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Thames Ventures Vct 2 Plc LSE:D467 London Ordinary Share GB00BWX53D91 DP67 ORD 0.1P
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Downing FOUR VCT plc Final Results

25/07/2022 6:28pm

UK Regulatory (RNS & others)


Thames Ventures Vct 2 (LSE:D467)
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From Jun 2022 to Dec 2022

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DOWNING FOUR VCT PLC

LEI: 21380035MV1VRYEXPR95

Final Results for the year ended 31 March 2022

25 July 2022

Financial Highlights

 
                                                   Audited   Audited 
                                                   31 March  31 March 
                                                     2022      2021 
                                                    pence     pence 
 
Ventures Share pool 
Net Asset Value ("NAV") per Ventures Share            68.20      67.2 
Cumulative distributions                               5.25       2.5 
Total Return per Ventures Share                       73.45      69.7 
 
Healthcare Share pool 
Net Asset Value ("NAV") per Healthcare Share          84.40      68.5 
Cumulative distributions                               5.25       2.5 
Total Return per Healthcare Share                     89.65      71.0 
 
AIM Share pool 
Net Asset Value ("NAV") per AIM Share                  99.9       n/a 
Cumulative distributions                                  -       n/a 
Total Return per AIM Share                             99.9       n/a 
 
DSO D Share pool 
Net Asset Value ("NAV") per DSO D Share                 2.6      10.2 
Cumulative distributions                              102.0      94.5 
Adjusted for Performance Incentive estimate               -     (0.5) 
Total Return per DSO D Share                          104.6     104.2 
 
DP67 Share pool 
Net Asset Value ("NAV") per DP67 Share                 26.8      18.4 
Cumulative distributions (since original launch)       67.8      67.8 
Total Return per DP67 Share                            94.6      86.2 
 
 

Chairman's Statement

Introduction

I present the Company's Annual Report for the year ended 31 March 2022.

As I reported to you in my half year Statement, this has been a busy year for your Company, with the creation of the new AIM share class and the offer for subscription which launched in September and closed at the end of May. We also had some changes on the Board and have continued to make good progress in investing the evergreen portfolios.

As the pandemic restrictions have gradually been lifted over the course of the year, we have seen an increase in investment activity and improvement in the performance of some investments which had stalled under the impact of Covid.

Management Arrangements

As Shareholders may be aware, in June 2022 it was announced that Downing LLP, our investment manager, had agreed to sell its technology ventures division to Foresight Group LLP ("Foresight"). As a result, the main executives from Downing LLP's technology ventures team will move to Foresight and the Board has consented to the novation of the investment management agreement to Foresight.

The Board had extensive discussions with Downing LLP and Foresight and satisfied itself that the transaction was in the best interests of Shareholders. The Company will benefit in future from the continuity of key investment executives as well as the substantial resources of the Foresight Group. Along with these changes, the Company plans to change its name to:

Thames Ventures VCT 2 plc

This is planned to take place on or around 31 August 2022.

Foresight is a quoted fund management business, with GBP8.7 billion of funds under management and long-standing experience in the VCT sector. We believe the scale of its operation, its resources as a quoted business and its expertise in the VCT market, means it is well placed to support the ongoing development of Downing FOUR VCT plc. Foresight has 12 offices around the UK and should be able to source more new deals than at present and should have greater ability to raise funds in future.

The management of the Healthcare share pool will remain with Downing LLP, as Downing retains a well-resourced healthcare team. Downing LLP will also provide investment management services for the non-ventures investments (primarily those in the planned exit and AIM share pools) and administration services to the Company for at least six months. This will cover the period while the planned exit share pools are wound up.

Fundraising

As noted in the half yearly report, a new offer for subscription was launched in September 2021. The offer closed after the year end, on 31 May 2022, having raised GBP11.6 million split between the Ventures, Healthcare and new AIM Share classes. A proportion of the shares allotted under the offer were issued after the year end.

During the year ended 31 March 2022, the Company issued 6,889,747 Ventures Shares of 0.1p each at an average price of 69.29p per Ordinary Share, 3,136,178 Healthcare Shares of 0.1p each at an average price of 84.74p per Ordinary Share and 2,034,990 AIM Shares of 0.1p each at an average price of 1.0218p per Ordinary Share. No Ventures or Healthcare Management Shares were issued during the year.

Evergreen Share pool review

Ventures Share pool (formerly Generalist)

The task of building the Ventures Share portfolio continued during the year, with GBP2.0m invested in ten VCT Qualifying companies, two of which were new additions to the portfolio.

The Ventures Share Total Return stood at 73.45p at the year end, representing an increase of 3.75p per share or 5.6% in NAV over the year. This is inclusive of the dividend of 2.75p per share, which was paid on 24 September 2021.

The NAV increase is largely attributable to a number of valuation increases in the qualifying investments, on the back of improvements in performance as the economy has started to normalise after Covid.

Positive developments include E-Fundamentals

(Group) Limited, Upp Technologies Group Limited, Hackajob Limited, Cambridge Touch Technologies Limited, and Ayar Labs Inc, which were uplifted by a combined GBP4.0 million over the year.

Arecor Therapeutics plc undertook a successful IPO which is discussed further in the Investment Manager's Reports for the Ventures and Healthcare pools.

There have, however, also been some valuation reductions, most notably GBP1.3 million in Trouva (Streethub Limited) which did not recover from the impact of the pandemic and was sold shortly after the year end. Empiribox Holdings Limited reduced in value by GBP503,000 and Hummingbird Technologies Limited by GBP405,000 as at 31 March 2022.

There were also four full exits during the period, which are set out below and in the Investment Manager's Report. Further deferred consideration was received from BridgeU Limited in relation to the exit in 2021. These transactions resulted in a total realised loss of GBP205,000.

Within the Ventures Liquidity Portfolio, there was a further redemption from MI Downing UK Micro-Cap Growth Fund, which is in the process of winding up. The holding in Downing Strategic Micro-Cap Investment Trust decreased in value GBP262,000 in line with general stock market movements.

A more detailed review of the Ventures Share pool is included in the Investment Manager's Report.

Healthcare Share pool

The development of the Healthcare Share portfolio continued during the year, with GBP4.8 million having been invested in seven VCT Qualifying companies, two of which were new investments.

The Healthcare Share Total Return stood at 89.65p at the year end, representing an increase of 18.65p per share or 27.2% in NAV over the year after adjusting for the Healthcare dividend of 2.75p per share, which was paid on 24 September 2021.

The growth in the Healthcare NAV is the result of positive developments in the Venture Capital portfolio, in particular Arecor Therapeutics plc which is showing a significant increase of GBP2.7million since the company listed on 3 June 2021. There is further information on this investment in the Investment Manager's Report.

Other significant uplifts in Adaptix Limited, GENinCode plc (which also listed on AIM during the year) and Open Bionics Limited totalled GBP1.6 million.

As with the Ventures Share pool, the Healthcare Share pool received a further redemption from MIDowning UK Micro-Cap Growth Fund, which is in the process of winding up. Downing Strategic Micro-Cap Investment Trust also suffered a reduction in valuation at the year end of GBP44,000.

Within the Healthcare qualifying portfolio, the sole valuation reduction to report was Destiny Pharma plc which was down in value by GBP564,000 as at 31 March 2022, based on the quoted share price at that date.

A more detailed review of the Healthcare Share pool is included in the Investment Manager's Report.

AIM Share pool

The AIM Share class raised a total of GBP2.8 million under the offer, and whilst this is less than we had hoped for, it should not create any significant issues for Shareholders as the nature of the fund will allow co-investment to ensure that a reasonably diverse portfolio can still be built.

No investments have been made to date so there is no investment Managers Report for the AIM Share Class included, although I look forward to updating you on the pools progress at the half year point.

Planned Exit Share pools

DSO D Share pool

The DSO D Share portfolio held two remaining investments as at 31 March 2022. As Shareholders will be aware, the ongoing impact of the coronavirus pandemic has continued to cause disruption to the exit processes in respect of these remaining investments.

The two solar businesses, Fresh Green Power Limited and Green Energy Production Limited were sold during the year at a small loss. The funds received were distributed to Shareholders with a dividend of 7.5p per share paid on 7 January 2022.

The realisation of the investments in Pearce and Saunders Limited and Pearce and Saunders DevCo Limited still rests on the sale of the remaining pub site in Eltham. Plans for their exit continue to progress and should conclude before the end of the year.

The DSO D Share NAV stood at 2.6p at the year end, a decrease of 0.1p per share over the year after taking into account the dividend of 7.5p. However, owing to the delays in exiting from the remaining investments, no performance incentive is now expected to be payable, resulting in the Total Return to DSO Shareholders increasing from the level stated at 31 March 2021 by 0.4p per share, or 4.1%. Total Return therefore now stands at 104.6p per share compared to the cost for Shareholders who invested in the original DSO D Share offer of 100.0p, or 70.0p per share net of income tax relief.

A more detailed review of the DSO D Share pool is included in the Investment Manager's Report.

DP67 Share pool

The remaining value in the DP67 Share portfolio is spread across three investments which operate in the hospitality sector. As the UK economy continues to recover from the impact of the restrictions, the Manager continues to target an exit by the end of the year.

