Half-yearly report
(Thomson Reuters ONE) - Downing Protected VCT III plcHalf Yearly Report for the six months ended 31 July 2009Performance summary 31 Jul 31 Jan 31 Jul 2009 2009 2008 pence pence penceNet asset value per Ordinary Share 10.3 36.3 93.3Cumulative distributions per Ordinary Share 81.0 60.0 4.5Total return per Ordinary Share 91.3 96.3 97.8 31 Jul 31 Jan 31 Jul 2009 2009 2008 pence pence penceNet asset value per 'C' Share 94.2 n/a n/aNet asset value per 'A' Share 0.1 n/a n/aTotal return per 'C' Share and 'A' Share 94.2 n/a n/aCHAIRMAN'S STATEMENTI am sure that Ordinary Shareholders will be pleased to have receiveddividends totalling 89p per share (including 8p paid since the end ofthe half-year under review), representing an absolute return of 29pper share or 48.3% on the 60p per share net of income tax relief theyoriginally invested. This equates to an internal rate of return of10.8% per annum. I doubt investors could have found many betterinvestment opportunities over the period.To fund the above dividends, the Ordinary share pool exited from themajority of its remaining investments during the period. The Companyhas also successfully completed a new share fundraising issue and hasembarked on the process of investing these funds.Ordinary Share poolOrdinary Shareholders will be aware from my letter sent to them inAugust that the investment exits achieved during the period fundedthe payment of a further dividend of 8.0p per Ordinary Share on 28August 2009. Ordinary Shareholders have now received total tax-freedividends of 89.0p per share from the Company in addition to the 40pper share in income tax relief that Shareholders received on theiroriginal investment.The Ordinary Share pool now holds a small number of remaininginvestments, none of which have an imminent prospect of beingrealised. The remaining net asset value per share of the OrdinaryShares (following the payment of the dividend described above) is2.3p per share. The Investment Manager believes that opportunitiesmight arise in the future to realise one or more of the remaininginvestments at values well above the current carrying values.Profitable outcomes are likely to depend on a significant improvementin the market for development land and therefore may not arise forsome considerable time or ultimately may not arise at all.Management IncentiveAs I also described in my letter to Ordinary Shareholders in August,the Company redeemed the loan notes held by the Board and Managementunder the performance incentive arrangements at a price equivalent to5.0p per Ordinary Share. A total consideration of 8.5p per OrdinaryShare was due under the performance incentive arrangements, which washigher than we originally anticipated because funds have beenreturned to Shareholders at a much quicker rate than originallyenvisaged. The Board and Management Team agreed to accept the lowersum (and to forgo any further amounts that that might have becomedue) for the benefit of Shareholders. The Board and Management Teamfeel that this provides a fair outcome for Shareholders.The Board feels that the overall return to Ordinary Shareholders todate of 89p per share is a satisfactory result in the currentconditions. There remains a possibility of a further distribution atsome point in the future.'C' Share poolFundraisingThe 'C' Share fundraising closed on 11 September 2009 having raisedgross proceeds (along with its sister company) of £14.3 million. Thisprovides your Company with net proceeds of £6.8 million and willallow the Investment Manager to take advantage of good qualityinvestment opportunities that are expected to arise as economicconditions start to improve.Portfolio activityThe 'C' Share pool did not make any VCT-qualifying investments duringthe period under review. However, since the period end good progresshas been made with four qualifying investment being completed.The Investment Manager has also taken advantage of opportunities