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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Downing Three Vct Plc | LSE:DP3F | London | Ordinary Share | GB00B6ZS1P26 | F SHS 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 13.50 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMDP3F
DOWNING THREE VCT PLC
FINAL RESULTS FOR THE YEAR 31 DECEMBER 2019
LEI: 2138008V2JDU2K6ZHF80
FINANCIAL HIGHLIGHTS
Audited
Unaudited Audited 31 Dec
31 Mar 2020 31 Dec 2019 2018
Pence Pence Pence
'F' Share pool
Net asset value per 'F' Share 21.3 24.5 28.4
Cumulative distributions per 'F'
Share 72.0 72.0 67.0
------------ ------------ -------
Total Return per 'F' Share 93.3 96.5 95.4
============ ============ =======
'H' Share pool
Net asset value per 'H' Share 22.3 33.2 51.3
Cumulative distribution per 'H' Share 35.0 35.0 25.0
------------ ------------ -------
Total Return per 'H' Share 57.3 68.2 76.3
============ ============ =======
'J' Share pool
Net asset value per 'J' Share 43.8 50.3 88.9
Cumulative distribution per 'J' Share 5.0 5.0 -
------------
Total Return per 'J' Share 48.8 55.3 88.9
============ ============ =======
CHAIRMAN'S STATEMENT
Introduction
I write this statement during a time when the world is experiencing
unprecedented conditions as a result of the coronavirus pandemic. At
this time, it is not clear exactly what the full extent of the impact on
the UK and global economies will be, although it is inevitable that it
will be substantial.
In line with its strategy, your Company has built investment portfolios
focused around a number of sectors including leisure and hospitality. It
is clear that many of the businesses in these sectors will be badly
affected by the Coronavirus pandemic lockdown in the UK. Unfortunately,
this will result in reduced investment valuations and increased
challenges in exiting from these investments.
This report includes the audited results for the year ended 31 December
2019, a period prior to the coronavirus pandemic. In order to provide
Shareholders with a more up to date picture, the Company has also
prepared unaudited investment valuations to 31 March 2020, based of the
best information the Board and Manager have at the current time.
A brief summary of each share pool is provided below. More detailed
reviews are provided in the Investment Manager's Report and Review of
Investments.
'F' Share pool
The 'F' Share pool was launched in 2012 and now holds a portfolio of
nine investments with a total value of GBP2.4 million.
At 31 December 2019, the 'F' Share NAV stood at 24.5p, which represents
an increase of 3.9% over the year after adjusting for the dividends of
5.0p per share paid in the year. Dividends paid to date total 72.0p per
share such that Total Return (NAV plus cumulative dividends to date) is
now 96.5p, compared to the initial cost to original subscribers net of
income tax relief of 70.0p.
At 31 March 2020, the unaudited net asset value has fallen to 21.3p per
share, resulting in a Total Return of 93.3p per share. The 'F' Share
pool has commenced the process of realising its investments and
returning funds to investors. Plans for further realisation have however
been severely disrupted by the pandemic. The Company will update 'F'
Shareholders when there is firm news to report.
'H' Share pool
The 'H' Share pool was launched in 2014 and the task of building the
initial VCT qualifying portfolio is now complete. At 31 December 2019,
the pool held 11 investments with a total value of GBP3.8 million.
At 31 December 2019, the 'H' Share NAV stood at 33.2p, which represents
a decrease over the year of 15.8% after adjusting for the dividends of
10.0p per share paid in the year. Total Return (NAV plus cumulative
dividends to date) is now 68.2p, compared to the initial NAV, before
income tax relief, of 100.0p (or original cost, net of income tax relief,
which was typically between 70.0p and 75.0p, depending on costs). Major
provisions have been required against several of the Share pool's
investments, accounting for most of the fall in value.
With the share class still heavily exposed to the pub and hospitality
sector, further falls in value have been experienced as the impact of
the Coronavirus pandemic has started to become clearer. At 31 March
2020, the unaudited net asset value was 22.3p per share, resulting in a
Total Return of 57.3p per share. The 'H' Share pool has also commenced
the process of realising its investments and returning funds to
investors after passing its five year anniversary at the end of 2019.
However, plans for further realisations have been severely disrupted by
the pandemic. The Company will update 'H' Shareholders when there is
firm news to report.
'J' Share pool
The 'J' Share Pool was launched in December 2014 and the majority of
these funds have now been invested as at the year end. At 31 December
2019, the pool held 13 investments with a total value of GBP3.5 million.
The 'J' Share pool suffered from some major problems in a number of
portfolio companies towards the end of 2019, resulting in the NAV and
Total Return falling.
At 31 December 2019, the 'J' Share NAV stood at 50.3p, which represents
a decrease over the year of 37.8% after adjusting for the dividends of
5.0p per share paid in the year. Total Return (NAV plus cumulative
dividends to date) is now 55.3p, compared to the initial NAV, before
income tax relief, of 100.0p (or original cost, net of income tax relief,
of 70.0p and 75.0p, depending on costs). Major provisions have been
required against several of the share pool's investments, accounting for
most of the fall in value.
Much of the share pool's value is now held in a children's nursery and a
wedding venue. The pandemic has created significant uncertainty for
these businesses. At 31 March 2020, the unaudited NAV was 43.8p per
share, giving a Total Return of 48.8p per share. Despite the bad news,
the J Share is able to continue with its dividend policy. The Company
will pay a dividend of 2.5p per 'J' Share on 19 May 2020 to shareholders
on the register at 24 April 2020. This will be paid as an interim
dividend in respect of the year ended 31 December 2019.
Share buybacks
As announced in June 2019, the Company is now unlikely to make any
further purchases of any of its shares as the process of returning funds
to all groups of Shareholders is progressing.
No share buybacks in respect of any share class were undertaken during
the period.
