TIDMDP3C
Downing THREE VCT plc
Final results for the year ended 31 December 2014
FINANCIAL SUMMARY
31 Dec 31 Dec
2014 2013
Pence Pence
'C' Share pool
Net asset value per 'C' Share 98.2 90.7
Net asset value per 'A' Share 0.1 0.1
Cumulative distributions per 'C' Share 25.0 22.5
Total return per 'C' Share and 'A' Share 123.3 113.3
'D' Share pool
Net asset value per 'D' Share 71.3 76.9
Net asset value per 'E' Share 0.1 0.1
Cumulative distributions per 'D' Share 22.5 17.5
Total return per 'D' Share and 'E' Share 93.9 94.5
'F' Share pool
Net asset value per 'F' Share 75.5 79.9
Cumulative distributions per 'F' Share 15.0 10.0
Total return per 'F' Share 90.5 89.9
'H' Share pool
Net asset value per 'H' Share 94.7 -
Cumulative distribution per 'H' Share 5.0 -
Total return per 'H' Share 99.7 -
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Annual Report for the year ended 31 December
2014. The Company now has five share pools each of which are in
different phases of their expected life. The Manager has continued to
invest funds for those pools that are still in their initial investment
phase and has made good progress in working towards realisations in the
pools which are nearing their target exit date.
I welcome new Shareholders to the Company who invested in the current J
Share fundraising. As the first J Shares were allotted after the year
end, there is limited coverage of the J Share class in this report. The
Half Yearly Report to 30 June 2015 will cover the initial investment
activities of the J Share class.
A brief summary of each of the other share pools is provided below.
More detailed reviews are provided in the Investment Manager's Report
and Review of Investments.
'C' Share pool
The Company's 'C' Shares were originally issued in 2008 and 2009. The
'C' Share pool was fully invested at the year end and held a portfolio
of 21 investments with a total value of GBP6.6 million.
At 31 December 2014, the Net Asset Value ("NAV") of a combined holding
of one 'C' Share and one 'A' Share stood at 98.3p, which represents an
increase of 11.0% over the year after adjusting for the dividends of
2.5p per share paid in the year. Dividends paid to date total 25.0p.
Assuming that certain targets are met, it is estimated that a
performance incentive fee will become payable equivalent to
approximately 7p per 'C' Share. After providing for the estimated
performance fee, Total Return (NAV plus cumulative dividends to date) is
now estimated to be 116.3p, compared to the initial cost, net of income
tax relief of 70p.
Since the year end, realisations from Atlantic Dogstar, East Dulwich
Tavern and Westow House have been achieved, generating proceeds of
GBP2.9 million. As 'C' Shareholders will be aware, the Company has used
these funds to declare a special dividend of 50.0p per 'C' Share. Work
is ongoing on further realisations and the Manager hopes to be in a
position to distribute the remaining funds to 'C' Shareholders in the
second half of this year.
'D' Share pool
The 'D' Shares were originally issued in 2010 and now hold a portfolio
of 21 investments with a total value of GBP7.1 million.
At 31 December 2014, the Net Asset Value ("NAV") of a combined holding
of one 'D' Share and one 'E' Share stood at 71.4p, which represents a
decrease of 0.8% over the year after adjusting for the dividends of 5.0p
per share paid in the year. Dividends paid to date total 22.5p such that
Total Return (NAV plus cumulative dividends to date) is now 93.9p,
compared to the initial NAV of 94.5p.
The fifth anniversary of the close of the 'D' Share fundraising occurs
in April and so plans are now being advanced for the exit of a number of
the share pool's investments. The Manager believes the share pool will
be able to make its first major return of capital distribution later
this year. In view of the fact that this is imminent, no usual final
dividend will be paid this year.
'F' Share pool
The 'F' Share pool was launched in 2012 and completed its initial
investment phase this year. At 31 December 2014, the pool held 17 VCT
qualifying or partly qualifying investments and a further 7
non-qualifying investments, most of which are in the form of secured
loans.
At 31 December 2014, the 'F' Share NAV stood at 75.5p, which represents
an increase of 0.8% over the year after adjusting for the dividends of
5.0p per share paid in the year. Dividends paid to date total 15.0p such
that Total Return (NAV plus cumulative dividends to date) is now 90.5p,
compared to the initial NAV of 94.5p.
In line with the dividend policy, the Board is proposing to pay a final
dividend of 2.5p per 'F' Share on 19 June 2015 to Shareholders on the
register at the close of business on 22 May 2015.
'H' Share pool
The 'H' Share pool was launched in 2014 and it is still in its initial
investment phase. At 31 December 2014, the pool held 7 non-qualifying
investments, most of which are secured loans.
At 31 December 2014, the 'H' Share NAV stood at 94.7p. Total Return (NAV
plus cumulative dividends to date) is now 99.7p, compared to the initial
NAV of 100.0p.
In line with the dividend policy, the Board is proposing to pay a final
dividend of 2.5p per 'H' Share on 19 June 2015 to Shareholders on the
register at the close of business on 22 May 2015.
