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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Downing Plan 3 | LSE:DPV3 | London | Ordinary Share | GB00B078VQ91 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.55 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Downing Planned Exit VCT 3 PLC
FINAL RESULTS FOR THE YEAR ENDED 31 JANUARY 2012
FINANCIAL HIGHLIGHTS
(All "pence per share") 31 Jan 12 31 Jan 11
'C' & 'A' 'D' & 'E' 'C' & 'A' 'D' & 'E'
pools pools pools pools
Net asset value 91.6 83.4 92.9 93.6
Total distributions paid since launch 12.5 7.5 5.0 2.5
Total return 104.1 90.9 97.9 96.1
The Ordinary Shares now have negligible value. No 'F' Shares were issued during
the year ended 31 January 2012.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present my report of the year ended 31 January 2012. During the
year, the Company had two active share pools, being the 'C' Share pool, launched
in 2008/9, and the 'D' Share pool, launched in 2009/10. The Board is preparing
proposals to cancel the Ordinary Share class, all funds of which have been paid
out to Shareholders.
Since the 31 January year end, the Company has issued shares in a new share
class, the 'F' Shares. As no 'F' Shares were in issue at the at the year end
this report has very limited coverage of this new share class, but I would like
to welcome all 'F' Shareholders to the Company and look forward to reporting
developments in respect of this new share pool in future reports.
'C' Share pool
Portfolio activity
The 'C' Share pool made nine VCT qualifying or partially qualifying investments
during the year at a cost of GBP2.1 million. At the year end, approximately 72% of
the pool's funds were invested in VCT qualifying investments. A further GBP705,000
was invested in non-qualifying investments.
The investment valuations have been reviewed by the Board at the year end. The
Board concluded that most had not shown any significant deviation from plan and
it was appropriate to hold them at values equivalent to original cost. There
were, however, a number of small valuation adjustments. In four cases, the
underlying businesses have been performing ahead of expectations and have been
uplifted by a total of GBP347,000. One pub investment has produced disappointing
results and has been reduced in value by GBP80,000. Net valuation movement on the
portfolio was a gain of GBP267,000.
Net asset value, results and dividends
At 31 January 2012, the 'C' Share NAV stood at 91.5p per share and the 'A' Share
NAV was 0.1p making 91.6p for a combined holding of one 'C' Share and one 'A'
Share. This is an increase of 6.2p (6.7%) over the year, after adjusting for the
dividend of 7.5p paid in the year. Total Return (Total NAV plus cumulative
dividends paid) is now 104.1p
In accordance with its policy, the Board is proposing to pay a dividend of 2.5p
per 'C' Share on 27 July 2012 to Shareholders on the register at the close of
business on 29 June 2012.
'D' Share pool
Portfolio activity
The 'D' Share pool made 15 VCT qualifying or partially qualifying investments
during the year at a cost of GBP4.6 million. At the year end, the pool had
approximately 50% of it funds invested in VCT qualifying investments and has
made good progress towards the target of having 75% invested in qualifying
investments by 31 January 2013. A further GBP1 million was invested in non-
qualifying investments.
It is disappointing to report that two investments in the 'D' Share pool have
faced some significant difficulties. Camandale, which owns two pubs in Scotland,
experienced extremely poor trading which ultimately uncovered further problems.
Although a new management team has now been put in place, the current value of
the pubs is believed to be significantly below the original cost and, as a
result, a provision GBP403,000 has been made against the investment.
Gingerbread Pre-Schools (UK) owns and operates a number of children's nurseries.
The Company ran significantly over budget in setting up a new nursery which
along with other issues led to the removal of the manager and investment
partner. Since the year end, Gingerbread has gone into administration, although
the Company has reacquired the nurseries from the administrator and, with a new
management team in place, believes that there is a viable business. The
investment in Gingerbread has been written down by GBP181,000 at the year end,
such that the carrying value is equal to the value recovered from the
administrator since the period end. The Manager is hopeful that some of the lost
value can be recovered by the new business, Liverpool Nurseries (Holdings), over
time.
All other investments have performed more or less to plan and have been held at
values equal to original cost.
Net asset value, results and dividends
At 31 January 2012, the 'D' Share NAV stood at 83.3p per share and the 'E' Share
NAV was 0.1p making 83.4p for a combined holding of one 'D' Share and one 'E'
Share. This is a decrease of 5.2p (5.6%) over the year, after adjusting for the
dividend of 5p paid in the year. Total Return (Total NAV plus cumulative
dividends paid) is now 90.9p
In accordance with its stated policy, the Board is proposing to pay a dividend
of 2.5p per 'D' Share on 27 July 2012 to Shareholders on the register at the
close of business on 29 June 2012.