A resolution to renew the buyback authority will however be proposed at
the next Annual General Meeting to ensure the Company has flexibility.
Annual General Meeting ("AGM")
As Shareholders will be aware, there are currently major challenges to
holding physical Annual General Meetings under the effective lockdown
conditions. The Board is aware that this topic is being discussed by
the various relevant authorities and believes that practical solutions
will become clear in due course. The Board will monitor developments and
will make arrangements to hold this year's AGM once it is practical to
do so. The Company will send a notice of the AGM to all Shareholders at
that time.
Future of the Company
As a planned exit VCT, the Board notes that the existing share classes
are working towards returning funds to Shareholders and there are no
plans for the Company to raise new funds or create any new share
classes. The Board is therefore reviewing the future plans of the
Company and may consider taking advantage of the VCT Winding Up
Regulations, which involve the Company going into voluntary liquidation.
This would allow the Company to reduce running costs while it works on
exiting from investments. Any developments to this end will be
communicated with Shareholders in due course and would require
Shareholder approval.
Outlook
As with so many businesses, the coronavirus pandemic has created major
challenges and uncertainty for many of our portfolio companies,
especially as the Company typically invests in sectors which are
particularly heavily exposed to the effects of the lockdown. The
Investment Manager is working to support and assist all the businesses
to ensure that they all take advantage of Government support that has
been made available and make sensible business decisions in this
stressful time. We aim to have the businesses as well placed as they can
be to survive these extreme conditions and recover when the effects of
the pandemic start to subside.
There is however downside risk in many of the investment valuations and
the timing of exits from any investments cannot be reliably estimated at
this time.
I will update Shareholders on progress in my statement with the Half
Yearly Report to 30 June 2020.
Michael Robinson
Chairman
30 April 2020
INVESTMENT MANAGER'S REPORT- 'F' SHARE POOL
Introduction
The 'F' Share pool holds nine investments and is fully invested in a
portfolio focussed on asset backed businesses and those with predictable
revenue streams. The focus for the year continues to be on realisations
and maximising Shareholder returns.
Net asset value and results
At 31 December 2019, the 'F' Share NAV stood at 24.5p. This represents a
net increase of 1.1p per share over the year (after adjusting for
dividends paid during the year of 5.0p per Share), equivalent to an
increase of 3.9%. Total Return (NAV plus cumulative dividends to date)
for Shareholders who invested in the original share offer is now 96.5p.
The gain on ordinary activities for the 'F' Share pool for the year was
GBP114,000 (2018: loss of GBP451,000), being a revenue gain of GBP14,000
(2018: loss GBP21,000) and a capital gain of GBP100,000 (2018: loss
GBP430,000).
'F' Share pool - Investment activity
During the year, total proceeds of GBP716,000 were received from one
full exit in Lambridge Solar Limited, the owner of commercial solar
arrays in Lincolnshire. The exit generated a total gain over opening
value of GBP111,000. As the pool is in its realisation phase, there were
no new investments made during the period.
Plans were in place for the exit of the remaining portfolio companies.
However, Shareholders should note that due to current market conditions
and the global pandemic, this may now take longer than originally
anticipated.
'F' Share pool -- Portfolio valuation
The majority of investments remain valued at or above cost and there
were several valuation movements in the period. This generated a small
decrease in valuation over opening value of GBP11,000.
The most notable increase in the period related to Baron House
Developments LLP, a company created to fund the purchase of a property
outside Newcastle station, which qualifies under the BPRA scheme. At the
period end, the investment value was uplifted by GBP192,000 following
improved trading and an uplift in the value of the hotel site.
There were a number of small write downs at the period end that
contributed to the valuation decrease during the period.
The largest decreases in valuation related to the Antic portfolio of
investments, including, Pearce and Saunders Limited, Pearce and Saunders
DevCo Limited and Atlantic Dogstar Limited.
Pearce and Saunders Limited, the owner of freehold pubs in south east
London, and Pearce and Saunders DevCo Limited, the owner of development
land at the rear of one of the freehold pub sites owned by Pearce and
Saunders Limited, were decreased by GBP121,000 and GBP44,000
respectively, in line with expected exit proceeds.
Apex Energy Limited, the developer of a standby electricity generation
plant in the East Midlands, was further reduced in value by GBP83,000 in
line with preliminary exit proceeds.
Outlook
Focus for the 'F' Share pool remains on the realisation of its
investments, with plans for the exit of the final investments now being
delayed due to the coronavirus pandemic. Shareholders should note, as a
result of the current global economy and effective lockdown in the UK,
valuations post year end have been impacted and a number of provisions
have been made. At 31 March 2020, the unaudited net asset value has
fallen to 21.3p, resulting in a total return of 93.3p. We shall look to
provide as much support as possible during this time to all investee
companies and suggest, where possible, the extensive government schemes
that are available.
Downing LLP
30 April 2020
REVIEW OF INVESTMENTS -- 'F' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2019:
Valuation
movement % of
'F' Share pool Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying and partially
qualifying investments
Downing Pub EIS One Limited 490 656 36 25.0%
Pearce and Saunders Limited 497 550 (121) 21.0%
Atlantic Dogstar Limited 200 258 (12) 9.9%
Fresh Green Power Limited 189 231 21 8.8%
Green Energy Production UK
Limited 100 54 - 2.1%
Apex Energy Limited 1,000 17 (83) 0.6%
2,476 1,766 (159) 67.4%
Non-qualifying investments
Baron House Developments LLP 481 673 192 25.6%
Pearce and Saunders DevCo
Limited 46 2 (44) 0.1%
London City Shopping Centre
Limited 66 - - 0.0%
593 675 148 25.7%
3,069 2,441 (11) 93.1%
======== =========
Cash at bank and in hand 181 6.9%
---------- -----------
Total investments 2,622 100.0%
========== ===========
Summary of investment movements
Disposals
Gain
Disposal against Total realised
Cost MV at 01/01/19 proceeds cost gain during the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT
qualifying
investments
Lambridge
Solar
Limited 500 605 716 216 111
Total 'F'
Share pool 500 605 716 216 111
======= =============== ========= ======== =====================
INVESTMENT MANAGER'S REPORT- 'H' SHARE POOL
The 'H' Share pool raised funds in 2014 and the task of building the
initial VCT qualifying portfolio is now complete. The share pool reached
its five year anniversary at the end of 2019 and focus now shifts to the
realisation of the share pool in order to return funds to shareholders.