Share buybacks
The Company operates a general policy of buying in its own shares that
are within the initial five year period for cancellation when any become
available in the market. The current policy is in respect of the 'F'
Shares, 'H' Shares and 'J' Shares. In the initial years after issue any
such purchases will be undertaken at a price equal to the latest
published NAV (i.e. at nil discount). The Company is now unlikely to
make any further purchases of 'C' Shares, 'A' Shares, 'D' Shares or 'E'
Shares as the process of returning funds to those Shareholders has
already started or is expected to start later this year. All buybacks
are subject to regulatory restrictions and other factors such as the
availability of liquid funds.
A resolution to renew the authority for the Company to purchase its own
shares will be proposed at the forthcoming AGM.
Fundraising
The 'H' Share pool fundraising closed during the year having raised a
total of GBP13.6 million. The Company launched the fundraising for the
new 'J' Share pool in December 2014 although did not allot any shares
before the year end. As at the date of this report, GBP7.4m had been
raised.
Annual General Meeting ("AGM")
The Company's eighth AGM will be held at Ergon House, Horseferry Road,
London, SW1P 2AL at 3:05 p.m. on 16 June 2015.
One item of special business will be proposed at the AGM in connection
with the authority for the Company to buy back shares as described
above.
Outlook
Over the coming year we expect to see the completion of the return of
funds to C Shareholders to conclude a good outcome for C Shareholders.
We also expect to see a significant proportion of funds returned to 'D'
Shareholders and believe that there are some prospects for uplifts in
value to be achieved in the exit process.
Investment activity is expected to be limited over the coming year in
the F Share pool, which is now fully invested and working towards
starting to exit in 2018. We expect to see a significant number of new
qualifying investments added to the H Share pool over the year as the
process of building the initial investment portfolio is due to complete
by the end of the year.
In summary, it is expected to be another busy year for the Manager. The
Board remains satisfied generally with progress although there are some
investments that require intensive monitoring to ensure that the Company
is ultimately able to provide each group of shareholders with a
satisfactory outcome.
Michael Robinson
Chairman
21 April 2015
INVESTMENT MANAGER'S REPORT- 'C' SHARE POOL
Introduction
At the year end, the 'C' Share pool held investments in 21 companies and
was fully invested. The process of exiting from the investments is now
underway and the first return of capital dividend has now been paid to
'C' Shareholders, funded by the initial realisations.
Net asset value and results
At 31 December 2014, the 'C' Share NAV stood at 98.2p and the 'A' Share
NAV at 0.1p, giving a combined NAV of 98.3p. Total Return (NAV plus
cumulative dividends to date) was 123.3p for a combined holding of one
'C' and one 'A' Share. This represents a net increase of 10.0p over the
period (after adjusting for dividends paid during the period of 2.5p per
'C' Share), equivalent to an increase of 11.0%.
The return on ordinary activities of the 'C' Share pool for the period
was GBP711,000 (2013: GBP75,000), comprising a revenue profit of
GBP182,000 (2013: GBP162,000) and a capital gain of GBP529,000 (2013:
loss GBP87,000).
'C' Share pool - investment activity
In the year, the Company made no new investments and made further
investments totalling GBP650,000 in to Atlantic Dogstar Limited, Westow
House Limited and East Dulwich Tavern Limited prior to their exit.
Proceeds of GBP2.9m were received for the three public houses in January
2015.
A repayment of non-qualifying loan was made on Hoole Hall County Club of
GBP371,000. No other disposals occurred during the period.
'C' Share pool - portfolio valuation
The majority of the investments within the 'C' Share pool performed
satisfactorily throughout the year. An unrealised value increase was
recognised on the cumulative values of Atlantic Dogstar Limited, Westow
House Limited and East Dulwich Tavern Limited in anticipation of their
sale. Unfortunately this gain was partially offset by value reductions
on two investments resulting in an overall unrealised gain of
GBP530,000.
Atlantic Dogstar Limited owned two pubs in London: The Dogstar in
Brixton and The Clapton Hart in Clapton. Westow House Limited owned the
Westow House, a pub in Crystal Palace, South London. East Dulwich Tavern
Limited owned a London pub of the same name. Proceeds for the three
companies of GBP2.9m were realised in the year against a cost of GBP1.7m,
generating a total gain of GBP698,000 after the year end.
AEW Pubs No 1 Limited, East Dulwich Pub No 1 Limited and Westow House
Pub No 1 were set up to purchase shares previously held by an investment
partner who became insolvent. These shares were purchased for GBP1 and,
at exit, these companies were valued at GBP261,000, GBP31,000 and
GBP16,000 respectively.
Vermont Developments Limited is in a sales process and a valuation based
on expected proceeds less an appropriate discount resulted in a
GBP95,000 increase in value.
Future Biogas (Spring Farm) Limited, the owner and operator of a biogas
plant in Norfolk, has not performed in line with initial expectations
and while the issues have now been resolved, performance to date is
notably below plan. This has resulted in a decrease in the valuation of
GBP254,000.
