Damille Investments II : Half-yearly Financial Report to 31 May, 2017

Damille Investments II Limited

Half-Yearly Financial Report

From 1 December 2016 to 31 May 2017 (Unaudited)

Summary Information 1 - 3

Chairman's Statement 4

Investment Report 5 - 6

Interim Management Report 7

Directors 8

Unaudited Financial Statements 9 - 12

Notes to Unaudited Financial Statements 13 - 27

Key Advisers and Contact Information 28

Damille Investments II Limited (LSE:DIL2) (the "Company") is a Guernsey-incorporated company formed as a registered closed-ended investment company. It was incorporated on 3 November, 2011 and operates under The Companies (Guernsey) Law, 2008, as amended (the "Law"), The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission (the "GFSC") and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (the "FCA").

The ordinary shares of no par value (the "Shares") of the Company were admitted to trading on the Specialist Fund Segment (the "SFS") (formerly the Specialist Fund Market) of the London Stock Exchange's Main Market for Listed Securities and listed and admitted to trading on the Channel Islands Stock Exchange (the "CISX") on 9 November, 2011 ("Admission"). The listing of the Shares on the Channel Islands Securities Exchange (the successor to the CISX) was cancelled with effect from 21 July, 2014.

The Company's investment objective was to realise significant capital returns for its shareholders with low volatility, by investing in a concentrated portfolio of primarily equity securities. In the opinion of the Company, many but not all of these companies would have benefited from implementing certain measures to optimise their balance sheets and align management and shareholder interests. Such issuers were expected to be, but were not limited to, closed-ended investment funds, investment companies and other corporate entities, such as real estate companies or natural resource companies.

At the Company's annual general meeting held on 4 May, 2016 a resolution put to the shareholders that, in accordance with Article 172 of the Company's Articles of Incorporation (the "Articles"), the Company continue its business as a closed-ended investment company, was not passed. Therefore, on 23 June, 2016 the Company announced that the Directors proposed to commence an orderly realisation of the Company's assets, which process was expected to take approximately 18 months. Shareholders' capital was intended to be returned to them by way of periodic distributions.

In order to permit the cost-effective return of capital to shareholders, at an extraordinary general meeting held on 5 September, 2016, the shareholders voted to adopt new articles of incorporation (the "New Articles") in substitution for and to the exclusion of the previous Articles. The New Articles include provisions permitting the Directors at their discretion to compulsorily redeem any issued Shares in the Company.

The Directors intend to continue to realise the Company's investment portfolio for cash and to return such cash to shareholders periodically by means of a compulsory redemption of a portion of each shareholder's Shares pro rata to their then percentage holding in the Company.

The Company previously aimed to provide shareholders with an attractive total return, comprising primarily capital growth, although there was also the potential for distributions of income to be made.

The nature of the Company's investments is such that the timing and amount of investment income can not be predicted. Because the Company is making periodic returns of capital to shareholders via compulsory redemptions of Shares, there is no current intention to declare any dividends and any surplus income received which is not needed to finance the Company's operating expenses will be distributed to shareholders when making the afore-mentioned redemptions.

As the Company has been granted "reporting fund" status by H.M. Revenue & Customs, United Kingdom resident or ordinarily resident shareholders, or any shareholders who carry on a trade in the United Kingdom through a branch, agency of permanent establishment, will be subject to UK income tax or corporation tax (as appropriate) on their share of the excess of the Company's "reportable income" for any period of account over any amounts actually distributed, in addition to such tax on amounts actually distributed. Since the Directors intend to distribute all reportable income, such shareholders should not in practice be subject to UK tax on 'excess' amounts of income not actually distributed. This detail has been included for information purposes and should not in any way be regarded as tax advice and relied on. Investors who are affected are recommended to contact their own tax advisors when taking decisions regarding the above.

Since the adoption of the New Articles on 5 September, 2016, the Directors have resolved to make the following compulsory redemptions of Shares:

The return of capital via a compulsory redemption of Shares, in some instances, has triggered the payment of a performance fee to Damille Partners Limited ("Damille"), a 15% portion of which was payable to Nimrod Capital LLP ("Nimrod") under the Services Agreement with Damille and the Corporate and Shareholder Advisory Agreement between the Company and Nimrod Capital LLP. The

performance fees were settled by the sale out of treasury to Damille and Nimrod of Shares at their prevailing net asset value. All such issues of Shares are disclosed in note 10 and 14 to the financial statements.

At the annual general meeting held on 18 May, 2017, the shareholders granted the Directors authority to make market purchases of up to 3,782,231 Shares within specified parameters, with a view to addressing any imbalance between the supply of and demand for Shares. The Directors seek annual renewal of this authority from shareholders at each annual general meeting held under section 199 of the Law.

