Source - GNW

Downing THREE VCT plc

Half-Yearly Report for the six months ended 30 June 2016

PERFORMANCE SUMMARY

'C' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'C' Share -   53.2   49.3
Net asset value per 'A' Share -   0.1   0.1
Cumulative distributions per 'C' Share 120.36   75.0   75.0
Adjusted for estimated performance fee -   (7.4)   (7.0)
Total return per 'C' Share and 'A' Share 120.36   120.9   117.4

'D' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'D' Share 34.7   51.3   72.9
Net asset value per 'E' Share 0.1   0.1   0.1
Cumulative distributions per 'D' Share 66.5   49.5   22.5
Total return per 'D' Share and 'E' Share 101.3   100.9   95.5

'F' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'F' Share 69.7   71.5   71.7
Cumulative distributions per 'F' Share 22.5   20.0   17.5
Total return per 'F' Share 92.2   91.5   89.2

'H' Share pool30 Jun
2016
 31 Dec
2015
 30 Jun
2015
  Pence Pence Pence
Net asset value per 'H' Share 88.9   90.5   93.3
Cumulative distributions per 'H' Share 12.5   10.0   7.5
Total return per 'H' Share 101.4   100.5   100.8

'J' Share pool30 Jun
2016
 31 Dec 2015 30 Jun 2015
  Pence Pence Pence
Net asset value per 'J' Share 97.7   98.5   99.9

CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Half-Yearly Report for the six months ended 30 June 2016. The period has seen the Company complete the process of returning capital to 'C' Shareholders and make a start in returning funds to investors in the 'D' Share pool.

Net asset values and overview
'C' Share pool
The task of returning funds to investors in the 'C' Share pool was completed with final dividends paid on 24 March 2016. The Total Return to Shareholders was 120.36p for a holding of one 'C' Share and one 'A' Share, compared to the cost net of income tax relief in 2009 of 70p.

The Company is now taking steps to cancel the 'C' Shares and 'A' Shares and will update relevant Shareholders on progress shortly.

'D' Share pool
The 'D' Share pool has now commenced the process of exiting from its investments. During the period sufficient realisations were completed to allow the payment of a dividend of 17.0p per 'D' Share in March 2016.

At 30 June 2016, the remaining net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 34.8p, an increase of 0.4p (0.8%) over the period. Total Return (NAV plus dividends paid to date) is now 101.3p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

'F' Share pool
The 'F' Share pool launched in 2012 and is scheduled to start exiting from investments in early 2018.

At 30 June 2016, the NAV for a holding of one 'F' Share was 69.7p, a net increase of 0.7p (1.0%) over the period (after adjusting for dividends paid during the period of 2.5p per 'F' Share). Total Return (NAV plus dividends paid to date) is now 92.2p, compared to the original cost, net of income tax relief, of 70p per share.

'H' Share pool
The 'H' Share pool raised funds in 2014 and is in the process of building its VCT qualifying portfolio. The target date to start realising investments is 2019.

At 30 June 2016, the NAV for a holding of one 'H' Share was 88.9p. This represents a net increase of 0.9p (1.0%) over the period (after adjusting for the dividends paid during the period of 2.5p per 'H' Share).  Total Return (NAV plus dividends paid to date) is now 101.4p, compared to the initial NAV of 100p and the original cost to investors (net of income tax relief) of between 70.4p and 80.1p (depending on initial costs).

'J' Share pool
The 'J' Share pool raised funds in 2015 and is in the process of building its VCT qualifying portfolio. The target date to start realising investments is 2020.

At 30 June 2016, the NAV for a holding of one 'J' Share was 97.7p, compared to the initial NAV of 100p and the original cost to investors (net of income tax relief) of between 70.0p and 76.5p (depending on initial costs).

A full review for each share pool is covered in the specific Investment Manager's Reports.

Dividends
In line with the Company's stated policies, interim dividends will be paid as follows:

'F' Shares 2.5p per share
'H' Shares 2.5p per share

Each of the above dividends will be paid on 16 December 2016 to Shareholders on the register at 18 November 2016.

No interim dividend is being declared in respect of the 'D' Shares as further return of capital dividends will be declared once further investment realisation have been completed.

As a result of changes to the VCT regulations in 2014, the 'J' Share pool is effectively prohibited from paying dividends in its first three years.

Share buybacks
The Company has a general policy in the first five years after the launch of a share class of buying in its own shares that become available in the market for cancellation. As a result, the Company will buy 'F' Shares, 'H' Shares and 'J' Shares that become available in the market and will, subject to liquidity and regulatory constraints, buy at prices approximately equal to net asset value i.e. with no discount.

No shares were purchased in the six month period to 30 June 2016.

Outlook
The Board is pleased to have delivered a good final outcome for 'C' Shareholders and the Manager's focus has now shifted to the exit process for the 'D' Share pool. Over the remainder of the year we expect to see significant progress in exiting from the remaining 'D' Share pool investments and hope to be in a position to declare a further dividend later in 2016 or early 2017. 'D' Shareholders should note that the exit process may well present some challenges which could result in the exit process taking some time to complete.