A small decrease in value of GBP9,000 was made on Mosaic Spa and Health
Clubs Limited in the period.
Outlook
Overall, we are very satisfied with the 'C' Share portfolio and
optimistic that further investment realisations will be achieved in a
timely manner and at full value. The exit from the three pub companies
achieved in January 2015 is a good start and funded the dividend of 50p
per 'C' Share paid on 20 March 2015. We hope to be in a position to
complete the task of returning funds to 'C' Shareholders during the
second half of this year.
Downing Managers 3 Limited
21 April 2015
REVIEW OF INVESTMENTS - 'C' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2014:
'C' Share pool
Valuation
movement % of
Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying investments and partially qualifying
investments
Atlantic Dogstar Limited 663 1,260 307 17.8%
East Dulwich Tavern Limited 644 734 28 10.4%
Westow House Limited 429 606 54 8.5%
Domestic Solar Limited 500 560 - 7.9%
Future Biogas (Spring Farm) Limited* 697 476 (254) 6.7%
Redmed Limited 350 451 - 6.4%
Quadrate Spa Limited* 363 363 - 5.1%
Quadrate Catering Limited 330 359 - 5.1%
AEW Pubs No 1 Limited - 261 261 3.7%
The 3D Pub Co Limited 267 227 - 3.2%
Ecossol Limited 250 213 - 3.0%
Mosaic Spa and Health Clubs Limited* 125 96 (9) 1.4%
East Dulwich Pub No 1 Limited - 31 31 0.4%
Westow House Pub No 1 Limited - 16 16 0.2%
Chapel Street Food and Beverage Limited 50 13 - 0.2%
Chapel Street Services Limited 50 13 - 0.2%
4,718 5,679 434 80.2%
Non-qualifying investments
The Thames Club Limited 500 500 - 7.1%
Hoole Hall Country Club Holdings Limited 210 210 - 3.0%
Vermont Developments Limited 25 120 95 1.7%
Honeycombe Pubs VCT Limited 188 66 - 0.9%
Chapel Street Hotel Limited 2 1 - 0.0%
925 897 95 12.7%
5,643 6,576 529 92.9%
Cash at bank and in hand 503 7.1%
Total investments 7,079 100.0%
* Part-qualifying investment
Summary of investment movements
Additions
Cost
VCT qualifying investments and partially qualifying
investments GBP'000
East Dulwich Tavern Limited 300
Atlantic Dogstar Limited 225
Westow House Limited 125
Total 'C' Share pool 650
Disposals
MV at Gain Total realised
01/01/14 Disposal against gain during
Cost * proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-qualifying
investments
Hoole Hall
Country Club
Holdings
Limited 371 371 371 - -
371 371 371 - -
* Adjusted for additions in the year
INVESTMENT MANAGER'S REPORT- 'D' SHARE POOL
Introduction
The 'D' Share pool holds investments in 21 companies and is now fully
invested. The portfolio as a whole remains relatively stable although
has had one setback that has hindered overall performance. We are now
developing realisation plans for the portfolio for the unwinding process
which will start shortly.
Net asset value and results
At 31 December 2014, the 'D' Share NAV stood at 71.3p and the 'E' Share
NAV at 0.1p, giving a combined NAV of 71.4p. Total Return (NAV plus
cumulative dividends to date) was 93.9p for a combined holding of one
'D' and one 'E' Share. This represents a net decrease of 0.6p over the
period (after adjusting for dividends paid during the period of 5.0p per
'D' Share), equivalent to an decrease of 0.8%.
The return on ordinary activities for the 'D' Shares for the period was
a loss of GBP59,000 (2013: gain GBP215,000) being a revenue profit of
GBP233,000 (2013: GBP221,000) and a capital loss of GBP292,000 (2013:
loss GBP6,000).
'D' Share pool - investment activity
No new investments or full exits were completed in the period, but one
partial loan repayment of GBP143,000 was made on the non-qualifying loan
in Aminghurst Limited.
'D' Share pool - portfolio valuation
The majority of the 'D' Share portfolio performed in line with
expectations during the year. There were a small number of valuation
movements and one notable valuation decrease which resulted in a net
unrealised loss of GBP292,000.
Future Biogas (Reepham Road) Limited, the owner and operator of a biogas
plant in Norfolk, has not performed in line with initial expectations
and while the issues have now been resolved, performance to date is
notably below plan. This has resulted in a decrease in the valuation of
GBP320,000.
Mosaic Spa and Health Clubs Limited owns and manages two health clubs:
The Shrewsbury Club, in Shrewsbury; and Holmer Park in Hereford. It also
provides gym and spa management services to hotels, universities and
corporate clients. Both Holmer Park and the Shrewsbury club have
underperformed against expectations throughout the period and the value
has been reduced by GBP41,000.
