DOWNING PLANNED EXIT VCT 7 PLC 
By
Downing Protected VCT VII plc
Half Yearly Report for the six months ended 31 July 2009
Performance summary
31 Jul 31 Jan 31 Jul
2009 2009 2008
pence pence pence
Net asset value per Ordinary Share 87.10 92.00 94.40
Net asset value per 'A' Share 0.10 0.10 0.10
Cumulative distributions per Share 3.75 1.75 1.75
Total return per Ordinary and 'A' Share 90.95 93.85 96.25
CHAIRMAN'S STATEMENT
I am pleased to update Shareholders on the progress of your Company
over the six months ended 31 July 2009.
Venture capital investments
As the Company has now essentially achieved the VCT qualification
target of having 70% of its funds in qualifying investments,
portfolio activity has been reasonably limited over the period.
One follow-on qualifying investment of £150,000 was made into West
Tower Holdings Limited to provide additional funding for the Company
to complete the planned refurbishment of its pub/restaurant and
wedding venues.
There were two part disposals during the period in the form of loan
stock redemptions at par of £285,000 by Richstone Contracting Limited
and £17,000 from JEB Leisure Limited.
The Company also made a small non-qualifying investment of £188,000
in Downing Acquisitions 1 Limited. This company holds an investment
in a children's nurseries group and provides a reasonable yield with
a very low level of risk.
The Board has undertaken a review of the investment valuations at the
period end and made some adjustments.
The Thames Club Limited owns a health club which is in the process of
being refurbished to a higher standard. This is progressing to plan
and prospects appear good. However, an independent valuation,
undertaken for the bank, has suggested that the value of the club has
fallen since it was acquired in July 2008. Your Directors are
satisfied that the investment is developing to plan, but, in view of
the valuation, have made a provision of £150,000 against the
investment's original cost of £1,000,000.
Richstone Contracting Limited has been building an apartment and
hotel complex in south Devon, but recently building work was put on
hold while the developer reviews the viability of the planned
development in the current market conditions. In view of the current
uncertainty about the project, the Board has made a provision of
£90,000 against the original cost of £407,000. Richstone has now
repaid the loan stock element of the investment.
Shareholders will be aware from my previous reports that one of the
Company's investments, Vermont Developments Limited, went into
administration last year. The Company is now seeking to recover
value from the charge it had taken over a plot of development land in
Salford. A recent indicative valuation of the development land
suggests that the current market value may be very low. Accordingly,
the Directors have reduced the carrying value by a further £75,000 to
£25,000. The Investment Manager considers this valuation to be
excessively low and believes that ultimately the Company should be
able to realise its investment at a higher value.
Of the other investments, all are progressing more or less to plan
and the Board is satisfied that the previous carrying values remain
fair.
The three valuation adjustments described above total £315,000 which
is equivalent to 3.5p per Ordinary Share. At 31 July 2009, the
Company's portfolio comprised 21 investments with a total value of
£7.5 million.
Net Asset Value and results
At 31 July 2009, the Net Asset Value ("NAV") per Ordinary Share stood
at 87.2p and the NAV per 'A' Share at 0.1p, giving a combined total
of 87.3p. This is a decrease of 2.9p per share (3.1%) since the year
end of 31 January 2009 (after adjusting for the 2.0p dividend paid
during the period).
The loss on ordinary activities after taxation for the period as set
out in the Income Statement was £258,000, comprising a revenue profit
of £57,000 and a capital loss of £315,000.
Share buybacks
The Company operates a policy, subject to certain restrictions, of
buying any shares that become available in the market. At the current
time, the Board has agreed to undertake any share buybacks at
approximately a 10% discount to the most recently announced NAV. The
Board reviews this discount level regularly and will make adjustments
if they feel it is appropriate.
No shares buybacks were undertaken in the period.
Risks and uncertainties
The Board has reviewed the principal risks and uncertainties facing
the Company over the remainder of the financial period and concluded
that the key risks are:
(i) investment risk associated with investing in small and immature
businesses; and
(ii) failure to maintain approval as a VCT.
In both cases the Board is satisfied with the Company's approach to
these risks. The strategy of, where possible, taking charges over
assets to secure its investments helps to limit any potential losses
which could arise from the failure of an investee business.
