Downing ONE VCT plc : Final Results

Downing One VCT plc
Final results for the year ended 31 March 2015

FINANCIAL SUMMARY

	31 Mar		31 Mar
	2015		2014
	pence		pence
Net asset value per share ("NAV")	96.9		98.2
Cumulative dividends paid since 12 November 2013	6.0		2.0
Total return (net asset value plus cumulative dividends paid per share)	102.9		100.2
Dividends in respect of financial year
Interim dividend per share	2.0		2.0
Proposed final dividend per share	3.0		2.0
	5.0		4.0

CHAIRMAN'S STATEMENT

I am pleased to present the Company's Annual Report for the year ended 31 March 2015. This has been the first full financial year since the merger of six VCTs which took place in November 2013. The year has seen a solid performance by the quoted portfolio against the background of a weaker AIM market and, despite some provisions being required on the unquoted portfolio, a steady performance by the Company overall.

Net asset value and results
As at the 31 March 2015 year end, the net asset value per share ("NAV") stood at 96.9p, an increase of 2.7p (2.7%) after adding back dividends of 4.0p per share which were paid during the year.

The Income Statement shows a return attributable to equity shareholders for the year of £2.0 million comprising a revenue return of £1.1 million and a capital profit of £947,000.

Dividends
At the time of the merger in November 2013, the Company adopted a policy of seeking to pay annual dividends of at least 4% of net assets per annum.

In view of the level of investment realisations which have taken place in the year and since the year end, the Board is proposing a final dividend of 3.0p per share to be paid on 7 August 2015, subject to Shareholder approval at the forthcoming AGM, to Shareholders on the register at 17 July 2015. This will bring total dividends in respect of the year ended 31 March 2015 to 5.0p per share, which represents a yield of 5.2%.

Investment activity and performance
At the year end, the Company held a portfolio of 99 investments.  Of these, 30 are either quoted on AIM or the ISDX Growth Market and have a value of £25.6 million (32% of the portfolio). The 69 unquoted investments have a value of £43.6 million and represent 68% of the portfolio.

There was a significant level of portfolio activity during the year. In the quoted portfolio, full or partial disposals of 13 investments were achieved, giving rise to total proceeds of £3.6 million and realised gains of £442,000 million. Two new quoted investments and six follow-on investments were also made at a total cost of £1.8 million.

In the unquoted portfolio, there were 16 realisations, producing proceeds of £4.5 million and realised gains of £621,000. 11 follow-on investments were made at a total cost of £2.6 million and four new investments at £3.0 million.  In addition, a number of care home investments underwent a reorganisation such that they are now all held under one holding company.

In respect of the existing portfolio, the quoted portfolio showed net gains of £2.3 million over the year. At the year end, the Board reviewed the valuations of the unquoted investments and made a number of adjustments. Overall the unquoted portfolio showed total unrealised losses of £1.5 million for the year.  Net unrealised gains for the full portfolio were therefore £789,000.

Fundraising
In December 2014, the Company launched an offer for subscription seeking to raise new funds. The offer has raised £10.0 million to date and is now scheduled to close on 30 June 2015.

The new funds provide the Company with additional liquid resources to pursue new investment opportunities. In view of the success of this fundraising and continued investment opportunities, the Board is making some provisional plans for a new launch for the 2015/16 tax year.

Share buybacks
The Company operates a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

During the year, the Company purchased 3.0 million Ordinary Shares at an average price of 92.1p per share.

The Company retains Panmure Gordon as its corporate broker to assist in operating the share buyback process and ensuring that the quoted spread on the Company's shares remains at a reasonable level. Contact details for Panmure Gordon are on the inside back cover of this report.

Dividend Reinvestment Scheme
The Company has received a number of enquiries from Shareholders as to whether the Company operates Dividend Reinvestment Scheme ("DRIS"). Historically this has not been the case, however, now that the Company is substantially larger than it used to be, the Board has decided to introduce such a scheme to allow shareholders the option of reinvesting their dividends in new VCT shares and benefitting from further 30% income tax relief on their reinvested sum.

Full details are being sent to Shareholders with the Annual Report. In order for the forthcoming dividend to be reinvested, Shareholders will need to return the DRIS form to Downing LLP by 17 July 2015. A resolution will be put to Shareholders at the forthcoming AGM to approve a standing authority to issue shares under the DRIS.

Annual General Meeting
The Company's next Annual General Meeting ("AGM") will be held at Downing LLP, Fifth Floor, Ergon House, Horseferry Road, London, SW1P 2AL at 10:30 a.m. on 27 July 2015.