It is disappointing to report that the 'H' Share pool has suffered
heavily from difficulties in several of its investments. The further
required write downs have had a significant negative impact on Total
Return over the year.
Net asset value and results
At 31 December 2019, the net asset value per 'H' Share was 33.2p. This
represents a net decrease of 8.1p per Share over the year (after
adjusting for dividends paid during the year of 10.0p per share),
equivalent to a decrease of 15.8%. Total Return (NAV plus cumulative
dividends to date) for Shareholders who invested in the original share
offer is now 68.2p.
The loss on ordinary activities for the 'H' Share pool for the year was
GBP1.1 million (2018: GBP3.5 million) being a revenue profit of
GBP132,000 (2018: GBP194,000) and a capital loss of GBP1.2 million
(2018: GBP3.7 million).
Investment activity
With the task of building the initial VCT qualifying portfolio complete,
no new investments were made in the period. Two full exits completed
during the period generating total proceeds of GBP1.5 million.
Proceeds of GBP515,000 were generated from the sale of Antelope Pub
Limited, which owns a pub of the same name in Tooting, London. This
represented a gain over cost of GBP15,000.
In addition, Hedderwick Limited, the owner of two freehold pubs located
in Royston, Hertfordshire and Olney, Milton Keynes, was successfully
exited during the year and generated proceeds of GBP1.0 million. This
represented a gain over cost of GBP143,000.
'H' Share pool -- Portfolio valuation
The period to 31 December 2019 has seen a number of disappointing
developments, resulting in an unrealised loss of GBP1.3 million.
The most notable decreases come from the Indian Solar portfolio of
investments which include Ironhide Generation Limited, Indigo Generation
Limited, SF Renewables Limited and Rockhopper Renewables Limited, which
contributed over GBP1.1 million of the total unrealised loss.
Indigo Generation Limited and Ironhide Generation Limited are both
developing solar farms on adjacent land in India. Due to a combination
of factors, each investment has been reduced in value at the period end.
One of the main factors affecting the sites is the private Power
Purchase Agreement ("PPA") market in the region of India that has been
particularly affected by reductions in long term PPA terms, as a result
of high inflation levels. Construction of the first phase of each site
has now been completed at the year end and grid connections have been
secured. However, the second phase of the build programme is currently
behind schedule. As a result, a provision of GBP399,000 has been
required against each investment.
Rockhopper Renewables Limited, which operates a single ground-mounted
solar farm in Telagana has also suffered as a result of the above issues
to the Indian solar portfolio. In addition, there is further uncertainty
over whether a permit will be granted to enter into private PPAs due to
the state authorities delaying these permits unlawfully. As a result,
the valuation of the investment has been reduced by GBP246,000.
Apex Energy Limited, the developer of a standby electricity generation
plant in the East Midlands, was further reduced in value by GBP108,000
in line with preliminary expected exit proceeds.
Outlook
The falls in value experienced by the 'H' Share pool are extremely
disappointing. We have dedicated substantial resources to the portfolio
companies in question in seeking to address the issues and are
developing plans to recover as much value as possible for investors.
Regrettably, the Coronavirus pandemic has further hit valuations after
the year end. Following a review, it is clear that adjustments have been
required to the valuations of the pub and hospitality related
investments. As at 31 March 2020, the unaudited net asset value has
fallen to 22.3p, resulting in a total return of 57.3p. In addition, the
plans for exiting the investments have been impacted and it is unclear
currently when further exits will be achieved. We are providing as much
support as possible to all investee companies during this difficult time,
seeking to position them as well as we can to facilitate an exit when
conditions improve.
Downing LLP
30 April 2020
REVIEW OF INVESTMENTS -- 'H' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2019:
Valuation
movement % of
'H' Share pool Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying investments and partially qualifying
investments
Atlantic Dogstar Limited 1,000 1,292 (58) 31.7%
Quadrate Catering Limited 850 701 - 17.2%
SF Renewables (Solar) Limited 281 253 (70) 6.2%
Rockhopper Renewables Limited 492 246 (246) 6.0%
Hermes Wood Pellets Limited 1,500 228 - 5.6%
Ironhide Generation Limited 613 215 (399) 5.3%
Indigo Generation Limited 613 215 (399) 5.3%
Pearce and Saunders Limited 193 193 - 4.7%
Zora Energy Renewables Limited 1,000 90 (13) 2.2%
Apex Energy Limited 1,300 22 (108) 0.5%
7,842 3,455 (1,293) 84.7%
Non-qualifying investments
Quadrate Spa Limited 850 392 - 9.6%
850 392 - 9.6%
8,692 3,847 (1,293) 94.3%
======== =========
Cash at bank and in hand 233 5.7%
----------- ----------
Total investments 4,080 100.0%
=========== ==========
Summary of investment movements
Disposals
Gain
Disposal against Total realised
Cost MV at 01/01/19 proceeds cost gain during the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying and partially qualifying
investments
Antelope Pub Limited 500 500 515 15 15
Non-qualifying investments
Hedderwick Limited 875 945 1,018 143 73
1,375 1,445 1,533 158 88
======= ================ ========= ======== =====================
INVESTMENT MANAGER'S REPORT- 'J' SHARE POOL
Introduction
The fundraising for the 'J' Share pool was launched in December 2014 and
raised GBP11 million prior to closing in 2015. The majority of these
funds have now been invested as at the year end. It is disappointing to
report that during the period, the share pool suffered some significant
provisions in respect of a number of investments.
