Downing THREE VCT plc

Half-Yearly Report
for the six months ended 30 June 2017

Performance summary

'D' Share pool	30 Jun 2017		31 Dec 2016		30 Jun 2016
	Pence		Pence		Pence
Net asset value per 'D' Share	23.7		36.4		34.7
Net asset value per 'E' Share	0.1		0.1		0.1
Cumulative distributions per 'D' Share	80.0		66.5		66.5
Total return per 'D' Share and 'E' Share	103.8		103.0		101.3

'F' Share pool	30 Jun 2017		31 Dec 2016		30 Jun 2016
	Pence		Pence		Pence
Net asset value per 'F' Share	69.6		69.4		69.7
Cumulative distributions per 'F' Share	27.5		25.0		22.5
Total return per 'F' Share	97.1		94.4		92.2

'H' Share pool	30 Jun 2017		31 Dec 2016		30 Jun 2016
	Pence		Pence		Pence
Net asset value per 'H' Share	84.6		86.2		88.9
Cumulative distributions per 'H' Share	17.5		15.0		12.5
Total return per 'H' Share	102.1		101.2		101.4

'J' Share pool	30 Jun 2017		31 Dec 2016		30 Jun 2016
	Pence		Pence		Pence
Net asset value per 'J' Share	95.7		95.8		97.7

CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Half-Yearly Report for the six months ended 30 June 2017. The Company has a number of share pools, each of which is in a different stage in its planned exit life. Generally progress has been satisfactory over the period, with all the mature share pools seeing an increase in their total return.

Net asset values and overview
'D' Share pool
The 'D' Share pool is now in the process of exiting from its investments.

At 30 June 2017, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 23.8p. Total Return (NAV plus dividends paid to date) is now 103.8p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

Total dividends of 80p per combined share have been paid to date. The Manager is optimistic that one final dividend can be paid before the end of the year to bring the share pool to a close.

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

At 30 June 2017, the net asset value ("NAV") for a holding of one 'F' Share was 69.6p, an increase of 2.7p (3.9%) over the period. Total Return (NAV plus dividends paid to date) is now 97.1p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

The Manager anticipates that the first major distribution will be paid in the first quarter of 2018.

'H' Share pool
The 'H' Share pool raised funds in 2014 and has now completed its initial investment phase. The target date to start realising investments is 2019.

At 30 June 2017, the net asset value ("NAV") for a holding of one 'H' Share was 84.6p which represents a net increase of 0.9p (1.0%) over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 102.1p, compared to the initial NAV, before income tax relief, of 100.0p.

'J' Share pool
The 'J' Share pool raised funds in 2015 and is continuing to build its initial investment portfolio. The target date to start realising investments is 2020.

At 30 June 2017, the net asset value ("NAV") and total return for a holding of one 'J' Share was 95.7p which represents a net decrease of 0.1p (0.1%) over the period, compared to the initial NAV, before income tax relief, of 100.0p.

The Investment Manager's Report below will provide more detail on each of the share pools.

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

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

Each of the above dividends will be paid on 15 December 2017 to Shareholders on the register at 24 November 2017.

No interim dividend is being declared in respect of the 'D' Shares as additional dividends will be declared once further investment realisations have been completed. No dividend is being declared in respect of the 'J' Share pool as the VCT regulations effectively prohibit dividends at this early stage in the pool's life.
Share buybacks
The Company has a general policy in the first five years after the launch of a share class, of buying in its own shares that become available in the market for cancellation. As a result, the Company will currently buy 'H' Shares and 'J' Shares that become available in the market and will, subject to liquidity and regulatory constraints, buy at prices approximately equal to net asset value i.e. with no discount.

During the period to 30 June 2017, the Company repurchased and subsequently cancelled 14,562 'J' Shares for an aggregate consideration of £13,907, being an average price of 95.5p per 'J' Share.

No share buybacks in respect of any other share classes were undertaken during the period.