Cadbury House Holdings has seen good performance since reopening in April 2021 and discussions with management are ongoing in order to seek an exit as soon as possible.

As at 31 March 2022, the DP67 Share NAV stood at 26.8p and Total Return stood at 94.6p per share, an increase of 8.4p per share, equivalent to a 45.6% in NAV term since 31 March 2021.

A more detailed review of the DP67 Share pool is included in the Investment Manager's Report.

Share buybacks

The Company operates a policy of buying in its own shares that become available in the market, subject to regulatory and liquidity factors. Any such purchases are undertaken at a price approximately equal to NAV (i.e. at a nil discount).

As the focus for the two remaining Planned Exit Share pools is on returning funds to Shareholders via distributions, the Company will not undertake any further buybacks in respect of those share classes.

Panmure Gordon continues to act as the Company's corporate broker, operating the share buyback process and ensuring that the quoted spread on the Company's shares remains at a reasonable level.

During the year ended 31 March 2022, the Company repurchased 86,425 Ventures Shares at an average price of 67.49p per Share and 159,833 Healthcare Shares at an average price of 85.28p per Share.

Dividends

Downing FOUR has a target of seeking to pay annual dividends for the Ventures and Healthcare share classes of at least 4% of the respective NAVs per annum.

The Board is proposing to pay final dividends of 2.75p per Ventures Share and 3.5p per Healthcare Share on 30 September 2022, to Shareholders on the register as at 2 September 2022. The proposed dividends are subject to Shareholder approval at the forthcoming AGM. Following the payment of the proposed dividends, the Company will have paid cumulative dividends of 8.0p per Ventures Share and 8.75p per Healthcare Share.

Further dividends in respect of the Company's Planned Exit Share pools will be paid once further realisations have taken place. No dividends are expected to be paid by the new AIM-Share class in the initial years.

Responsible investment

The Board notes the Investment Manager, Downing LLP's, commitment to being a "Responsible Investor". Downing LLP places Environmental, Social and Governance (ESG) criteria at the forefront of its business and investment activities, in line with best practice, in order to enhance returns for investors. The Board further notes that the Foresight Group has an equally high commitment to sustainability and is confident that the Company investments will continue to be managed in a responsible manner in future.

Annual General Meeting ("AGM")

The Company invites Shareholders to attend this year's AGM in person once more. The AGM is planned to take place at the offices of Foresight Group LLP, The Shard, 32 London Bridge Street, London, SE1 9SG at 3.30 p.m. on 27 September 2022.

Shareholders wishing to attend the AGM are requested to please notify Downing LLP via email, to d4agm@downing.co.uk, in case there are changes to arrangements which need to be communicated at short notice.

Four items of special business are proposed at the AGM as follows:

   -- one resolution in respect of the authority to buy back shares as noted 
      above; 
 
   -- two resolutions in respect of authority to allot shares and disapply 
      pre-emptions rights to give the Company flexibility in respect of further 
      fundraising plans; and 
 
   -- one resolution to cancel the share premium account and capital redemption 
      reserve to give the Company the ability to use the reserve created to 
      acquire shares in the market and, in future, to give flexibility in 
      paying dividends. 

This year Shareholders will be able submit proxy votes electronically. The details required for voting will be sent to each shareholder. The deadline for proxy votes to be received is 3.30 p.m. on 23 September 2022.

Board changes

As set out in the Half Yearly Report, a review of the board composition was undertaken in August 2021 to ensure it was well aligned with the Company's needs going forward.

Ultimately two candidates from this process were invited to join the board. Steven Clarke and Andrew Mackintosh were appointed as non-executive directors on 8 September 2021. Both have significant experience in the scientific and technology sectors, which is now the main focus of the Company's investment activity.

In addition to the above, Chris Allner, partner of Downing LLP, also joined the board on 8 September 2021 as a non-executive director. His remuneration will be borne by Downing LLP for the first 2 years of his role.

Alongside the above appointments, Russell Catley stepped down as a non-executive director of the Company on 8 September 2021. Russell joined the Company's board following the merger with three other VCTs in 2015. We thank Russell for his valuable contributions throughout his tenure and will miss his sage and intelligent advice. We wish him all the very best in his future activities.

Also, Lord Flight will step down at the forthcoming AGM and will not offer himself for re-election. Lord Flight has been a non-executive director of the Company since its inception in 2009 and was its first chairman. My colleagues and I thank Lord Flight for his significant contributions in several roles through the various phases of the Company's life to date. We wish him every happiness and success in his other ventures.

I believe we now have a board of directors with a broad range of skills and experience that is well suited to oversee the Company during the next years of its life.

Outlook

With the new management arrangements, there will clearly be some changes to your Company over the next year. The Board is satisfied that these changes will be positive for all Shareholders with Downing LLP continuing to manage the Healthcare Share pool and providing support for a gradual transition in the management of the non-ventures investments (primarily those in the planned exit and AIM share pools). Foresight is a substantial and well-respected fund manager and the Board believes that its further expansion into the unquoted ventures space will deliver good benefits to our shareholders. The Board looks forward to with working the Foresight Group and continuing to work with the existing ventures team at their new home.

In terms of the planned exit portfolios, we believe the task of exiting from the remaining investments DSO D share class should complete this year. A final exit from the DP67 share class is expected to fall into 2023. The pandemic has caused significant delays because of the type of assets, mainly hospitality, owned by these pools. However, progress is now being made, with exit plans from Cadbury House Holdings now being explored following good post pandemic results.

In respect of the Evergreen share pools, we believe that the Ventures and Healthcare pools now have a solid core of investments that are making progress. Both pools will continue to make new investments with funds that are available and the task of investing the new AIM Share pool will get underway shortly. Foresight is committed to raising new funds for the Ventures Share pool as is Downing in respect of the Healthcare Share pool so we look forward to developing the portfolios with attractive new opportunities.

Although the impact of the Covid pandemic is now reducing, there are new threats of increasing inflation, possible recession and the conflict in Ukraine. As a result, recently we have seen falling stock markets and increasing concern about the short-term outlook. However, while we need to be mindful of the potential impact of the challenges, these conditions can present good opportunities.

I look forward to reporting on what is expected to be a busy period in the half yearly report to 30 September 2022.

Sir Aubrey Brocklebank Bt.

Chairman

Ventures Share Pool

Share Pool Summary

 
                                     31 March  31 March 
                                       2022      2021 
Financial highlights                  Pence     pence 
 
Net Asset Value per Ventures Share      68.20      67.2 
Cumulative distributions                 5.25       2.5 
Total Return per Ventures Share         73.45      69.7 
 

Investment Manager's Report - Ventures Share Pool

i. Overview

Introduction

We present a review of the investment portfolio and activity for the Ventures Share pool for the year ended 31 March 2022.

This Investment Manager's Report is split into three sections comprising this overview, a review of Venture Capital Portfolio and a report on the portfolio of Liquidity Investments.

Net Asset Value and results

As at 31 March 2022, the NAV of a Ventures Share stood at 68.2p, an increase of 3.75p (5.6%) for the year after adding back the Ventures dividend, of 2.75p per share, which was paid on 24 September 2021.

The return on ordinary activities for the Ventures Share pool for the year was GBP1.8 million (2021: GBP3.7 million), comprising a revenue loss of GBP491,000 (2021: GBP91,000) and a capital gain of GBP2.3 million (2021: GBP3.8 million).

Whilst there is still a slow recovery in the NAV since 31 March 2021, the Total Return to Shareholders as at 31 March 2022, of 73.4p, continues to be considered an underperformance against our expectations for the Ventures Share pool.

A final dividend of 2.75p per share is proposed to be paid on 30 September 2022, to Shareholders on the register at 2 September 2022. This is in line with the stated dividend target for the Ventures Share pool, to pay dividends of at least 4% of net assets per annum.

Portfolio Overview

As at 31 March 2022, the Ventures Share pool held a portfolio of 34 Venture Capital investments and two Liquidity investments, with a combined value of GBP31.3 million.

As the restrictions of the pandemic were slowly lifted over the course of the year ended 31 March 2022, it continued to be a period of challenges for businesses in the UK and the rest of the World. We have been pleased to see significant recovery in some of the companies in the portfolio, although others are still struggling in the aftermath.

There are a number of risks emerging including both the situation in Ukraine and the impact of increasing inflation in the UK. We will continue to work closely with portfolio companies to provide guidance and, where appropriate, additional funding in order to deliver support through these turbulent times.

The valuation movements during the period are discussed in more detail in the following sections of this Investment Manager's Report.

Portfolio Performance

Overall, several larger valuation reductions in the Venture Capital Portfolio were more than offset by a number of valuation uplifts during the period, resulting in a net valuation uplift on this portfolio, of GBP2.4 million.

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022. This resulted in a valuation decrease of GBP238,000 for the period.

ii. Venture Capital Portfolio

Investment activity

During the period, a total of GBP2.1 million was invested in ten businesses, two of which are new VCT Qualifying investments.

New Venture Capital investments

A description of each of the new VCT Qualifying investments made during the year is shown below.

DSTBTD Limited (trading as Distributed Limited) (GBP275,000) has built a platform that connects enterprise clients with fully remote developer teams across the globe to address demand for outsourced software development.