'F' Share pool fundraising
During the year the Company launched a new fundraising along with its sister
company, Downing Planned Exit VCT 2 plc. The Company allotted no 'F' Shares
during the year ended 31 January 2012, but between 1 February 2012 and 19 April
2012, 8.5 million 'F' Shares have been issued, generating net proceeds of GBP8
million after share issue costs. The task of investing these new funds is now
underway.
Ordinary Share pool
The Ordinary Shares were originally issued by the Company in 2004/05 and still
remain in issue despite the fact that all funds having been returned to
Shareholders. No further dividends will be paid to Ordinary Shareholders. The
Company will shortly put proposals to Shareholders to formally wind up this
share class.
Share buybacks
The Company has a general policy of buying in for cancellation its own shares
that become available in the market. No shares were purchased in the year for
cancellation.
The Board has a current policy that it will buy in any 'C' Shares, 'A' Shares,
'D' Shares or 'E' Shares at approximately a 10% discount to the latest published
NAV of those share classes. In respect of the new 'F' Shares, any such purchases
will be undertaken at a price equal to the latest published NAV (i.e. at nil
discount) until 1 October 2016. Buybacks are subject to regulatory restrictions
and other factors such as availability of liquid funds. No buybacks in respect
of the Ordinary Shares will be undertaken.
Annual General Meeting and Share Class Meetings
The Company's seventh Annual General Meeting will be held at 10 Lower Grosvenor
Place, London SW1W 0EN at 10.40 a.m. on 24 July 2012. No items of special
business will be proposed at the AGM.
As stated above, the Company operates a share buyback policy where it intends to
buy in any of its own shares that become available in the market for
cancellation. The Company's Articles of Association require that approval for
the Company to purchase its own shares is given at a meeting of all Shareholders
and also meetings of each separate share class.
As also stated above, the Company is preparing proposals to cancel the Ordinary
Share class, which will also require approval by each separate share class.
The Company is currently preparing a circular covering the matters described
above. The circular will include details of a general meeting and share class
meetings. It is anticipated that this will be sent to Shareholders shortly.
Outlook
The Board is satisfied with the performance of the 'C' Shares to date. With the
pool essentially fully invested, there is likely to be a relatively low level of
investment activity now until plans to start realising the portfolio investments
commence in 2014.
Two troublesome investments have pulled down the performance of the 'D' Share
pool. The Board believes that appropriate action has been taken by the
Investment Manager in respect of these two investments and, with the job of
building the 'D' Share portfolio still continuing, there is sufficient time for
the performance to recover before the Company starts to seek to realisations
from the 'D' Share portfolio in 2015.
The new 'F' Share pool has raised net proceeds of in excess of GBP8 million to
date. As the task of investing the 'D' Share pool nears completion, the task of
investing the 'F' Share funds will become one of the Investment Manager's main
tasks. Although the climate for investing remains challenging, these conditions
also provide opportunities which we believe the Manager is well placed to
exploit.
Hugh Gillespie
Chairman
INVESTMENT MANAGER'S REPORT- 'C' SHARE POOL
Introduction
The 'C' Share pool holds investments in 20 companies and is now fully invested,
with further investment activity limited to reinvesting proceeds from
divestments when short term investment opportunities arise. The 'C' Share pool
investments are currently performing well, despite the challenging economic
environment, and this is reflected in a net increase in valuations at the year
end.
Net asset value and results
At 31 January 2012, the 'C' Share NAV stood at 91.5p and the 'A' Share NAV at
0.1p, giving a combined NAV of 91.6p. Total Return (NAV plus cumulative
dividends to date) was 104.1p for one combined 'C' and one 'A' Share. This
represents a net increase of 6.2p per Share against the NAV on 31 January 2011
(after adjusting for dividends paid during the year of 7.5p per 'C' Share),
equivalent to an increase of 6.7%.
The Total Return on ordinary activities for the 'C' Shares for the year was
GBP444,000 (2011: 137,000) relating to a revenue profit of GBP124,000 (2011:
GBP137,000) and a capital gain of GBP320,000 (2011: GBPnil).
'C' Share pool - Investment activity
The 'C' Share pool began the year with GBP5.9 million of investments and ended
with GBP6.4 million spread across a portfolio of 20 companies. During the year,
the Company made further investments totalling GBP2.8 million, and divestments of
GBP2.6 million.
Eleven investments were made during the year including four new VCT qualifying
investments. An overview of the largest investments made during the year is
detailed below.
In March 2011, a GBP500,000 investment was made in Domestic Solar Limited which
installs, owns and manages solar panels on domestic rooftops. In August 2011, a
GBP250,000 investment was made in Ecossol Limited which owns a portfolio of
commercial solar installations. Both solar investments benefit from the receipt
of Feed-in Tariffs from solar energy generation.