Small reductions in value were also made on three investments: GBP26,000
on Camandale Limited, the owner of The Riverbank pub in Kilmarnock,
Scotland; GBP16,000 on Kilmarnock Monkey Bar Limited; and GBP14,000 on
Liverpool Nurseries (Holdings) Limited.
On the positive side, a valuation increase of GBP39,000 was made on
Kidspace Adventures Holdings Limited, the owner of three well
established children's play areas in Croydon, Romford and Epsom. The
company continues to perform well.
The profits of Alpha Schools Holdings Limited, the independent primary
school operator, have also continued to increase and the value has been
increased by GBP36,000 to reflect this.
Slopingtactic Limited, the owner of the Lamb and Lion freehold pub in
York, has demonstrated good performance in the year and the value has
been increased by GBP30,000.
Progressive Energies Limited, generate electricity from solar panels on
domestic properties in the UK. The investment is performing beyond
initial expectations and an increase in value of GBP20,000 has been
recognised.
Outlook
The 'D' share pool investments are generally performing satisfactorily
and steps have been taken to improve performance where necessary. Exit
plans for a number of investments are progressing well and once the
initial disposals are completed we expect the pool to declare its first
return of capital dividend. We believe there are reasonable prospects
for a substantial proportion of the investment portfolio to be exited at
full value over the next year.
Downing Managers 3 Limited
21 April 2015
REVIEW OF INVESTMENTS - 'D' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2014:
'D' Share pool
Valuation
movement % of
Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying and partially
qualifying investments
Future Biogas (Reepham Road)
Limited 842 522 (320) 7.3%
Quadrate Spa Limited* 496 496 - 6.9%
Quadrate Catering Limited 441 481 - 6.7%
Kidspace Adventures Holdings
Limited 375 448 39 6.3%
Domestic Solar Limited 400 448 - 6.3%
Alpha Schools Holdings Limited 367 438 36 6.1%
Liverpool Nurseries (Holdings)
Limited 435 386 (14) 5.4%
Mosaic Spa and Health Clubs
Limited* 475 347 (41) 4.8%
Green Electricity Generation
Limited 250 303 - 4.2%
Westcountry Solar Solutions
Limited 250 250 - 3.5%
West Tower Property Limited 250 250 - 3.5%
Slopingtactic Limited 196 225 30 3.2%
Ecossol Limited 250 213 - 3.0%
Avon Solar Energy Limited 210 210 - 2.9%
Progressive Energies Limited 170 190 20 2.7%
Ridgeway Pub Company Limited 137 126 - 1.8%
Camandale Limited* 516 31 (26) 0.4%
6,060 5,364 (276) 75.0%
Non-qualifying investments
Aminghurst Limited 1,507 1,507 - 21.1%
Fenkle Street LLP 122 122 - 1.7%
Commercial Street Hotel Limited 100 100 - 1.4%
Kilmarnock Monkey Bar Limited 42 26 (16) 0.4%
1,771 1,755 (16) 24.6%
7,831 7,119 (292) 99.6%
Cash at bank and in hand 31 0.4%
Total investments 7,150 100.0%
* Part-qualifying investment
Summary of investment movements
Disposals
Total
Loss realised
MV at Disposal against gain during
Cost 01/01/14 * proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-qualifying
investments
Aminghurst
Limited 143 143 143 - -
Total 'D' Share
pool 143 143 143 - -
* Adjusted for additions in the year
INVESTMENT MANAGER'S REPORT- 'F' SHARE POOL
Introduction
The 'F' Share pool has continued to build a qualifying investment
portfolio with a focus on asset backed businesses and those with
predictable revenue streams and the pool is now fully qualifying. In the
period four new qualifying investments were made at a total cost of
GBP2.1m. One follow on investment of GBP43,000 was also made.
Several non-qualifying investments were exited in the period: two full
exits; and five partial exits, generating total proceeds of GBP998,000.
Net asset value and results
At 31 December 2014, the 'F' Share NAV stood at 75.5p. Total Return (NAV
plus cumulative dividends to date) for shareholders who invested in the
original share offer is now 90.5p. This represents a net increase of
0.6p per share over the period (after adjusting for dividends paid
during the period of 5.0p per Share), equivalent to an increase of 0.8%.
The return on ordinary activities for the 'F' Share pool for the period
was a gain of GBP71,000 (2013: loss GBP389,000) being a revenue profit
of GBP82,000 (2013: GBP15,000) and a capital loss of GBP11,000 (2013:
GBP404,000).
'F' Share pool - investment activity
In January 2014, a new investment of GBP760,000 was made in Goonhilly
Earth Station Limited. The company operates a large satellite
communications site in Cornwall. The investment provided funding to
allow the Company to secure a long lease on its site and to develop
additional facilities on the site.
The 'F' Share pool invested GBP378,000 in March 2014 in to Grasshopper
2007 Limited. The company operates the Grasshopper Inn, a public house
near Westerham, Kent, which operates as a traditional pub, restaurant
and wedding venue.