Bulbshare Limited (GBP245,000) has developed a SaaS platform which enables brands to build communities from their existing customers/fans both to gather insights from and to create a richer experience for those customers.

Follow-on Venture Capital investments

A description of each of the follow-on investments made into existing businesses in the Venture Capital Portfolio is shown below.

Cambridge Touch Technologies Limited (GBP500,000) is developing pressure sensitive multi touch technology that is cheaper and simpler to integrate

in touch screen panels of mobile devices.

On 3 June 2021 Arecor Therapeutics plc ("Arecor") undertook a successful IPO on AIM. As part of the IPO, the Ventures Share pool's existing loan note holding was converted into ordinary shares.

E-Fundamentals Group Limited (GBP166,000) is a Software as a Service (SaaS) analytics company, which has developed and commercialised a SaaS analytics tool sold directly to companies to enable them to accurately assess the performance of their products when being sold through third party e-commerce sites.

FVRVS Limited (trading as Fundamental VR) (GBP125,000) has developed a platform, Fundamental Surgery, which is the market leading medical education platform delivering multimodal simulation and education across tethered and all-in-one VR, mixed reality and mobile, harnessing the very latest AI techniques. It is the only global platform to have achieved educational accreditation from leading medical institutions such as the AAOS and Royal College of Surgeons England.

Rated People Limited (GBP100,000) is an online marketplace connecting homeowners with local tradespeople.

MIP Discovery Limited (previously MIP Diagnostics) (GBP100,000) is a technology leader in the field of Molecularly Imprinted Polymers (MIPs) - polymer based synthetic antibodies that provide a viable alternative to antibodies for diagnostic immunoassays which are used across a variety of sectors including diagnostics, sensors, food testing and reagent purification.

GBP71,000 was invested in Streethub Limited (trading as Trouva) in order to support the business towards an exit. After the year end, the Ventures Share Pool exited in full recovering only the value of this latest investment.

Channel Mum Limited has been trading well in recent months and a further GBP62,000 was invested in order to facilitate an exit.

There were two full exits during the year Xupes Limited, a pre-owned luxury goods retailer generated proceeds of GBP675,000 at a profit of GBP384,000 over the value at 31 March 2021.

JRNI Limited, a business to business (B2B) software platform that enables companies to offer online appointments and event bookings for their customers and staff, exited at GBP23,000 profit over cost.

It is disappointing to report that Exonar Limited and Glownet Limited both exited in full for nil proceeds during the year, with a combined loss of GBP379,000 against the value held at 31 March 2021.

Deferred consideration of GBP301,000 was received in relation to the exit of BridgeU Limited which occurred in the year ended 31 March 2021.

Portfolio valuation

During the period, the Venture Capital portfolio of the Ventures Share pool was increased in value by a total of GBP2.7 million. Whilst there have been a number of significant positive developments within the Venture Capital portfolio, this was in part offset by the reduction in value of several companies due to them not progressing as we had hoped.

Streethub Limited (t/a Trouva) failed to recover after the impact of the pandemic and is well behind budget. The Ventures Share Pool exited after the year end and the value of the investment has therefore been reduced by GBP1.27 million to reflect the amount recovered.

E-Fundamentals Group Limited continues to progress well both in the UK and in the US, with recurring revenues continuing to grow. This strong performance has resulted in a valuation uplift of GBP1.27 million as at 31 March 2022.

Upp Technologies Limited (previously Volo Commerce) a provider of multichannel e-commerce technology, was increased in value by GBP835,000 as its performance recovers following a change in strategy and a new product focus.

Ayar Labs inc. the developer of components for high performance computing and data centre applications, was uplifted in valuation by GBP800,000 as at 31 March 2022, including the impact of foreign exchange. This revaluation is the result of a calibration to the price set under a recent funding round.

The valuation of Arecor was uplifted by GBP723,000 as at 31 March 2022.

Cambridge Touch Technologies Limited was uplifted by GBP508,000 to align with the valuation set under the recent round of funding.

Hummingbird Technologies Limited the owner of an advanced crop analytics platform that is powered by machine learning and aerial imagery, was reduced in value by GBP503,000 as at 31 March 2022, on the back of a downgrade in revenue forecasts.

The remaining investments in the Venture Capital Portfolio were adjusted in value by a total net uplift of GBP314,000 as at 31 March 2022.

Outlook

There have been a number of positive developments in the portfolio, as the investments continue to recover in the aftermath of the pandemic and life returns to 'normal'.

We continue to actively engage with these companies, providing guidance and support to ensure they are well positioned to proceed with their milestones.

Liquidity Investments

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022. This resulted in a total reduction of GBP238,000 for the year.

Downing Strategic Micro-Cap Investment Trust plc

The value of the Ventures Share pool's holding in Downing Strategic Micro-Cap Investment Trust plc ("DSM") decreased in value by GBP262,000 during the period. As at 31 March 2022, DSM's mid-market share price traded at a discount to NAV of 21.36%, representing unrealised value in the company's share price. The Managers of DSM believe that the trust's portfolio also has a level of intrinsic value which is yet to be recognised by the market and believe that a return of positive sentiment to value investing could further enhance this.

DSM reported positive results for the full year ended 28 February 2022. The Company reported a 5.3% increase in NAV, and 1% increase in the share price, despite the volatility in markets due to the post-Covid macroeconomic backdrop and the conflict in Ukraine. The managers remain positive on the prospects for the Company's holdings which are generally cheaper than the wider market, with stronger balance sheets and good growth prospects from the compelling products or services they provide. Typically, these investments have gone through significant catalytic changes over the last few years and are therefore stronger than they were pre this period of economic instability.

Downing UK Micro-Cap Growth Fund

Ventures Shareholders will be aware of the small residual investments in Downing Micro--Cap Growth Fund ("DMCG"). Since 19th February 2021, the ACD (Associated Corporate Director) has been working with the investment manager Downing LLP to dispose of and liquidate all assets of the Fund with the intention of returning monies to investors at the earliest opportunity. The second round of capital distributions were made in June 2021, returning proceeds of GBP301,000, realising gains of GBP31,000 over the valuations as at 31 March 2021. More than the price per share at which the fund was suspended has now been returned to shareholders.

As at 31 March 2022, the Ventures Share pool's residual holding in DMCG increased in value by GBP24,000.

Outlook

The ramifications of the pandemic continued to disrupt throughout the reporting period, and markets have been faced with extreme demand /supply side shocks, labour shortages, energy price crises, and freight and logistical challenges. The macroeconomic backdrop remains concerning and markets are likely to remain volatile in the months ahead as rising inflation, higher interest rates and the situation in Ukraine all cause concern.

The year ahead is likely to be more difficult than last year, where lingering Covid issues were offset by massive stimulus and record household savings feeding a demand spike. Supply chain issues continue to have an impact, Covid is still crippling parts of China where so many goods are manufactured, household savings are being rapidly eroded by the unforeseen cost of living crisis, and expansionary policy has reversed. Confidence is low and uncertainty is high. However, the portfolio contains good companies, with plenty of scope for strong balance sheets, and significant prospects for growth over the long-term.

As you will have seen in the Chairman's Statement, following the year end, Downing LLP agreed to sell its technology Ventures portfolio business to Foresight Group Holdings Limited. As part of the transaction, the Investment Management agreement was novated from Downing to Foresight on 5 July 2022 and the whole of the Downing Ventures team and key support staff were transferred to Foresight.

We look forward to managing the assets as part of the Foresight Group, our new home, and the next chapter for the Company.

Downing LLP -- Ventures Team

Review of Investments -- Ventures Share Pool

The following investments were held at 31 March 2022:

 
                                                                             Valuation 
                                                                              movement       % of 
                                                         Cost     Valuation   in period    portfolio 
Portfolio of investments                               GBP'000    GBP'000     GBP'000 
Venture Capital investments 
  E-Fundamentals (Group) Limited                         1,508        3,847       1,273        10.8% 
---------------------------------------------------- 
  Rated People Limited                                   1,382        1,895         211         5.3% 
---------------------------------------------------- 
  Virtual Class Limited (Third Space Learning)           1,053        1,816        (60)         5.1% 
---------------------------------------------------- 
  Imagen Limited                                         1,000        1,763        (65)         5.0% 
---------------------------------------------------- 
  Ayar Labs, Inc.                                          764        1,526         800         4.3% 
---------------------------------------------------- 
  Hackajob Limited                                         784        1,523         739         4.3% 
---------------------------------------------------- 
  Cornelis Networks, Inc.                                1,402        1,370          63         3.9% 
---------------------------------------------------- 
  Cambridge Touch Technologies Limited                     959        1,369         508         3.8% 
---------------------------------------------------- 
  Ecstase Limited (t/a ADAY)                             1,000        1,257         257         3.5% 
---------------------------------------------------- 
  Trinny London Limited                                    219        1,240         283         3.5% 
---------------------------------------------------- 
  Arecor Therapeutics plc^                                 418        1,141         723         3.2% 
---------------------------------------------------- 
  Upp Technologies Group Limited (previously 
   Volo Commerce)                                        1,077        1,077         835         3.0% 
---------------------------------------------------- 
  Firefly Learning Limited                               1,047        1,047           -         2.9% 
---------------------------------------------------- 
  Limitless Technology Limited                             757          920           -         2.6% 
---------------------------------------------------- 
  FundingXchange Limited                                 1,050          786       (264)         2.2% 
---------------------------------------------------- 
  Congenica Limited                                        734          746           -         2.1% 
---------------------------------------------------- 
  Parsable, Inc.                                           766          711          33         2.0% 
---------------------------------------------------- 
  Masters of Pie Limited                                   667          667           -         1.9% 
---------------------------------------------------- 
  Carbice Corporation                                      656          639          30         1.8% 
---------------------------------------------------- 
  FVRVS Limited (t/a Fundamental VR)                       375          484         109         1.4% 
---------------------------------------------------- 
  Maverick Pubs (Holdings) Limited                       1,000          450           -         1.3% 
---------------------------------------------------- 
  Fenkle Street LLP*                                       301          405          17         1.1% 
---------------------------------------------------- 
  MIP Discovery Limited (previously MIP Diagnostics 
   Limited)                                                300          300           -         0.8% 
---------------------------------------------------- 
  Channel Mum Limited                                      737          291        (49)         0.8% 
---------------------------------------------------- 
  DSTBTD Limited (t/a Distributed Limited)                 275          275           -         0.8% 
---------------------------------------------------- 
  Hummingbird Technologies Limited                         750          250       (503)         0.7% 
---------------------------------------------------- 
  Bulbshare Limited                                        249          249           -         0.7% 
---------------------------------------------------- 
  Destiny Pharma plc^                                      500          153       (376)         0.4% 
---------------------------------------------------- 
  Streethub Limited (t/a Trouva)                         1,279           71     (1,273)         0.2% 
---------------------------------------------------- 
  Empiribox Holdings Limited                             1,563            -       (405)         0.0% 
---------------------------------------------------- 
  Lineten Limited                                          400            -       (209)         0.0% 
---------------------------------------------------- 
  Lignia Wood Company Limited                            1,778            -           -         0.0% 
---------------------------------------------------- 
  Live Better With Limited                               1,211            -           -         0.0% 
---------------------------------------------------- 
  Ormsborough Limited                                      900            -           -         0.0% 
---------------------------------------------------- 
  London City Shopping Centre Limited*                      30            -           -         0.0% 
---------------------------------------------------- 
                                                        28,891       28,268       2,677        79.4% 
Liquidity investments 
  Downing Strategic Micro-Cap Investment Trust 
   plc*^                                                 4,269        2,875       (262)         8.1% 
---------------------------------------------------- 
  MI Downing UK Micro-Cap Growth Fund*                     123          116          24         0.3% 
---------------------------------------------------- 
                                                         4,392        2,991       (238)         8.4% 
                                                        33,283       31,259       2,439        87.8% 
Cash at bank and in hand                                              4,321                    12.2% 
Total investments                                                    35,580                   100.0% 
 

All Venture Capital investments are incorporated in England and Wales.

*non-qualifying investment

^listed and traded on the London Stock Exchange

Investment movements for the year ended 31 March 2022

 
                                             Cost 
Additions                                   GBP'000 
Venture Capital investments 
Cambridge Touch Technologies Limited            500 
Arecor Therapeutics plc^                        418 
DSTBTD Limited (t/a Distributed Limited)        275 
Bulbshare Limited                               249 
E-Fundamentals (Group) Limited                  166 
FVRVS Limited (t/a Fundamental VR)              125 
Rated People Limited                            100 
MIP Discovery Limited (previously MIP 
 Diagnostics Limited)                           100 
Streethub Limited (t/a Trouva)                   71 
Channel Mum Limited                              62 
Arecor Limited                                    4 
                                              2,070 
 
 
                                   Valuation               (Loss)/ 
                                       at                    Gain       Realised 
                           Cost     01/04/21*   Proceeds   vs. cost    (loss)/gain 
Disposals                 GBP'000   GBP'000     GBP'000    GBP'000      GBP'000 
Venture Capital 
investments 
------------------------  -------  ----------  ---------  ---------  ------------- 
Xupes Limited                 933         291        675      (258)            384 
JRNI Limited                  525         525        548         23             23 
Arecor Limited                418         418        418          -              - 
Glownet Limited               741           -          -      (741)              - 
Exonar Limited                550         379          -      (550)          (379) 
BridgeU Limited ***             -           -        143        143            143 
Liquidity investments 
MI Downing UK Micro-Cap 
 Growth Fund**                369         270        301       (68)             31 
                            2,078       1,067        862    (1,216)          (205) 
 

*adjusted for additions in the year as appropriate

**non-qualifying investment

***deferred proceeds not recognised in prior periods

Healthcare Share Pool

Share Pool Summary

 
                                 31 March  31 March 
                                   2022      2021 
Financial highlights              Pence     pence 
 
Net Asset Value per Healthcare 
 Share                              84.40      68.5 
Cumulative distributions             5.25       2.5 
Total Return per Healthcare 
 Share                              89.65      71.0 
 

Investment Manager's Report- Healthcare Share Pool

i. Overview

Introduction

We present a review of the investment portfolio and activity for the Healthcare Share pool over the year ended 31 March 2022.

This Investment Manager's Report is split into three sections comprising this overview, a review of Venture Capital Portfolio and a report on the portfolio of Liquidity Investments.

Net Asset Value and results

As at 31 March 2022, the NAV of a Healthcare share stood at 84.4p, an increase of 18.6p (27.2%) over the year after adding back the Healthcare dividend, of 2.75p per share, which was paid on 24 September 2021.

The return on ordinary activities for the Healthcare Share pool for the year was GBP3.7 million (2021: GBP549,000), being a revenue loss of GBP314,000 (2021: GBP113,000) and a capital gain of GBP3.98 million (2021: GBP662,000).

There has now been significant recovery in the NAV since 31 March 2021 which we are pleased with, although the Total Return to Shareholders as at 31 March 2022, of 89.7p, continues to be considered an underperformance against our expectations for the Healthcare Share pool.

A proposed final dividend of 3.5p per share will be paid on 30 September 2022, to Shareholders on the register at 2 September 2022. This is in line with the stated dividend target for the Healthcare Share pool, to pay dividends of at least 4% of net assets per annum.

Portfolio Overview

As at 31 March 2022, the Healthcare Share pool held a portfolio of 15 Venture Capital investments and two Liquidity investments, with a combined value of GBP15.9 million.

We have been pleased to see significant recovery across much of the portfolio with many of the established companies increasing in value in the period and two IPOs demonstrating the potential for success in the portfolio.

However, there are a number of risks which have developed over the latter part of the year, including both the situation in Ukraine and the impact of increasing inflation in the UK. We will continue monitor the situation alongside our investee companies in order to minimise the risk exposure as much as possible and to provide guidance and support as necessary.

The valuation movements during the period are discussed in more detail in the following sections of this Investment Manager's Report.

Portfolio Performance

There were several valuation movements in the Venture Capital Portfolio during the year, resulting in a net valuation uplift of GBP4.2 million as at 31 March 2022.

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022, resulting in a valuation decrease of GBP36,000 for the year.

ii. Venture Capital Portfolio

Investment activity

During the year, a total of GBP4.8 million was invested in eight businesses, two of which are new VCT Qualifying investments.

New Venture Capital investments

DIA Imaging Analysis EU (GBP415,000) is a leading provider of advanced AI--based solutions for ultrasound analysis. The additional capital will enable DiA to expand its portfolio of FDA--cleared

and CE--marked AI--based ultrasound solutions that enable clinicians to identify clinical abnormalities with speed and accuracy.

Closed Loop Medicine Limited (GBP650,000) has developed an integrated healthcare technology intended to improve patient outcomes and health system performance by combining drugs/medicines with its digital platform for greater precision in treatment that is personalised to the individual.

Follow-on Venture Capital investments

GENinCode plc ("GENinCode") develops products and technology that helps patients and healthcare practitioners to assess and predict the onset of cardiovascular disease, thrombosis, and the diagnosis of Familial Hypercholesterolemia. As part of the Company's IPO on 22 July 2021, the Healthcare Share pool made a follow--on investment of GBP302,000 in the business.

On 3 June 2021 Arecor Therapeutics plc ("Arecor")

undertook a successful IPO on AIM (see portfolio valuation commentary). As part of the IPO, the Healthcare Share pool's existing loan note holding was converted into ordinary shares.

GBP400,000 was invested in Cambridge Respiratory Innovations Limited, a company that creates innovative respiratory technologies, including its award-winning N-Tidal device which helps medical professionals diagnose respiratory conditions and monitor lung function in patients.

A further GBP250,000 was invested in FVRVS Limited (trading as Fundamental VR) which provides surgery simulation software for enterprise clients and hospitals.

The Electrospinning Company Limited is a supplier and manufacturer of clinical--grade biomaterials, which can be used to act as a synthetic scaffold for implantation within body tissue to promote repair post trauma or surgery. During the period the Healthcare Share pool invested a further GBP200,000 in the business.

MIP Discovery Limited (previously MIP Diagnostics Limited) is a manufacturer of polymer based synthetic antibodies that provide a viable alternative to antibodies for diagnostic immunoassays which are used across a variety of sectors including diagnostics, sensors, food testing and reagent purification. A further GBP100,000 was invested in the year to 31 March 2022.

Portfolio valuation

During the period, the Venture Capital portfolio of the Healthcare Share pool increased in value by a total of GBP4.2 million.