We expect investment activity in the 'F' Share pool to be reasonably low during the remainder of the year as we look to the portfolio companies to develop further ahead of the planned exit date.

The 'H' Share and 'J' Share pools have invested in a number of companies that are preparing to commence trading and so these will require close monitoring as they start to establish businesses.

In terms of the general outlook for small businesses, the result of the EU Referendum appears to have created a period of uncertainty for the UK economy and some volatility in stock markets. With a large proportion of the Company's funds already invested, the Board believes that any possible negative impact on the Company's performance will be limited.  A weaker longer term economy could result in greater difficulty in exiting from investments at the appropriate time, however the Directors feel that this is not a major risk. The Board will, of course, continue to monitor developments closely.

I look forward to updating Shareholders in my statement with the Annual Report to 31 December 2016.

Michael Robinson
Chairman

INVESTMENT MANAGER'S REPORT
'C' SHARE POOL
The 'C' Share pool completed the task of realising its investments in January 2016, and on 24 March 2016, paid final dividends.

Net asset value and results
Over the life of their investment, investors in the 'C' Share pool received total dividends of 105.51p per 'C' Share and 14.85p per 'A' Share making a total return of 120.36p for an original investment of 100p (70p net of income tax relief). We believe that this represents a very good return to Shareholders and brings the investment by 'C' Shareholders to a close.

Investment activity in the period
The 'C' Share pool had two investments at the start of the period. Both Quadrate Spa Limited and Quadrate Catering Limited were sold generating gains over original cost of £160,000.
Outlook
We are very satisfied with the final performance of the 'C' Share pool. Following the payment of the final dividends on 24 March 2016, the 'C' Share pool had negligible value at the period end and, in line with the Articles of the Company, the Company is taking steps to cancel the share class. We will notify Shareholders of progress in due course.

Downing LLP

SUMMARY OF INVESTMENT MOVEMENTS
'C' SHARE POOL
for the six months ended 30 June 2016

Disposals
Cost
 
Market
 value at
01/01/16
Disposal
proceeds
 
Gain
against
cost
 
 Total
 Realised
 gain
 
£'000
£'000
£'000
£'000
£'000
VCT qualifying and partially qualifying
  investments
         
Quadrate Spa Limited 258 381 381 123 -
Quadrate Catering Limited 330 367 367 37 -
           
  588 748 748 160 -

INVESTMENT MANAGER'S REPORT
'D' SHARE POOL
The 'D' Share pool is in the process of seeking to realise its investments in order to return funds to 'D' Shareholders.

Investment activity
During the period under review, there were three full disposals and four partial disposals which produced proceeds of £1.5 million and showed a gain against previous carrying value of £109,000.

At 30 June 2016, the pool held 11 investments with a valuation of £3.0 million. One minor valuation change was made at the period end resulting in a total valuation reduction of £58,000 in Mosaic Spa and Health Clubs Limited. The carrying values adopted at the end of the period are consistent with the values at which we believe the investments can be exited.

The majority of investments have performed to plan although a small number which have underperformed historically are yet to fully recover.

Realisation plans
There are exit plans in place for the remaining 11 investments. The significant holdings in Kidspace Adventures Holdings Limited, Westcountry Solar Solutions Limited and Avon Solar Energy Limited are expected to exit in the next few months.

Although Gara Rock Resort Limited, formerly Aminghurst Limited, was sold in March 2016, the timing of the loan repayments depends on when the underlying apartments are sold. We are exploring some options to draw the investment to a conclusion earlier than might otherwise be the case.

Net asset value and results
At 30 June 2016, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 34.8p, an increase of 0.4p (0.8%) over the period. Total Return (NAV plus dividends paid to date) is now 101.3p for a combined holding.

The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £38,000, comprising a revenue loss of £13,000 and a capital profit of £51,000.

Outlook
The remainder of the year will be a busy period in terms of investment realisations and we expect the next major distribution to Shareholders to be made before the end of the year or early 2017.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'D' SHARE POOL
as at 30 June 2016

 
Cost
Valuation
Unrealised
 loss in
 period
% of
 Portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Kidspace Adventure Holdings Limited 375 465 -
13.0%
Mosaic Spa and Health Clubs Limited * 521 288 (58)
8.1%
Westcountry Solar Solutions Limited 250 250 -
7.0%
Avon Solar Energy Limited 210 218 -
6.1%
Future Biogas (Reepham Road) Limited 451 98 -
2.7%
Camandale Limited* 422 2 -
0.1%
Quadrate Spa Limited 144 - -
0.0%
       
 
Non-qualifying investments      
 
Gara Rock Resort Limited 1,322 1,322 -
37.1%
Fenkle Street LLP 122 220 -
6.2%
Future Biogas (SF) Limited 84 84 -
2.4%
Redmed Limited 21 19 -
0.5%
       