In July 2014, an investment of GBP500,000 was made in Lambridge Solar
Limited. The company operates a ground mounted array of solar panels in
Lincolnshire.
GBP500,000 was invested in to Merlin Renewables Limited in October 2014.
The company is developing an anaerobic digestion plant in Norfolk. The
plant will qualify for government backed subsidies as it produces gas
and supplies it to the national gas grid.
A further investment of GBP43,000 was made in to London City Shopping
Centre Limited.
Two full exits of non-qualifying investments were completed in the
period for the 'F' Share. Retallack Surfpods Limited generated exit
proceeds of GBP98,000 in March 2014. The company owned holiday
apartments in a Cornish holiday park.
In December 2014, the GBP500,000 non-qualifying loan in Pub People
Limited was transferred to the Downing Three VCT plc H Share.
Partial repayments of non-qualifying loans in the period included Hoole
Hall Hotel Limited (GBP181,000), Aminghurst Limited (GBP143,000);
Dominions House (GBP48,000); and Redmed Limited (GBP26,000).
GBP193,200 of qualifying loan notes in Pearce & Saunders Limited, the
pub company which owns three South East London pubs, were transferred to
the 'G' Share pool in the period.
'F' Share pool - portfolio valuation
The majority of the 'F' Share pool investments have performed in line
with expectations over the period and continue to be valued at original
cost. However, there have been two adjustments and a net unrealised loss
of GBP11,000 has been made in the period.
Performance of the nightclub owned by City Falkirk Limited has continued
to operate below expectations and a further reduction in value of
GBP38,000 has been made. Whilst we continue to work closely with the
club's management to bring trading back on track, it is clear that the
depressed economic conditions are a major contributing factor to the
weak performance.
On the positive side, Kidspace Adventures Holdings Limited, which owns
three well established children's play areas in Croydon, Romford and
Epsom, continues to perform well. As such the valuation has been
increased by GBP26,000.
Outlook
The 'F' Share portfolio is now fully qualifying. The focus for the
coming year is to continue to drive growth and build value from these
investments in order to achieve good exits over the next 3 years when
realisations are planned.
Downing Managers 3 Limited
21 April 2015
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 2014:
Valuation
movement % of
'F' Share pool Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying and partially
qualifying investments
Goonhilly Earth Station Limited 760 760 - 9.3%
Tor Solar PV Limited 680 680 - 8.3%
Vulcan Renewables Limited 588 588 - 7.2%
Merlin Renewables Limited 500 500 - 6.1%
Lambridge Solar Limited 500 500 - 6.1%
Pearce and Saunders Limited* 451 451 - 5.6%
Grasshopper 2007 Limited 378 378 - 4.6%
Kidspace Adventures Holdings
Limited 250 299 26 3.7%
Augusta Pub Company Limited 290 290 - 3.5%
Fubar Stirling Limited 268 268 - 3.3%
Redmed Limited* 250 251 1 3.1%
City Falkirk Limited 421 206 (38) 2.5%
Fresh Green Power Limited 200 200 - 2.5%
Pabulum Pubs Limited 200 200 - 2.5%
Green Energy Production UK
Limited 100 100 - 1.2%
Cheers Dumbarton Limited 48 17 - 0.2%
Lochrise Limited 13 - - 0.0%
5,897 5,688 (11) 69.7%
Non-qualifying investments
Aminghurst Limited 967 967 - 11.8%
Baron House Developments LLP 481 481 - 5.9%
Hoole Hall Hotel Limited 84 84 - 1.0%
Dominions House Limited 59 59 - 0.7%
The 3D Pub Co Limited 55 55 - 0.7%
London City Shopping Centre
Limited 43 43 - 0.5%
Southampton Hotel Developments
Limited 298 - - 0.0%
1,987 1,689 (11) 20.6%
7,884 7,377 (11) 90.3%
Cash at bank and in hand 792 9.7%
Total investments 8,169 100.0%
* Part-qualifying investment
Summary of investment movements
Additions
Cost
GBP'000
VCT qualifying and partially qualifying investments
Goonhilly Earth Station Limited 760
Merlin Renewables Limited 500
Lambridge Solar Limited 500
Grasshopper 2007 Limited 378
Non-qualifying investments
London City Shopping Centre Limited 43
Total 'F' Share pool 2,181
Disposals
Total
Gain realised
MV at Disposal against loss during
Cost 01/01/14 * proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying
and partially
qualifying
investments
Pearce and
Saunders
Limited 193 193 193 - -
Non-qualifying
investments
Pub People
Holdings
Limited 500 500 500 - -
Hoole Hall Hotel
Limited 181 181 181 - -
Aminghurst
Limited 143 143 143 - -
Retallack
Surfpods
Limited 98 98 98 - -
Dominion House
Limited 48 48 48 - -
Redmed Limited 26 26 26 - -
Southampton Hotel
Developments
Limited 2 2 - - (2)
1,191 1,191 1,189 - (2)
* Adjusted for additions in the year
INVESTMENT MANAGER'S REPORT- 'H' SHARE POOL
Fundraising
The 'H' Share fundraising launched in December 2013 and has raised
GBP13.6 million. 13,446,972 'H' Shares were allotted in the period at an
average price of 101.2p per share. The task of investing these new funds
is now underway.