We are pleased to report that the majority of the businesses in the portfolio have been able to navigate the challenges brought about by the pandemic and were able to continue to progress with their plans over the period.

Since its IPO, Arecor has made several positive updates on the progress of its products, which have bolstered its share price. As at 31 March 2022, the market capitalisation of Arecor was GBP101 million. With the valuation now being based on the quoted bid price, the valuation of the Healthcare Share pool's investment in the group was uplifted by GBP2.7 million as at 31 March 2022.

Adaptix Limited increased in value by GBP758,000 as at 31 March 2022, in line with calibrations to the valuations set under their latest funding rounds. The company is developing a flat panel X-ray source which seeks to improve the accuracy and mobility of 3D imaging

GENinCode plc successfully admitted its shares to trading on AIM on 22 July 2021, taking the market capitalisation of the company to approximately GBP42 million at that date. In line with the quoted bid price as at 31 March 2022, the Healthcare Share pool's holding was increased in value by GBP422,000.

Open Bionics Limited is an award--winning designer, manufacturer and supplier of bionic limbs. The company uses 3D printing and scanning technology to produce custom--made prosthetics at a lower manufacturing cost relative to existing technologies. The valuation of the business has been increased in accordance with an external valuation. The resulting uplift for the Healthcare Share pool was GBP379,000 as at 31 March 2022.

The valuations of FVRVS Limited (trading as Fundamental VR) and Future Health Works Limited (trading as MyRecovery) have been increased by GBP218,000 and GBP194,000 respectively in order to calibrate to the most recent funding rounds.

The Electrospinning Company Limited is a supplier and manufacturer of clinical-grade biomaterials, which can be used to act as a synthetic scaffold for implantation within body tissue to promote repair post trauma or surgery. The valuation of the Healthcare Share pool's investment has been calibrated to the price of the most recent funding round and increased by GBP124,000 at 31 March 2022 as a result.

Destiny Pharma plc, which is listed on AIM, was reduced in value by GBP564,000. The business continues to progress with its clinical pipeline and trials, however the quoted share price continues to fall on the back of limited trading volumes. We remain confident that there will be long--term appreciation in the share price, as key milestones continue to be achieved.

There were no other valuation movements in the Venture Capital portfolio.

iii. Liquidity Investments

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022, resulting in a total reduction of GBP36,000 for the year.

Downing Strategic Micro-Cap Investment Trust plc

The value of the Healthcare Share pool's holding in Downing Strategic Micro-Cap Investment Trust plc ("DSM") decreased in value by GBP44,000 during the period. As at 31 March 2022, DSM's mid-market share price traded at a discount to NAV of 21.36%, representing unrealised value in the company's share price.

Downing UK Micro-Cap Growth Fund

There remains a small residual investment in Downing Micro--Cap Growth Fund. As at 31 March 2022, the Ventures Share pool's residual holding in DMCG increased in value by GBP8,000.

Outlook

The building of the portfolio of the Healthcare Share pool has progressed well during the period and is now almost fully invested. The focus is on working with the existing portfolio companies to help these businesses achieve their plans, whilst also continuing to add appropriate VCT Qualifying investments to the Healthcare Share pool's portfolio.

We are pleased that the majority of the Healthcare Venture Capital portfolio has coped well with the repercussions of the pandemic, with some strong results in our more established portfolio. We believe there is much potential still to be realised within a number of these businesses.

As you will have seen in the Chairman's Statement, following the year end, Downing LLP agreed to sell its technology Ventures portfolio business to Foresight Group Holdings Limited. The management of the Healthcare share pool will remain with Downing and will continue to be managed by Downing's expanding Healthcare team.

We look forward to continuing to manage the assets alongside Foresight Group where the remainder of the VCT will be settling into its new home.

Downing LLP -- Healthcare Ventures Team

Review of Investments -- Healthcare Share Pool

The following investments were held at 31 March 2022:

 
                                                                  Valuation 
                                                                   movement       % of 
                                              Cost     Valuation   in period    portfolio 
Portfolio of investments                    GBP'000    GBP'000     GBP'000 
Venture Capital investments 
  Arecor Therapeutics plc^                    1,533        4,186       2,653        22.7% 
----------------------------------------- 
  Adaptix Limited                             1,056        1,843         758        10.0% 
----------------------------------------- 
  GENinCode plc^                              1,202        1,624         422         8.8% 
----------------------------------------- 
  Open Bionics Limited                        1,000        1,379         379         7.5% 
----------------------------------------- 
  Congenica Limited                           1,184        1,215           -         6.6% 
----------------------------------------- 
  FVRVS Limited (t/a Fundamental VR)            750          968         218         5.3% 
----------------------------------------- 
  Cambridge Respiratory Innovations 
   Limited                                      800          800           -         4.3% 
----------------------------------------- 
  Future Health Works Limited (t/a 
   MyRecovery)                                  528          750         194         4.1% 
----------------------------------------- 
  Closed Loop Medicine Limited                  650          650           -         3.5% 
----------------------------------------- 
  The Electrospinning Company Limited           478          544         124         3.0% 
----------------------------------------- 
  Invizius Limited                              500          500           -         2.7% 
----------------------------------------- 
  DiA Imaging Analysis EU                       415          429          14         2.3% 
----------------------------------------- 
  MIP Discovery Limited (previously MIP 
   Diagnostics Limited)                         300          300           -         1.6% 
----------------------------------------- 
  Destiny Pharma plc^                           750          229       (564)         1.2% 
----------------------------------------- 
  Live Better With Limited                    1,106            -           -         0.0% 
----------------------------------------- 
                                             12,252       15,417       4,198        83.6% 
Liquidity Investments 
  Downing Strategic Micro-Cap Investment 
   Trust plc*^                                  729          491        (44)         2.7% 
----------------------------------------- 
  MI Downing UK Micro-Cap Growth Fund*           40           37           8         0.2% 
----------------------------------------- 
                                                769          528        (36)         2.9% 
                                             13,021       15,945       4,162        86.5% 
Cash at bank and in hand                                   2,483                    13.5% 
Total investments                                         18,428                   100.0% 
 

*non-qualifying investment

^listed and traded on the London Stock Exchange

Investment movements for the year ended 31 March 2022

 
                                                      Cost 
Additions                                            GBP'000 
Venture Capital investments 
Arecor Therapeutics plc^                               1,533 
GENinCode plc^                                         1,202 
Closed Loop Medicine Limited                             650 
DiA Imaging Analysis EU                                  415 
Cambridge Respiratory Innovations Limited                400 
FVRVS Limited (t/a Fundamental VR)                       250 
The Electrospinning Company Limited                      200 
MIP Discovery Limited (previously MIP Diagnostics 
 Limited)                                                100 
Arecor Limited                                            14 
                                                       4,764 
 
 
                                            Valuation                 Loss       Realised 
                                  Cost     at 01/04/21*   Proceeds   vs. cost   (loss)/gain 
Disposals                        GBP'000     GBP'000      GBP'000    GBP'000     GBP'000 
Venture Capital investments 
-------------------------------  -------  -------------  ---------  ---------  ------------ 
Arecor Therapeutics plc^           1,533          1,533      1,533          -             - 
GENinCode plc^                       900            900        900          -             - 
Liquidity investments 
MI Downing UK Micro-Cap Growth 
 Fund**                              116             86         96       (20)            10 
                                   2,549          2,519      2,529       (20)            10 
 

*adjusted for additions in the year as appropriate

**non-qualifying investment

DSO D Share Pool

Share Pool Summary

 
                                     31 March  31 March 
                                       2022      2021 
-----------------------------------  --------  -------- 
Financial highlights                  Pence     Pence 
Net Asset Value per DSO D Share           2.6      10.2 
Cumulative distributions                102.0      94.5 
Adjusted for Performance Incentive 
 estimate                                   -     (0.5) 
Total Return per DSO D Share            104.6     104.2 
 

Investment Manager's Report - DSO D Share Pool

Introduction

The process of realising the investments and returning funds to Shareholders remains the focus of the DSO D Share pool, although this has been subject to significant delays as a result of the continued impact of the coronavirus pandemic.

Net Asset Value and results

The Net Asset Value ("NAV") per DSO D Share at 31 March 2022 stood at 2.6p, an increase of 0.1p or 3.9% over the period. Whilst the reported NAV (prior to the deduction of the performance fee estimate) reduced by 0.1p during the year, the estimated performance incentive fee is no longer expected to become payable and so this deduction is no longer applicable (2021: GBP0.5p). Should the hurdles ultimately be met, a performance incentive could become due.

Total Return stands at 104.6p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share. We consider this to be satisfactory performance when compared to the initial NAV of 100p.

The loss on ordinary activities after taxation for the year was GBP3,000 (2021: GBP143,000), comprising a revenue loss of GBP16,000 (2021: GBP31,000) and a capital gain of GBP13,000 (2021: loss of GBP112,000).

Whilst it is unfortunate to report further delays in the realisation process, the NAV of the DSO D Share pool has not been materially impacted by the coronavirus pandemic. We believe that there continue to be opportunities to exit from the remaining investments, however this will take a little more time to complete.

Venture Capital investments

As at 31 March 2022, the DSO D Share pool held two Venture Capital investments with a total value of GBP43,000.