In May 2011, the 'C' Share pool made a GBP437,000 investment into Redmed Limited
which bought and refurbished a nightclub in Lincoln city centre. The club 'Home'
reopened in October 2011 and is performing to plan.
In February 2011, the 'C' Share pool invested GBP125,000 in Mosaic Spa and Health
Clubs Limited. Mosaic is a spa and health club management company which trades
under the name 'Fitness Express'. Fitness Express has management contracts to
provide and operate gyms and spas in hotels, universities and on behalf of
corporate clients.
A further qualifying investment of GBP267,000 was made in Atlantic Dogstar Limited
during the year to allow the business to purchase a second pub in Clapton,
London.
Further qualifying investments in Bijou Wedding Venues Limited, Future Biogas
(SF) Limited, Quadrate Catering Limited and Quadrate Spa Limited were also made
during the year following the disposal of non-qualifying loan stock in each of
the respective companies.
'C' Share pool - Portfolio valuation
The majority of the 'C' Share portfolio performed well during the year with a
net valuation uplift of GBP267,000 recognised at the year end. Valuation increases
arose on four investments: GBP176,000 in Atlantic Dogstar Limited; GBP75,000 in
Future Biogas (SF) Limited; GBP69,000 in Bijou Wedding Venues Limited; and GBP27,000
in Westow House Limited. These increases were partially offset by a GBP80,000
reduction in the value of The 3D Pub Co Limited.
The investment in Atlantic Dogstar Limited was written up by GBP176,000 at the
year end to reflect the excellent performance of The Dogstar pub in Brixton,
which is significantly surpassing its original business plan.
A GBP75,000 increase in value of Future Biogas (SF) Limited was recognised to
reflect that the biogas plant is now complete and operating at the target
levels. Further increases in value were recognised in Bijou Wedding Venues
Limited, GBP69,000, and Westow House Limited, GBP27,000, to reflect that both
businesses are performing well and in line with expectations.
An GBP80,000 reduction in value of The 3D Pub Co Limited was made at the year end
to reflect that the business, which operates two pubs in Surrey, is operating
behind plan at the year end. The business has, however, had a good start to
2012 and it is hoped that the value will recover in due course.
Outlook
The general economic conditions in the UK are expected to continue throughout
2012 with consumer confidence likely to remain subdued. The 'C' Share pool is
nearing full investment and, therefore, further investment will be limited to
the reinvestment of non-qualifying loan stock disposals where good quality
investment opportunities exist. The Company is focused on achieving its target
returns through these challenging economic times and will seek to return funds
to 'C' Share investors in 2013-2014.
Downing Managers 3 Limited
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 January 2012:
'C' Share pool Valuation
movement
Cost Valuation in year % of
GBP'000 GBP'000 GBP'000 portfolio
VCT qualifying investments and partially
qualifying investments
Bijou Wedding Venues 815 884 69 13.5%
Limited*
Future Biogas (SF) Limited* 627 703 75 10.7%
Domestic Solar Limited* 500 500 - 7.6%
Redmed Limited* 437 437 - 6.7%
Atlantic Dogstar Limited 429 605 176 9.2%
East Dulwich Tavern Limited 344 344 - 5.2%
Quadrate Catering Limited* 330 330 - 5.0%
Quadrate Spa Limited* 310 310 - 4.7%
Westow House Limited 304 331 27 5.0%
Ecossol Limited 250 250 - 3.8%
The 3D Pub Co Limited 267 187 (80) 2.8%
Mosaic Spa and Health Clubs 125 125 - 1.9%
Limited*
Chapel Street Food and 50 50 - 0.8%
Beverage Limited
Chapel Street Services 50 50 - 0.8%
Limited
Non-qualifying investments
Hoole Hall Country Club 581 581 - 8.9%
Holdings Limited
The Thames Club Limited 500 500 - 7.6%
Honeycombe Pubs VCT plc 175 175 - 2.7%
Vermont Developments Limited 25 25 - 0.4%
Chapel Street Hotel Limited 2 2 - 0.0%
Commercial Street Hotel - - - 0.0%
Limited
----------------------------------------------------
6,121 6,389 267 97.3%
-------------------------------------------
Cash at bank and in hand 179 2.7%
----------- ----------
Total investments 6,568 100.0%
----------- ----------
*Part-qualifying investment
Summary of investment movements
Additions Cost
GBP'000
VCT qualifying investments and partially qualifying investments
Domestic Solar Limited* 500
Redmed Limited* 437
Atlantic Dogstar Limited 267
Ecossol Limited 250
Quadrate Catering Limited* 181
Quadrate Spa Limited* 179
Bijou Wedding Venues Limited* 150
Mosaic Spa and Health Clubs Limited* 125
Future Biogas (SF) Limited* 48
Non-qualifying investments
Hoole Hall Country Club Holdings Limited 625
Commercial Street Hotel Limited 80
--------
Total 'C' Share pool 2,842
--------
Disposals Total
Gain realised gain
MV at Disposal against during
Cost 01/02/11 proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
'C' Share pool
VCT qualifying investments and partially qualifying investments
Bijou Wedding Venues Limited* 550 550 550 - -
Future Biogas (SF) Limited* 350 350 350 - -
Quadrate Catering Limited* 142 142 142 - -
Quadrate Spa Limited* 126 126 126 - -
Non-qualifying investments
Hoole Hall Country Club
Holdings Limited 1,250 1,250 1,250 - -
Commercial Street Hotel Limited 92 92 92 - -
Chapel Street Hotel (2008) LLP 63 63 98 35 35
Chapel Street Hotel Limited 1 1 1 - -
Sanguine Hospitality Limited - - 18 18 18
----------------------------------------------
2,574 2,574 2,627 53 53
----------------------------------------------
*Part-qualifying investments
INVESTMENT MANAGER'S REPORT- 'D' SHARE POOL
Introduction
The 'D' Share pool currently holds investments in 23 companies and is expected
to become fully invested over the course of 2012. Whilst most of the 'D' Share
pool's investments are performing more or less to plan, two investments have
faced significant difficulties which have resulted in reductions in their
valuations at the year end.