Investment activity
The first investment was a non-qualifying secured loan of GBP525,000 in
April 2014 in Future Biogas (SF) Limited. The company owns and operates
a 1.4MW self-contained biogas plant in Norfolk.
In July, the share pool made a second non-qualifying secured loan
investment of GBP420,000 to Ludlow Taverns Springhill Limited, secured
by a charge over The Springhill pub in Wolverhampton.
GBP1.4m was invested in Vulcan Renewables Limited. The company has built
a 2.0MW anaerobic digestion plant near Doncaster. Some of the gas
produced is used to create electricity and some is injected in to the
National Gas Grid for which feed in tariffs are received.
GBP2.3m was invested in Deeside Solar Farm Limited, which generates
electricity from an array of solar panels. During the period GBP450,000
of loan notes were repaid, leaving a residual cost of GBP1.8m.
GBP1.8m was invested in to Woodbridge Solar Limited, another solar
electricity generator.
Pub People Limited own and operate more than 50 pubs in the East
Midlands. The 'H' Share pool invested GBP984,000 in the company.
GBP193,000 of non-qualifying loan notes in Pearce & Saunders Limited,
the pub company which owns three South East London pubs, were
transferred from the 'G' Share pool in the period.
Since the end of the period, the 'H' Share has invested GBP1.8m in 4
companies.
Net asset value and results
At 31 December 2014, the net asset value per 'H' Share was 94.7p, a
decrease of 5.3p on the initial price resulting from the initial "cash
drag" from holding uninvested funds.
Results and dividend
The loss on ordinary activities for the 'H' Shares, after taxation, for
the period was GBP46,000, being wholly related to Revenue.
Outlook
The task of building the 'H' Share portfolio is now underway. We have a
good pipeline of potential investment opportunities from which we expect
to be able to build a solid qualifying portfolio with good potential for
growth over the next five years. This will be complimented with
non-qualifying investments that will provide additional yield before the
new funds are utilised in qualifying investments. We expect to be very
active to this end over the coming year.
Downing Managers 3 Limited
21 April 2015
REVIEW OF INVESTMENTS - 'H' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2014:
Valuation
movement % of
'H' Share pool Cost Valuation in period portfolio
GBP'000 GBP'000 GBP'000
Non-qualifying investments
Deeside Solar Farm Limited 1,800 1,800 - 13.9%
Woodbridge Solar Limited 1,800 1,800 - 13.9%
Vulcan Renewables Limited 1,410 1,410 - 10.8%
Pub People Limited 984 984 - 7.6%
Future Biogas (Spring Farm)
Limited 525 525 - 4.0%
Ludlow Taverns Springhill
Limited 420 420 - 3.2%
Pearce and Saunders Limited 193 193 - 1.5%
7,132 7,132 54.9%
7,132 7,132 - 54.9%
Cash at bank and in hand 5,856 45.1%
Total investments 12,988 100%
* Part-qualifying investment
Summary of investment movements
Additions
Cost
GBP'000
Non-qualifying investments
Deeside Solar Farm Limited 2,250
Woodbridge Solar Limited 1,800
Vulcan Renewables Limited 1,410
Pub People Limited 984
Future Biogas (Spring Farm) Limited 525
Ludlow Taverns Springhill Limited 420
Pearce and Saunders Limited 193
Total 'H' Share pool 7,582
Disposals
Total
Gain realised
MV at Disposal against gain during
Cost 01/01/14 * proceeds cost the period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-qualifying
investments
Deeside Solar
Farm Limited 450 450 450 - -
450 450 450 - -
* Adjusted for additions in the period
Directors' responsibilities statement
The Directors are responsible for preparing the Strategic Report, The
Report of the Directors, the Directors' Remuneration 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). 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 period.
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
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 2014
Year ended 31 December 2014 Period ended 31 December 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 1,466 - 1,466 1,066 - 1,066
Gain/(loss) on
investments - 226 226 - (462) (462)
1,466 226 1,692 1,066 (462) 604
Investment
management
fees (564) - (564) (334) - (334)
Other expenses (296) - (296) (206) (35) (241)
Return/(loss)
on ordinary
activities
before tax 606 226 832 526 (497) 29
Tax on ordinary
activities (155) - (155) (128) - (128)
Return/(loss)
attributable to
equity
shareholders 451 226 677 398 (497) (99)
Basic and
diluted
return/(loss)
per:
'C' Share 2.5p 7.4p 9.9p 2.3p (1.2p) 1.1p
'A' Share - - - - - -
'D' Share 2.3p (2.9p) (0.6p) 2.2p (0.1p) 2.1p
'E' Share - - - - - -
'F' Share 0.8p (0.1p) 0.7p 0.1p (3.7p) (3.6p)
'H' Share (0.5p) - (0.5p) - - -
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period. The total column within the Income Statement
represents the profit and loss account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared
as all gains and losses are recognised in the Income Statement noted
above.