Portfolio activity

Both solar panel companies, Fresh Green Power Limited and Green Energy production Limited were exited during the year, generating total proceeds of GBP341,000 at a total of GBP8,000 below the value shown at 31 March 2021.

A dividend of 7.5p was paid to shareholders to return these realised funds to investors.

Pearce and Saunders Limited, the owner of a freehold pub in south east London, repaid loan note principal of GBP20,000 during the period, along with a redemption premium of GBP60,000.

Portfolio valuation

During the year, the carrying value of the portfolio of Venture Capital investments held by the DSO D Share pool was reduced by GBP33,000.

Pearce and Saunders Limited and Pearce and Saunders DevCo Limited are the only remaining investments in the portfolio. The final pub has now been sold. Unfortunately, distributions to investors have been delayed as we await a final sign off from HMRC. The valuation has been reduced by GBP33,000 as at 31 March 2022 to reflect likely final proceeds.

There were no other valuation movements in the DSO D Share pool portfolio.

Outlook

The focus for the DSO D Share pool continues to be on exiting from the remaining investments, however the pandemic has significantly delayed these processes, even more than originally foreseen. We now anticipate that these processes will be completed by the end of 2022. We will continue to monitor the companies and seek to maximise the proceeds for DSO D Shareholders. The final distribution will be once the final realisations have taken place.

Downing LLP

Review of investments - DSO D Share Pool

The following investments were held at 31 March 2022:

 
                                                     Valuation 
                                                      movement      % of 
                                 Cost     Valuation   in year     portfolio 
Portfolio of investments       GBP'000    GBP'000     GBP'000 
Venture Capital investments 
Pearce and Saunders Limited        255           27       (30)        16.2% 
Pearce and Saunders DevCo 
 Limited*                           19           16        (3)         9.6% 
                                   274           43       (33) 
Cash at bank and in hand                        124 
Total investments                               167 
 

* non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2022

 
                                      Valuation 
                                          At                   Gain/(loss)     Realised 
                              Cost     01/04/21    Proceeds     vs. cost      Gain/(loss) 
Disposals                    GBP'000   GBP'000    GBP'000       GBP'000        GBP'000 
Venture Capital investments 
Fresh Green Power Limited        189        282         278             89            (4) 
Green Energy Production UK 
 Limited                         100         67          63           (37)            (4) 
Pearce and Saunders 
 Limited*                         20         20          80             60             60 
                                 309        369         421            112             52 
 
 

* non-qualifying investment

DP67 Share Pool

Share Pool Summary

 
                           31 March  31 March 
                             2022      2021 
Financial highlights        pence     pence 
Net Asset Value per DP67 
 Share                         26.8      18.4 
Cumulative distributions       67.8      67.8 
Total Return per DP67 
 Share                         94.6      86.2 
 

Investment Manager's Report - DP67 Share Pool

Introduction

The process of realising the investments and returning funds to DP67 Shareholders remains the focus for this Share pool, although as Shareholders will be aware, this continues to be subject to substantial delays as a result of the coronavirus pandemic.

Net Asset Value and results

The Net Asset Value ("NAV") per DP67 Share at 31 March 2022 stood at 26.8p, an increase of 8.4p or 45.6% during the year. Total Return stands at 94.6p per DP67 Share, compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share. Compared to the initial NAV of 100p, we consider the Total Return to be underperformance against the original expectations for the DP67 Share pool.

The gain on ordinary activities after taxation for the year was GBP934,000 (2021: GBP31,000), comprising a revenue gain of GBP1.2 million (2021: GBP76,000) and a capital loss of GBP247,000 (2021: gain GBP45,000).

As DP67 Shareholders will be aware, the remaining DP67 portfolio has a high level of exposure to the leisure and hospitality sector, which was significantly impacted by the restrictions and closures during the pandemic. However, over the past year there has generally been good recovery and we are now making progress with the exit process across the final investments.

Venture Capital investments

As at 31 March 2022, the DP67 Share pool held a portfolio of five Venture Capital investments, with a total value of GBP1.9 million.

Portfolio activity

It is disappointing to report that there were no realisations during the year ended 31 March 2022.

Portfolio valuation

The DP67 portfolio decreased in value by a total of GBP233,000 during the year ended 31 March 2022. This movement is attributable to adjustments to the related discounted cash flow assessments conducted in respect of Fenkle Street LLP and its subsidiary Gatewales Limited.

Significant loan note interest has been recognised in the year, resulting in the revenue gain of GBP1.2 million for the period. We shortly expect to receive first round offers on the BPRA funded hotel, and now consider the accrued interest on these loans to be fully recoverable.

Cadbury House Holdings has seen good performance since reopening in April 2021 and discussions with management are ongoing in order to seek an exit as soon as possible. The valuation will not be adjusted until we have a clearer picture of how that exit will be achieved.

The valuations of the remaining Venture Capital investments are unchanged from 31 March 2021.

Outlook

The focus for the DP67 Share pool continues to be on exiting from the remaining investments. It is frustrating to report that this process has taken so long but hope that it can be complete with an exit from Cadbury House in 2023. During this next period, we will continue to work with the portfolio companies to seek to maximise proceeds for the DP67 Share pool. Further dividends will be paid once the final realisations have taken place.

Downing LLP

Review of Investments -- DP67 Share Pool

The following investments were held at 31 March 2022:

 
                                                        Valuation 
                                                         movement      % of 
                                    Cost     Valuation   in year     portfolio 
Portfolio of investments          GBP'000    GBP'000     GBP'000 
Venture Capital investments 
Cadbury House Holdings Limited      1,409          791          -        41.5% 
Fenkle Street LLP**                   405          759         32        39.9% 
Gatewales Limited*                    343          344      (265)        18.1% 
Yamuna Renewables Limited             400            -          -         0.0% 
London City Shopping Centre 
 Limited**                             99            -          -         0.0% 
                                    2,656        1,894      (233)        99.5% 
Cash at bank and in hand                            10                    0.5% 
Total investments                                1,904                  100.0% 
 
 

* partially qualifying investment

** non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

There were no investment disposals during the period.

Directors' responsibilities

The Directors are responsible for preparing the Report of the Directors, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. The Directors 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) including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland (FRS 102). 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 or 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; 
 
   -- prepare the financial statements on the going concern basis unless it is 
      inappropriate to presume that the Company will continue in business; 
 
   -- prepare a directors' report, a strategic report and directors' 
      remuneration report which comply with the requirements of the Companies 
      Act 2006; and 
 
   -- carry out a robust assessment of the principal risks facing the Company, 
      as set out in the Strategic Report. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements 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 understandable and provides the information necessary for Shareholders to assess the Company's position, performance, business model and strategy.

The Directors are responsible for 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 the Annual Reports may differ from legislation in other jurisdictions.

Audited Income Statement for the year ended 31 March 2022

 
                                      Year ended 31 March        Year ended 31 March 
                                             2022                       2021 
--------------------------------  -------------------------  ------------------------- 
                                  Revenue  Capital   Total   Revenue  Capital   Total 
                                  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Income                              1,296        -    1,296      266        2      268 
Gain on investments                     -    6,599    6,599        -    4,816    4,816 
                                    1,296    6,599    7,895      266    4,818    5,084 
Investment management fees          (531)    (531)  (1,062)    (411)    (411)    (822) 
Other expenses                      (409)        -    (409)     (97)        -     (97) 
Return/(loss) on ordinary 
 activities before tax                356    6,068    6,424    (242)    4,407    4,165 
Tax on total comprehensive 
 income and ordinary activities         -        -        -     (69)        -     (69) 
Return/(loss) attributable 
 to equity Shareholders, 
 being total comprehensive 
 income for the year                  356    6,068    6,424    (311)    4,407    4,096 
 
Basic and diluted return 
 per share: 
DSO D Share                         (0.2)      0.2      0.0   (0.4p)   (1.4p)   (1.8p) 
DP67 Share                           10.5    (2.2)      8.3   (0.8p)     0.4p   (0.4p) 
Ventures Share                      (1.0)      4.8      3.8   (0.2p)     8.2p     8.0p 
Healthcare Share                    (1.6)     19.9     18.3   (0.6p)     3.5p     2.9p 
AIM Share                           (1.5)    (0.9)    (2.3)      n/a      n/a      n/a 
 

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standard 102 ("FRS 102"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in April 2021 by the Association of Investment Companies ("AIC SORP").