 
  3,922 2,966 (58)
83.2%
       
 
Cash at bank and in hand   597  
16.8%
       
 
Total   3,563  
100%

* Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'D' SHARE POOL
for the six months ended 30 June 2016

Disposals
Cost
 
Market
value at
01/01/16
Disposal
Proceeds *
Gain/
(loss)
against
cost
Total
 Realised
 gain
 
£'000
£'000
£'000
£'000
£'000
VCT qualifying and partially qualifying
investments
         
Quadrate Catering Limited 441 539 581 140 42
Future Biogas (Reepham Road) Limited 130 97 130 - 33
Liverpool Nurseries (Holdings) Limited - - 11 11 11
Quadrate Spa Limited 352 520 520 168 -
           
Non-qualifying investments          
Future Biogas (SF) Limited 85 85 102 17 17
Kilmarnock Monkey Bar Limited - - 6 6 6
Commercial Street Hotel Limited 100 100 100 - -
Redmed Limited 6 5 5 (1) -
           
  1,114 1,346 1,455 341 109

* Adjusted for additions in the year

INVESTMENT MANAGER'S REPORT
'F' SHARE POOL
The 'F' Share pool is fully invested in a portfolio focussed on asset backed businesses and those with predictable revenue streams. The 'F' Share pool is scheduled to start realising investments in 2017 in order to return funds to shareholders in 2018.

Investment activity
Four new investments were made in the period totalling £700,000. £300,000 was invested into Vectis Power Generation Limited which is seeking to build and develop renewable energy plants; £150,000 was invested into Brownfields Energy Limited which is seeking to develop small-scale waste disposal projects; £125,000 was invested into both Rhodes Renewables Limited and Morava Renewables Limited which are both exploring opportunities in the wood refinery sector.

One full exit was completed in the period for Grasshoppper 2007 Limited, the company that owns The Grasshopper Inn, a public house near Westerham, Kent which was sold and generated proceeds equivalent to the original cost of £378,000.

One notable partial divestment took place in the period being the part repayment of a non-qualifying loan to Gara Rock Resort Limited, formerly Aminghurst Limited, which generated proceeds of £494,000.

The majority of investments remain valued at or above cost and there was one small valuation movement in the period on Atlantic Dogstar Limited. The company owns a group of London pubs which are performing to plan and as such the valuation has been increased by £18,000.
Net asset value, results and dividend
At 30 June 2016, the net asset value ("NAV") for a holding of one 'F' Share was 69.7p, an increase of 0.7p (1.0%) over the period. Total Return (NAV plus dividends paid to date) is now 92.2p for a combined holding.

The gain on ordinary activities for the 'F' Shares, after taxation, for the period was £71,000, comprising a revenue profit of £53,000 and a capital gain of £18,000.

The Company will pay an interim dividend of 2.5p per 'F' Share, on 16 December 2016 to 'F' Shareholders on the register at 18 November 2016.

Outlook
The focus now for the 'F' Share portfolio is on close monitoring and support of the portfolio companies to ensure that prospects for growth are optimised in the period until the realisation process commences in 2017.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2016

 
 
 
Cost
 
 
Valuation
Unrealised
 gain in
 period
% of
 Portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Apex Energy Limited 1,000 1,000 -
13.3%
Vulcan Renewables Limited 653 778 -
10.4%
Goonhilly Earth Station Limited 760 760 -
10.1%
Lambridge Solar Limited 500 543 -
7.2%
Merlin Renewables Limited 500 500 -
6.7%
Augusta Pub Company Limited 290 324 -
4.3%
Kidspace Adventures Holdings Limited 250 310 -
4.1%
Vectis Power Generation Limited 300 300 -
4.0%
Pearce and Saunders Limited 497 248 -
3.3%
Pabulum Pubs Limited 200 229 -
3.1%
Atlantic Dogstar Limited 200 218 18
2.9%
Fresh Green Power Limited 200 200 -
2.7%
City Falkirk Limited 422 177 -
2.4%
Fubar Stirling Limited 268 169 -
2.3%
Brownfields Energy Limited 150 150 -
2.0%
Rhodes Renewables Limited 125 125 -
1.7%
Morava Renewables Limited 125 125 -
1.7%
Green Energy Production UK Limited 100 100 -
1.4%
Cheers Dumbarton Limited 48 17 -
0.2%
Redmed Limited * 13 11 -
0.1%
Lochrise Limited 13 - -
0.0%
       
 
Non-qualifying investments      
 
Baron House Developments LLP 481 481 -
6.4%
Gara Rock Resort Limited 345 345 -
4.6%
London City Shopping Centre Limited 66 66 -
0.9%
Pearce and Saunders DevCo Limited 46 46 -
0.6%
Southampton Hotel Development Limited 298 - -
0.0%
       
 
  7,850 7,222 18
96.4%
       
 
Cash at bank and in hand   269  
3.6%
       
 
Total   7,491  
100.0%

* Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Vectis Power Generation Limited 300
Brownfields Energy Limited 150
Rhodes Renewables Limited 125
Morava Renewables Limited 125
Total 700