Net asset value and results
At 31 December 2019, the net asset value and total return per 'J' Share
was 50.3p. This represents a net decrease of 33.6p per Share over the
year (after adjusting for dividends paid during the year of 5.0p per
Share), equivalent to a decrease of 37.8%. Total Return (NAV plus
cumulative dividends to date) for Shareholders who invested in the
original offer is now 55.3p.
The loss on ordinary activities for the 'J' Share, after taxation, for
the period was GBP3.6 million (2018: GBP617,000), being a revenue loss
of GBP25,000 (2018: GBP86,000) and a capital loss of GBP3.6 million
(2018: loss of GBP531,000).
'J' Share pool - Investment activity
During the period, no new investments were made, with there being three
full exits generating an overall gain over cost in the period of
GBP7,000.
Proceeds of GBP61,000 were received from the exit of Snow Hill
Developments LLP, representing a gain over cost of GBP18,000. In
addition, the residual holding in Mosaic Spa and Health Clubs Limited,
the provider of gym and spa management services, was exited at the end
of the summer, generating minor loss over cost of GBP11,000.
There was also a loan note redemption in Hedderwick Limited, the owner
of freehold pubs located in Royston, Hertfordshire and Olney, Milton
Keynes, which was redeemed at par.
'J' Share pool -- portfolio valuation
The period to 31 December 2019 has seen a number of disappointing
developments, resulting in an unrealised loss of GBP3.6 million.
A significant portion of the unrealised loss for the year related to
five investments. Further details on each is noted below.
The most notable decreases related to Jito trading Limited and Yamuna
Renewables Limited, which were written down by GBP1.0 million and
GBP800,000 respectively. As noted in the half year accounts, Yamuna
Renewables Limited, a wood pelleting plant in Gars am Kamp, Austria was
reduced to nil due to a number of factors.
Consumer demand at the site substantially reduced following warmer than
expected weather, in addition to two serious fires at the facility which
resulted in a halt to production. As the company has some borrowings, it
is difficult to recover any value and as a result the investment has
been fully provided against.
The problems encountered at Yamuna have resulted in consequential
problems with Jito Trading Limited, the operator of another wood
pelleting plant in Weitra, Austria, who share the same management team.
As a result, an advisor has been appointed to sell the business. However,
as the company has borrowings, it is not expected that a sale based on
the current offers would recover any value for the equity shareholders,
including the 'J' Share pool.
Ormsborough Limited, the owner of several pubs and restaurants in
Yorkshire, has been reduced to nil at the period end following the sale
of the company that resulted in nil value for equity shareholders. The
company has since gone into liquidation and as a result a full provision
has been recognised.
Indigo Generation Limited and Ironhide Generation Limited are both
developing solar farms on adjacent land in India. Due to a combination
of factors, each investment has been reduced in value at the period end.
One of the main factors affecting the sites is the private Power
Purchase Agreements ("PPA") market in this region of India that has been
particularly affected by reductions in long term PPA terms, as a result
of high inflation levels. Construction of the first phase of each site
has now been completed at the year end and grid connections have been
secured. However, the second phase of the build programme is currently
behind schedule. As a result, a write down of GBP398,000 has been
required against each investment.
Outlook
The falls in value experienced by the 'J' Share pool during the year are
extremely disappointing. We have dedicated substantial resources to
address the issues of the affected companies. Since the year end, the
coronavirus pandemic has further impacted the portfolio. Children's
nurseries and wedding venues are clearly businesses that are suffering
heavily from the lockdown and provisions have been made accordingly. The
unaudited net asset value as at 31 March 2020 was 43.8p per share, and
Total Return of 48.8p per share. Plans to exit the investments will be
reformulated when conditions allow. In the meantime, we will be working
to support all portfolio companies, ensuring that they benefit from
Government aid that is available and take sensible decisions as they
deal with these unprecedented conditions.
Downing LLP
30 April 2020
REVIEW OF INVESTMENTS -- 'J' SHARE POOL
Portfolio of investments
The following investments, all of which are incorporated in England and
Wales, were held at 31 December 2019:
Valuation
movement % of
'J' Share pool Cost Valuation in year portfolio
GBP'000 GBP'000 GBP'000
VCT qualifying investments and partially qualifying
investments
Pilgrim Trading Limited 1,297 1,297 - 24.7%
Exclusive Events Venues Limited 500 500 - 9.5%
Garthcliff Shipping Limited 400 400 - 7.6%
SF Renewables (Solar) Limited 281 253 (71) 4.8%
Rockhopper Renewables Limited 492 246 (246) 4.7%
Indigo Generation Limited 613 215 (398) 4.1%
Ironhide Generation Limited 613 215 (398) 4.1%
Zora Energy Renewables Limited 300 27 (5) 0.5%
Jito Trading Limited 1,000 - (1,000) 0.0%
Yamuna Renewables Limited 800 - (800) 0.0%
Ormsborough Limited 1,000 - (688) 0.0%
7,296 3,153 (3,606) 60.0%
Non-qualifying investments
Fenkle Street LLP 287 317 22 6.1%
London City Shopping Centre Limited 15 - - 0.0%
302 317 22 6.1%
7,598 3,470 (3,584) 66.1%
======== =========
Cash at bank and in hand 1,779 33.9%
---------- ----------
Total investments 5,249 100.0%
========== ==========
Summary of investment movements
Gain/
(loss)
Disposal against Total realised
Cost MV at 01/01/19 proceeds cost gain during the year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying and
partially qualifying
investments
Mosaic Spa and
Healthclubs
Limited 24 26 13 (11) (13)
Non-qualifying
investments
Snow Hill
Developments
LLP 43 43 61 18 18
Hedderwick
Limited 375 375 375 - -
Total 'J' Share
pool 442 444 449 7 5
======= ================ ========== ======== =====================
Directors' responsibilities statement
The Directors are responsible for preparing the Strategic Report, The
Report of the Directors, the Directors' Remuneration Report and the
financial statements in accordance with applicable law and regulations.