Five items of special business are proposed at the AGM:
      *two in respect of the allotment of shares,
      *one in respect of the allotment shares under the DRIS as described above,
      *one in respect of the authority to buy back shares as noted above, and
      *one to cancel the Company's share premium account.

The resolutions in respect of the allotment of shares would allow the Board to consider launching a new offer for subscription for up to approximately £30 million without the Company having to incur the costs of an additional shareholder circular. The Board will, of course, assess any such plan in detail before deciding to proceed.

Outlook
Although there have been some setbacks, the portfolio in general has become more stable over the last year and we believe now provides a solid foundation for the future. The unquoted portfolio should be able to continue to generate annual investment income while targeting a moderate level of growth.

The quoted investments are perhaps more sensitive to market conditions but with continued careful management have the potential to deliver further growth. The task of rationalising the quoted portfolio will continue over the next year, as and when suitable exit opportunities from non-core investments arise. This, along with the funds raised from the recent fundraising, should ensure that the Company has sufficient liquid resources to take advantage of new good quality investment opportunities as they arise.

Chris Kay
Chairman

INVESTMENT ADVISER'S REPORT

Introduction
The following is a review of the performance of the combined investment portfolio.

At 31 March 2015, the Company held a portfolio of investments in 99 quoted and unquoted companies, valued in total at £69.2 million. Many of the Company's investments are performing well or to plan and we are pleased to report that good uplifts were made within the quoted portfolio which contributed significantly to the NAV performance.

Net asset value and results
The NAV per Share at 31 March 2015 stood at 96.9p, compared to the NAV at 31 March 2014 of 98.2p. Total Return (NAV plus cumulative dividends paid since the merger) is 102.9p.

The return on ordinary activities after taxation for the year was £2,002,000, comprising a revenue return of £1,055,000 and a capital profit of £947,000.

Unquoted Venture Capital investments
Investment activity
At 31 March 2015, the unquoted portfolio was valued at £43.6 million, comprising 69 investments, spread across a number of sectors.

In the year, Bowman Care Homes Limited, Downing (Alton) Limited and Downing (Pirbright Road) Limited were re-organised under existing portfolio company, Blue Cedars Holdings Limited to create a group of care homes. This was subsequently renamed Downing Care Homes Holdings Limited. This transaction is shown within the accounts as a £2.6m investment and an equal and opposite £2.6m disposal. These two figures have been excluded from the following analysis.

Over the year, the Fund made investments totalling £3.7 million. One new non-qualifying investment of £2.0 million was made in UK Solar (Hartwell) LLP. The company has built an 18MW solar plant in Hartwell, Northamptonshire. The fund made eight follow on investments in the year totalling £1.7m and the most significant of these were as follows:

      *£607,000 was invested in Pabulum Pubs Limited, a company setup to purchase and refurbish freehold pubs in London;

      *£420,000 in Oak Grove Renewables Limited, an anaerobic digestion plant in Norfolk;

      *£265,000 in Vulcan Renewables Limited, an anaerobic digestion plant near Doncaster;

      *£130,000 in Ludorum, the previously quoted owner of the IP of "Chuggington"; and

      *£100,000 in software company Rostima Limited.

The above investments were partially funded by disposals in the year which generated proceeds of £1.9 million. Details of the disposals are below.

Three full exits completed in the period: Hoole Hall Hotel Limited generated proceeds of £272,000; Ridgeway Pub Limited, the owner and operator of two pubs in Oxfordshire, was sold in March 2015 and generated proceeds of £150,000; and the exit process of EPI Services Limited completed a final liquidation payment made of £51,000 during the period.

Loan note repayments totalling £1.2 million were received on nine investments, all of which were at or above par: £425,000 in Data Centre Response Limited; £250,000 in Tramps Nightclub Limited; £118,000 in Aminghurst Limited; £103,000 in SPC International; £100,000 in First Care Limited; £68,000 in Gatewales Limited; £64,000 in Dominions House Limited; £47,000 in The Leytonstone Pub Limited; and £34,000 in Redmed Limited.

Portfolio valuation
The majority of the investments within the Fund have performed to plan in the year and there have been several valuation uplifts totalling £2.0 million. Unfortunately a few investments have experienced significant write downs in value which has resulted in a net valuation decrease of £1.5 million. The largest valuation movements are discussed below.

Vulcan Renewables Limited owns and operates a 2.0MW anaerobic digestion plant near Doncaster. Some of the gas produced is used to create electricity and most of it is injected into the National Gas Grid for which renewable heat incentive payments are received. Continued good performance at the site has led to an increase in the valuation of £517,000.

The Leytonstone Pub Limited owns The Red Lion pub in Leytonstone. Performance at the site has been strong, justifying an increase in value of £300,000 over the period.