The Company continually monitors its compliance with the VCT
regulations and retains PricewaterhouseCoopers to provide regular
reviews and advice in this area. The Board considers that this
approach reduces the risk of a breach of the VCT regulations to a
minimal level.
Outlook
The process of building the Company's investment portfolio has taken
place over a period where economic conditions have rapidly
deteriorated. Naturally, this has had some impact on the portfolio.
The provisions made against a small number of investments have
generally arisen as a direct result of the economic decline. The
Company's objective is to seek to start returning funds to
Shareholders after June 2012 so there is some time before investment
realisations will be sought. The Board and Manager believe that the
portfolio can ultimately deliver reasonable returns.
Hugh Gillespie
Chairman
30 September 2009
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 July 2009
31 Jul 2009 31 Jul 2008 31 Jan 2009
£'000 £'000 £'000
Fixed assets
Investments 7,455 8,411 7,734
Net current assets 485 193 646
Net assets 7,940 8,604 8,380
Capital and reserves
Called up share capital 23 23 23
Deferred shares 3 3 3
Share premium - 8,580 -
Special reserve 8,576 - 8,576
Revenue reserve 155 159 280
Investment holding losses (817) (161) (502)
Equity shareholders' funds 7,940 8,604 8,380
Net asset value per Ordinary 87.1p 94.4p 92.0p
Share
Net asset value per 'A' Share 0.1p 0.1p 0.1p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 July 2009
31 Jul 2009 31 Jul 2008 31 Jan 2009
£'000 £'000 £'000
Opening Shareholders' funds 8,380 8,783 8,783
Issue of shares - - -
Share issue costs - - -
Total recognised (losses)/gains for (258) (20) (244)
the period
Distributions paid in the (182) (159) (159)
period
Closing Shareholders' funds 7,940 8,604 8,380
UNAUDITED INCOME STATEMENT
for the six months ended 31 July 2009
Six months ended
31 Jul 2009
Revenue Capital Total
£'000 £'000 £'000
Income 207 - 207
Losses on investments - (315) (315)
207 (315) (108)
Investment management fees (56) - (56)
Other expenses (73) - (73)
Return/(loss) on ordinary activities 78 (315) (237)
before taxation
Taxation (21) - (21)
Return/(loss) attributable to equity 57 (315) (258)
Shareholders
Return/(loss) per Ordinary Share 0.6p (3.4p) (2.8p)
Return per 'A' Share - - -
Six months ended Year ended
31 Jul 2008 31 Jan 2009
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Income 317 - 317 611
Losses on investments - (161) (161) (506)
317 (161) 156 105
Investment management fees (59) - (59) (118)
Other expenses (61) - (61) (128)
Return/(loss) on ordinary 197 (161) 36 (141)
activities before taxation
Taxation (56) - (56) (103)
Return/(loss) attributable to 141 (161) (20) (244)
equity Shareholders
Return/(loss) per Ordinary 1.5p (1.7p) (0.2p) 2.7p
Share
Return per 'A' Share - - - -
A Statement of Total Recognised Gains and Losses has not been
prepared as all gains and losses are recognised in the Income
Statement as noted above.