Outlook
The Manager will be engaged in a number of different activities for each of the share pools over the remainder of the year. We hope to see the 'D' Share come to the end of its life with a final dividend and expect preparations for investment realisations in the 'F' Share pool to advance significantly. The 'H' Share pool is expected to have limited investment activity over the remainder of the year while the Manager focuses on the existing portfolio, but we expect to see a small number of new additions to the 'J' Share portfolio as the funds raised continue to be employed.

Shareholders may be aware of the "Patient Capital Review" currently being undertaken by the Government which is seeking to strengthen the UK as a place for growing innovative businesses. It is possible that this review could result in some changes to the VCT regulations and the associated tax reliefs. We expect that any planned changes will be announced in the Budget in November. The Board and Manager are closely monitoring developments and we will communicate with Shareholders if we believe there are any changes which could have a significant impact on Shareholders' investments.

In addition to any communications in connection with the above, I will update all Shareholders in my statement in the next Annual Report, and I also expect to write separately to 'D' Shareholders as and when there is news of a final distribution.

Michael Robinson
Chairman

INVESTMENT MANAGER'S REPORT
'D' SHARE POOL

The 'D' Share pool is in the process of realising its investments in order to return funds to 'D' Shareholders. The process has continued to progress through the period and we are optimistic it will be completed in the near future.

Investment activity
During the period under review, there was one partial disposal of £245,000 in Mosaic Spa and Health Clubs Limited. This represented a gain of £68,000 against the previous carrying value. Further proceeds for this investment are expected in due course at which point the company will be fully exited from the pool. 

At 30 June 2017, the pool held seven investments with a valuation of £2.2 million. Three small valuation changes were made at the period end resulting in a total valuation reduction of £4,000. The carrying values adopted at the end of the period are consistent with the values at which we believe the investments can be exited.

Realisation plans
The pools most significant holding is in Gara Rock Resort Limited, formerly Aminghurst Limited. We are pleased to report that we have recently exchanged contracts for the sale of the investment and expect this transaction to complete shortly.

Of the remaining six investments Avon Solar Energy Limited and Westcountry Solar Solutions Limited are expected to exit in the next two months. Mosaic Spa and Health Clubs Limited has partially exited in the period and we are exploring options to facilitate a complete exit for the share pool. No further proceeds are expected from Quadrate Spa Limited or Future Biogas (Reepham Road) Limited.

Net asset value and results
At 30 June 2017, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 23.8p, an increase of 0.8p (2.2%) over the period. Total Return (NAV plus dividends paid to date) is now 103.8p for a combined holding.

The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £76,000, comprising a revenue loss of £22,000 and a capital profit of £98,000.

Outlook
The end of the task of realising all the share pool's investments is now in sight. The exact timing is dependent on transactions involving third parties so is somewhat uncertain, however we anticipate that the pool should be able to make one final payment before the end of the year.

Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'D' SHARE POOL
as at 30 June 2017

	Cost	Valuation	Unrealised gain/ (loss) in period	% of  portfolio  by value
	£'000	£'000	£'000
VCT qualifying and partially qualifying investments
Avon Solar Energy Limited	210	252	12	10.3%
Westcountry Solar Solutions Limited	250	216	(34)	8.9%
Mosaic Spa and Health Clubs Limited*	325	123	-	5.0%
Quadrate Spa Limited	144	-	-	0.0%
Non-qualifying investments
Gara Rock Resort Limited	1,322	1,322	-	54.2%
Fenkle Street LLP	122	287	18	11.8%
Future Biogas (Reepham Road) Limited	320	-	-	0.0%
	2,693	2,200	(4)	90.2%
Cash at bank and in hand		240		9.8%
Total		2,440		100%

*    Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS
'D' SHARE POOL
for the six months ended 30 June 2017

Disposals	Cost	Market value at 01/01/17	Disposal proceeds	Gain against cost	Total realised  gain
	£'000	£'000	£'000	£'000	£'000
VCT qualifying and partially qualifying investments
Mosaic Spa and Health Clubs Limited	196	177	245	49	68
	196	177	245	49	68

* Adjusted for additions in the year

INVESTMENT MANAGER'S REPORT
'F' SHARE POOL

The 'F' Share pool is fully invested in a portfolio focussed on asset backed businesses and those with predictable revenue streams. Planning has begun in respect of the process to realise investments and start returning funds to Shareholders which can commence early in 2018.