Performance has improved at Tramps Nightclub Limited, a night club complex in central Worcester, and an increase in value of £174,000 has been recognised.

Following an offer to buy the business, the value of SPC International, the electronic equipment repairer, was increased by £175,000.

The care home business operated by Downing Care Homes Limited has performed well in the period and an uplift in value of £150,000 has been made.

Data Centre Response Limited, the maintenance provider to third party owned data centres, has outperformed its budget in the period and a valuation increase of £118,000 has been recognised.

Slopingtactic Limited, the owner of the Lamb and Lion freehold pub in York, has demonstrated good performance in the year and the value has been increased by £102,000. This investment was fully exited in April 2015.

We have disposed of both Chapel Street Food and Beverage Limited and Chapel Street Services at the small increase above their year- end carrying values in June 2015.

Performance of the solar arrays at Wickham Solar Limited continues to be positive and resulted in an uplift in the value of £78,000 in the period.

An offer was received to purchase the shares of formerly quoted investment Keycom which increased the value of the business by £89,000. The purchase has since completed.

The profits of Alpha Schools Holdings Limited, the independent primary school operator, have also continued to increase and the value has been increased by £52,000 to reflect this.

The positive valuation movements above have been offset by disappointing performances of several large investments. These are described in detail below.

Rostima Limited, the software business based in Maidenhead, Berkshire, has experienced significant delays in contracts being signed and as a result a reduction in value of £783,000 has been made.

Formerly quoted investment, Ludorum Limited is the owner of the IP of "Chuggington" the popular under 5-year olds media title. The company saw its value fall by £717,000 in the period. This was reflective of a highly illiquid market in the shares of Ludorum and the company has been de-listed.

Hoole Hall Country Club Holdings Limited and Hoole Hall Spa and Leisure Limited own and operate the restaurant, conferencing centre, and spa and health club facilities at Hoole Hall alongside a large DoubleTree by Hilton hotel in Chester. Below budget performance in the year has resulted in the valuation of Hoole Hall Spa and Leisure being reduced by £439,000 and Hoole Hall Country Club Holdings by £586,000.

Future Biogas (Reepham Road) Limited and Future Biogas (Spring Farm) Limited are the owners and operators of two separate biogas plants in Norfolk. Both have underperformed against initial expectations and while the issues have now been resolved, performance to date is notably below plan. This has resulted in a decrease in the valuation of £427,000 and £401,000 respectively.

Performance at all three pubs owned and managed by Pearce and Saunders Limited has been disappointing in the year and a value reduction of £370,000 has been recognised.

Mosaic Spa and Health Clubs Limited owns and manages two health clubs: The Shrewsbury Club, in Shrewsbury; and Holmer Park in Hereford. It also provides gym and spa management services to hotels, universities and corporate clients. Both Holmer Park and the Shrewsbury club have underperformed against expectations throughout the period and the value has been reduced by £223,000.

Quoted investments
Investment Activity
As at 31 March 2015, the quoted portfolio was valued at £25.6 million comprising of 30 holdings. As per the investment strategy to concentrate on a more focused portfolio of investments, eight investments were fully disposed of in the period. Over 45% of the quoted portfolio is accounted for in the top 10 holdings and represents 32% of the overall fund.

Over the period since 31 March 2014, the valuation of the quoted portfolio (taking into account realised and unrealised) is up over 11.0%, well ahead of the main AIM indices over the same period which were down by approximately 15.0%.

Eight full realisations were made, one being subject to tender offers or takeovers and the balance being in companies where we believed the valuations were not reflective of the prospects of the company. These included Afraig plc, Bglobal plc, Concha plc, Corac plc, H&T Group plc and Octagonal plc. Aside from H&T Group plc, these were legacy investments which we inherited.  Separately, profits were taken in four portfolio holdings (Frontier IP plc, Inland Home plc, Science in Sport plc and Tracsis plc). Overall the realised gains (versus cost) on quoted investments since 31 March 2014 equated to £1.4 million.

A new non-qualifying position was taken in Finsbury Foods Plc, a manufacturer and distributor of cake and bakery products. Since the position was taken, it has demonstrated a gain of £222,000 over cost.  In addition, a small portfolio position was taken in Northbridge Industrial Services Plc (a manufacturer/distributor and leaser of power load banks).  This position is showing a small loss on the original investment cost.

The renewed interest in the quoted small companies market was reflected in the significant number of new AIM IPOs and secondary fund raisings. Although we welcome this activity, the Fund once again elected not to invest in these new offerings. It is our view that the valuations of these fundraisings were not aligned with the quality of many of the companies coming to market.  This adversely affects the risk profile of the investment and hence we have elected to focus on those companies that we already know well within the quoted portfolio.  However two new holdings were introduced to the portfolio over the period, all of whom were non-qualifying investments and companies that had been on our "watch" list for some time. 