Net asset value and results
At 31 January 2012, the 'D' Share NAV stood at 83.3p and the 'E' Share NAV at
0.1p, giving a combined NAV of 83.4p. Total Return (NAV plus cumulative
dividends to date) was 90.9p for one combined 'D' and one 'E' Share. This
represents a net decrease of 5.2p per combined share against the NAV on 31
January 2011 (after adjusting for dividends paid during the year of 5p per 'D'
Share), equivalent to a decrease of 5.6%.
The Total Return on ordinary activities for the 'D' Shares for the year was a
loss of GBP527,000 (2011 gain: GBP160,000) being a revenue gain of GBP57,000 (2011:
GBP160,000) and a capital loss of GBP584,000 (2011: GBPnil).
'D' Share pool - Investment activity
The 'D' Share pool began the year with GBP7.4 million of investments and ended
with GBP7.8 million spread across a portfolio of 23 companies. During the year,
the Company made further investments totalling GBP5.6 million, which was offset by
divestments of GBP4.6 million.
The 'D' Share pool made 22 investments during the year, 12 of which were new
qualifying investments. An overview of the largest new qualifying, or partially
qualifying, investments made during the period are detailed below:
In April 2011, the 'D' Share pool invested GBP748,000 in Future Biogas (Reepham
Road) Limited which is developing a 1.5MWh self-contained biogas plant in
Norfolk. This is the second anaerobic digestion plant with our investment
partner Future Biogas.
In June 2011, a GBP576,000 investment was made in Gingerbread Pre-Schools (UK)
Limited to purchase two operating children's day nurseries in Liverpool and
provide funding to purchase and renovate a third nursery. All three nurseries
were open and operating at the year end.
In June 2011, a GBP367,000 investment was made in Alpha Schools (Holdings) Limited
to purchase a school in Buckinghamshire and provide working capital to the
existing business. The business is performing well and further investment in
additional school sites is expected in due course.
In December 2011, the 'D' Share pool invested GBP350,000 in Mosaic Spa and Health
Club (Shrewsbury) Limited to purchase the freehold, of an operating health club
known as Welti. The purchase was made out of administration for GBP2.1 million.
In January 2012, a GBP250,000 investment was made in Kidspace Adventures Holdings
Limited to purchase a site in Epsom, Surrey, which will be redeveloped into an
indoor and outdoor children's play centre. This business also owns Kidspace
Adventures Limited, which owns two indoor play centres in Croydon and Romford.
During the year, the 'D' Share pool invested GBP1.6 million in six qualifying
solar investments. Four investments were made in companies which install, own
and manage solar panels on domestic rooftops. These include: GBP400,000 in
Domestic Solar Limited, GBP250,000 in Avon Solar Energy Limited, GBP250,000 in Green
Electricity Generation Limited and GBP170,000 in Progressive Energies Limited. Two
investments were made in solar companies which invest in commercial solar
installations. These include: GBP297,000 investment in Westcountry Solar Solutions
Limited and GBP250,000 investment in Ecossol Limited.
All six of the qualifying solar investments made during the year benefit from
the receipt of Feed-in Tariffs from solar energy generation.
'D' Share pool - Portfolio valuation
The majority of the investments were all made during the year and, accordingly,
were held at cost as reviewed for impairment at the year end. The GBP584,000 net
valuation reduction at the year end arose on two investments: GBP403,000 in
Camandale Limited and GBP18,000 in Gingerbread Pre-Schools (UK) Limited.