tomake a number of non-qualifying investments. All these investmentsprovide significantly higher yields than are available on cashdeposits or gilts with relatively low risk. In some cases,investments have been acquired from the Ordinary Share pool, whichare obviously well-known to the Investment Manager and Board.Net Asset ValueAt 31 July 2009, the NAV per 'C' Share stood at 94.6p and the NAV per'A' Share at 0.1p. This is a small increase of 0.2p on the initialNAV net of fundraising costs.ResultsThe return on ordinary activities for the period was as follows: Revenue Capital Total £'000 £'000 £'000Ordinary Share pool (29) (474) (503)'C' Share pool (12) - (12) (41) (474) (515)Share buybacksIn order to provide liquidity in the market for Shareholders thatneed to sell all or part of their holdings, the Company operates ashare buyback policy in respect of its 'C' and 'A' Shares. Thecurrent policy is to undertake share buybacks at a price equivalentto 10% discount to the latest NAV. However, the Board will reviewthis discount level from time to time.In view of the fact that the vast majority of the Ordinary Share Poolfunds fund have now been distributed to Ordinary Shareholders, theCompany will not buy in any further Ordinary Shares for cancellation.No share buybacks in any share class were undertaken during theperiod.Risks and uncertaintiesUnder the Disclosure and Transparency Directive, the Board isrequired in the Company's half-yearly results, to report on principalrisks and uncertainties facing the Company over the remainder of thefinancial year.The Board has reviewed the principal risks and uncertainties facingthe Company over the remainder of the financial period and concludedthat the key risks are:(i) investment risk associated with investing in small and immaturebusinesses; and(ii) failure to maintain approval as a VCT.In both cases the Board is satisfied with the Company's approach tothese risks. The strategy of, where possible, taking charges overassets to secure its investments helps to limit any potential losseswhich could arise from the failure of an investee business.The Company continually monitors its compliance with the VCTregulations and retains PricewaterhouseCoopers to provide regularreviews and advice in this area. The Board considers that thisapproach reduces the risk of a breach of the VCT regulations to aminimal level.OutlookThe Board consider that the work of unwinding the Ordinary Share pooland returning funds it investors is now virtually complete. TheInvestment Manager will continue to work on the remaining OrdinaryShare pool investments with a view to ultimately extracting valuebut, even if this is achievable, but it may be some considerable timebefore any results are seen.In respect of the 'C' Share pool, the Investment Manager is nowstarting to see an increased flow of good quality potentialVCT-qualifying investment opportunities. The Board expects theprocess of building the VCT-qualifying portfolio to make good headwayin the second half of the year.Hugh GillespieChairman30 September 2009UNAUDITED SUMMARISED BALANCE SHEETas at 31 July 2009 31 July2009 31 July 31 Jan 2008 2009 Ordinary 'C' Shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000Fixed assetsUnquoted investments 62 3,386 3,448 6,237 3,801Current assetsDebtors 118 319 437 61 20Cash at bank and in hand * 989 2,739 3,728 3,330 21 1,107 3,058 4,165 3,391 41Creditors: amounts fallingdue within one year (129) (44) (173) (214) (165)Net current 978 3,014 3,992 9,414 (124)assets/(liabilities)Creditors: amounts fallingdue after one year - - - (20) (20)Net assets 1,040 6,400 7,440 9,394 3,657Capital and reservesCalled up share capital 101 21 122 101 101Capital redemption reserve 1 - 1 1 1Special reserve 1,393 - 1,393 9,440 3,882Share premium account - 6,391 6,391 - -Investment holding losses (492) - (492) (240) (393)Capital reserve - realised - - - (81) -Revenue reserve 37 (12) 25 173 66Total equity