Disposals
 
 
Cost
Market
value at
01/01/16 *
Disposal
proceeds
Loss
against
cost
 Total
 Realised
 gain
 
£'000
£'000
£'000
£'000
£'000
           
VCT qualifying and partially qualifying investments        
Grasshopper 2007 Limited 378 378 378 - -
Redmed Limited 5 3 3 (2) -
           
Non-qualifying investments          
Gara Rock Resort Limited 494 494 494 - -
           
  877 875 875 (2) -

* adjusted for purchases made in the period

INVESTMENT MANAGER'S REPORT
'H' SHARE POOL
The 'H' Share pool raised funds in 2014 and has made good progress in building the initial VCT qualifying portfolio. The fund is expected to be fully qualifying by 31 December 2016.

Investment activity
During the last six months, six qualifying investments were made totalling £4.4 million and one non-qualifying investment for £850,000 as we continue to build the qualifying portfolio of the 'H' Share pool.

The qualifying investments include £1.5 million in Hermes Renewables Limited, which is seeking to build and operate a wood pelleting plant.

£850,000 was invested in Quadrate Catering Limited which operates a restaurant in the iconic Cube Complex in Birmingham.

£613,000 was invested in both Ironhide Generation Limited and £614,000 into Indigo Generation Limited. £492,000 was invested in Rockhopper Renewables Limited and £281,000 in SF Renewables (Solar) Limited. All of the above investments are in the process of acquiring land in India to build and operate 15MW ground mounted solar arrays.

One non-qualifying investment was made in Quadrate Spa Limited for £850,000 which owns and operates a health club business in The Cube complex in Birmingham. 

Two non-qualifying loans were repaid in full in the period being Pub People Limited, the public house operator in the East Midlands, repaid £984,000 and Ludlow Taverns Limited which repaid £388,000. 

The majority of investments remain valued at cost and there was one small valuation movement in the period on Atlantic Dogstar. The company owns a group of London pubs which are performing to plan and as such the valuation has been increased by £88,000.

Net asset value and results
At 30 June 2016, the net asset value per 'H' Share was 88.9p, a net increase of 0.9p (1.0%) over the period. Total Return (NAV plus dividends paid to date) is now 101.4p.

Results and dividend
The gain on ordinary activities for the 'H' Shares, after taxation, for the period was £128,000, comprising a revenue profit of £40,000 and a capital gain of £88,000.

The Company will pay an interim dividend of 2.5p per 'H' Share, on 16 December 2016 to 'H' Shareholders on the register at 18 November 2016.

Outlook
The 'H' Share pool will become fully qualifying at the year end and as a result our focus will shift to the close monitoring and support of the portfolio companies in order to nurture growth before the planned exit date.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'H' SHARE POOL
as at 30 June 2016

 
 
 
Cost
 
 
Valuation
Unrealised
 gain in
 period
% of
 Portfolio
 by value
 
£'000
£'000
£'000
 
VCT qualifying investments      
 
Hermes Renewables Limited 1,500 1,500 -
12.5%
Apex Energy Limited 1,300 1,300 -
10.8%
Hedderwick Limited 1,250 1,250 -
10.4%
Atlantic Dogstar Limited 1,000 1,088 88
9.1%
Kidspace Adventures Holdings Limited 1,085 1,085 -
9.1%
Quadrate Catering Limited 850 850 -
7.1%
Ironhide Generation Limited 613 613 -
5.1%
Indigo Generation Limited 613 613 -
5.1%
Antelope Pub Limited 500 500 -
4.2%
Rockhopper Renewables Limited 492 492 -
4.1%
Oak Grove Renewables Limited 420 315 -
2.6%
SF Renewables (Solar) Limited 281 281 -
2.3%
       
 
Non-qualifying investments      
 
Quadrate Spa Limited 850 850 -
7.1%
Hobblers Heath Limited 727 727 -
6.1%
Pearce and Saunders Limited 193 193 -
1.6%
Augusta Pub Company Limited 155 155 -
1.3%
       
 
  11,829 11,812 88
98.5%
       
 
Cash at bank and in hand   183  
1.5%
       
 
Total   11,995  
100%

SUMMARY OF INVESTMENT MOVEMENTS
'H' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Hermes Renewables Limited 1,500
Quadrate Catering Limited 850
Ironhide Generation Limited 614
Indigo Generation Limited 613
Rockhopper Renewables Limited 492
SF Renewables (Solar) Limited 281
   
Non-qualifying investments  
Quadrate Spa Limited 850
   
Total 5,200

Disposals
Cost
Market
value at
01/01/16 *
Disposal
proceeds
Gain
against
cost
 Total
 Realised
 gain
 
£'000
£'000
£'000
£'000
£'000
           
Non-qualifying investments          
Pub People Limited 984 984 984 - -
Ludlow Taverns Springhill Limited 388 388 388 - -
           
  1,372 1,372 1,372 - -

* adjusted for purchases made in the period

INVESTMENT MANAGER'S REPORT
'J' SHARE POOL

The fundraising for the 'J' Share pool was launched in December 2014 and raised £11 million prior to closing in 2015. The majority of these funds have now been invested as at the period end and is due to become qualifying by the end of 2017.