Investment activity
With the pool being fully invested, no new investments were made in the period although one follow-on investment of £194,000 was made in Goonhilly Earth Station Limited, where further funding was required.

Funds had previously been invested in two companies, Morava Limited and Brownfields Trading Limited to explore business opportunities in specific sectors. In the event both companies were unable to find suitable opportunities, the £275,000 of funds invested were returned to the Share pool.

One partial divestment took place in the period being the part repayment of a non-qualifying loan to Gara Rock Resort Limited, formerly Aminghurst Limited, which generated proceeds of £95,000.

The majority of investments remain valued at or above cost and there were several valuation movements in the period.

Merlin Renewables Limited, the anaerobic digestion plant in Norfolk continues to perform well and the valuation was increased by £67,000.

Vulcan Renewables Limited has been sold after the period and the increase in value of £66,000 reflected expected sales proceeds minus a discount for execution risk. The sale subsequently completed at a higher value than shown overleaf.

An uplift of £39,000 was recognised in the period on Fresh Green Power Limited. The domestic rooftop solar company is generating profits in line with our expectations and we are now exploring options to sell the investment.

The valuation of Lambridge Solar Limited, the owner of commercial solar arrays in Lincolnshire, has been increased by £26,000 as it continues to perform well.

Atlantic Dogstar Limited continues to perform to plan and a small valuation uplift of £7,000 has been recognised in the period.

Net asset value, results and dividend
At 30 June 2017, the net asset value ("NAV") for a holding of one 'F' Share was 69.6p, an increase of 2.7p (3.9%) over the period. Total Return (NAV plus dividends paid to date) is now 97.1p for a combined holding.

The gain on ordinary activities for the 'F' Shares, after taxation, for the period was £291,000, comprising a revenue profit of £86,000 and a capital gain of £205,000.

The Company will pay an interim dividend of 2.5p per 'F' Share, on 15 December 2017 to 'F' Shareholders on the register at 24 November 2017.

Outlook
The focus now for the 'F' Share portfolio is shifting towards planning for exits. Good progress is being made and we anticipate that the first major distribution will be paid in the first quarter of 2018.

Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2017

	Cost	Valuation	Unrealised  gain in  period	% of  portfolio  by value
	£'000	£'000	£'000
VCT qualifying and partially qualifying investments
Apex Energy Limited	1,000	1,000	-	13.4%
Goonhilly Earth Station Limited	954	954	-	12.8%
Vulcan Renewables Limited	653	844	66	11.3%
Merlin Renewables Limited	500	642	67	8.6%
Lambridge Solar Limited	500	595	26	8.0%
Pearce and Saunders Limited	497	497	-	6.6%
Augusta Pub Company Limited	290	349	-	4.7%
Vectis Alpha Limited	300	300	-	4.0%
Fresh Green Power Limited	200	239	39	3.2%
Pabulum Pubs Limited	200	237	-	3.2%
Atlantic Dogstar Limited	200	234	7	3.1%
City Falkirk Limited	422	177	-	2.4%
Fubar Stirling Limited	268	169	-	2.3%
Rhodes Solutions Limited	125	125	-	1.7%
Green Energy Production UK Limited	100	100	-	1.3%
Cheers Dumbarton Limited	48	17	-	0.2%
Lochrise Limited	13	-	-	0.0%
Non-qualifying investments
Baron House Developments Limited	481	481	-	6.4%
Gara Rock Resort Limited	163	163	-	2.2%
London City Shopping Centre Limited	66	66	-	0.9%
Pearce and Saunders DevCo Limited	46	46	-	0.6%
	7,026	7,235	205	96.9%
Cash at bank and in hand		232		3.1%
Total		7,467		100.0%

*    Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2017

Additions	£'000
Qualifying investments
Goonhilly Earth Station Limited	194
Total	194

Disposals	Cost	Market value at 01/01/17	Disposal proceeds	Gain against cost	Total  realised  gain
	£'000	£'000	£'000	£'000	£'000
VCT qualifying and partially qualifying investments
Brownfields Trading Limited	150	150	150	-	-
Morava Limited	125	125	125	-	-
Non-qualifying investments
Gara Rock Resort Limited	95	95	95	-	-
	370	370	370	-	-

* adjusted for purchases made in the period

INVESTMENT MANAGER'S REPORT
'H' SHARE POOL

The 'H' Share pool raised funds in 2014 and has made good progress in building the initial VCT qualifying portfolio. The fund is now fully qualifying.