shareholders' 1,040 6,400 7,440 9,394 3,657fundsOrdinary Share * 10.3p - - 93.3p 36.3p'C' Share - 94.2p - n/a n/a'A' Share - 0.1p - n/a n/a* On 28 August 2009, a dividend of 8.0p per Ordinary Share was paidto Ordinary Shareholders, reducing the Ordinary Share pool's cash atbank balance by £805,000 and the basic and diluted net asset valueper Ordinary Share to 2.3p.RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended 31 July 31 31 July 2009 2008 January 2009 Ordinary 'C' Share Share pool pool Total Total Total £'000 £'000 £'000 £'000 £'000Opening shareholders' 3,657 - 3,657 9,730fundsIssue of shares - 6,785 6,785 -Share issue costs - (373) (373)Purchase of own shares - - - (16) (16)Total recognised(losses)/gains for the (503) (12) (515) (119) (270)yearDistributions (2,114) - (2,114) (201) (5,787)Closing shareholders' 1,040 6,400 7,440 9,394 3,657fundsINCOME STATEMENTfor the six months ended 31 July 2009 Six months endedCompany Total 31 Jul 2009 Revenue Capital Total £'000 £'000 £'000Income 59 59Gain/ (loss) on investments-realised - 48 48-unrealised - (124) (124) 59 (76) (17)Investment management fees (36) - (36)Other expenses (73) (503) (576)Return on ordinary activities before (50) (579) (629)taxationTaxation 9 105 114Return attributable to equity shareholders (41) (474) (515)Basic and diluted returnOrdinary share (0.2p) (4.7p) (4.9p)'C' share (0.2p) - -'A' share - - - Six months ended Year endedCompany Total 31 Jul 2008 31 Jan 2009 Revenue Capital Total Total £'000 £'000 £'000 £'000Income 274 - 274 412Gain/ (loss) on investments - 8 8 (34)-realised-unrealised - (240) (240) (393) 274 (232) 42 (15)Investment management fees (48) - (48) (81)Other expenses (68) - (68) (120)Return on ordinary activities 158 (232) (74) (216)before taxationTaxation (45) - (45) (54)Return attributable to equity 113 (232) (119) (270)shareholdersBasic and diluted returnOrdinary share 1.1p (2.3p) (1.2p) 2.7p'C' share n/a n/a n/a n/a'A' share n/a n/a n/a n/a Six months endedOrdinary Shares 31 Jul 2009 Revenue Capital Total £'000 £'000 £'000Income 21 - 21Gain/ (loss) on investments-realised - 48 48-unrealised - (124) (124) 21 (76) (55)Investment management fees (9) - (9)Other expenses (48) (503) (551)Return on ordinary activities before (36) (579) (615)taxationTaxation 7 105 112Return attributable to equity shareholders (29) (474) (503) Six months ended Year endedOrdinary Shares 31 Jul 2008 31 Jan 2009 Revenue Capital Total Total £'000 £'000 £'000 £'000Income 274 - 274 412Gain/ (loss) on investments - 8 8 (34)-realised-unrealised - (240) (240) (393) 274 (232) 42 (15)Investment management fees (48) - (48) (81)Other expenses (68) - (68) (120)Return on ordinary activities 158 (232) (74) (216)before taxationTaxation (45) - (45) (54)Return attributable to equity 113 (232) (119) (270)shareholders Six months ended'C' Shares 31 Jul 2009 Revenue Capital Total £'000 £'000 £'000Income 38 - 38Gain (loss) on investments-realised - - --unrealised - - - 38 - 38Investment management fees (27) - (27)Other expenses (25) - (25)Return on ordinary activities before (14) - (14)taxationTaxation 2 - 2Return attributable to equity shareholders (12) - (12) Six months ended Year ended'C' Shares 31 Jul 2008 31 Jan 2009 Revenue Capital Total Total £'000 £'000 £'000 £'000Income n/a n/a n/a n/aGain (loss) on investments n/a n/a n/a n/a-realised-unrealised n/a n/a n/a n/a n/a n/a n/a n/aInvestment management fees n/a n/a n/a n/aOther expenses n/a n/a n/a n/aReturn on ordinary activities n/a n/a n/a n/abefore taxationTaxation n/a n/a n/a n/aReturn attributable to equity n/a n/a n/a n/ashareholdersA Statement of Total Recognised Gains and Losses has not beenprepared as all gains/losses are recognised in the Income Statementas noted aboveUNAUDITED CASH FLOW STATEMENTfor the six months ended 31 July 2009 Notes Six Year Six months ended months ended 31 July 2009 to 31 31 July January 2008 2009 Ordinary 'C' Shares Shares Total Total Total £'000 £'000 £'000 £'000 £'000Net cash inflow from 1 (562) (287) (849) 344 379operating activities (562) (287) (849) 344 379TaxationCorporation tax paid - - - (100) (100)Capital expenditurePurchase of (200) (4,074) (4,274) - (3,066)investmentsSale of investments 3,864 688 4,552 2,742 7,989Net cash inflow/(outflow) from 3,664 (3,386) 278 2,742 4,983capital expenditureEquity dividends (2,114) - (2,114) (201) (5,787)paidNet cash inflow/ 988 (3,673) (2,685) 2,785 (525)(outflow) beforefinancingFinancingProceeds from share - 6,785 6,785 - -issueShare issue costs - (373) (373) - -Purchase of own (20) - (20) (16) (16)shares/ loan notesNet cash inflow from (20) 6,412 6,392 (16) (16)financingIncrease/ (decrease) 2 968 2,739 3,707 2,769 (541)in cashNotes to the cash Sixflow statement: Six months ended months Year 31 July 2009 ended ended 31 31 July January 2008 2009 Ordinary 'C' Total Total Total Shares Shares £'000 £'000 £'000 £'000 £'0001 Cash inflow from operating activities andreturns on investmentsReturn on ordinary (615) (14) (629) (74) (270)activities beforetaxationLosses on 76 - 76 232 427investmentsDecrease/(increase) (20) (317) (337) 100 141in other debtorsIncrease/(decrease) (3) 44 41 86 81in other creditorsNet cash inflow from (562) (287) (849) 344 379operating activities2 Analysis of netfundsBeginning of period 21 - 21 562 562Net cash 968 2,739 3,707 2,769 (541)inflow/(outflow)End of period 989 2,739 3,728 3,331 21SUMMARY OF INVESTMENT PORTFOLIOas at 31 July 2009Ordinary Share pool Unrealised % of gain/ (loss) in portfolio by Cost Valuation period valueVenture capital £'000investments £'000 £'000 £'000Chapel Street Hotel 31 31 - 3.0%(2008) LLPVermont Development 452 25 (75) 2.5%LimitedSanguine Hospitality 6 6 - 0.5%LimitedHoneycombe Pubs VCT 65 - (49) 0.0%Limited 554 62 (124) 6.0%Cash at bank and in 94.0%hand 989Ordinary Share pool 1,051 100.0%- Total'C' Share pool Unrealised % of gain/ (loss) portfolio Cost Valuation in period by valueVenture capital investments £'000 £'000 £'000 £'000Hoole Hall Country Club 1,206 1,206 - 19.7%Holdings LimitedLiongold Contracting 1,000 1,000 - 16.3%LimitedThe Thames Club Limited 500 500 - 8.2%Coastal Partnerships 330 330 - 5.4%LimitedHoneycombe Pubs VCT Limited 175 175 - 2.9%Close Imperial Pub Company 175 175 - 2.9%plc 3,386 3,386 - 55.4%Cash at bank and in hand 2,739 44.6%'C' Share pool - Total 6,125 100.0%SUMMARY OF INVESTMENT MOVEMENTSfor the six months ended 31 July 2009Additions Ordinary Share pool 'C' Share pool £'000 £000Non Qualifying VCT investmentsLiongold Contracting Limited - 1,000Hoole Hall Country Club Holdings Limited - 1,894The Thames Club Limited - 500Coastal Partnerships Limited - 330Honeycombe Pubs VCT Limited 200 175Close Imperial Pub Company Plc - 175 200 4,074Disposals Gain/ Total Market (loss) Realized value at Disposal against gain/ Cost 01/02/09 Proceeds cost (loss)Ordinary Share pool £'000 £'000 £'000VCT Qualifying investmentsLiongold Contracting 1,000 -Limited 1,000 1,000 -Honeycombe Pubs VCT 200 48Limited 151 199 48Honeycombe Pubs VCT 200 (25)Limited 200 175 (25) 1,351 1,400 1,374 23 23Non VCT QualifyinginvestmentsDowning Acquisitions 1 750 -Limited 750 750 -Hoole Hall Country Club 1,375 -Holdings Limited 1,375 1,375 -Coastal Partnerships 330 -Limited 330 330 -Heyford Homes (Thornton 9 -Hall) Limited 9 9 -Universe Contracting - -Limited 25 25 25 2,489 2,464 2,489 - 25 3,480 3,864 3,863 - -'C' Share poolNon VCT QualifyinginvestmentsHoole Hall Country Club 688 -Holdings Limited 688 688 - 688 688 688 - -Total Ordinary and 'C' 4,552 23Share pools 4,528 4,551 48NOTES TO THE UNAUDITED FINANCIAL STATEMENTS1. The unaudited half-yearly results cover the six months to 31 July2009 and have been prepared in accordance with the accountingpolicies set out in the statutory accounts for the year ended 31January 2009 which were prepared under UK Generally AcceptedAccounting Practice ("UK GAAP") and in accordance with the Statementof