Other than revaluation movements arising on investments held at fair
value through the profit and loss, there were no differences between the
return/loss as stated above and at historical cost.
INCOME STATEMENT (ANALYSED BY SHARE POOL)
for the year ended 31 December 2014
'C' Share pool
Period ended 31 December
Year ended 31 December 2014 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 391 - 391 351 - 351
Gain/(loss) on
investments - 529 529 - (52) (52)
391 529 920 351 (52) 299
Investment
management
fees (89) - (89) (82) - (82)
Other expenses (64) - (64) (58) (35) (93)
Return/(loss)
on ordinary
activities
before tax 238 529 767 211 (87) 124
Tax on ordinary
activities (56) - (56) (49) - (49)
Return/(loss)
attributable 182 529 711 162 (87) 75
to equity
shareholders
'D' Share pool
Period ended 31 December
Year ended 31 December 2014 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 473 - 473 458 - 458
Loss on
investments - (292) (292) - (6) (6)
473 (292) 181 458 (6) 452
Investment
management
fees (103) - (103) (98) - (98)
Other expenses (67) - (67) (68) - (68)
Return/(loss)
on ordinary
activities
before tax 303 (292) 11 292 (6) 286
Tax on ordinary
activities (70) - (70) (71) - (71)
Return/(loss)
attributable 233 (292) (59) 221 (6) 215
to equity
shareholders
'F' Share pool
Period ended 31 December
Year ended 31 December 2014 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 424 - 424 257 - 257
Loss on
investments - (11) (11) - (404) (404)
424 (11) 413 257 (404) (147)
Investment
management
fees (184) - (184) (154) - (154)
Other expenses (117) - (117) (80) - (80)
Return/(loss)
on ordinary
activities
before tax 123 (11) 112 23 (404) (381)
Tax on ordinary
activities (41) - (41) (8) - (8)
Return/(loss)
attributable 82 (11) 71 15 (404) (389)
to equity
shareholders
'H' Share pool
Period ended 31 December
Year ended 31 December 2014 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 178 - 178 - - -
Loss on
investments - - - - - -
178 - 178 - - -
Investment
management
fees (188) - (188) - - -
Other expenses (48) - (48) - - -
(Loss)/return
on ordinary
activities
before tax (58) - (58) - - -
Tax on ordinary
activities 12 - 12 - - -
(Loss)/return
attributable (46) - (46) - - -
to equity
shareholders
BALANCE SHEET
as at 31 December 2014
As at 31 December 2014 As at 31 December 2013
'C' 'D' 'F' 'H' 'C' 'D' 'F'
Share Share Share Share Share Share Share
pool pool pool pool Total pool pool pool Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 6,576 7,119 7,377 7,132 28,204 5,768 7,554 6,396 19,718
Current assets
Debtors 67 152 139 59 417 23 93 53 169
Cash at bank and
in hand 503 31 792 5,856 7,182 809 173 2,272 3,254
570 183 931 5,915 7,599 832 266 2,325 3,423
Creditors:
amounts falling
due within one
year (109) (172) (134) (319) (734) (95) (132) (77) (304)
Net current
assets 4 11 797 5,596 6,865 737 134 2,248 3,119
Net assets 7,037 7,130 8,174 12,728 35,069 6,505 7,688 8,644 22,837
Capital and
reserves
Called up share
capital 18 25 11 13 67 18 25 11 54
Capital
redemption
reserve 106 - - - 106 106 - - 106
Special reserve 5,761 7,562 9,617 (672) 22,268 5,940 8,061 - 14,001
Share premium
reserve - - - 13,608 13,608 - - 10,160 10,160
Revaluation
reserve 932 (713) (508) - (289) 403 (421) (499) (517)
Capital reserve
- realised - - (1,033) - (1,033) - - (1,033) (1,033)
Revenue reserve 220 256 87 (221) 342 38 23 5 66
Total equity
shareholders' 7,037 7,130 8,174 12,728 35,069 6,505 7,688 8,644 22,837
funds
Basic and diluted net
asset value per Share
'C'/'D'/'F'/'H' 98.2p 71.3p 75.5p 94.7p 90.7p 76.9p 79.9p
Share
'A'/'E' Share 0.1p 0.1p n/a n/a 0.1p 0.1p n/a
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2014
Year ended 31 December 2014 Period ended 31 December 2013
'C' 'D' 'F' 'H' 'C' 'D' 'F'
Share Share Share Share Share Share Share
pool pool pool pool Total pool pool pool Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening Shareholders'
funds 6,505 7,688 8,644 - 22,837 6,789 7,984 9,574 24,347
Issue of shares - - - 14,009 14,009 - - - -
Share issue costs - - - (563) (563) - - - -
Purchase of own shares - - - - - - (11) - (11)
Total recognised
return /(loss) for the
period 711 (59) 71 (46) 677 75 215 (389) (99)
Dividends paid (179) (499) (541) (672) (1,891) (359) (500) (541) (1,400)
Closing Shareholders'
funds 7,037 7,130 8,174 12,728 35,069 6,505 7,688 8,644 22,837
CASH FLOW STATEMENT
for the year ended 31 December 2014
Year ended 31 December 2014 Period ended 31 December 2013
'C' 'D' 'F' 'H' 'C' 'D' 'F'
Share Share Share Share Share Share Share
pool pool pool pool Total pool pool pool Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash inflow from
operating activities 200 286 61 215 762 301 273 38 612
Taxation
Corporation tax paid (50) (71) (8) - (129) (89) (63) (5) (157)
Capital expenditure
Purchase of investments (650) - (2,181) (7,582) (10,413) (83) (136) (2,157) (2,376)