They are also responsible for ensuring that the Annual Report includes
information required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom accounting
standards and applicable law), including Financial Reporting Standard
102, the financial reporting standard applicable in the UK and Republic
of Ireland (FRS 102). Under company law the directors must not approve
the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the company and of the profit
or loss of the company for that period.
In preparing these financial statements the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and
prudent;
- state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company's transactions, to
disclose with reasonable accuracy at any time the financial position of
the company and to enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
In addition, each of the Directors considers that the Annual Report,
taken as a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's position
and performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements and other information included
in annual reports may differ from legislation in other jurisdictions.
Statement as to disclosure of information to Auditor
The Directors in office at the date of the report have confirmed, as far
as they are aware, that there is no relevant audit information of which
the Auditor is unaware. Each of the Directors has confirmed that they
have taken all the steps that they ought to have taken as Directors in
order to make themselves aware of any relevant audit information and to
establish that it has been communicated to the Auditor.
INCOME STATEMENT
for the year ended 31 December 2019
Year ended 31 December 2019 Year ended 31 December 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 654 16 670 885 32 917
Loss on investments - (4,684) (4,684) - (4,677) (4,677)
--------- --------- -------- --------- --------- --------
654 (4,668) (4,014) 885 (4,645) (3,760)
Investment management fees (307) - (307) (430) - (430)
Other expenses (250) - (250) (256) - (256)
--------- --------- -------- --------- --------- --------
(Loss)/return on ordinary activities before tax 97 (4,668) (4,571) 199 (4,645) (4,446)
Tax on total comprehensive income and
ordinary activities 24 - 24 (112) - (112)
--------- --------- -------- --------- --------- --------
(Loss)/return for the year attributable to equity
shareholders 121 (4,668) (4,547) 87 (4,645) (4,558)
========= ========= ======== ========= ========= ========
Basic and diluted (loss)/return per:
'F' Share 0.1p 0.9p 1.0p (0.2p) (4.0p) (4.2p)
'H' Share 1.0p (9.0p) (8.0p) 1.5p (27.6p) (26.1p)
'J' Share (0.2p) (33.4p) (33.6p) (0.8p) (5.0p) (5.8p)
All Revenue and Capital items in the above statement are derived from
continuing operations. No operations were acquired or discontinued
during the year. The total column within the Income Statement represents
the Statement of Total Comprehensive Income of the Company prepared in
accordance with Financial Reporting Standards ("FRS 102"). The
supplementary revenue and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued in November
2014 and updated February 2018 by the Association of Investment
Companies ("AIC SORP").
Other than revaluation movements arising on investments held at fair
value through profit and loss, there were no differences between the
return/loss as stated above and historical cost.
INCOME STATEMENT (ANALYSED BY SHARE POOL)
for the year ended 31 December 2019
'F' Share pool
Year ended 31 December 2019 Year ended 31 December 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 105 - 105 172 - 172
Gain/(loss) on
investments - 100 100 - (430) (430)
105 100 205 172 (430) (258)
Investment
management
fees (49) - (49) (98) - (98)
Other expenses (52) - (52) (68) - (68)
------- -------- -------- -------- -------- --------
Return/(loss)
on ordinary
activities
before tax 4 100 104 6 (430) (424)
Tax on total
comprehensive
income and
ordinary
activities 10 - 10 (27) - (27)
------- -------- -------- -------- -------- --------
Return/(loss)
attributable
to equity
shareholders 14 100 114 (21) (430) (451)
======= ======== ======== ======== ======== ========
'H' Share pool
Year ended 31 December 2019 Year ended 31 December 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 382 - 382 515 - 515
(Loss)/gain on
investments - (1,205) (1,205) - (3,684) (3,684)
382 (1,205) (823) 515 (3,684) (3,169)
Investment
management
fees (131) - (131) (169) - (169)
Other expenses (91) - (91) (105) - (105)
------- -------- -------- -------- -------- --------
(Loss)/return
on ordinary
activities
before tax 160 (1,205) (1,045) 241 (3,684) (3,443)
Tax on total
comprehensive
income and
ordinary
activities (28) - (28) (47) - (47)
------- -------- -------- -------- -------- --------
Loss/(return)
attributable
to equity
shareholders 132 (1,205) (1,073) 194 (3,684) (3,490)
======= ======== ======== ======== ======== ========
'J' Share pool
Year ended 31 December 2019 Year ended 31 December 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 167 16 183 198 32 230
(Loss)/gain on
investments - (3,579) (3,579) - (563) (563)