Recommended Practice "Financial Statements of Investment TrustCompanies" revised January 2009 ("SORP").2. All revenue and capital items in the Income Statement derive fromcontinuing operations.3. The Company has only one class of business and derives its incomefrom investments made in shares, securities and bank deposits.4. The comparative figures are in respect of the six-month periodended 31 July 2008 and the year ended 31 January 2009 respectively.5. Dividends Six months ended Year ended 31 July 2009 31 Jan 2009Ordinary Shares Per share Revenue Capital Total Total pence £'000 £'000 £'000 £'000Paid in year2010 Interim 21.0p - 2,114 2,1142009 Interim 55.5p - - - 5,5862008 Final 2.0p - - - 201 - 2,114 2,114 5,787No dividend have been paid or declared in respect of the 'C' Sharesor 'A' Shares6. Basic and diluted return per share Ordinary 'C' 'A' Shares Shares SharesRevenue return per share basedon:Net revenue after taxation (29) (12) -(£'000)Weighted average number of 10,068,985 6,651,327 14,151,327ordinary shares in issueCapital return/(loss) per sharebased on:Net capital gain for the (474) - -financial year (£'000)Weighted average number of 10,068,985 6,651,327 14,151,327ordinary shares in issue7. Net asset value per Share Ordinary Shares 'C' Shares 'A' SharesRevenue return per share basedon:Net assets (£'000) 1,040 6,386 14Number of shares in issue at 10,064,617 6,777,113 14,277,113period end8. Reserves Capital Capital Investment redemption Special Share Revenue reserve holding reserve reserve premium reserve realised losses £'000 £'000 £'000 £'000 £'000 £'000At 1 February 1 3,882 - 66 - (393)2009Issue of - - 6,764 - - -sharesShare issue - - (373) - - -costsNetgains/(losses) - - - - 48 (124)on investmentsExpenses - - - - (398) -capitalisedDistributions - (2,114) - - - -paidTransferbetween - (375) - - 350 25reservesRetained netrevenue for - - - (41) - -the yearAt 31 July 1 1,393 6,391 25 - (492)2009The Special reserve, Capital reserve-realised, Investment holdinglosses reserve and Revenue reserve are all distributable reserves.Reserves available for distribution at the period end amounted to£926,000.9. The unaudited condensed financial statements set out herein do notconstitute statutory accounts within the meaning of Section 240 ofthe Companies Act 1985 and have not been delivered to the Registrarof Companies. The figures for the year ended 31 January 2009 havebeen extracted from the financial statements for that year, whichhave been delivered to the Registrar of Companies; the auditors'report on those financial statements was unqualified.10.The Directors confirm that, to the best of their knowledge, thehalf-yearly financial statements have been prepared in accordancewith the "Statement: Half-Yearly Financial Reports" issued by the UKAccounting Standards Board and the half-yearly financial reportincludes a fair review of the information required by:(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being anindication of important events that have occurred during the firstsix months of the financial year and their impact on the condensedset of financial statements, and a description of the principal risksand uncertainties for the remaining six months of the year; and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, beingrelated party transactions that have taken place in the first sixmonths of the current financial year and that have materiallyaffected the financial position or performance of the entity duringthat period, and any changes in the related party transactionsdescribed in the last annual report that could do so.11. Copies of the unaudited half-yearly report will be sent toShareholders shortly. Further copies can be obtained from theCompany's Registered Office or will be available for download fromwww.downing.co.uk.---END OF MESSAGE---This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 30.09.2009 - 09:01 Uhr
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