Investment activity
During the last six months, there were no investment additions or realisations.

The majority of investments remain valued at cost and there were two valuation movements recognised in the period generating a total gain of £61,000.

Atlantic Dogstar Limited continues to perform to plan and a small valuation uplift of £38,000 has been recognised in the period.

The Antelope Pub Limited owns a pub of the same name in Tooting which continues to trade well and ahead of budget resulting in an increase in value of £23,000 being recognised in the period.

Net asset value and results
At 30 June 2017, the net asset value per 'H' Share was 84.6p, a net increase of 0.9p (1.0%) over the period. Total Return (NAV plus dividends paid to date) is now 102.1p.

Results and dividend
The gain on ordinary activities for the 'H' Shares, after taxation, for the period was £115,000, comprising a revenue profit of £54,000 and a capital gain of £61,000.

The Company will pay an interim dividend of 2.5p per 'H' Share, on 15 December 2017 to 'H' Shareholders on the register at 24 November 2017.

Outlook
The 'H' Share pool is now fully qualifying and therefore our focus is now on close monitoring and support of the portfolio companies in order to nurture growth before the ultimate exit date.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'H' SHARE POOL
as at 30 June 2017

	Cost	Valuation	Unrealised  gain in  period	% of  portfolio  by value
	£'000	£'000	£'000
VCT qualifying investments
Hermes Renewables Limited	1,500	1,500	-	13.1%
Apex Energy Limited	1,300	1,300	-	11.4%
Atlantic Dogstar Limited	1,000	1,175	38	10.3%
Zora Energy Renewables Limited	1,000	1,000	-	8.8%
Quadrate Catering Limited	850	850	-	7.4%
Ironhide Generation Limited	613	613	-	5.4%
Indigo Generation Limited	613	613	-	5.4%
Antelope Pub Limited	500	523	23	4.6%
Rockhopper Renewables Limited	492	492	-	4.3%
SF Renewables (Solar) Limited	281	281	-	2.5%
Oak Grove Renewables Limited	420	231	-	2.0%
Non-qualifying investments
Hedderwick Limited	1,250	1,250	-	11.0%
Quadrate Spa Limited	850	850	-	7.4%
Pearce and Saunders Limited	193	193	-	1.7%
Augusta Pub Company Limited	155	155	-	1.4%
	11,017	11,026	61	96.7%
Cash at bank and in hand		372		3.3%
Total		11,398		100%

No investment movements in the period to 30 June 2017.

INVESTMENT MANAGER'S REPORT
'J' SHARE POOL

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

Investment activity
During the last six months, three new qualifying investments have been made totalling £1.3 million as we continue to build the qualifying portfolio.

The qualifying investments include a £1 million investment in Ormsborough Limited. The company owns several pubs and restaurants across Yorkshire and this investment supported their continued expansion.

£297,000 was invested into Pilgrim Trading Limited. The company acquired two sites to be converted in to children's nurseries, one of which has recently been opened in Twickenham and the other is in the planning stage.

A £10,000 investment was made into Exclusive Events Venues Limited to pay a deposit to secure a site in Chester that will be used exclusively as a wedding venue. Since the period end, following a successful planning application, a further investment has been made to acquire and develop the site.

Funds were invested in Morava Limited to explore opportunities in the wood refinery sector, Brownfields Trading Limited to develop small scale waste disposal projects and Cedarville Limited to identify a wedding venue site. During the period, these funds have been returned to the Share pool to provide £3.0 million for alternative investment opportunities. There were no other disposals in the period.