Portfolio Movements
The most significant portfolio movement was Accumuli plc which demonstrated an unrealised gain of £1.0 million in the year to 31 March 2015.  At the year end, this holding is valued at £3.8 million and is one of the largest holdings within the Company.  Post the period end, Accumuli plc was sold to NCC Group plc, a larger competitor.  Shareholders of Accumuli have crystallised part of their Accumuli holding in cash at a c. 10% premium to the levels reflected at 31 March 2015 and are now holders of NCC Group plc.  Post period end, the holding in NCC Group plc has been sold down in part.

Tracsis plc is a developer and supplier of resource optimisation technologies to the transport industry, supplying a range of products and services to transport operators and infrastructure owners. The company is well known to us having been a holding since 2011. Continued positive news flow allowed us to revisit the target valuation for the company and we believe that the current valuation underestimates the value of future cash flows that the company can generate. However some gains were taken in the holding, realising £1.0 million, a £720,000 gain on the initial cost.  The holding continues to be material and accounts for 4.4% of the total portfolio.

Plastics Capital plc, the manufacturer and distributor of specialist plastic extrusions, saw its value within the portfolio decrease by £360,000 reflecting caution regarding input prices.  We believe that this concern has been overdone and continue to maintain the holding.

The UKs largest manufacturer and distributor of fire protection products, Sprue Aegis plc, saw its value in the portfolio increase by £563,000 in the year, versus a cost of £545,000.  The Company raised £8.0 million for working capital to fund growth when it moved from ISDX to AIM post the end of the period.  The Company increased its holding by £212,000 as part of this fundraising.

Pressure Technologies plc increased its value by £211,000 in the portfolio, reflecting the fundraising and acquisition of Roota Engineering, a specialist engineer in the oil and gas sector.

Science in Sport, the manufacturer of sports nutritional products, saw its value fall by £429,000 in the Fund, reflecting a lack of news flow and small sellers in the market.  Post year end, the company has announced positive trading results evidenced by 24% top line growth, ahead of our expectations. 

Outlook
The continued improvement in the economic environment is welcome for our unquoted portfolio after a challenging few years. More opportunities are arising to allow for both exits and new investments whilst asset values continue to rise. There are some signs that banks and other funding sources are starting to become more active, though not at levels that are expected to impact deal flow significantly.

For the quoted portfolio, we remain positive on the key drivers within the quoted portfolio on the basis of the fundamentals and the valuations on which they trade.  Instead of predicting the outlook for the wider AIM index, we will focus on the existing portfolio and here we hold confidence and optimism for the longer term.

With the recent fundraising and receipts from exits, our overall strategy is to look at a wide range of transactions in both the asset backed arena and growth capital where income and growth can be achieved and risk mitigated.

Downing LLP

REVIEW OF INVESTMENTS

Portfolio of investments
The following investments, all of which are incorporated in England and Wales, were held at 31 March 2015:

	Cost	Valuation	Valuation movement in year	% of portfolio by value	Total invested by Funds also managed by Downing LLP (1)
	£'000	£'000	£'000			£'000
Top ten venture capital investments
Downing Care Homes Holdings Limited (formerly Blue Cedars Holdings Limited)	3,881	4,030	150	5.0%		-
Accumuli plc *	2,395	3,796	1,017	4.7%		266
Tracsis plc *	1,771	3,505	805	4.4%		1,099
Vulcan Renewables Limited	2,680	3,197	517	4.0%		3,589
Baron House Developments LLP	2,695	2,695	-	3.4%		-
Cadbury House Holdings Limited	3,081	2,326	-	2.9%		-
Inland Homes plc *	1,738	2,318	624	2.9%		1,360
Mosaic Spa and Health Clubs Limited	2,747	2,214	(223)	2.8%		3,270
Universe Group plc *	1,706	2,185	71	2.7%		1,305
UK Solar (Hartwell) LLP	2,000	2,000	-	2.5%		2,400
	24,694	28,266	2,961	35.3%		13,289
Other venture capital investments
Anpario plc *	1,446	1,885	270	2.4%		1,119
Science in Sport plc *	1,686	1,781	452	2.2%		1,386
Ludorum plc	3,573	1,741	(717)	2.2%		455
Leytonstone Pub Limited	1,061	1,690	300	2.1%		-
Oak Grove Renewables Limited	1,365	1,365	-	1.7%		945
Kidspace Adventure Holdings Limited	1,216	1,362	10	1.7%		2,611
Sprue Aegis plc *	545	1,308	563	1.6%		1,246
Residential PV Trading Limited	1,060	1,270	30	1.6%		1,000
Plastics Capital plc *	849	1,255	(360)	1.6%		1,518
Domestic Solar Limited	1,008	1,008	-	1.3%		1,800
Quadrate Spa Limited	1,074	988	-	1.2%		1,589
Aminghurst Limited	988	988	-	1.2%		-
Craneware plc *	849	967	18	1.2%		704
Quadrate Catering Limited	966	966	-	1.2%		1,426
Antelope Pub Limited	840	885	16	1.1%		1,050
Finsbury Food Group plc*	655	877	222	1.1%		1,177
Vianet Group plc *	952	855	61	1.1%		-
The 3D Pub Co Limited	710	845	-	1.1%		627
Tramps Nightclub Limited	1,332	807	174	1.0%		-
Pabulum Pubs Limited	807	807	-	1.0%		-
Angle plc *	677	740	(40)	0.9%		-
Future Biogas (Reepham Road) Limited	1,123	696	(427)	0.9%		1,662
Data Centre Response Limited	558	676	118	0.8%		-
Alpha Schools (Holdings) Limited	585	637	52	0.8%		733
Future Biogas (SF) Limited	943	622	(401)	0.8%		1,009
Kimbolton Lodge Limited	664	604	(60)	0.8%		-
Norman Broadbent plc *	906	602	(287)	0.8%		452
First Care Limited	843	568	-	0.7%		-
Redmed Limited	580	552	(27)	0.7%		850
Wickham Solar Limited	472	550	78	0.7%		945
Curo Compensation Limited	525	525	-	0.6%		-
Angel Solar Limited	500	500	-	0.6%		500
Cohort plc*	393	497	195	0.6%		-
Liverpool Nurseries (Holdings) Limited	478	461	-	0.6%		870
Slopingtactic Limited	380	482	102	0.6%		-
Hoole Hall Country Club Holdings Limited	2,316	428	(586)	0.5%		-
Fresh Green Power Limited	400	400	-	0.5%		200
Brady public limited company*	272	395	69	0.5%		-
Pearce & Saunders Limited	739	369	(370)	0.5%		200
Progressive Energies Limited	320	358	38	0.5%		1,740
SPC International Limited	180	355	175	0.4%		-
Dillistone Group plc *	411	355	(28)	0.4%		-
Fenkle Street LLP	346	346	-	0.4%		212
Fubar Stirling Limited	357	341	(16)	0.4%		1,072
Sanderson Group plc*	336	323	(3)	0.4%		846
Hoole Hall Spa and Leisure Club Limited	1,467	322	(439)	0.4%		-
Pennant International Group plc*	335	321	(101)	0.4%		-
Flowgroup plc *	207	306	(86)	0.4%		-
Augusta Pub Company Limited	290	290	-	0.4%		-
City Falkirk Limited	326	275	-	0.4%		1,686
Kidspace Adventures Limited	260	260	-	0.3%		539
Brooks Macdonald Group plc*	257	257	(24)	0.3%		505
Interquest Group plc*	229	255	(17)	0.3%		-
Avacta Group plc*	247	238	(84)	0.3%		-
Northbridge Financial Services plc	254	228	(26)	0.3%		1,639
Green Energy Production UK Limited	200	200	-	0.2%		100
Chapel Street Food and Beverage Limited	97	194	97	0.2%		75
Chapel Street Services Limited	97	194	97	0.2%		75
Camandale Limited	297	189	(77)	0.2%		1,017
PHSC plc*	156	155	(6)	0.2%		-
Gatewales Limited	152	152	-	0.2%		-
Pressure Technologies plc*	249	146	(314)	0.2%		503
Commercial Street Hotel Limited	115	115	-	0.1%		185
Giving Limited	83	83	-	0.1%		-
Leytonstone Pub no 1 Limited	81	81	-	0.1%		-
London City Shopping Centre Limited	79	79	-	0.1%		50
Dominions House Limited	78	78	-	0.1%		98
Keycom plc	817	91	89	0.1%		-
Kilmarnock Monkey Bar Limited	113	68	(45)	0.1%		-
Mi-Pay Group plc*	136	67	(20)	0.1%		-
Concha plc*	2	65	59	0.1%		-
Pro Global Insurance Solutions plc*	61	61	8	0.1%		-
Frontier IP Group plc*	31	47	(13)	0.1%		-
Wheelsure Holdings plc**	70	44	(39)	0.1%		-
Cheers Dumbarton Limited	64	22	-	-		191
Chapel Street Hotel Limited	4	8	4	-		3
VSA Capital Group plc	6	6	-	-		-
Rostima Limited	1,042	-	(783)	-		-
China Food Company plc	149	-	(73)	-		316
Southampton Hotel Developments Limited	395	-	-	-		-
The Thames Club Limited	175	-	-	-		-
Top Ten Holdings plc	399	-	-	-		-
	47,307	40,929	(2,172)	51.1%		36,926
	72,000	69,195	789	86.4%		50,215
Cash at bank and in hand		10,857		13.6%
Total investments		80,052		100.0%