Investment activity
During the last six months, ten qualifying investments have been made totalling £7.8m as we start to build the qualifying portfolio of the 'J' Share pool.

The qualifying investments include £900,000 in Vectis Power Generation Limited which is seeking to build and develop renewable energy plants.

£900,000 was also invested in Brownfields Energy Limited which is seeking to develop small-scale waste disposal projects.

£800,000 was invested in Yamuna Renewables Limited who are seeking investment opportunities in the wood refinery sector.

£613,000 was invested in Ironhide Generation Limited and £614,000 into Indigo Generation Limited. £492,000 was invested into Rockhopper Renewables Limited and £281,000 into SF Renewables (Solar) Limited. All of the above investments are in the process of acquiring land in India to build and operate 15MW ground mounted solar arrays.

Jito Renewables Limited, Rhodes Renewables Limited and Morava Renewables Limited are all exploring opportunities in the wood refinery sector following investments of £1 million, £1 million and £1.2 million respectively.

No valuation adjustments have been made in the period with all investments remaining at cost.

Net asset value and results
At 30 June 2016, the net asset value per 'J' Share was 97.7p, a net decrease of 0.8p (0.8%) over the period.

The loss on ordinary activities for the 'J' Shares, after taxation, for the period was £90,000, being wholly related to revenue.

Outlook
The task of building the 'J' Share portfolio is progressing well. 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 planned life of the Share pool. Accordingly, we expect to complete a number of new qualifying and non-qualifying investments for the share pool over the remainder of the year.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'J' SHARE POOL
as at 30 June 2016

 
 
 
Cost
 
 
Valuation
Unrealised
 gain in
 period
% of
 Portfolio
 by value
 
£'000
£'000
£'000
 
VCT qualifying and partially qualifying investments      
 
Morava Renewables Limited 1,150 1,150 -
10.9%
Jito Renewables Limited 1,000 1,000 -
9.5%
Rhodes Renewables Limited 1,000 1,000 -
9.5%
Cedarville Limited 1,000 1,000 -
9.5%
Pilgrim Pubs Limited 1,000 1,000 -
9.5%
Brownfields Energy Limited 900 900 -
8.6%
Vectis Power Generation Limited 900 900 -
8.6%
Yamuna Power Generation Limited 800 800 -
7.6%
Indigo Generation Limited 614 614 -
5.8%
Ironhide Generation Limited 613 613 -
5.8%
Rockhopper Renewables Limited 492 492 -
4.7%
Oak Grove Renewables Limited 420 315 -
3.0%
SF Renewables (Solar) Limited 281 281 -
2.7%
       
 
  10,170 10,065 -
95.7%
       
 
Cash at bank and in hand   457  
4.3%
       
 
Total   10,522  
100%

SUMMARY OF INVESTMENT MOVEMENTS
'J' SHARE POOL
as at 30 June 2016

Additions
£'000
   
Qualifying investments  
Morava Renewables Limited 1,150
Jito Renewables Limited 1,000
Rhodes Renewables Limited 1,000
Brownfields Energy Limited 900
Vectis Power Generations Limited 900
Yamuna Renewables Limited 800
Indigo Generation Limited 614
Ironhide Generation Limited 613
Rockhopper Renewables Limited 492
SF Renewables Limited 281
   
Total 7,750

UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2016

   

30 Jun 2016
 30 Jun
2015
 31 Dec
2015

 

 

'C'
Shares
 

'D'
Shares
 

'F' Shares
 

'H' Shares

'J' Shares
 

 

Total
  

 

Total
  

 

Total

 

£'000£'000£'000£'000£'000£'000 £'000 £'000

 

                   
Fixed assets                    
Unquoted investments - 2,966 7,222 11,812 10,065 32,065   26,046   22,707
                     
Current assets                    
Debtors - (3) 153 103 3 256   655   632
Cash at bank and in hand 67 597 269 183 457 1,573   13,044   16,578
  67 594 422 286 460 1,829   13,699   17,210
                     
Creditors: amounts falling due within one year (64) (92) (102) (139) (40) (437)   (1,019)   (494)
                     
Net current assets 3 502 320 147 420 1,392   12,680   16,716
                     
Net assets 3 3,468 7,542 11,959 10,485 33,457   38,726   39,423
                     
Capital and reserves                    
Called up share capital 18 25 11 13 11 78   75   78
Capital redemption reserve 106 - - - - 106   106   106
Special reserve - 3,850 8,885 (1,681) - 11,054   17,348   15,749
Share premium account - - - 13,608 11,031 24,639   21,367   24,639
Revaluation reserve (105) (956) (627) (17) (105) (1,810)   (1,504)   (1,466)
Capital reserve - realised - - (1,033) - - (1,033)   301   (1,033)
Revenue reserve (16) 549 306 36 (452) 423   1,033   1,350
Total equity shareholders' funds  