167 (3,563) (3,396) 198 (531) (333)
Investment
management
fees (127) - (127) (163) - (163)
Other expenses (107) - (107) (83) - (83)
------- -------- -------- -------- -------- --------
(Loss)/return
on ordinary
activities
before tax (67) (3,563) (3,630) (48) (531) (579)
Tax on total
comprehensive
income and
ordinary
activities 42 - 42 (38) - (38)
------- -------- -------- -------- -------- --------
(Loss)/return
attributable
to equity
shareholders (25) (3,563) (3,588) (86) (531) (617)
======= ======== ======== ======== ======== ========
BALANCE SHEET
as at 31 December 2019
2019 2018
GBP000 GBP000
Fixed assets
Investments 9,758 17,140
Current assets
Debtors 678 779
Cash at bank and in hand 2,193 1,762
------- -------
2,871 2,541
Creditors: amounts falling due within one year (164) (255)
------- -------
Net current assets 2,707 2,286
Net assets 12,465 19,426
======= =======
Capital and reserves
Called up share capital 35 35
Capital redemption reserve 149 149
Special reserve 23,726 25,206
Revaluation reserve (6,932) (4,748)
Capital reserve -- realised (4,447) (1,029)
Revenue reserve (66) (187)
------- -------
Total equity shareholders' funds 12,465 19,426
======= =======
Basic and diluted net asset value per Share:
'F' Share 24.5p 28.4p
'H' Share 33.2p 51.3p
'J' Share 50.3p 88.9p
The financial statements were approved and authorised for issue by the
Board of Directors on 30 April 2020 and were signed on its behalf by:
Michael Robinson
Chairman
Company number: 5334413
BALANCE SHEET (ANALYSED BY SHARE POOL)
as at 31 December 2019
'F' Shares
2019 2018
GBP000 GBP000
Fixed assets
Investments 2,441 3,057
Current assets
Debtors 69 55
Cash at bank and in hand 181 31
------- -------
250 86
Creditors: amounts falling due within one year (45) (70)
------- -------
Net current assets 205 16
------- -------
Net assets 2,646 3,073
======= =======
Capital and reserves
Called up share capital 11 11
Capital redemption reserve 149 149
Special reserve 3,903 4,229
Revaluation reserve (771) (721)
Capital reserve -- realised (1,099) (1,033)
Revenue reserve 453 438
------- -------
Total equity shareholders' funds 2,646 3,073
======= =======
'H' Shares
2019 2018
GBP000 GBP000
Fixed assets
Investments 3,847 6,586
Current assets
Debtors 451 284
Cash at bank and in hand 233 103
------- -------
684 387
Creditors: amounts falling due within one year (83) (111)
------- -------
Net current assets 601 276
------- -------
Net assets 4,448 6,862
======= =======
Capital and reserves
Called up share capital 13 13
Special reserve 8,905 10,086
Revaluation reserve (4,847) (3,483)
Revenue reserve 377 246
------- -------
Total equity shareholders' funds 4,448 6,862
======= =======
'J' Shares
2019 2018
GBP000 GBP000
Fixed assets
Investments 3,470 7,497
Current assets
Debtors 158 440
Cash at bank and in hand 1,779 1,628
------- ------
1,937 2,068
Creditors: amounts falling due within one year (36) (74)
------- ------
Net current assets 1,901 1,994
------- ------
Net assets 5,371 9,491
======= ======
Capital and reserves
Called up share capital 11 11
Special reserve 10,918 10,891
Revaluation reserve (1,314) (544)
Capital reserve -- realised (3,348) 4
Revenue reserve (896) (871)
------- ------
Total equity shareholders' funds 5,371 9,491
======= ======
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2019
Capital Share Capital
Called up share redemption Special premium Revaluation reserve Revenue
capital reserve reserve reserve reserve - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2018 60 124 5,146 24,639 1 (1,039) (239) 28,692
Total
comprehensive
income - - - - (5,079) 434 87 (4,558)
Share premium
cancellation - - 24,639 (24,639) - - - -
Transactions with
owners
Purchase of own
shares - - - - - - (35) (35)
Transfer between
Reserves* - - (4,579) - 330 4,249 - -
Cancellation of
shares (25) 25 - - - - - -
Dividends paid - - - - - (4,673) - (4,673)
--------------- ------------- --------- -------- ----------- ------------- -------- -------
At 31 December
2018 35 149 25,206 - (4,748) (1,029) (187) 19,426
=============== ============= ========= ======== =========== ============= ======== =======
Total
comprehensive
income - - - - (4,888) 220 121 (4,547)
Realisation of
impaired
valuations - - - - 2,881 (2,881) - -
Transactions with
owners
Transfer between
Reserves* - - (1,480) - (177) 1,657 - -
Dividends paid - - - - - (2,414) - (2,414)
--------------- ------------- --------- -------- ----------- ------------- -------- -------
At 31 December 2019 35 149 23,726 - (6,932) (4,447) (66) 12,465
=============== ============= ========= ======== =========== ============= ======== =======
* A transfer of GBP177,000 (2018: GBP330,000) representing previously
recognised unrealised gains/losses on disposal of investments during the
year ended 31 December 2019 has been made from the Revaluation Reserve
to the Capital Reserve-realised. A transfer of GBP1.7 million (2018:
GBP4.2 million) representing realised gains on disposal of investments,
less capital expenses and capital dividends in the year was made from
Capital Reserve -- realised to Special reserve.