Sale of investments 371 143 1,189 450 2,153 1,004 604 1,197 2,805
Net cash (outflow)/inflow
from capital expenditure (279) 143 (992) (7,132) (8,260) 921 468 (960) 429
Equity dividends paid (179) (499) (541) (672) (1,891) (359) (500) (541) (1,400)
Net cash (outflow)/inflow
before financing (308) (141) (1,480) (7,589) (9,518) 774 178 (1,468) (516)
Financing
Proceeds from share issue - - - 13,621 13,621 - - - -
Share issue costs - - - (175) (175) - - - -
Purchase of own shares
- - - - - - (11) - (11)
Net cash inflow/(outflow)
from financing - - - 13,446 13,446 - (11) - (11)
(Decrease)/increase in cash
(308) (141) (1,480) 5,857 3,928 774 167 (1,468) (527)
There were no cash flow movements with respect to the Ordinary Share
pool in either year.
NOTES
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally
Accepted Accounting Practice ("UK GAAP") and in accordance with the
Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" revised January 2009
("SORP").
The financial statements are prepared under the historical cost
convention except for certain financial instruments measured at fair
value and on the basis that it is not necessary to prepare consolidated
accounts.
The Company implements new Financial Reporting Standards ("FRS") issued
by the Financial Reporting Council when required.
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 net revenue is the
measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Part 6 of the Income Tax
Act 2007.
Investments
Venture capital investments are designated as "fair value through profit
or loss" assets 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
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 and FRS 9 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 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 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 'H' Shares
Revenue
return
(GBP'000) 182 - 233 - 82 (46)
Weighted
average 7,158,326 10,750,064 9,979,109 14,994,862 10,821,660 9,139,447
number of
shares in
issue
Net capital
gain/(loss) 529 - (292) - (11) -
for the
period
(GBP'000)
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
31 Dec 2014 2013
Net
asset
Shares in issue Net asset value value
31 Dec 31 Dec per per GBP'000
2014 2013 share GBP'000 share
'C'
Shares 7,158,326 7,158,326 98.2p 7,026 90.7p 6,494
'A'
Shares 10,750,064 10,750,064 0.1p 11 0.1p 11
'D'
Shares 9,979,109 9,979,109 71.3p 7,115 76.9p 7,673
'E'
Shares 14,994,862 14,994,862 0.1p 15 0.1p 15
'F'
Shares 10,821,660 10,821,660 75.5p 8,174 79.9p 8,644
'H'
shares 13,446,972 - 94.7p 12,728 - -
35,069 22,837
The 'C' Share pool, 'D' Share pool, 'F' Share pool and 'H' 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 financial instruments comprise investments held at fair
value through profit and loss, being equity and loan stock investments
in unquoted companies; loans and receivables, being cash deposits and
short term debtors; 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 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 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
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 "Investment risks" above. In addition the
credit risk is partially mitigated by registering floating charges over
the assets of certain 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 and both also
ultimately part-owned by the UK Government. Consequently, the Directors
consider that the credit risk associated with cash deposits is low.
There have been no changes in fair value during the period that are
directly attributable to changes in credit risk.
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, (GBP734,000, 2013: GBP304,000) 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.
5. Related party transactions
Downing Managers 3 Limited ("DM3"), a wholly owned subsidiary, is the
Company's Investment Manager..
During the period ended 31 December 2014, GBP564,000 (2013: GBP334,000)
was payable to DM3 in respect of Investment management fees.
Additionally, DM3 provides accounting, secretarial and administrative
services for an annual fee of GBP55,000 (2013: GBP49,000). At the period
end a balance of GBP193,000 (2013: GBP67,000) was due to DM3.
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 2014,
but has been extracted from the statutory financial statements for the
year ended 31 December 2014 which were approved by the Board of
Directors on 21 April 2015 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 2013 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 2014 will be printed and posted to shareholders
shortly. Copies will also be available to the public at the registered
office of the Company at Ergon House, London, SW1P 2AL and will be
available for download from www.downing.co.uk.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Downing THREE VCT plc via Globenewswire
HUG#1913075
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