3
 

3,468
 

7,542
 

11,959
 

10,485
 

33,457
   

38,726
  39,423
                     
Basic and diluted net asset value per:      
'C' Share -           49.3p 53.2p
'A' Share -           0.1p 0.1p
'D' Share   34.7p           72.9p 51.3p
'E' Share   0.1p           0.1p 0.1p
'F' Share     69.7p         71.7p 71.5p
'H' Share       88.9p       93.3p 90.5p
'J' Share         97.7p     99.9p 98.5p

STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2016

 Called up share
capital
Capital
redemption
reserve
Special
reserve
Share
premium
reserve
Revaluation
reserve
Capital
reserve
- realised
Revenue
reserve
Total
 £'000£'000£'000£'000£'000£'000£'000£'000
         
At 1 January 2015 67 106 22,268 13,608 (289) (1,033) 342 35,069
(Loss)/gain on
   investments
- - - - (234) 34 - (200)
Retained revenue - - - - - - 1,317 1,317
Issue of new
shares
11 - - 11,031 - - - 11,042
Share issue costs - - - - - - (309) (309)
Transfer between
   reserves
- - (6,519) - (943) 7,462 - -
Dividend paid - - - - - (7,496) - (7,496)
At 31 December 2015 78 106 15,749 24,639 (1,466) (1,033) 1,350 39,423
Gain on
   investments
- - - - 47 110 - 157
Retained revenue - - - - - - (40) (40)
Transfer between
   reserves
- - (4,695) - (391) 5,973 (887) -
Dividend paid - - - - - (6,083) - (6,083)
At 30 June 2016 78 106 11,054 24,639 (1,810) (1,033) 423 33,457
         

INCOME STATEMENT
for the six months ended 30 June 2016
Company Total

  

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year
 Ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 435 - 435   1,411 - 1,411   2,449
                   
Gains/(losses) on investments                  
- realised - 110 110   - (362) (362)   34
- unrealised - 47 47   - (244) (244)   (234)
  435 157 592   1,411 (606) 805   2,249
                   
Investment management fees (328) - (328)   (332) - (332)   (695)
Other expenses (164) - (164)   (148) - (148)   (275)
                   
Return/(loss) on ordinary activities before taxation (57) 157 100   931 (606) 325   1,279
                   
Tax on total comprehensive income and ordinary activities 17 - 17   (84) - (84)   (162)
                   
Return/(loss) attributable to equity shareholders (40) 157 117   847 (606) 241   1,117
       
Return per 'C' Share (0.4p) - (0.4p)   7.7p (6.5p) 1.2p   5.1p
Return per 'A' Share - - -                  -            -          -   -
Return per 'D' Share (0.1p) 0.5p 0.4p   1.2p 0.4p 1.6p   6.9p
Return per 'E' Share - - -                 -           -          -   -
Return per 'F' Share 0.5p 0.2p 0.7p   0.3p (1.7p) (1.4p)   1.0p
Return per 'H' Share 0.3p 0.7p 1.0p   1.2p           - 1.2p   0.8p
Return per 'J' Share (0.8p) - (0.8p)   (0.2p)           - (0.2p)        (2.4p)

A Statement of Total Recognised Gains and Losses has not been prepared as all gains/losses are recognised in the Income Statement as noted above.

INCOME STATEMENT
for the six months ended 30 June 2016

'C' Shares 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 Year
 ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 6 - 6   621 - 621   815
                   
Gains/(losses) on investments                  
- realised - - -   - (412) (412)   (342)
- unrealised - - -   - (53) (53)   25
  6 - 6   621 (465) 156   498
                   
Investment management fees (8) - (8)   (31) - (31)   (56)
Other expenses (35) - (35)   (24) - (24)   (41)
                   
Return/(loss) on ordinary activities before taxation (37) - (37)   566 (465) 101   401
                   
Tax on total comprehensive income and ordinary activities 7 - 7   (12) - (12)   (36)
                   
Return/(loss) attributable to equity shareholders (30) - (30)   554 (465) 89   365

INCOME STATEMENT
for the six months ended 30 June 2016

'D' Shares 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year
 Ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 19 - 19   227 - 227   528
                   
Gains/(losses) on investments                  
- realised - 109 109   - 50 50   297
- unrealised - (58) (58)   - (11) (11)   87
  19 51 70   227 39 266   912
                   
Investment management fees (27) - (27)   (49) - (49)   (97)
Other expenses (16) - (16)   (32) - (32)   (54)
                   
Return/(loss) on ordinary activities before taxation (24) 51 27   146 39 185   761
                   
Tax on total comprehensive income and ordinary activities 11 - 11   (31) - (31)   (71)
                   