One valuation adjustment was made in the period on Ormsborough Limited following good overall performance of the group which resulted in an uplift in valuation of £28,000.

Net asset value and results
At 30 June 2017, the net asset value per 'J' Share was 95.7p, a net decrease of 0.1p (0.1%) over the period.

The loss on ordinary activities for the 'J' Shares, after taxation, for the period was £10,000, comprising a revenue loss of £32,000 and a capital gain of £22,000.

Outlook
The 'J' Share pool will become fully qualifying at the year end, therefore we will continue to seek investment opportunities and develop the current investment portfolio over the remainder of the period.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'J' SHARE POOL
as at 30 June 2017

	Cost	Valuation	Unrealised  gain in period	% of portfolio  by value
	£'000	£'000	£'000
VCT qualifying investments
Pilgrim Trading Limited	1,297	1,297	-	12.7%
Ormsborough Limited	1,000	1,028	28	10.1%
Rhodes Solutions Limited	1,000	1,000	-	9.8%
Jito Trading Limited	1,000	1,000	-	9.8%
Vectis Alpha Limited	900	900	-	8.8%
Yamuna Renewables Limited	800	800	-	7.8%
Indigo Generation Limited	613	613	-	6.0%
Ironhide Generation Limited	613	613	-	6.0%
Rockhopper Renewables Limited	492	492	-	4.8%
Zora Energy Renewables Limited	300	300	-	2.9%
SF Renewables (Solar) Limited	281	281	-	2.8%
Oak Grove Renewables Limited	420	231	-	2.3%
Exclusive Events Venues Limited	10	10	-	0.1%
	8,726	8,565	28	83.9%
Cash at bank and in hand		1,642		16.1%
Total		10,207		100%

SUMMARY OF INVESTMENT MOVEMENTS
'J' SHARE POOL
as at 30 June 2017

Additions	£'000
Qualifying investments
Ormsborough Limited	1,000
Pilgrim Trading Limited	297
Exclusive Events Venues Limited	10
Total	1,307

Disposals	Cost	Market value at 01/01/17	Disposal proceeds	Loss against cost	Total  realised  loss
	£'000	£'000	£'000	£'000	£'000
VCT qualifying and partially qualifying investments
Morava Limited	1,150	1,150	1,149	(1)	(1)
Cedarville Limited	1,000	1,000	995	(5)	(5)
Brownfields Trading Limited	900	900	900	-	-
	3,050	3,050	3,044	(6)	(6)

*Adjusted for additions made in the period

UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2017

*

 

*

 

		30 Jun 2017						30 Jun 2016		31 Dec 2016
		'D' Shares	'F' Shares	'H' Shares	'J' Shares	Total		Total		Total
		£'000	£'000	£'000	£'000	£'000		£'000		£'000
Fixed assets
Unquoted investments		2,200	7,235	11,026	8,565	29,026		32,065		30,836
Current assets
Debtors		3	185	77	59	324		256		133
Cash at bank and in hand		240	232	372	1,642	2,486		1,573		2,337
		243	417	449	1,701	2,810		1,829		2,470
Creditors: amounts falling due within one year		(76)	(122)	(104)	(10)	(312)		(437)		(286)
Net current assets		167	295	345	1,691	2,498		1,392		2,184
Net assets		2,367	7,530	11,371	10,256	31,524		33,457		33,020
Capital and reserves
Called up share capital		25	11	13	11	60		78		78
Capital redemption reserve		124	-	-	-	124		106		106
Special reserve		2,319	8,051	(2,353)	-	8,017		11,054		9,888
Share premium account		-	-	13,608	11,031	24,639		24,639		24,639
Revaluation reserve		(597)	269	9	(162)	(481)		(1,810)		(790)
Capital reserve - realised		-	(1,033)	-	(6)	(1,039)		(1,033)		(1,033)
Revenue reserve		496	232	94	(618)	204		423		132
Total equity shareholders'  funds		2,367	7,530	11,371	10,256	31,524		33,457		33,020
Basic and diluted net asset value per:
'D' Share		23.7p						34.7p		36.4p
'E' Share		0.1p						0.1p		0.1p
'F' Share			69.6p					69.7p		69.4p
'H' Share				84.6p				88.9p		86.2p
'J' Share					95.7p			97.7p		95.8p

* The comparative Balance Sheet at 30 June 2016 and 31 December 2016 includes the 'C' Share pool which has subsequently been cancelled.

STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2017

	Called up share capital			Capital redemption reserve	Special reserve	Share premium reserve	Revaluation reserve	Capital reserve - realised	Revenue reserve	Total
	£'000			£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January        2016	78			106	15,749	24,639	(1,466)	(1,033)	1,350	39,423
Total comprehensive income		-		-	-	-	406	214	(333)	287
Transactions with owners
Issue of new shares		-		-	-	-	-	-	-	-
Share issue costs	-			-	-	-	-	-	-	-
Transfer between    reserves	-			-	(5,861)	-	270	6,476	(885)	-
Dividend paid			-	-	-	-	-	(6,690)	-	(6,690)
At 31 December 2016			78	106	9,888	24,639	(790)	(1,033)	132	33,020
Total comprehensive income			-	-	-	-	290	96	86	472
Transactions with owners
Purchase of own shares			-	-	-	-	-	-	(14)	(14)
Transfer between    reserves	-			-	(1,871)	-	19	1,852	-	-
Dividend paid			-	-	-	-	-	(1,954)	-	(1,954)
Cancellation of shares			(18)	18	-	-	-	-	-	-
At 30 June 2017			60	124	8,017	24,639	(481)	(1,039)	204	31,524

INCOME STATEMENT
for the six months ended 30 June 2017

Company Total

	Six months ended 30 Jun 2017				Six months ended 30 Jun 2016*				Year ended 31 Dec 2016
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	556	34	590		435	-	435		625
Gains on investments
- realised	-	62	62		-	110	110		174
- unrealised	-	290	290		-	47	47		406
	556	386	942		435	157	592		1,205
Investment management fees	(303)	-	(303)		(328)	-	(328)		(643)
Other expenses	(146)	-	(146)		(164)	-	(164)		(296)
Return/(loss) on ordinary activities before taxation	107	386	493		(57)	157	100		266
Tax on total comprehensive income and ordinary activities	(21)	-	(21)		17	-	17		21
Return/(loss) attributable to equity shareholders	86	386	472		(40)	157	117		287
Return per 'C' Share	-	-	-		(0.4p)	-	(0.4p)		(0.4p)
Return per 'A' Share	-	-	-		-	-	-		-
Return per 'D' Share	(0.2p)	1.0p	0.8p		(0.1p)	0.5p	0.4p		2.0p
Return per 'E' Share	-	-	-		-	-	-		-
Return per 'F' Share	0.8p	1.9p	2.7p		0.5p	0.2p	0.7p		2.8p
Return per 'H' Share	0.4p	0.5p	0.9p		0.3p	0.7p	1.0p		0.7p
Return per 'J' Share	(0.3p)	0.2p	(0.1p)		(0.8p)	-	(0.8p)		(2.8p)

* The comparative Income Statement as at 30 June 2016 and 31 December 2016 includes the 'C' Share pool which has subsequently been cancelled.

INCOME STATEMENT
for the six months ended 30 June 2017

'D' Shares	Six months ended 30 Jun 2017				Six months ended 30 Jun 2016				Year ended 31 Dec 2016
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	9	34	43		19	-	19		123
Gains/(losses) on investments
- realised	-	68	68		-	109	109		168
- unrealised	-	(4)	(4)		-	(58)	(58)		28
	9	98	107		19	51	70		319
Investment management fees	(19)	-	(19)		(27)	-	(27)		(52)
Other expenses	(17)	-	(17)		(16)	-	(16)		(31)
Return/(loss) on ordinary activities before taxation	(27)	98	71		(24)	51	27		236
Tax on total comprehensive income and ordinary activities	5	-	5		11	-	11		(30)
Return/(loss) attributable to equity shareholders	(22)	98	76		(13)	51	38		206

