DP3C Downing Three C

Equity and Venture Capital Valuation Guidelines ("IPEV") together with 
FRS26. 
 
   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. 
 
   Gains and losses arising from changes in fair value are included in the 
Income Statement for the period 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 that does not 
require portfolio investments 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. 
 
   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. 
 
   Taxation 
 
   The tax effects on different items in the Income Statement are allocated 
between capital and revenue on the same basis as the particular item to 
which they relate using the Company's effective rate of tax for the 
accounting period. 
 
   Due to the Company's status as a Venture Capital Trust and the continued 
intention to meet the conditions required to comply with Part 6 of the 
Income Tax Act 2007, no provision for taxation is required in respect of 
any realised or unrealised appreciation of the Company's investments 
which 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 periods different from those in 
which they are included in the accounts. Deferred taxation is not 
discounted. 
 
   Other debtors, other creditors and loan notes 
 
   Other debtors (including accrued income), other creditors and loan notes 
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 share premium account for the relevant share 
class. 
 
   2. Basic and diluted return per share 
 
 
 
 
              'C' Shares  'A' Shares  'D' Shares  'E' Shares  'F' Shares 
 
Revenue 
 return 
 (GBP'000)           162           -         221           -          15 
 
Weighted 
 average 
 number of 
 shares in 
 issue         7,158,826  10,750,064   9,985,620  14,994,862  10,821,660 
 
Net capital 
 (loss) for 
 the period 
 (GBP'000)          (87)           -         (6)           -       (404) 
 
Weighted 
 average 
 number of 
 shares in 
 issue         7,158,826  10,750,064   9,985,620  14,994,862  10,821,660 
 
 
   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. 
 
   3.  Basic and diluted net asset value per share 
 
 
 
 
                                       31 Dec 2013         31 Jan 2013 
               Shares in issue       Net asset value     Net asset value 
              31 Dec      31 Jan 
               2013        2013     per share  GBP'000  per share  GBP'000 
 
'C' Shares   7,158,326   7,158,326      90.7p    6,494      94.7p    6,778 
'A' Shares  10,750,064  10,750,064       0.1p       11       0.1p       11 
'D' Shares   9,979,109   9,994,109      76.9p    7,673      79.7p    7,969 
'E' Shares  14,994,862  14,994,862       0.1p       15       0.1p       15 
'F' Shares  10,821,660  10,821,660      79.9p    8,644      88.5p    9,574 
                                                22,837              24,347 
 
 
   The 'C' Share pool, 'D' Share pool and 'F' Share pool are treated as 
separate investment pools. Within the 'C' Share pool the Directors 
allocate the assets and liabilities of the Company between the 'C' 
Shares and 'A' Shares such that each share class has sufficient net 
assets to represent its dividend and return of capital rights. Within 
the 'D' Share pool the Directors allocate the assets and liabilities of 
the Company between the 'D' Shares and 'E' Shares such that each share 
class has sufficient net assets to represent its dividend and return of 
capital rights. 
 
   4.      Principal Risks 
 
   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 principal financial risks arising from the 
Company's operations are: 
 
 
   -- Investment 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 period and there have 
also been no significant changes to the policies for managing those 
risks during the period. 
 
   The risk management policies used by the Company in respect of the 
principal financial risks and a review of the financial instruments held 
at the period end are provided below: 
 
 
 
   Investment 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 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. 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 

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