Return/(loss) attributable to equity shareholders (13) 51 38   115 39 154   690

INCOME STATEMENT
for the six months ended 30 June 2016

'F' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year
Ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 171 - 171   153 - 153   407
                   
Losses on investments                  
- realised - - -   - - -   79
- unrealised - 18 18   - (180) (180)   (136)
  171 18 189   153 (180) (27)   350
                   
Investment management fees (69) - (69)   (73) - (73)   (144)
Other expenses (36) - (36)   (46) - (46)   (85)
                   
Return/(loss) on ordinary activities before taxation 66 18 84   34 (180) (146)   121
                   
Tax on total comprehensive income and ordinary activities (13) - (13)   (2) - (2)   (13)
                   
Return/(loss) attributable to equity shareholders 53 18 71   32 (180) (148)   108

INCOME STATEMENT
for the six months ended 30 June 2016

'H' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year
 Ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 202 - 202   359 - 359   594
                   
Gains/(losses) on investments                  
- realised - - -   - - -   -
- unrealised - 88 88   - - -   (105)
  202 88 290   359 - 359   489
                   
Investment management fees (120) - (120)   (128) - (128)   (253)
Other expenses (32) - (32)   (36) - (36)   (69)
                   
Return on ordinary activities before taxation 50 88 138   195 - 195   167
                   
Taxation on total comprehensive income and ordinary activates (10) - (10)   (41) - (41)   (55)
                   
Return attributable to equity shareholders 40 88 128   154 - 154   112

INCOME STATEMENT
for the six months ended 30 June 2016

'J' Shares

 
 

Six months ended
30 Jun 2016

 
  

Six months ended
30 Jun 2015
 
Year
Ended
31 Dec
2015
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 37 - 37   51 - 51   104
                   
Gains/(losses) on investments                  
- realised - - -   - - -   -
- unrealised - - -   - - -   (105)
  37 - 37   51 - 51   (1)
                   
Investment management fees (104) - (104)   (51) - (51)   (144)
Other expenses (45) - (45)   (10) - (10)   (26)
                   
Loss on ordinary activities before taxation (112) - (112)   (10) - (10)   (171)
                   
Tax on total comprehensive income and ordinary activities 22 - 22   2 - 2   13
                   
Loss attributable to equity shareholders (90) - (90)   (8) - (8)   (158)

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2016

 

 
 

30 Jun 2016
 30 Jun 2015 31 Dec 2015
  

'C'
Shares
 

'D'
Shares
 

'F'
Shares
 

'H'
Shares

'J' Shares
 

 

Total
  

Total

 
 Total
Note£'000£'000£'000£'000£'000£'000 £'000 £'000
                     
Net cash inflow/
(outflow) from operating activities
1 

  
137
210 16 (13) (72) 278   893   862
                     
Cash flows from investing activities                    
Purchase of investments - - (700) (5,200) (7,750) (13,650)   (3,227)   (11,766)
Sale of investments 748 1,455 875 1,372 -     4,450   4,780   17,063
Net cash inflow/(outflow)
from investing activities
748 1,455 175 (3,828) (7,750) (9,200)   1,553   5,297
                     
Net cash inflow/(outflow) before financing activities 885 1,665 191 (3,841) (7,822) (8,922)   2,446   6,159
                     
Cash flows from
financing activities
                   
Equity dividends paid (3,780) (1,696) (271) (336) - (6,083)   (4,195)   (7,496)
Proceeds from share issue - - - - - -   7,767   11,042
Share issue costs - - - - - -   (156)   (309)
Net cash (outflow)/inflow from financing (3,780) (1,696) (271) (336)            -   (6,083)   3,416   3,237
(Decrease)/increase
in cash
2 (2,895) (31) (80) (4,177) (7,822) (15,005)   5,862   9,396

NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2016

 

 

 30 Jun 2016 30 Jun 2015 31 Dec 2015

 

 

'C'
Shares
 

'D'
Shares
 

'F'
Shares
 

'H'
Shares

'J'

Shares
 

 

Total
 Total  Total

 

£'000£'000£'000£'000£'000£'000 £'000 £'000
1 Cash inflow from operating activities and returns on investments                   
Return/(loss) on ordinary activities before taxation (37) 27 84 138 (112) 100   325   1,279
Corporation tax paid 5 7 - - - 12   - (132)
Losses/(gains) on investments - (51) (18) (88) - (157)   606   200
Decrease/(increase) in other debtors 174 254 (24) (54) 25 375   (238)   (216)
(Decrease)/increase in other creditors (5) (27) (26) (9) 15 (52)   200   (269)
Net cash inflow/(outflow)    from operating activities 137 210 16 (13) (72) 278   893   862
                     
2 Analysis of net funds                    
Beginning of period 2,962 628 349 4,360 8,279 16,578   7,182   7,182
Net cash (outflow)/inflow (2,895) (31) (80) (4,177) (7,822) (15,005)   5,862   9,396
End of period 67 597 269 183 457 1,573   13,044   16,578

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1.   General information
Downing Three 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.