INCOME STATEMENT
for the six months ended 30 June 2017

'F' Shares	Six months ended 30 Jun 2017				Six months ended 30 Jun 2016				Year ended 31 Dec 2016
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	222	-	222		171	-	171		99
Losses on investments
- realised	-	-	-		-	-	-		5
- unrealised	-	205	205		-	18	18		410
	222	205	427		171	18	189		514
Investment management fees	(68)	-	(68)		(69)	-	(69)		(136)
Other expenses	(47)	-	(47)		(36)	-	(36)		(73)
Return on ordinary activities before taxation	107	205	312		66	18	84		305
Tax on total comprehensive income and ordinary activities	(21)	-	(21)		(13)	-	(13)		3
Return attributable to equity shareholders	86	205	291		53	18	71		308

INCOME STATEMENT
for the six months ended 30 June 2017

'H' Shares	Six months ended 30 Jun 2017				Six months ended 30 Jun 2016				Year ended 31 Dec 2016
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	226	-	226		202	-	202		355
Gains/(losses) on investments
- realised	-	-	-		-	-	-		-
- unrealised	-	61	61		-	88	88		53
	226	61	287		202	88	290		408
Investment management fees	(116)	-	(116)		(120)	-	(120)		(239)
Other expenses	(43)	-	(43)		(32)	-	(32)		(61)
Return on ordinary activities before taxation	67	61	128		50	88	138		108
Taxation on total comprehensive income and ordinary activities	(13)	-	(13)		(10)	-	(10)		(11)
Return attributable to equity shareholders	54	61	115		40	88	128		97

INCOME STATEMENT
for the six months ended 30 June 2017

'J' Shares	Six months ended 30 Jun 2017				Six months ended 30 Jun 2016				Year ended 31 Dec 2016
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	99	-	99		37	-	37		42
Losses on investments
- realised	-	(6)	(6)		-	-	-		-
- unrealised	-	28	28		-	-	-		(84)
	99	22	121		37	-	37		(42)
Investment management fees	(100)	-	(100)		(104)	-	(104)		(208)
Other expenses	(39)	-	(39)		(45)	-	(45)		(96)
Loss on ordinary activities before taxation	(40)	22	(18)		(112)	-	(112)		(346)
Tax on total comprehensive income and ordinary activities	8	-	8		22	-	22		52
Loss attributable to equity shareholders	(32)	22	(10)		(90)	-	(90)		(294)

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2017

	30 Jun 2017								30 Jun 2016		31 Dec 2016
		'D' Shares		'F' Shares	'H' Shares	'J' Shares	Total		Total		Total
Note		£'000		£'000	£'000	£'000	£'000		£'000		£'000
Net cash (outflow)/inflow from operating activities	1		3	(30)	99	(113)	(41)		278		(3)
Cash flows from investing activities
Purchase of investments		-		(194)	-	(1,307)	(1,501)		(13,650)		(14,950)
Sale of investments		245		370	-	3,044	3,659		4,450		7,401
Net cash inflow/(outflow) from investing activities		245		176	-	1,737	2,158		(9,200)		(7,549)
Net cash inflow/(outflow) before financing activities		248		146	99	1,624	2,117		(8,922)		(7,552)
Cash flows from financing activities
Purchase of own shares		-		-	-	(14)	(14)		-		-
Equity dividends paid		(1,347)		(271)	(336)	-	(1,954)		(6,083)		(6,690)
Net cash (outflow)/inflow from financing		(1,347)		(271)	(336)	(14)	(1,968)		(6,083)		(6,690)
Increase/(decrease) in cash	2	(1,099)		(125)	(237)	1,610	149		(15,005)		(14,242)

NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2017

		30 Jun 2017						30 Jun 2016		31 Dec 2016
		'D' Shares	'F' Shares	'H' Shares	'J' Shares	Total		Total		Total
		£'000	£'000	£'000	£'000	£'000		£'000		£'000
1 Cash inflow from operating activities and returns on investments
Return/(loss) on ordinary activities before taxation		71	312	128	(18)	493		100		266
Corporation tax paid		-	-	-	-	-		12		(171)
Losses/(gains) on investments		(64)	(205)	(61)	(22)	(352)		(157)		(580)
Decrease/(increase) in other debtors		-	(160)	28	(59)	(191)		375		498
(Decrease)/increase in other creditors		(4)	23	4	(14)	9		(52)		(16)
Net cash inflow/(outflow)    from operating activities		3	(30)	99	(113)	(41)		278		(3)
2 Analysis of net funds
Beginning of period		1,339	357	609	32	2,337		16,578		16,579
Net cash (outflow)/inflow		(1,099)	(125)	(237)	1,610	149		(15,005)		(14,242)
End of period		240	232	372	1,642	2,486		1,573		2,337

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1. General information
Downing Three VCT plc ("the Company") is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales.

2. Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2017 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2016, which were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland ("FRS 102").

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

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

5. The comparative figures are in respect of the six month period ended 30 June 2016 and the year ended 31 December 2016 respectively.

6. Dividends

			Six months ended 30 June 2017				Year ended 31 Dec 2016
	Per share		Revenue	Capital	Total		Total
Paid in period	pence		£'000	£'000	£'000		£'000
'C' Shares
Special 'C' 2016	30.5p		-	-	-		2,184
Special 'A' 2016	14.8p		-	-	-		1,596
			-	-	-		3,780
'D' Shares
Y/E Dec 2016 Final	13.5p		-	1,347	1,347		-
Y/E Dec 2015 Final	17.0p		-	-	-		1,697
			-	1,347	1,347		1,697
'F' Shares
Y/E Dec 2016 Final	2.5p		-	271	271		-
Y/E Dec 2015 Final	2.5p		-	-	-		271
Y/E Dec 2015 Interim	2.5p		-	-	-		270
			-	271	271		541
'H' Shares
Y/E Dec 2016 Final	2.5p		-	336	336		-
Y/E Dec 2015 Final	2.5p		-	-	-		336
Y/E Dec 2015 Interim	2.5p		-	-	-		336
			-	336	336		672

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

7. Basic and diluted return per share

	Weighted average number of shares in issue		Revenue return/(loss)			Capital return
			£'000	Per share		£'000	Per  share
'D' Shares	9,979,109		(22)	(0.2p)		98	1.0p
'E' Shares	14,994,862		-	-		-	-
'F' Shares	10,821,660		86	0.8p		205	1.9p
'H' Shares	13,446,972		54	0.4p		61	0.5p
'J' Shares	10,718,653		(32)	(0.3p)		22	0.2p
			86			386

8. Net asset value per share

	Shares in issue		Net asset value
			£'000		Per Share
'D' Shares	9,979,109		2,352		23.7p
'E' Shares	14,994,862		15		0.1p
'F' Shares	10,821,660		7,530		69.6p
'H' Shares	13,446,972		11,371		84.6p
'J' Shares	10,718,815		10,256		95.7p
			31,524

9. Reserves

	Period ended  30 June 2017		Year ended 31 Dec  2016
	£'000		£'000
Capital redemption reserve	124		106
Special reserve	8,017		9,888
Share premium reserve	24,639		24,639
Revaluation reserve	(481)		(790)
Capital reserve-realised	(1,039)		(1,033)
Revenue reserve	204		132
	31,464		32,942

The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £1,570,000 which are included in the calculation of distributable reserves. Total distributable reserves are £5,612,000 (31 Dec 2016: £7,407,000).

10. The fair value of investments is determined using the detailed accounting policy set out in the statutory accounts for the year ended 31 December 2016.

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

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

	Level a	Level b	Level  c (ii)	Period ended  30 June  2017		Level a	Level  b	Level  c (ii)	Year ended 31 Dec 2016
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Loan notes	-	-	5,794	5,794		-	-	6,201	6,201
Unquoted equity	-	-	23,232	23,232		-	-	24,635	24,635
	-	-	29,026	29,026		-	-	30,836	30,836

11. The unaudited condensed financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2016 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

12. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board as well as in accordance with FRS 104 Interim Financial Reporting and the half-yearly financial report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.
             
13. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

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

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

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

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

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

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