Camandale Limited owns two pubs, The Riverbank and the Monkey Bar, located in
Kilmarnock, Scotland. The pubs performed very poorly and, in November 2011, the
investment partner was removed as the manager and the management contracts were
terminated. A new management team was put in place to manage the Riverbank and
the decision was made to close the Monkey Bar and market it for sale in January
2012. A reduction in value of GBP463,000 was made at the 'D' Share pool's year end
to reflect the closed value of the Monkey Bar and the revised view of the value
of the Riverbank.
Gingerbread Pre-Schools (UK) Limited experienced significant cost overruns on
the refurbishment of a new nursery, together with poor performance of one of the
existing sites. The investment partner, who was also the Chief Executive, was
suspended and later dismissed. In the interim, further liabilities came to
light, and the business entered into administration in February 2012. The
trading assets were purchased from the Administrator into a new company,
Liverpool Nurseries (Holdings) Limited in February 2012 and a new manager was
appointed. The valuation of Gingerbread Pre-Schools (UK) Limited as at 31
January 2012 was reduced to reflect the cost incurred by the new company of
purchasing the assets from the administrator at the year end.
Outlook
The difficult general economic conditions in the UK are expected to continue
throughout 2012. However, the continued lack of traditional funding is likely to
mean that the Manager will continue to see a steady flow of potential investment
opportunities for the Company. Identifying the strongest of these opportunities
which fit the Company's investment criteria will be key to the overall success
of the Share pool. The Manager will continue to focus on securing qualifying
investments for the 'D' Share pool as the Share pool continues to exit from some
of the non-qualifying investments. There may then be a period of reduced
investment activity before the pool starts to seek to return funds to 'D' Share
investors in 2014-2015.
Downing Managers 3 Limited
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 January 2012:
'D' Share pool Valuation
movement
Cost Valuation in year % of
GBP'000 GBP'000 GBP'000 portfolio
VCT qualifying and partially qualifying
investments
Future Biogas (Reepham Road) Limited* 748 748 - 9.0%
Quadrate Catering Limited* 441 441 - 5.3%
Quadrate Spa Limited* 419 419 - 5.0%
Domestic Solar Limited* 400 400 - 4.8%
Gingerbread Pre-Schools (UK) Limited* 576 395 (181) 4.7%
Alpha Schools (Holdings) Limited 367 367 - 4.4%
Mosaic Spa and Health Club (Shrewsbury) 350 350 - 4.2%
Limited
Avon Solar Energy Limited 250 250 - 3.0%
Ecossol Limited 250 250 - 3.0%
Green Electricity Generation Limited 250 250 - 3.0%
Kidspace Adventures Holdings Limited 250 250 - 3.0%
Westcountry Solar Solutions Limited* 250 250 - 3.0%
Slopingtactic Limited 195 195 - 2.3%
Progressive Energies Limited 170 170 - 2.0%
Camandale Limited* 561 158 (403) 1.9%
Ridgeway Pub Company Limited 136 136 - 1.6%
Mosaic Spa and Health Clubs Limited* 125 125 - 1.5%
Non-qualifying investments
Aminghurst Limited 2,000 2,000 - 24.0%
Retallack Surfpods Limited 250 250 - 3.0%
Fenkle Street LLP 147 147 - 1.8%
Kidspace Adventures Limited 135 135 - 1.6%
Commercial Street Hotel Limited 100 100 - 1.2%
Hoi Polloi Pub Co Limited 60 60 - 0.7%
---------------------------------------
8,430 7,846 (584) 94.0%
Cash at bank and in hand 493 6.0%
----------- -----------
Total investments 8,339 100.0%
----------- -----------
*Part-qualifying investment
Summary of investment movements
Additions Cost
GBP'000
VCT qualifying and partially qualifying investments
Future Biogas (Reepham Road) Limited* 748
Gingerbread Pre-Schools (UK) Limited* 576
Domestic Solar Limited* 400
Alpha Schools (Holdings) Limited 367
Mosaic Spa and Health Club (Shrewsbury) Limited 350
Westcountry Solar solutions Limited* 297
Avon Solar Energy Limited 250
Ecossol Limited 250
Green Electricity Generation Limited 250
Kidspace Adventures Holdings Limited 250
Quadrate Spa Limited* 221
Quadrate Catering Limited* 219
Progressive Energies Limited 170
Camandale Limited* 136
Mosaic Spa and Health Club Limited* 125
Non-qualifying investments
Manor Capital LLP 375
Lullingstone Limited 173
Kidspace Adventures Limited 135
Commercial Street Hotel Limited 120
Woolmer Properties Limited 93
Edison House Limited 73
Looe Road Student Accommodation Limited 49
--------
Total 'D' Share pool 5,627
--------
Disposals Total
Gain realised
MV at Disposal against gain during
Cost 01/02/11 proceeds cost the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying and partially qualifying investments
Quadrate Catering Limited* 213 213 213 - -
Quadrate Spa Limited* 189 189 189 - -
Westcountry Solar Solutions Limited* 47 47 47 - -
Non-qualifying investments
Woolmer Properties Limited 1,088 1,088 1,088 - -
Lullingstone Limited 750 750 750 - -
Edison House Limited 669 669 669 - -
Fenkle Street LLP 488 488 488 - -
Manor Capital LLP 375 375 375 - -
Looe Road Student Accommodation
Limited 350 350 350 - -
The Kirkhouse Limited 175 175 175 - -
Camandale Limited 106 106 106 - -
Hoi Polloi Pub Co Limited 40 40 40 - -
Commercial Street Hotel Limited 38 38 38 - -
Fenkle Street Developments LLP 32 32 32 - -
--------------------------------------------
4,560 4,560 4,560 - -
--------------------------------------------
*Part-qualifying investments
Directors' responsibilities statement
The Directors are responsible for preparing the Directors' report, 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 Services 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 judgments 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;
* 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.