Income Statement for the year ended 31 March 2022

Analysed by Share pool -- unaudited and non-statutory

Split as:

 
                                          Year ended 31 March           Year ended 31 March 
                                                  2022                   2021 
                                       Revenue  Capital   Total         Revenue  Capital   Total 
DSO D Share pool                       GBP'000  GBP'000  GBP'000        GBP'000  GBP'000  GBP'000 
Income                                    -        -        -                 -     -        - 
Net gain/(loss) on investments               -       19       19              -    (106)    (106) 
                                             -       19       19              -    (106)    (106) 
Investment management fees                 (6)      (6)     (12)            (6)      (6)     (12) 
Other expenses                            (10)        -     (10)           (25)        -     (25) 
(Loss)/return on ordinary activities 
 before tax                               (16)       13      (3)           (31)    (112)    (143) 
Tax on total comprehensive income 
 and ordinary activities                     -        -        -              -        -        - 
(Loss)/return attributable to 
 equity Shareholders, being total 
 comprehensive income for the 
 year                                     (16)       13      (3)           (31)    (112)    (143) 
 
 
 
                                          Year ended 31 March     Year ended 31 March 
                                                  2022             2021 
                                       Revenue  Capital   Total   Revenue  Capital   Total 
DP67 Share pool                        GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Income                                   1,217        -    1,217        -        -        - 
Net (loss)/gain on investments               -    (233)    (233)        -       59       59 
                                         1,217    (233)      984        -       59       59 
Investment management fees                (14)     (14)     (28)     (14)     (14)     (28) 
Other expenses                            (22)        -     (22)     (32)        -     (32) 
Return/(loss) on ordinary activities 
 before tax                              1,181    (247)      934     (46)       45      (1) 
Tax on total comprehensive income 
 and ordinary activities                     -        -        -     (30)        -     (30) 
Return/(loss) attributable to 
 equity Shareholders, being total 
 comprehensive income for the 
 year                                    1,181    (247)      934     (76)       45     (31) 
 

Income Statement for the year ended 31 March 2022

Analysed by Share pool -- unaudited and non-statutory

 
                                          Year ended 31 March     Year ended 31 March 
                                                  2022             2021 
                                       Revenue  Capital   Total   Revenue  Capital   Total 
Ventures Share pool                    GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Income                                      58        -       58      230        2      232 
Net gain on investments                      -    2,641    2,641        -    4,067    4,067 
                                            58    2,641    2,699      230    4,069    4,299 
Investment management fees               (314)    (314)    (628)    (257)    (257)    (514) 
Other expenses                           (235)        -    (235)     (25)        -     (25) 
(Loss)/return on ordinary activities 
 before tax                              (491)    2,327    1,836     (52)    3,812    3,760 
Tax on total comprehensive 
 income and ordinary activities              -        -        -     (39)        -     (39) 
(Loss)/return attributable 
 to equity Shareholders, being 
 total comprehensive income 
 for the year                            (449)    2,327    1,836     (91)    3,812    3,721 
 
 
                                            Year ended 31 March     Year ended 31 March 
                                                    2022             2021 
                                         Revenue  Capital   Total   Revenue  Capital   Total 
Healthcare Share pool                    GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
Income                                        21        -       21       36        -       36 
Net gain/(loss) on investments                 -    4,172    4,172        -      796      796 
                                              21    4,172    4,193       36      796      832 
Investment management fees                 (195)    (195)    (390)    (134)    (134)    (268) 
Other expenses                             (140)        -    (140)     (15)        -     (15) 
  (Loss)/return on ordinary activities 
   before tax                              (314)    3,977    3,663    (113)      662      549 
--------------------------------------- 
Tax on total comprehensive 
 income and ordinary activities                -        -        -        -        -        - 
(Loss)/return attributable 
 to equity Shareholders, being 
 total comprehensive income 
 for the year                              (314)    3,977    3,663    (113)      662      549 
 

Income Statement for the year ended 31 March 2022

Analysed by Share pool -- unaudited and non-statutory

 
                                           Year ended 31 March 
                                            2022 
                                           Revenue  Capital   Total 
AIM Share pool                             GBP'000  GBP'000  GBP'000 
Income                                        -        -        - 
Net gain on investments                       -        -        - 
                                              -        -        - 
Investment management fees                     (2)      (2)      (4) 
Other expenses                                 (2)        -      (2) 
Loss on ordinary activities 
 before tax                                    (4)        -      (6) 
Tax on total comprehensive 
 income and ordinary activities                  -        -        - 
Loss attributable to equity 
 Shareholders, being total comprehensive 
 income for the year                           (4)      (2)      (6) 
 

Audited Balance Sheet as at 31 March 2022

 
                                                    2022     2021 
                                                   GBP'000  GBP'000 
------------------------------------------------- 
Fixed assets 
Investments                                         49,141   40,743 
Current assets 
Debtors                                              4,317      701 
Cash at bank and in hand                             8,384    6,986 
                                                    12,701    7,687 
Creditors: amounts falling due within one year       (965)    (381) 
Net current assets                                  11,736    7,306 
Net assets                                          60,877   48,049 
 
8BCapital and reserves 
Called up Share capital                                113      102 
Capital redemption reserve                              58       58 
Special reserve                                     24,063   29,417 
Share premium account                               29,284   20,010 
Funds held in respect of shares not yet allotted         7      241 
Revaluation reserve                                  6,995  (1,143) 
Capital reserve -- realised                          3,769    3,132 
Revenue reserve                                    (3,412)  (3,768) 
Total equity Shareholders' funds                    60,877   48,049 
 
Basic and diluted Net Asset Value per share: 
DSO D Share                                           2.6p    10.2p 
DP67 Share                                           26.8p    18.4p 
Ventures Share                                       68.2p    67.2p 
Healthcare Share                                     84.4p    68.5p 
AIM Share                                            99.9p      n/a 
 

Balance Sheet as at 31 March 2022

Analysed by Share pool -- unaudited and non-statutory

Split as:

 
                                                  2022     2021 
DSO D Share pool                                 GBP'000  GBP'000 
Fixed assets 
Investments                                           43      445 
Current assets 
Debtors                                               61       29 
Cash at bank and in hand                             124      344 
                                                     185      373 
Creditors: amounts falling due within one year      (20)     (17) 
Net current assets                                   165      356 
Net assets                                           208      801 
Capital and reserves 
Called up share capital                                8        8 
Special reserve                                      423      966 
Revaluation reserve                                (231)    (138) 
Capital reserve -- realised                           22     (37) 
Revenue reserve                                     (14)        2 
Total equity Shareholders' funds                     208      801 
 
 
                                                  2022     2021 
DP67 Share pool                                  GBP'000  GBP'000 
Fixed assets 
Investments                                        1,894    2,127 
Current assets 
Debtors                                            1,218        1 
Cash at bank and in hand                              10       10 
                                                   1,228       11 
Creditors: amounts falling due within one year     (124)     (74) 
Net current assets                                 1,104     (63) 
Net assets                                         2,998    2,064 
Capital and reserves 
Called up share capital                               11       11 
Special reserve                                    (400)    (400) 
Revaluation reserve                                (263)     (30) 
Capital reserve -- realised                        2,392    2,406 
Revenue reserve                                    1,258       77 
Total equity Shareholders' funds                   2,998    2,064 
 
 
                                    2022     2021 
Ventures Share pool                GBP'000  GBP'000 
Fixed assets 
Investments                         31,259   28,633 
Current assets 
Debtors                              1,801      464 
Cash at bank and in hand             4,321    3,141 
                                     6,122    3,605 
Creditors: amounts falling due 
 within one year                     (490)    (238) 
Net current assets                   5,632    3,367 
Net assets                          36,891   32,000 
Capital and reserves 
Called up share capital                 65       59 
Capital redemption reserve              58       58 
Special reserve                     16,290   20,195 
Share premium account               18,657   14,009 
Funds held in respect of shares 
 not yet allotted                        2      222 
Revaluation reserve                  3,548    (814) 
Capital reserve -- realised          1,428      847 
Revenue reserve                    (3,067)  (2,576) 
Total equity Shareholders' funds    36,891   32,000 
 
 
                                                    2022     2021 
-------------------------------------------------  -------  ------- 
Healthcare Share pool                              GBP'000  GBP'000 
Fixed assets 
Investments                                         15,945    9,538 
Current assets 
Debtors                                                633      254 
Cash at bank and in hand                             2,483    3,491 
                                                     3,116    3,745 
Creditors: amounts falling due within one year       (310)     (99) 
Net current assets                                   2,806    3,646 
Net assets                                          18,751   13,184 
Capital and reserves 
Called up share capital                                 27       24 
Special reserve                                      7,752    8,656 
Share premium account                                8,594    6,001 
Funds held in respect of shares not yet allotted         5       19 
Revaluation reserve                                  4,031    (161) 
Capital reserve -- realised                           (73)     (84) 
Revenue reserve                                    (1,585)  (1,271) 
Total equity Shareholders' funds                    18,751   13,184 
 
 
                                                    2022 
AIM Share pool                                     GBP'000 
Fixed assets 
Investments                                           - 
Current assets 
Debtors                                                604 
Cash at bank and in hand                             1,446 
                                                     2,050 
Creditors: amounts falling due within one year        (21) 
Net current assets                                   2,029 
Net assets                                           2,029 
Capital and reserves 
Called up share capital                                  2 
Special reserve                                        (2) 
Share premium account                                2,033 
Funds held in respect of shares not yet allotted         - 
Revaluation reserve                                      - 
Capital reserve -- realised                              - 
Revenue reserve                                        (4) 
Total equity Shareholders' funds                     2,029 
 