CASH FLOW STATEMENT
for the year ended 31 December 2019
Year ended 31 December 2019
'F'
Share 'H' 'J'
pool Share pool Share pool Total
GBP'000 GBP'000 GBP'000 GBP'000
Net cash (outflow)/inflow
from operating activities (25) (64) 236 147
------- ----------- ----------- -------
Cash flow from
investing activities
Proceeds from sale of
investments 716 1,533 449 2,698
------- ----------- ----------- -------
Net cash inflow from
investing activities 716 1,533 449 2,698
------- ----------- ----------- -------
Net cash inflow before
financing activities 691 1,469 685 2,845
Cash flows from
financing activities
Equity dividends paid (541) (1,339) (534) (2,414)
Net cash outflow from
financing activities (541) (1,339) (534) (2,414)
------- ----------- ----------- -------
(Decrease)/increase
in cash 150 130 151 431
Cash and cash
equivalents at start
of year 31 103 1,628 1,762
------- ----------- ----------- -------
Cash and cash
equivalents at end
of year 181 233 1,779 2,193
======= =========== =========== =======
Cash and cash
equivalents comprise
Cash at bank and in
hand 181 233 1,779 2,193
------- ----------- ----------- -------
Total cash and cash
equivalents 181 233 1,779 2,193
======= =========== =========== =======
Year ended 31 December 2018
'F'
Share 'H' 'J'
pool Share pool Share pool Total
GBP'000 GBP'000 GBP'000 GBP'000
Net cash (outflow)/inflow
from operating activities 9 28 (382) (345)
-------- ----------- ----------- -------
Cash flow from
investing activities
Purchase of
investments - - (375) (375)
Proceeds from sale of
investments 1,964 632 661 3,257
-------- ----------- ----------- -------
Net cash inflow from
investing activities 1,964 632 286 2,882
-------- ----------- ----------- -------
Net cash inflow/(outflow)
before financing
activities 1,973 660 (96) 2,537
Cash flows from
financing activities
Equity dividends paid 8 (4,004) (669) - (4,673)
Purchase of own shares - (16) (19) (35)
Net cash outflow from
financing activities (4,004) (685) (19) (4,708)
-------- ----------- ----------- -------
(Decrease)/increase
in cash (2,031) (25) (115) (2,171)
Cash and cash
equivalents at start
of year 2,062 128 1,743 3,933
-------- ----------- ----------- -------
Cash and cash
equivalents at end
of year 31 103 1,628 1,762
======== =========== =========== =======
Cash and cash
equivalents comprise
Cash at bank and in
hand 31 103 1,628 1,762
-------- ----------- ----------- -------
Total cash and cash
equivalents 31 103 1,628 1,762
======== =========== =========== =======
NOTES TO THE ACCOUNTS
for the year ended 31 December 2019
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,
and its registered office is St. Magnus House, 3 Lower Thames Street,
London, EC3R 6HD.
2. Accounting policies
Basis of accounting
The Company has prepared its financial statements under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' and in accordance with the Statement of Recommended Practice
("SORP") for investment trust companies and venture capital trusts
issued by the Association of Investment Companies ("AIC") in November
2014 and updated February 2018 as well as the Companies Act 2006.
The financial statements are presented in Sterling (GBP) and rounded to
thousands.
Going concern
After reviewing the Company's forecasts and projections, the Directors
have a reasonable expectation that the major cash outflows of the
Company (most notably investments, share buybacks and dividends) are
within the Company's control and therefore the Company has sufficient
cash to meet its expenses and liabilities when they fall due. As such,
the Board confirms that the Company has adequate resources to continue
in operational existence for at least 12 months from the date of
approval of the financial statements. The Company therefore continues to
adopt the going concern basis in preparing its financial statements.
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 return on ordinary
activities 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
FRS 102 sections 11 and 12.
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.
All investments are held at the price of recent investment for an
appropriate period where there is considered to have been no change in
fair value. Where this basis is no longer considered appropriate, the
following factors will be considered:
- Where a value is demonstrated by a material arms-length transaction by
an independent third party in the shares of a company, this value may be
used;
- In the absence of the above, depending on each of the subsequent
trading performance and investment structure of an investee company, the
valuation basis will likely move to either:
i) an earnings multiple basis; or
ii) where a company's underperformance against plan indicates a
diminution in the value of the investment, provision against cost is
made, as appropriate.
- Premiums on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered
recoverable;
- Where an earnings multiple or cost less impairment basis is not
appropriate and overriding factors apply, discounted cash flow, a net
asset valuation, or industry specific valuation benchmarks may be
applied.
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 and FRS 102 sections
14 and 15 that does not require portfolio investments, where the
interest held is greater than 20%, 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.
Distributions from investments in limited liability partnerships
("LLPs") are recognised as they are paid to the Company. Where such
items are considered capital in nature they are recognised as capital
profits.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Income
Statement, all expenses have been presented as revenue items except as
follows:
- Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
- Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated. The Company has adopted the policy
of allocating Investment Manager's fees 100% as revenue.
- Expenses and liabilities not specific to a share class are generally
allocated pro rata to the net assets.
- Performance incentive fees arising from the disposal of investments
are deducted as a capital item.
Dividends payable
Dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been
established, normally the record date.
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 year.
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 financial statements. Deferred taxation
is not discounted.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Issue costs
Issue costs in relation to the shares issued for each share class have
been deducted from the revenue reserve account for the relevant share
class.
Significant estimates and judgements
Disclosure is required of judgements and estimates made by management in
applying the accounting policies that have a significant effect on the
financial statements. The area involving a higher degree of judgement
and estimates is the valuation of unquoted investments as explained in
the investment accounting policy.
3. Basic and diluted return per share
'F' Shares 'H' Shares 'J' Shares
Revenue return/(loss)
(GBP'000) 14 132 (25)
Per share (pence) 0.1p 1.0p (0.2p)
========== ========== ==========
Net capital gain/(loss) for
the year (GBP'000) 100 (1,205) (3,563)
Per share (pence) 0.9p (9.0p) (33.4p)
Total gain/(loss) after
taxation (GBP'000) 114 (1,073) (3,588)
Per share (pence) 1.0p (8.0p) (33.6p)
========== ========== ==========
Weighted average number of
shares in issue 10,821,660 13,389,758 10,675,533
========== ========== ==========
As the Company has not issued any convertible securities or share
options, there is no dilutive effect on return per share for any of the
share classes. The return per share disclosed therefore represents both
the basic and diluted return per share for all share classes.
4. Basic and diluted net asset value per share
2019 2018
Shares in issue Net asset value Net asset value
31 Dec 31 Dec per
2019 2018 per share GBP'000 share GBP'000
'F'
Shares 10,821,660 10,821,660 24.5p 2,646 28.4p 3,073
'H'
shares 13,389,758 13,389,758 33.2p 4,448 51.3p 6,862
'J'
Shares 10,675,533 10,675,533 50.3p 5,371 88.9p 9,491
------- -------
12,465 19,426
======= =======
The 'F' Share pool, 'H' Share pool and 'J' Share pool are treated as
separate investment pools.