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.
By order of the Board
Grant Whitehouse
Secretary
INCOME STATEMENT
for the year ended 31 January 2012
Year ended Year ended
31 January 2012 31 January 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 676 - 676 843 - 843
Losses on investments - (264) (264) - - -
---------------------------------------------
676 (264) 412 843 - 843
Investment management fees (211) - (211) (212) - (212)
Other expenses (199) - (199) (214) - (214)
---------------------------------------------
Return/(loss) on ordinary
activities before tax 266 (264) 2 417 - 417
Tax on ordinary activities (85) - (85) (120) - (120)
---------------------------------------------
Return/(loss) attributable to
equity shareholders 181 (264) (83) 297 - 297
---------------------------------------------
Basic and diluted
return/(loss) per:
Ordinary Share - - - - - -
'C' Share 1.7p 4.5p 6.2p 1.9p - 1.9p
'A' Share - - - - - -
'D' Share 0.5p (5.8)p (5.3)p 1.7p - 1.7p
'E' Share - - - - - -
All Revenue and Capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year. 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 January 2012
'C' Share pool
Year ended Year ended
31 January 2012 31 January 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 337 - 337 367 - 367
Gain on investments - 320 320 - - -
--------------------------------------------
337 320 657 367 - 367
Investment management fees (88) - (88) (90) - (90)
Other expenses (74) - (74) (140) - (140)
--------------------------------------------
Return on ordinary activities
before tax 175 320 495 137 - 137
Tax on ordinary activities (51) - (51) - - -
--------------------------------------------
Return attributable to equity
shareholders 124 320 444 137 - 137
--------------------------------------------
'D' Share pool
Year ended Year ended
31 January 2012 31 January 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 339 - 339 476 - 476
Loss on investments - (584) (584) - - -
--------------------------------------------
339 (584) (245) 476 - 476
Investment management fees (123) - (123) (122) - (122)
Other expenses (125) - (125) (74) - (74)
--------------------------------------------
Return/ (loss) on ordinary
activities before tax 91 (584) (493) 280 - 280
Tax on ordinary activities (34) - (34) (120) - (120)
--------------------------------------------
Return/ (loss) attributable to
equity shareholders 57 (584) (527) 160 - 160
--------------------------------------------
BALANCE SHEET
as at 31 January 2012
2012 2011
'C' 'D' Other 'C' 'D' Total
Share Share share Share Share (incl. Ord
pool pool pools Total pool pool Shares)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 6,389 7,846 5 14,240 5,854 7,363 13,222
Current assets
Debtors 114 99 1,178 1,391 201 250 451
Cash at bank and in hand 179 493 - 672 673 1,920 2,593
-------------------------------------------------
293 592 1,178 2,063 874 2,170 3,044
Creditors: amounts falling due
within one year (108) (105) - (213) (60) (173) (233)
-------------------------------------------------
Net current assets 185 487 1,178 1,850 814 1,997 2,811
-------------------------------------------------
Net assets 6,574 8,333 1,183 16,090 6,668 9,360 16,033
-------------------------------------------------
Capital and reserves
Called up share capital 18 25 101 144 18 25 144
Share capital to be issued - - 1,178 1,178
Capital redemption reserve 4 - 1 5 4 - 5
Special reserve 6,173 8,975 - 15,148 6,495 9,300 15,795
Revaluation reserve 267 (584) - (317) - - -
Capital reserve - realised 53 - - 53 - - -
Revenue reserve 59 (83) (97) (121) 151 35 89
-------------------------------------------------
Total equity shareholders' 6,574 8,333 1,183 16,090 6,668 9,360 16,033
funds
-------------------------------------------------
Basic and diluted net asset
value per
Ordinary Share - - - 0.1p - - 0.1p
'C'/'D' Share 91.5p 83.3p - - 92.8p 93.5p -
'A'/'E' Share 0.1p 0.1p - - 0.1p 0.1p -
Other share pools comprise the Ordinary Share pool and the 'F' Share pool. The
Ordinary Share pool is now so small as to be immaterial and as such is not
analysed separately above. No 'F' Shares were issued in the year to 31 January
2012, however, subscription monies in respect of 'F' Shares had been received.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended Year ended
31 January 2012 31 January 2011
'C' 'D' Other 'C' 'D' Total
Share Share share Share Share (incl. Ord