2.   Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2016 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2015, which were prepared 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).

3.   All revenue and capital items in the Income Statement derive from continuing operations.

4.   The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

5.   The comparative figures are in respect of the six month period ended 30 June 2015 and the year ended 31 December 2015 respectively.

6.   Dividends

    

Six months ended
30 June 2016
 Year ended
31 Dec
2015
 Per share RevenueCapitalTotal Total
Paid in periodpence £'000£'000£'000 £'000
               
'C' Shares              
Special 'C' 2016 30.5p   - 2,184 2,184   -
Special 'A' 2016 14.8p   - 1,596 1,596   -
Y/E Dec 2014 Final 50.0p   - - -   3,588
      - 3,780 3,780   3,588
               
'D' Shares              
Y/E Dec 2015 Final 17.0p   - 1,696 1,696   -
Y/E Dec 2014 Interim 27.0p   - - -   2,695
      - 1,696 1,696   2,695
               
'F' Shares              
Y/E Dec 2015 Final 2.5p   - 271 271   -
Y/E Dec 2015 Interim 2.5p   - - -   270
Y/E Dec 2014 Final 2.5p   - - -   270
      - 271 271   540
               
'H' Shares              
Y/E Dec 2015 Final 2.5p   - 336 336   -
Y/E Dec 2015 Interim 2.5p   - - -   337
Y/E Dec 2014 Final 2.5p   - - -   336
      - 336 336   673

No dividends have been paid or declared in respect of the 'E' Shares or 'J' Shares.

7.   Basic and diluted return per share

 

Weighted average number of shares in issue  

Revenue
return/(loss)
  

Capital
return
    

£'000
Per share  

£'000
Per
 share
             

'C' Shares

7,158,326   (30) (0.4p)   - -

'A' Shares

10,750,064   - -   - -

'D' Shares

9,979,109   (13) (0.1p)   51 0.5p

'E' Shares

14,994,862   - -   - -

'F' Shares

10,821,660   53 0.5p   18 0.2p

'H' Shares

13,446,972   40 0.3p   88 0.7p

'J' Shares

10,733,377   (90) (0.8p)   - -

 

    (40)     157  

8.   Net asset value per share

 

Shares in issue Net asset value
    £'000 Per
 Share

 

 

       

'C' Shares

7,158,326

  3   -

'A' Shares

10,750,064

  -   -

'D' Shares

9,979,109

  3,453   34.7p

'E' Shares

14,994,862

  15   0.1p

'F' Shares

10,821,660

  7,542   69.7p

'H' Shares

13,446,972

  11,959   88.9p

'J' Shares

10,733,377

  10,485   97.7p

 

 

  33,457    

9.   Reserves

 Period ended
 30 June
2016
 Year ended
 31 Dec
2015
 £'000 £'000
       
Capital redemption reserve 106   106
Special reserve 11,054   15,749
Share premium reserve 24,639   24,639
Revaluation reserve (1,810)   (1,466)
Capital reserve-realised (1,033)   (1,033)
Revenue reserve 423   1,350
  33,379   39,345

The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £2,414,000 which are included in the calculation of distributable reserves. Total distributable reserves are £8,030,000 (31 Dec 2015: £13,911,000).

  1. The fair value of investments is determined using the detail accounting policy set out in the statutory accounts for the year ended 31 December 2015.

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level a: Reflects financial instruments quoted in an active market;
Level b: Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level c:
i) Reflects financial instruments that use valuation techniques that are based on observable market date.
ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

   

 

Level
a
 

 

Level
 b
 

 

Level
 c (ii)
Period
ended
 30 June
 2016
  

 

Level
a
 

 

Level
 b
 

 

Level
 c (ii)
Year
ended
31 Dec
2015
  £'000£'000£'000£'000 £'000£'000£'000£'000
                   
Loan notes - - 7,928 7,928   - - 11,318 11,318
Unquoted equity  

-
 

-
 

24,137
 

24,137
   

-
 

-
 

11,389
 

11,389
  - - 32,065 32,065   - - 22,707 22,707

11. The unaudited condensed financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2015 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

12. 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.

13. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board concluded that the key risks facing the Company over the remainder of the financial period are as follows:

(i)       Compliance risk of failure to maintain approval as a VCT; and
(ii)      Investment risk associated with investing in small and immature businesses.

The Company's compliance with the VCT regulations is continually monitored by the Manager, who reports regularly to the Board on the current position. The Company has also reappointed Philip Hare & Associates LLP to provide regular reviews and advice in this area. In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature. It also has a limited period in which it must invest the majority of its funds. The Manager follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible and, after an investment is made, closely monitoring the business. The Board is satisfied that these approaches provide satisfactory management of the key risks.

14. Going concern
The Directors have reviewed the Company's financial resources at the period end and conclude that the Company is well placed to manage its business risks.

The Board confirms that it is satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, the Board believes that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

  1. Copies of the unaudited half-yearly report will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or will be available for download from www.downing.co.uk.



This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq 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

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