In accordance with the Law, any repurchase of Shares will be effected by the purchase of Shares in the market for cash at a price below the estimated prevailing net asset value per Share, which is accretive to the net asset value per Share. Shares which are purchased may be cancelled or held in treasury. Although shareholders can have a reasonable expectation that their Shares will in due course be redeemed at a price close to their prevailing net asset value, there can be no guarantee as to the timing of such future compulsory redemptions, so this discount control mechanism also offers shareholders an alternative method of realising their investment sooner and increases liquidity in the Shares.

During the financial period ended 31 May, 2017 the Company repurchased and cancelled 167,623 Shares. At the period end, the Company held 2,562,790 Shares in treasury.

Under both the previous Articles and the New Articles, the Directors had and continue to have the ability in each year following the second anniversary of Admission to offer at their absolute discretion to each holder of Shares an option to redeem up to 15% of their shareholding, subject to any legal or regulatory requirements and, in particular, the Law (the "Redemption Offer").

Prior to the adoption of the New Articles, the following Shares were redeemed pursuant to previous Redemption Offers:

Following the adoption by the shareholders of the New Articles and the empowerment of the Directors at their discretion to compulsorily redeem Shares, the Directors do not intend to incur the additional expense of making any further Redemption Offers.

I have pleasure in presenting the half yearly financial report of the Company for the period from 1 December, 2016 to 31 May, 2017(the "Period").

The Company's unaudited Net Asset Value (the "NAV") as at 31 May, 2017 was 101.65 pence per Share amounting to a net asset value of £22,256,384. As the NAV at 1 December, 2016 was 121.21 pence per Share, the performance was down 16.14% for the half year.

During the Period, the Company bought back 167,623 Shares, 799,931 Shares were sold out of treasury and 167,623 Shares were cancelled, so that the Company held 2,562,790 Shares in treasury at the Period end. The Company intends to continue to buy back Shares opportunistically where they trade at significant discounts to NAV.

As the Continuation Resolution put to shareholders at the Company's annual general meeting held on 4 May, 2016 was not passed, on 23 June, 2016 the Company announced that the Directors proposed to commence an orderly realisation of the Company's assets and this is currently underway. Pursuant to this, the Company has continued returning its capital to shareholders and during the Period undertook two compulsory redemptions of Shares, whereby a total of 9,063,848 Shares were redeemed for £11.317 million. Post the Period end, the Company has returned a further £2.2 million through a further compulsory redemption of Shares.

It should be noted that since inception (when the Company raised £70.7 million net of expenses) the Company has returned £60.2 million to shareholders through redemption offers, share buy backs and compulsory redemptions.

During the Period, the Company's NAV per Share decreased by 16.14%. Since launch on 3 November, 2011 until 31 May, 2017, the Company's NAV increased by 4.95%.

At the Period end, the Company was invested with weightings of approximately 85.3% in equities and 14.7% in cash and net working capital. However, shareholders should note that, as the Company is in realisation mode, equities have been sold and cash returned to shareholders.

At the Period end, the Company held eleven investments, of which four are currently notifiable under the Disclosure Guidance and Transparency Rules ("DGTR"). In total the top five investments (including cash) accounted for 94.3% of the Company's NAV.

At the annual general meeting held on 4 May, 2016, the resolution put to the Company's shareholders that, in accordance with Article 172 of the Company's Articles, the Company continue its business as a closed-ended investment company, did not pass. Accordingly, and as announced on 23 June, 2016, the Company is now in an orderly realisation which is expected to have concluded by the end of the 2017 calendar year although there is no guarantee that this will be achieved.

We set out below a summary of the Company's portfolio composition as at the Period end. Where any particular investments are notifiable under the DGTR these are detailed as in previous periods. However, where investments are not notifiable under the DGTR we do not disclose names, so as not to prejudice our ability to further deal in those investments and realise these holdings.

The Company's portfolio is demarcated into four distinct "classes" as follows:

1. Private Equity and Venture (one holding representing 17.7% of NAV)

   Whilst we have realised a substantial amount of this exposure, we retain a holding in Eurovestech plc ("EVT"). Our investment case was predicated on successive returns of capital ("RoCs"), and during its lifetime EVT has made five RoCs, however recent progress on realising its investments has been slower than expected. Since the Period end EVT have announced a recommended cash offer for one of its holdings, Kalibrate Technologies plc.

2. Real estate and other funds (three holdings representing 28.4% of NAV)

Here we again looked for the combination of attractive discounts to realisable net asset value and rational capital management policies. The underlying exposures of these funds are extremely diverse. Approximately 90% of our Other funds, by value, are in the Real Estate sector.