The Company also invested into Heyford Homes VCT Limited, Imagelinx plc, Invocas Group plc, Lochrise Limited, The New Swan Holding Company Limited, Southampton Spa Limited and Antelope Pub no 1 Limited. These investments were acquired at negligible value and continued to be valued at the same level.

All venture capital investments are unquoted unless otherwise stated

*       Quoted on AIM          
**     Quoted on the ISDX Growth Market
               
(1)Other funds also managed by Downing LLP as Investment Manager or Adviser as at 31 March 2015:

·Downing Planned Exit VCT 2011 plc
·Downing Structured Opportunities VCT 1 plc
·PFS Downing UK Micro-Cap Growth Fund
·Downing AIM Estate Planning Service and Downing AIM NISA

Investment movements for the year ended 31 March 2015

Additions

	£'000
Quoted
Finsbury Food Group plc	655
Northbridge Industrial Services plc	254
Angle plc	225
Sprue Aegis plc	212
Norman Broadbent plc	198
Science in Sport plc	151
Anpario plc	150
Tracsis plc	2
	1,847
Unquoted
Downing Care Homes Holdings Limited (formerly Blue Cedars Holdings Limited)*	2,612
UK Solar (Hartwell) LLP	2,000
Pabulum Pubs Limited	607
Oak Grove Renewables Limited	420
Vulcan Renewables Limited	265
Ludorum plc	130
Rostima Limited	100
Leytonstone Pub no.1 Limited	81
London City Shopping Centre Limited	79
Kidspace Adventures Holdings Limited	51
Camandale Limited	39
Other sundry investments	1
	6,385
	8,232

* Part of reorganisation of Bowman Care Homes Limited, Downing (Alton) Limited and Downing (Pirbright Road) Limited

Disposals

				Profit/	Realised
		Value at		(loss) vs	gain/
	Cost	01/04/14	Proceeds	cost	(loss)
	£'000	£'000	£'000	£'000	£'000
Quoted
Market sales
Afriaq plc	87	46	30	(57)	(16)
Bglobal public limited company	25	23	49	24	26
Concha plc	26	58	204	178	146
Corac Group plc	107	112	38	(69)	(74)
Frontier IT Group plc	10	20	26	16	6
H&T Group plc	413	463	411	(2)	(52)
IDOX plc	79	260	264	185	4
Inland Homes plc	337	593	729	392	136
Octagonal plc	38	20	23	(15)	3
Science in Sport plc	154	135	180	26	45
Tracsis plc	283	818	1,003	720	185
Tender offers
Hasgrove plc	81	110	110	29	-
Manroy plc	343	528	561	218	33
	1,983	3,186	3,628	1,645	442
Unquoted (including loan note redemptions)
Aminghurst Limited	118	118	118	-	-
Bowman Care Homes Limited**	1,535	1,635	1,535	-	(100)
Cadbury House Holdings Limited	152	131	152	-	21
Data Centre Response Limited	425	425	425	-	-
Dominions House Limited	64	64	64	-	-
Downing (Alton) Limited**	402	402	402	-	-
Downing (Pirbright Road) Limited**	675	675	675	-	-
EPI Services Limited	33	-	51	18	51
First Care Limited	100	100	100	-	-
Gatewales Limited	20	20	68	48	48
Hoole Hall Hotel Limited	270	270	272	2	2
Kidspace Adventures Limited	51	51	51	-	-
Leytonstone Pub Limited	47	47	47	-	-
Redmed Limited	34	34	34	-	-
Ridgeway Pub Company Limited	126	126	150	24	24
Southampton Hotel Developments Limited	5	-	-	(5)	-
SPC International Limited	103	103	103	-	-
Tramps Nightclub Limited	250	162	250	-	88
Liquidations/administrations
Helcim Limited	-	-	45	45	45
	4,410	4,363	4,542	132	179
Total disposals	6,393	7,549	8,170	1,777	621

*       Adjusted for purchases in the year where applicable
**     Part of reorganisation whereby Companies acquired by Downing Care Homes Holdings Limited (see additions)

Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic Report, the Directors' Report, the Directors' Remuneration Report, the separate Corporate Governance Statement 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). 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 and loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

*select suitable accounting policies and then apply them consistently;
*make judgments and accounting estimates that are reasonable and prudent;
*state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; 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 and to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements and the Directors Remuneration Report 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 undertakes and provides the information necessary to assess the Company's performance, business model and strategy.