pool pool pools Total pool pool Shares)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening Shareholders' funds 6,668 9,360 5 16,033 6,890 3,583 10,478
Issue of shares - - - - - 6,213 6,219
Share issue costs - - - - - (341) (347)
Purchase of own shares - - - - - (5) (5)
Share capital to be issued - - 1,178 1,178 - - -
Total recognised return/
(loss) for the year 444 (527) - (83) 137 160 297
Distributions (538) (500) - (1,038) (359) (250) (609)
-------------------------------------------------
Closing Shareholders' funds 6,574 8,333 1,183 16,090 6,668 9,360 16,033
-------------------------------------------------
Other share pools comprise the Ordinary Share pool and the 'F' Share pool as
detailed in the balance sheet.
CASH FLOW STATEMENT
for the year ended 31 January 2012
Year ended Year ended
31 January 2012 31 January 2011
'C' 'D' Other 'C' 'D' Share Total
pool
Share Share share Share (incl.
pool
pool pools Total pool Ord
Shares)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash
inflow/(outflow) from
259 260 - 519 45 (12) 33
operating activities
----------------------------------------------------------
Taxation
Corporation tax paid - (120) - (120) (21) - (21)
Capital expenditure
Purchase of (2,842) (5,627) - (8,469) (2,457) (7,499) (9,956)
investments
Sale of investments 2,627 4,560 - 7,187 906 136 1,042
----------------------------------------------------------
Net cash outflow from
capital expenditure (215) (1,067) - (1,282) (1,551) (7,363) (8,914)
----------------------------------------------------------
Equity dividends paid (538) (500) - (1,038) (359) (250) (609)
----------------------------------------------------------
Net cash outflow (494) (1,427) - (1,921) (1,886) (7,625) (9,511)
before financing
Financing
Proceeds from share - - - - - 8,696 8,696
issue
Share issue costs - - - - - (342) (342)
Purchase of own shares - - - - - (5) (5)
Share capital to be - - - -
issued
----------------------------------------------------------
Net cash inflow from - - - - - 8,349 8,349
financing
----------------------------------------------------------
(Decrease)/increase in (494) (1,427) - (1,921) (1,886) 724 (1,162)
cash
----------------------------------------------------------
Other Share pools comprise the Ordinary and 'F' Share pools. There were no cash
flow movements with respect to the Ordinary Share pool in the current year. No
allotments of share capital have been made by the 'F' Share pool at the year
end.
NOTES TO THE ACCOUNTS
for the year ended 31 January 2012
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
Accounting Standards Board 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 year as a capital item and transaction costs on acquisition or
disposal of the investment are expensed. Where an investee company has gone into
receivership, liquidation or administration (where there is little likelihood of
recovery), the loss on the investment, although not physically disposed of, is
treated as being realised.
It is not the Company's policy to exercise significant influence over investee
companies. Therefore the results of these companies are not incorporated into
the Income Statement except to the extent of any income accrued. This is in
accordance with the SORP that does not require portfolio investments to be
accounted for using the equity method of accounting.
Income
Dividend income from investments is recognised when the Shareholders' rights to
receive payment has been established, normally the ex-dividend date.
Interest income is accrued on a time apportionment basis, by reference to the
principal sum outstanding and at the effective rate applicable and only where
there is reasonable certainty of collection in the foreseeable future.
Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis
between revenue and capital items presented within the Income Statement, all
expenses have been presented as revenue items except as follows:
* Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can be
demonstrated. The Company has adopted the policy of allocating Investment
Manager's fees 100% as revenue.
Expenses and liabilities not specific to a share class are generally allocated
pro rata to the net assets.
Taxation
The tax effects on different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a Venture Capital Trust and the continued
intention to meet the conditions required to comply with Part 6 of the Income
Tax Act 2007, no provision for taxation is required in respect of any realised
or unrealised appreciation of the Company's investments which arise.
