Result of AGM

Downing TWO VCT plc
LEI: 213800HJGTPW7F8YEY55
Result of AGM
23 September 2010

At the Annual General Meeting (“AGM”) of Downing THREE VCT plc held on 23 September 2020, all resolutions were passed.

Details of the proxy votes in respect of the resolutions passed at the AGM received as at 11:00 a.m. on 21 September 2020, 48 hours before the time of the meeting (excluding weekends), at the receiving agent, Downing LLP, are set out below:

	For	Discretionary	Against		Withheld
Resolution No.	No. of	No. of	No. of	Total	No. of
	Votes	Votes	Votes	Votes Cast	Votes
	% of votes	% of votes	% of votes	% of votes
1	5,120,509	51,591	68,750	5,240,850	4,962
	97.70%	0.98%	1.31%	99.99%
2	4,436,256	74,136	387,338	4,897,730	348,082
	90.58%	1.51%	7.91%	100.00%
3	4,282,145	64,311	481,774	4,828,230	417,582
	88.69%	1.33%	9.98%	100.00%
4	4,884,960	51,591	270,374	5,206,925	38,887
	93.82%	0.99%	5.19%	100.00%
5	4,737,802	56,491	328,720	5,123,013	122,799
	92.48%	1.10%	6.42%	100.00%
6	4,721,682	56,491	333,845	5,112,018	133,794
	92.36%	1.11%	6.54%	100.00%
7	4,901,090	142,913	143,859	5,187,862	57,950
	94.47%	2.75%	2.77%	99.99%

A copy of the resolutions passed will be submitted to the National Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism

In view of the ongoing social distancing restrictions, the AGM was held as a closed meeting. The Board requested that shareholders submit any questions prior to the meeting. The board commented on the issues raised as follows:

G Share pool - Poor performance of a number of investments – Hermes, Apex and Zora
Hermes sought to develop a wood pelleting plant but encountered major issues. Zora was set up to distribute wood pellets to be supplied by Hermes. The investment decision was based upon the successful construction of a comparable plant by the same management team in Austria, however the management team struggled with UK construction practices and was unable to build the plant to the assumed cost and time budget and the project has become unviable. The Investment Manager is now seeking to sell the site to a third party as this is believed to be the best route to recover any value.

Apex Energy was a reserve energy plant which was constructed by a development partner with whom Downing had previously worked successfully on solar installations. The scheme relied upon sourcing previously used engines. Upon commissioning one engine failed and investigations showed that all the engines were unsafe. Although protected by a comprehensive contract, the VCT was unable to recover value from the developer as at that time because the developer was in financial distress. Lawyers were appointed, but the cost of pursuing the developer through the courts was not justified given the chances of a successful recovery.

K Share pool - portfolio diversification
Investing the K Share pool funds was very challenging as new VCT regulations had been brought in, which severely restricted the investments VCTs could make. Part of the planned exit approach was to invest the funds in a reasonably short period to ensure that exits could be achieved in a timely manner. This resulted in a lower diversification level than would have been optimal. The Board and Manager concluded at the time of the investments being made that the risk profile of these investments and the diversification level were acceptable under the circumstances.

Monitoring of overseas investments
The VCT primarily backs the management teams on its investments. On overseas investments, there are regular visits to the overseas locations by Downing executives – For example, several Downing executives have had regular visits to India on the Indian Solar investments. However in that case, the local management team has failed to deliver the same standards that Downing had seen from them on previous projects and Downing has now had to take a more hands-on role and all aspects of the projects are being investigated. A prevailing Indian power price of much lower than forecast by consultants is the key factor in the loss of value on these investments, although delays and adverse local government policy have also been a significant hindrance.

Why no online access to AGM?
The Board believes shareholders have been given a suitable opportunity to question the Board by inviting questions prior to the AGM.

The Board has considered an online option for the AGM, however, has concluded that it is difficult to get such meetings to work smoothly. To properly undertake voting at an online AGM really requires a specialist third party provider to run the meeting and this appears to be an inappropriately expensive cost for the Company. It is also worth noting that many other investment companies much larger than this VCT have also chosen to hold their AGMs in a similar manner, presumably for the same reasons as we have identified.

While the Board accepts that there was no opportunity to put questions to the board and manager without advance warning, the Board and Manager are able to respond perhaps more fully by being able to discuss the matters first.