The Directors are responsible for the oversight of 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.

INCOME STATEMENT
for the year ended 31 March 2015

				2015				2014
		Revenue	Capital	Total		Revenue	Capital	Total
		£'000	£'000	£'000		£'000	£'000	£'000
Income		2,659	-	2,659		1,158	-	1,158
Gains/ (losses) on investments		-	1,410	1,410		-	255	255
Net gain on acquisition of net assets on merger		-	-	-		-	253	253
		-	-	-		1,158	508	1,666
Investment management fees		(676)	(676)	(1,352)		(298)	(379)	(677)
Other expenses		(715)	-	(715)		(488)	-	(488)
Return on ordinary activities before tax		1,268	734	2,002		372	129	501
Tax on ordinary activities		(213)	213	-		(87)	87	-
Return attributable to equity shareholders		1,055	947	2,002		285	216	501
Basic and diluted return per share		1.4p	1.2p	2.6p		0.4p	0.3p	0.7p

All Revenue and Capital items in the above statement derive from continuing operations. The total column within the Income Statement represents the profit and loss account of the Company.

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

Other than revaluation movements arising on investments held at fair value through the Income Statement, there were no differences between the return as stated above and at historical cost.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 March 2015

	2015		2014
	£'000		£'000
Opening Shareholders' funds	74,577		14,005
Issue of share capital on acquisition	-		60,625
Issue of new shares	7,678		2,102
Funds held in respect of shares not yet allotted	1,672		921
Share issue costs	(156)		(57)
Purchase of own shares	(2,802)		(1,531)
Total recognised gains for the year	2,002		501
Dividends paid	(3,054)		(1,989)
Closing Shareholders' funds	79,917		74,577

BALANCE SHEET
as at 31 March 2015

	2015		2014
	£'000		£'000
Fixed assets
Investments	69,195		67,723
Current assets
Debtors	592		509
Cash at bank and in hand	10,857		7,983
	11,449		8,492
Creditors: amounts falling due within one year	(727)		(1,638)
Net current assets	10,722		6,854
Net assets	79,917		74,577
Capital and reserves
Called up share capital	798		750
Capital redemption reserve	1,500		1,470
Share premium account	69,714		62,114
Funds held in respect of shares not yet allotted	2,593		921
Special reserve	7,523		11,458
Capital reserve - realised	-		-
Capital reserve - unrealised	(2,805)		(2,438)
Revenue reserve	594		302
Total equity shareholders' funds	79,917		74,577
Basic and diluted net asset value per share	96.9p		98.2p

CASH FLOW STATEMENT
for the year ended 31 March 2015

	2015		2014
	£'000		£'000
Net cash inflow/(outflow) from operating activities	378		(128)
Taxation
Corporation tax paid	(199)		(169)
Capital expenditure
Purchase of investments	(5,620)		(1,482)
Disposal of investments	5,660		5,397
Net cash inflow from capital expenditure	40		3,915
Acquisitions
Cash acquired	-		4,627
Acquisition costs	(244)		(238)
Net cash (outflow)/ inflow from acquisitions	(244)		4,389
Equity dividends paid	(3,054)		(1,984)
Net cash (outflow)/inflow before financing	(3,079)		6,023
Financing
Proceeds from share issue	6,757		2,102
Funds held in respect of shares not yet allotted	2,593		921
Share issue costs	(156)		(57)
Purchase of own shares	(3,241)		(1,129)
Net cash inflow from financing	5,953		1,837
Increase in cash	2,874		7,860

NOTES TO THE ACCOUNTS
for the year ended 31 March 2015

1. Accounting policies

Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted Accounting Practice and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" January 2009 ("SORP").

The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments.

The Company implements new Financial Reporting Standards issued by the Accounting Standards Board when required.

Presentation of income statement
In order to better reflect the activities of a Venture Capital Trust and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. The net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Investments
Venture capital investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed on a fair value basis, with a view to selling after a period of time, in accordance with the Company's documented investment policy. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV") together with FRS 26.

Investments quoted on recognised stock markets are measured using bid prices.

The valuation methodologies for unlisted instruments (comprising equity and loan notes) 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 the 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.

Where an investee company has gone into receivership, liquidation, or administration where there is little likelihood of a recovery, the loss on the investment, although not physically disposed of, is treated as being realised.