Deferred taxation which is not discounted is provided in full on timing
differences that result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
accounts. Deferred taxation is not discounted.
Other debtors, other creditors and loan notes
Other debtors (including accrued income), other creditors and loan notes are
included within the accounts at amortised cost.
Issue costs
Issue costs in relation to the shares issued for each share class have been
deducted from the share premium account for the relevant share class.
2 Basic and diluted return per share
Ordinary 'C' 'A' 'D' 'E'
Shares Shares Shares Shares Shares
Revenue return ( GBP'000) - 124 - 57 -
-----------------------------------------------------
Weighted average number of
shares in issue 10,064,617 7,173,376 10,760,064 9,994,109 14,994,862
-----------------------------------------------------
Net capital gain/(loss) for
the
- 320 - (584) -
financial year ( GBP'000)
-----------------------------------------------------
Weighted average number of 10,064,617 7,173,376 10,760,064 9,994,109 14,994,862
shares in issue
-----------------------------------------------------
As the Company has not issued any convertible securities or share options, there
is no dilutive effect on return per share. The return per share disclosed
therefore represents both the basic and diluted return per share.
3. Basic and diluted net asset value per share
2012 2011
Shares in issue Net asset value Net asset value
per per
2012 2011 share GBP'000 share GBP'000
Ordinary Shares 10,064,617 10,064,617 0.1p 5 0.1p 5
'C' Shares 7,173,376 7,173,376 91.5p 6,563 92.8p 6,657
'A' Shares 10,760,064 10,760,064 0.1p 11 0.1p 11
'D' Shares 9,994,109 9,994,109 83.3p 8,318 93.5p 9,345
'E' Shares 14,994,862 14,994,862 0.1p 15 0.1p 15
Share capital to be issued 1,178 -
16,090 16,033
The Ordinary Share pool, 'C' Share pool and 'D' 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. Financial instruments
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:
Market 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 year and there have also been no significant
changes to the policies for managing those risks during the year.
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 year end
are provided below:
Market risks
As a VCT, the Company is exposed to market 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 market 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.
Market risk is also mitigated by holding a diversified portfolio spread across
various business sectors and asset classes.
The key market risks to which the Company is exposed are:
Market price risk
Interest rate risk
Market price risk
Market 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.
At 31 January 2012, the unquoted portfolio was valued at GBP14,240,000 (2011:
GBP13,222,000).
As the larger proportion of the Company's unlisted investments are 'asset-
backed', a fall in share prices generally would have a lesser impact on the
valuation of the unlisted portfolio.
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.
Average Average period 2012 2011
interest rate until maturity GBP'000 GBP'000
Fixed rate 5.9% 1,173 11,067 11,680
Floating rate 1.0% 847 2,768
No interest rate 4,320 1,818
------------------
16,234 16,266
------------------
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.
It is estimated that an increase of 1% in interest rates would have increased
total return before taxation for the year by GBP4,000 for the 'C' Share pool and
GBP4,000 for the 'D' Share pool. As the Bank of England base rate stood at 0.5%
per annum throughout the year, it is not believed that a reduction from this
level is likely.
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 Company's financial assets that are exposed to credit risk are summarised as
follows:
2012 2011
GBP'000 GBP'000
Investments in loan stocks 11,242 11,855
Cash and cash equivalents 672 2,593
Interest, dividends and other receivables 213 392
------------------
12,127 14,840
------------------
The Manager manages credit risk in respect of loan stock with a similar approach
as described under "Market risks" above. Similarly the management of credit risk
associated with interest, dividends and other receivables is covered within the
investment management procedures. The level of security is a key means of
managing credit risk.
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 year 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, ( GBP213,000) 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 year ended 31 January 2012, GBP211,000 (2011:
GBP212,000) was payable to DM3. Additionally, DM3 provides accounting, secretarial
and administrative services for an annual fee of GBP47,500 (plus VAT and RPI) per
annum. During the year ended 31 January 2012, GBP49,900 (2011: GBP47,500) was due in
respect of administration fees. At the year end a balance of GBP61,000 (2011:
GBP67,000) was due to DM3.
6. Post balance sheet events
Between 6 February 2012 and 19 April 2012 the company issued 8,490,780 'F'
Shares for an aggregate consideration of GBP8,370,173. Share issue costs thereon
amounted to GBP474,000.
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 January 2012, but has been extracted
from the statutory financial statements for the year ended 31 January 2012,
which were approved by the Board of Directors on 24 May 2012 and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. The Independent Auditor's Report on those financial statements was
unqualified and did not contain any emphasis of matter nor statements under
s498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2011 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
January 2012 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at 10
Lower Grosvenor Place, London, SW1W 0EN and will be available for download from
www.downing.co.uk
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Downing Planned Exit VCT 3 PLC via Thomson Reuters ONE
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