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 July 2009
31 Jul 31 Jul 31 Jan
2009 2008 2009
Note £'000 £'000 £'000
Cash inflow from operating activities
and returns on investments 1 164 24 302
Taxation
Corporation tax paid - - (73)
Capital expenditure
Purchase of investments (681) (2,850) (5,160)
Proceeds from sale of investments 642 592 3,234
Net cash outflow from capital (39) (2,258) (1,926)
expenditure
Equity dividends paid (182) (159) (159)
Net cash outflow before financing (57) (2,393) (1,856)
Financing
Net cash inflow from financing - - -
(Decrease)/increase in cash 2 (57) (2,393) (1,856)
Notes to the cash flow statement:
1 Cash inflow from operating
activities and returns on investments
Net revenue before taxation 78 197 365
Increase in other debtors 101 (156) (59)
(Decrease)/increase in other (15) (17) (4)
creditors
Net cash inflow from operating 164 24 302
activities
2 Analysis of net funds
Beginning of period 623 2,479 2,479
Net cash (outflow)/inflow (57) (2,393) (1,856)
End of period 566 86 623
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 July 2009
% of
Unrealised portfolio
Cost Valuation gain/(loss) by value
£'000 £'000 £'000 £'000
VCT qualifying
Cadbury House Limited 1,000 1,000 - 12.5%
West Tower Holdings Limited 1,150 1,000 (150) 12.5%
The Thames Club Limited 1,000 850 (150) 10.6%
Future Films Production
Services Limited 825 825 - 10.3%
Hoole Hall Country Club
Holdings Limited 750 750 - 9.4%
Crossco (1135) Limited (t/a
Kingsclere Nurseries) 665 665 - 8.3%
Liongold Contracting Limited 434 434 - 5.4%
Richstone Contracting Limited 122 32 (90) 0.4%
5,946 5,556 (390) 69.4%
Non-VCT qualifying
Kings Gap Group Limited 400 400 - 5.0%
JEB Leisure Limited 296 296 - 3.7%
Sanguine Hospitality Limited 250 250 - 3.1%
Future Films Production
Services Limited 225 225 - 2.8%
Aminghurst Limited 208 208 - 2.6%
Downing Acquisitions 1 Limited 188 188 - 2.3%
Cannock Developments (Field
End) LLP 125 125 - 1.6%
Coastal Partnerships Limited 75 75 - 0.9%
Cadbury House Limited 75 75 - 0.9%
Chapel Street Hotel (2008) LLP 31 31 - 0.4%
Vermont Developments Limited 452 25 (427) 0.3%
Chapel Street Hotel Limited 1 1 - 0.0%
2,326 1,899 (427) 23.6%
Total 8,272 7,455 (817) 93.0%
Cash at bank and in hand 566 7.0%
Total investments 8,021 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 July 2009
Additions
£'000
VCT qualifying investments
West Tower Holdings Limited 150
150
Non-VCT qualifying investments
Downing Acquisitions 1 Ltd 188
Hoole Hall Country Club Holdings Limited 343
531
681
Disposals
Profit/
Gain/ (loss)
Cost Proceeds (loss) in period
£'000 £'000 £'000 £'000
VCT qualifying investments
Richstone Contracting Limited 285 285 - -
Non-VCT qualifying investments
JEB Leisure Limited 17 17 - -
Hoole Hall Country Club
Holdings Limited 344 344 - -
646 646 - -
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly results cover the six months to 31 July
2009 and have been prepared in accordance with the accounting
policies set out in the statutory accounts for the period ended 31
January 2009 which were prepared under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement
of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 ("SORP").
2. All revenue and capital items in the Income Statement derive from
continuing operations.
3. The Company has only one class of business and derives its income
from investments made in shares, securities and bank deposits.
4. Net Asset Value per share has been calculated on 9,098,500
Ordinary Shares and 13,647,743 'A' Shares, being the shares in issue
at the period end.
5. Return per share for the period has been calculated on 9,098,500
Ordinary Shares and 13,647,743 'A' Shares, being the weighted average
number of shares in issue during the period.
6. Dividends
31 July 2009 31 Jan 2009
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Paid in year
2009 Final 182 - 182 159
7. Reserves
Investment
Special Revenue holding
reserve reserve losses
£'000 £'000 £'000
At 1 February 2009 8,576 280 (502)
Net losses on investments - - (315)
Distributions paid - (182) -
Retained net revenue for the year - 57 -
At 31 July 2009 8,576 155 (817)
The Revenue reserve, Special reserve and Investment holding losses
are distributable reserves.
Total distributable reserves at 31 July 2009 were £7,914,000.
8. The unaudited condensed financial statements set out herein do not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985 and have not been delivered to the Registrar
of Companies. The figures for the period ended 31 January 2009 have
been extracted from the financial statements for that year, which
have been delivered to the Registrar of Companies; the auditors'
report on those financial statements was unqualified.
9. The Directors confirm that, to the best of their knowledge, the
half-yearly financial statements have been prepared in accordance
with the "Statement: Half-Yearly Financial Reports" issued by the UK
Accounting Standards Board and the half-yearly financial report
includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period, and any changes in the related party transactions
described in the last annual report that could do so.
10. Copies of the unaudited half-yearly results will be sent to
Shareholders shortly. Further copies can be obtained from the
Company's Registered Office and will be available for download from
www.downing.co.uk.
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