Gains and losses arising from changes in fair value are included in the income statement as a capital item.

It is not the Company's policy to exercise either significant or controlling influence over investee companies. Consistent with FRS 9 and the SORP all portfolio investments are stated at fair value and not using the equity method of accounting. Therefore, the results of these companies are not incorporated into the revenue account except to the extent of any income accrued.

In respect of disclosures required by the SORP for the 10 largest investments held by the Company, the most recent publicly available accounts information, either as filed at Companies House, or announced to the London Stock Exchange, is disclosed. In the case of unlisted investments, this may be abbreviated information only.

Income
Dividend income from investments is recognised when the Shareholders' right to receive payment has been established, normally the ex-dividend date.

Loan stock interest is accrued on a time apportioned basis, by reference to the principal outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection.

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 acquisition of an investment are deducted from the Capital Account.
*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. Since the merger on 12 November 2013, investment management fees are allocated 50% to revenue and 50% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.

Taxation
The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.

Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments.

Deferred taxation is not discounted and 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 the obligations or rights crystallise based on tax rates and law enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts. Deferred tax assets are only recognised if it is expected that future taxable profits will be available to utilise such assets and are recognised on a non-discounted basis.

Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less.

Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

Share issue costs
Share issue costs have been deducted from the special reserve account.

Funds held in respect of shares not yet allotted
Cash received in respect of applications for new shares that have not yet been allotted is shown as "Funds held in respect of shares not yet allotted" and recorded on the Balance Sheet.

Segmental reporting
The Company only has one class of business and one market.

2. Basic and diluted return per share

	2015		2014
Return per share based on:
Net revenue return for the financial year (£'000)	1,055		285
Capital return per share based on:
Net capital gain for the financial year (£'000)	94		216
Weighted average number of shares in issue	76,191,863		74,326,968

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share. The return per share disclosed therefore represents both basic and diluted return per share.

3. Basic and diluted net asset value per share

		Shares in issue	Net assets	NAV per share
			£'000	pence
As at  31 March 2015	Ordinary Shares	79,798,496	77,324	96.9
	Funds held in respect of shares not yet allotted		2,593
			79,917
As at 31 March 2014	Ordinary Shares	75,007,105	73,656	98.2
	Funds held in respect of shares not yet allotted		921
			74,577

As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset value per class of share in issue. The net asset value per share disclosed therefore represents both basic and diluted net asset value per class of share in issue.

4. Principal risks
The Company's investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company's operations are:

*Investment risks;
*Credit risk; and
*Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year.

The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year-end are provided below:

Investment 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 Adviser and overseen by the Board. The Investment Adviser 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 Investment Adviser 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; and
*Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price risk
Investment price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through investment price movements in respect of quoted investments and also 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 and fixed interest securities attract interest predominately at fixed rates. A summary of the interest rate profile of the Company's investments is shown below.

Interest rate profile of financial assets and financial liabilities
There are three levels of interest which are attributable to the financial instruments as follows:

*"Fixed rate" assets represent investments with predetermined yield targets and comprise fixed interest and loan note investments.
*"Floating rate" assets predominantly bear interest at rates linked to Bank of England base rate and comprise cash at bank.
*"No interest rate" assets do not attract interest and comprise equity investments, non-interest bearing convertible loan notes, loans and receivables (excluding cash at bank) and other financial liabilities.

The Company monitors the level of income received from fixed, floating and non interest 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 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, investments in fixed interest securities, cash deposits and debtors.

The Investment Adviser manages credit risk in respect of loan notes with a similar approach as described under investment risks above. In addition the credit risk is partially mitigated by registering floating charges over the assets of certain 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. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held at Royal Bank of Scotland plc, with a balance also maintained at Bank of Scotland plc, both of which are A-rated financial institutions and ultimately part-owned by the UK Government. Consequently, the Directors consider that the credit risk associated with cash deposits is low.

There have been no changes in fair value during the year that can be directly attributable to changes in credit risk.

Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company only normally ever has a relatively low level of creditors (2015: £727,000, 2014: £1,638,000) and has no borrowings. Also most quoted investments held by the Company are considered to be readily realisable. The Company always holds sufficient levels of funds as cash and readily realisable investments 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 Adviser in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

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 March 2015, but has been extracted from the statutory financial statements for the year ended 31 March 2015 which were approved by the Board of Directors on 26 June 2015 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 year ended 31 March 2014 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 March 2015 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at Ergon House, Horseferry Road, London SW1P 2AL and will be available for download from and www.downing.co.uk

---

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Downing ONE VCT plc via Globenewswire

HUG#1932161