5. Principal risks
The Company's financial instruments comprise investments held at fair
value through profit and loss, being equity and loan stock investments
in unquoted companies, loans and receivables consisting of short term
debtors, cash deposits 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 investments is determined using the detailed
accounting policy above.
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 emerging and 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
emerging and 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 investment risks in the form of
potential losses and gains that may arise on the investments it holds in
accordance with its investment policy. The management of these
investment risks is a fundamental part of the investment activities
undertaken by the Investment Manager and overseen by the Board. The
Manager monitors investments through regular contact with management of
investee companies, regular review of management accounts and other
financial information, and attendance at investee company board
meetings. This enables the Manager to manage the investment risk in
respect of individual investments. Investment risk is also mitigated by
holding a diversified portfolio spread across various business sectors
and asset classes.
The key investment risks to which the Company is exposed are:
- Investment price risk
- Interest rate risk
Investment price risk
Investment price risk arises from uncertainty about the valuation of
financial instruments held in accordance with the Company's investment
objectives in addition to the appropriateness of the valuation method
used. It represents the potential loss that the Company might suffer
through changes in the fair value of unquoted investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on floating-rate
financial assets through the effect of changes in prevailing interest
rates. The Company receives interest on its cash deposits at a rate
agreed with its bankers. Investments in loan stock attract interest
predominately at fixed rates.
There are three categories in respect of interest which are attributable
to the financial instruments held by the Company as follows:
- "Fixed rate" assets represent investments with predetermined yield
targets and comprise certain loan note investments.
- "Floating rate" assets predominantly bear interest at rates linked to
Bank of England base rate or LIBOR and comprise cash at bank and
liquidity fund investments and certain loan note investments.
- "No interest rate" assets do not attract interest and comprise equity
investments and debtors.
The Company monitors the level of income received from fixed and
floating rate assets and, if appropriate, may make adjustments to the
allocation between the categories in particular, should this be required
to ensure compliance with the VCT regulations.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument is
unable to discharge a commitment to the Company made under that
instrument. The Company is exposed to credit risk through its holdings
of loan stock in investee companies, cash deposits and debtors.
The Manager manages credit risk in respect of loan stock with a similar
approach as described under "Market risks" above. In addition, the
credit risk is mitigated for all investments in loan stocks by taking
security, covering the full par value of the loan stock in the form of
fixed and floating charges over the assets of the investee companies.
The strength of this security in each case is dependent on the nature of
the investee company's business and its identifiable assets. Similarly,
the management of credit risk associated with interest, dividends and
other receivables is covered within the investment management
procedures.
Cash is mainly held by Bank of Scotland plc and Royal Bank of Scotland
plc, both of which are A-rated financial institutions. 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.
Of the loan stock classified as "past due" above, as at the balance
sheet date, GBP510,000, falling within the banding of one to two years
related to the principal of loan notes where, although the principal
remained within term, the investee company was not fully servicing the
interest obligations under the loan note and is thus in arrears. The
GBP1,593,000 remaining related to the principal of loan notes where the
note has passed the maturity date. Notwithstanding the arrears of
interest, the Directors do not consider that the maturity of the
principal has altered.
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, (GBP164,000, 2018: GBP255,000) 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.
6. Events after the end of the reporting period
After the end of the reporting period, on 11 March 2020, the World
Health Organisation declared the outbreak of a strain of novel
coronavirus disease, COVID-19, a global pandemic which has resulted in
subsequent major developments and an impact on post year end valuations.
Although the full impact of the pandemic is not yet known, there is a
significant risk that the pandemic will negatively impact the prospects
of many businesses within the portfolio, particularly those in the
hospitality and children's nursery sectors which are held across all
Share classes. Investment executives are carrying out an active and
ongoing role in supporting all portfolio companies at this unprecedented
time and are implementing any measures required to ensure each business
suffers the least possible disruption. Provisions have been required
against a number of the portfolio companies as at 31 March 2020. As a
result, the unaudited NAVs and Total Return as at 31 March 2020 are as
follows:
Audited
Unaudited 31 Dec
31 Mar 2020 2019
Pence Pence
'F' Share pool
Net asset value per 'F' Share 21.3 24.5
Cumulative distributions per 'F' Share 72.0 72.0
------------ -------
Total Return per 'F' Share 93.3 96.5
============ =======
'H' Share pool
Net asset value per 'H' Share 22.3 33.2
Cumulative distributions per 'H' Share 35.0 35.0
------------ -------
Total Return per 'H' Share 57.3 68.2
============ =======
'J' Share pool
Net asset value per 'J' Share 43.8 50.3
Cumulative distributions per 'J' Share 5.0 5.0
Total Return per 'J' Share 48.8 55.3
============ =======
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in accordance
with section 434 Companies Act 2006 for the year ended 31 December 2019,
but has been extracted from the statutory financial statements for the
year ended 31 December 2019 which were approved by the Board of
Directors on 30 April 2020 and will be delivered to the Registrar of
Companies. The Independent Auditor's Report on those financial
statements was unqualified and did not contain any emphasis of matter
nor statements under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the period ended 31 December 2018 have been
delivered to the Registrar of Companies and received an Independent
Auditors report which was unqualified and did not contain any emphasis
of matter nor statements under s 498(2) and (3) of the Companies Act
2006.
A copy of the full annual report and financial statements for the year
ended 31 December 2019 will be printed and posted to shareholders
shortly. Copies will also be available to the public at the registered
office of the Company at St. Magnus House, London, EC3R 6HD and will be
available for download from www.downing.co.uk.
(END) Dow Jones Newswires
April 30, 2020 11:41 ET (15:41 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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