financial liabilities, being creditors 
arising from its operations. The main purpose of these financial 
instruments is to generate cashflow and revenue and capital appreciation 
for the Company's operations. The Company has no gearing or other 
financial liabilities apart from short-term creditors and does not use 
any derivatives. 
 
   The fair value of investments is determined using the detailed 
accounting policy. 
 
   The fair value of cash deposits and short term debtors and creditors 
equates to their carrying value in the Balance Sheet. 
 
   Loans and receivables and other financial liabilities are stated at 
amortised cost which the Directors consider is equivalent to fair value. 
 
   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 emerging and 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 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 
emerging and 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 investment 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 
investment risks is a fundamental part of the investment activities 
undertaken by the Investment Manager and overseen by the Board. The 
Manager monitors investments through 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. Investment risk is also mitigated by 
holding a diversified portfolio spread across various business sectors 
and asset classes. 
 
   The key investment risks to which the Company is exposed are: 
 
   - Investment price risk 
 
   - Interest rate risk 
 
   Investment price risk 
 
   Investment price risk arises from uncertainty about the valuation of 
financial instruments held in accordance with the Company's investment 
objectives in addition to the appropriateness of the valuation method 
used. It represents the potential loss that the Company might suffer 
through 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 three 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. 
 
   - "Floating rate" assets predominantly bear interest at rates linked to 
Bank of England base rate or LIBOR and comprise cash at bank and 
liquidity fund investments and certain loan note investments. 
 
   - "No interest rate" assets do not attract interest and comprise equity 
investments and debtors. 
 
   The Company monitors the level of income received from fixed and 
floating rate assets and, if appropriate, may make adjustments to the 
allocation between the categories in particular, should this be required 
to ensure compliance with the VCT regulations. 
 
   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, cash deposits and debtors. 
 
   The Manager manages credit risk in respect of loan stock with a similar 
approach as described under "Market risks" above. In addition, the 
credit risk is mitigated for all investments in loan stocks by taking 
security, covering the full par value of the loan stock in the form of 
fixed and floating charges over the assets of the 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. Similarly, 
the management of credit risk associated with interest, dividends and 
other receivables is covered within the investment management 
procedures. 
 
   Cash is mainly held by Bank of Scotland plc and Royal Bank of Scotland 
plc, both of which are A-rated financial institutions. 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. 
 
   Of the loan stock classified as "past due" above, as at the balance 
sheet date, GBP1,269,000, falling within the banding of one to two years 
and GBP150,000, falling within the banding of two to three years related 
to the principal of loan notes where, although the principal remained 
within term, the investee company was not fully servicing the interest 
obligations under the loan note and is thus in arrears. Of the 
GBP3,762,000, the remaining GBP2,343,000 related to the principal of 
loan notes where the note has passed the maturity date. Notwithstanding 
the arrears of interest, the Directors do not consider that the maturity 
of the principal has altered. 
 
   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, (GBP306,000, 2018: GBP448,000) 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. 
 
   6. Events after the end of the reporting period 
 
   After the end of the reporting period, on 11 March 2020, the World 
Health Organisation declared the outbreak of a strain of novel 
coronavirus disease, COVID-19, a global pandemic which has resulted in 
subsequent major developments and an impact on post year end valuations. 
Although the full impact of the pandemic is not yet known, there is a 
significant risk that the pandemic will negatively impact the prospects 
of many businesses within the portfolio, particularly those in the 
hospitality and children's nursery sectors which are held across all 
Share classes. Investment executives are carrying out an active and 
ongoing role in supporting all portfolio companies at this unprecedented 
time and are implementing any measures required to ensure each business 
suffers the least possible disruption. Provisions have been required 
against a number of the portfolio companies as at 31 March 2020. As a 
result, the unaudited NAVs and Total Return as at 31 March 2020 are as 
follows: 
 
 
 
 
 
 
                                                             Audited 
                                                Unaudited     31 Dec 
                                                31 Mar 2020    2019 
                                                  Pence       Pence 
      'F' Share pool 
      Net asset value per 'F' Share                    21.6     24.7 
      Cumulative distributions per 'F' Share           72.0     72.0 
                                               ------------  ------- 
      Total Return per 'F' Share                       93.6     96.7 
                                               ============  ======= 
 
      'G' Share pool 
      Net asset value per 'G' Share                    36.0     48.1 
      Cumulative distributions per 'G' Share           51.5     51.5 
                                               ------------  ------- 
      Total Return per 'G' Share                       87.5     99.6 
                                               ============  ======= 
 
      'K' Share pool 
      Net asset value per 'K' Share                    50.3     58.2 
      Cumulative distributions per 'K' Share              -        - 
      Total Return per 'K' Share                       50.3     58.2 
                                               ============  ======= 
 
   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 31 December 2019, 
but has been extracted from the statutory financial statements for the 
year ended 31 December 2019 which were approved by the Board of 
Directors on 30 April 2020 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 31 December 2018 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 31 December 2019 will be printed and posted to shareholders 
shortly. Copies will also be available to the public at the registered 
office of the Company at St. Magnus House, London, EC3R 6HD and will be 
available for download from www.downing.co.uk. 
 
 
 
 
 
 

(END) Dow Jones Newswires

April 30, 2020 11:30 ET (15:30 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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