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Downing Income VCT 3

24 January 2012

New £20m Generalist VCT offer now open for subscription

Downing has just launched a new £20m Generalist VCT offer - Downing Income VCT 3. The offer seeks to provide investors with an attractive long-term, tax-free income of 7.1% p.a. with the first dividend expected to be paid by September 2012. Details of the offer are listed below and here: Downing Income VCT 3

• Generalist VCT: The Trust is seeking to take advantage of the growth potential of attractive businesses currently available because of the lack of alternative sources of finance. As a Generalist VCT, the Trust has greater flexibility, compared to planned exit VCTs, to hold investments until the most opportune time to exit.
• 7.1% p.a. target tax-free yield: The Trust has a stated objective of paying annual dividends of at least 5p per share. This represents a tax-free income of 7.1% p.a. based on the net offer price of 70p per share (100p less 30% income tax relief). It should be noted that dividend levels are not guaranteed.
• Managing risk: It is intended that 75% of the qualifying investments will be made in companies that own substantial assets (such as children's nurseries, health clubs), in order to reduce risk. The balance will be held in higher risk/higher growth investments.
• Tax relief: 30% income tax relief will be available on amounts subscribed, provided the shares are held for at least five years. The tax reliefs are subject to change and withdrawal (in the event of a breach of the VCT rules). The value of the VCT tax reliefs will depend on personal circumstances.
• Fair price on exit: The Trust has a policy of buying Shares at nil discount to Net Asset Value for the first five years and from year eight onwards. Share buybacks in years six and seven will be undertaken at a 15% and 7.5% discount to NAV respectively. This policy is subject to the availability of sufficient financial resources and regulations.

Risk Factors: Your attention is drawn to the risk factors on page 1 of the Securities Note. An investment in a VCT is only suitable for investors who are capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss which might arise. Before making any decision to invest contact your financial adviser. The key risks are set out below:

• Tax reliefs: the availability of the tax reliefs depends on the companies invested in maintaining their qualifying status. If the Trust does not maintain VCT qualifying status investors could lose the upfront 30% income tax relief and all other tax reliefs. All tax reliefs are subject to change in the future and personal circumstances. Please refer to HM Revenue & Customs' website for further guidance on the tax reliefs available on VCT investments.
• Liquidity: it may prove difficult for shareholders to sell their shares at a fair price, or at all. 
• Investment performance: the Trust will invest in small unlisted companies which, by their nature, are higher risk than larger "blue-chip" companies. Shares in such companies may be difficult to sell. Past performance is not a reliable indicator of future performance.
• Speculative risk: the value of shares may go down as well as up and shareholders may not receive back the full amount invested. In addition, there is no certainty as to the level of dividends.