Statement of Changes in Equity for the year ended 31 March 2022

 
                                                                 Funds held 
                       Called                                    in respect 
                         up     Capital                Share     of shares                Capital 
                        Share   Redemption   Special   premium   not yet     Revaluation  reserve     Revenue 
                       capital  reserve      reserve   account   allotted    Reserve      -realised   reserve   Total 
                      GBP'000       GBP'000   GBP'000   GBP'000     GBP'000      GBP'000     GBP'000   GBP'000     GBP'000 
--------------------            -----------                      ----------               ----------            ---------- 
At 31 March 2020            98           58    39,433    17,971         535     (13,302)       2,483   (3,451)      43,825 
                                                                 ---------- 
Total comprehensive 
 income                      -            -         -         -           -        4,158         249     (311)         4,096 
                                                                 ---------- 
Transfer between 
 reserves*                   -            -  (10,016)         -           -        8,001       2,021       (6)           - 
                                                                 ---------- 
Unallotted shares            -            -         -         -       (294)            -           -         -       (294) 
                                                                 ---------- 
Transactions with 
owners 
                                                                 ---------- 
Dividend paid                -            -         -         -           -            -     (1,621)         -     (1,621) 
                                                                 ---------- 
Purchase of own 
shares                       -            -         -         -           -            -           -         -           - 
                                                                 ---------- 
Issue of shares              4            -         -     2,097           -            -           -         -       2,101 
                                                                 ---------- 
Share issue costs            -            -         -      (58)           -            -           -         -        (58) 
                                                                 ---------- 
At 31 March 2021           102           58    29,417    20,010         241      (1,143)       3,132   (3,768)      48,049 
                                                                 ---------- 
Total comprehensive 
 income                      -            -         -         -           -        6,335       (267)       356         6,424 
                                                                 ---------- 
Transfer between 
 reserves*                   -            -   (5,159)         -           -        1,803       3,356         -           - 
                                                                 ---------- 
Unallotted shares            -            -         -         -       (234)            -           -         -       (234) 
                                                                 ---------- 
Transactions with 
owners 
                                                                 ---------- 
Dividend paid                -            -         -         -           -            -     (2,452)         -     (2,452) 
                                                                 ---------- 
Purchase of own 
 shares                      -            -     (195)         -           -            -           -         -       (195) 
                                                                 ---------- 
Issue of shares             11            -         -     9,501           -            -           -         -       9,512 
                                                                 ---------- 
Share issue costs            -            -         -     (227)           -            -           -         -       (227) 
                                                                 ---------- 
At 31 March 2022           113           58    24,063    29,284           7        6,995       3,769   (3,412)      60,877 
                                                                 ---------- 
 
 

* A transfer of GBP1,803,000 (2021: GBP8,001,000) representing previously recognised realised gains and losses on disposal of investments during the period has been made between the Revaluation Reserve and the Capital reserve - realised. A transfer of GBP5,159,000 (2021: GBP10,022,000) representing the total of: realised losses on the disposal of investments, cumulative realised losses on permanent fair value change, capital expenses and capital dividends in the period, has been made between the Capital Reserve - realised and the Special reserve. In 2021 a transfer of GBP6,000, representing the balance on the Revenue reserve relating to previously cancelled share classes, was made from the revenue reserve to the Special reserve.

Cash Flow Statement for the year ended 31 March 2022

 
                                              Unaudited non-statutory analysis          Audited 
                                        DSO D    DP67    Ventures  Healthcare    AIM 
                                        Share    Share     Share      Share     Share 
                                         pool     pool     pool       pool       Pool   Company 
                                       GBP'000  GBP'000  GBP'000    GBP'000    GBP'000  GBP'000 
Cash flows from operating activities 
(Loss)/return on ordinary activities 
 before taxation                           (3)      934     1,836       3,663      (6)    6,424 
(Gains)/losses on investments             (19)      233   (2,641)     (4,172)        -  (6,599) 
Increase in creditors                        3       50       253         211       21      538 
Increase in debtors                       (32)  (1,217)   (1,337)       (379)    (604)  (3,569) 
Net cash outflow from operating 
 activities                               (51)        -   (1,889)       (677)    (589)  (3,206) 
Corporation tax paid                         -        -         -           -        -        - 
Net cash generated from operating 
 activities                               (51)        -   (1,889)       (677)    (589)  (3,206) 
Cash flow from investing activities 
Purchase of investments                      -        -   (2,070)     (4,764)        -  (6,834) 
Proceeds from disposal of investments      421        -     2,085       2,529        -    5,035 
Net cash inflow/(outflow) from 
 investing activities                      421        -        15     (2,235)        -  (1,799) 
Net cash inflow/(outflow) before 
 financing                                 370        -   (1,874)     (2,912)    (589)  (5,005) 
Cash flows from financing activities 
Repurchase of shares                         -        -      (58)       (137)        -    (195) 
Issue of share capital                       -        -     4,775       2,658    2,079    9,512 
Cost of issue of share capital               -        -     (122)        (61)     (44)    (227) 
Funds held in respect of shares 
 not yet allotted                            -        -     (220)        (14)        -    (234) 
Equity dividends paid                    (590)        -   (1,321)       (542)        -  (2,453) 
Net cash (outflow)/inflow from 
 financing activities                    (590)        -     3,054       1,904    2,035    6,403 
 
Net change in cash                       (220)        -     1,180     (1,008)    1,446    1,398 
Cash and cash equivalents at 
 start of the year                         344       10     3,141       3,491        -    6,986 
Cash and cash equivalents at 
 end of the year                           124       10     4,321       2,483    1,446    8,384 
 
Cash and cash equivalents comprise 
Cash at bank and in hand                   124       10     4,321       2,483    1,466    8,384 
Total cash and cash equivalents            124       10     4,321       2,483    1,446    6,938 
 

Cash Flow Statement for the year ended 31 March 2021

 
                                          Unaudited non-statutory analysis     Audited 
                                        DSO D    DP67    Ventures  Healthcare 
                                        Share    Share     Share      Share 
                                         pool     pool     pool       pool     Company 
                                       GBP'000  GBP'000  GBP'000    GBP'000    GBP'000 
Cash flows from operating activities 
(Loss)/return on ordinary activities 
 before taxation                         (143)      (1)     3,760         549     4,165 
Losses/(gains) on investments              106     (59)   (4,067)       (796)   (4,816) 
(Decrease)/increase in creditors          (16)      (8)      (28)       (321)     (373) 
Decrease/(increase) in debtors              21       16      (61)       (248)     (272) 
Net cash outflow from operating 
 activities                               (32)     (52)     (396)       (816)   (1,296) 
Corporation tax paid                         -        -         -           -         - 
Net cash outflow from operating 
 activities                               (32)     (52)     (396)       (816)   (1,296) 
Cash flow from investing activities 
Purchase of investments                      -        -   (7,010)     (3,458)  (10,468) 
Proceeds from disposal of investments      104        -     7,029       1,875     9,008 
Net cash inflow/(outflow) from 
 investing activities                      104        -        19     (1,583)   (1,460) 
Net cash inflow/(outflow) before 
 financing                                  72     (52)     (377)     (2,399)   (2,756) 
Cash flows from financing activities 
Issue of share capital                       -        -     1,549         552     2,101 
Cost of issue of share capital               -        -      (42)        (16)      (58) 
Funds held in respect of shares 
 not yet allotted                            -        -     (189)       (105)     (294) 
Equity dividends paid                        -        -   (1,150)       (471)   (1,621) 
Net cash inflow/(outflow) from 
 financing activities                        -        -       168        (40)       128 
 
Net change in cash                          72     (52)     (209)     (2,439)   (2,628) 
Cash and cash equivalents at start 
 of the year                               272       62     3,350       5,930     9,614 
Cash and cash equivalents at end 
 of the year                               344       10     3,141       3,491     6,986 
 
Cash and cash equivalents comprise 
Cash at bank and in hand                   344       10     3,141       3,491     6,986 
Total cash and cash equivalents            344       10     3,141       3,491     6,986 
 

Notes

1. General information

Downing FOUR 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, and its registered office is St. Magnus House, 3 Lower Thames Street, London EC3R 6HD.

2. Accounting policies

Basis of accounting

The Company has prepared its financial statements in accordance with the Financial Reporting Standard 102 ("FRS 102") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised April 2021 ("SORP").

The financial statements are presented in pounds sterling and rounded to thousands. The Company's functional and presentational currency is pounds sterling.

Going concern

The Directors have made an assessment of the company's ability to continue as a going concern and are satisfied that the company has the resources to continue in business for the foreseeable future, being a period of 12 months from the date these Financial Statements were approved. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the company's ability to continue as a going concern, having taken into account the liquidity of the company's investment portfolio and the company's financial position in respect of its cash flows and investment commitments. Therefore, the Financial Statements have been prepared on the going concern basis.

Presentation of Income Statement

In order to better reflect the activities of a Venture Capital Trust, and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue return 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.

Reportable segments

The Company has one reportable segment as the sole activity of the Company is to operate as a VCT and all of the Company's resources are allocated to this activity.

Investments

All investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis, in accordance with Section 9.9B(a) of FRS 102. 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.

It is possible to determine the fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter investments are measured at fair value in accordance with FRS 102 sections 11 and 12, together with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV").

Liquidity investments are measured using bid prices.

For unquoted investments, fair value is established by using the IPEV guidelines. The valuation methodologies for unquoted entities used by the IPEV to ascertain the fair value of an investment are as follows:

   -- Calibration to price of recent investment; 
 
   -- Multiples; 
 
   -- Net assets; 
 
   -- Discounted cash flows or earnings (of 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.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item and transaction costs on acquisition or disposal of the investment are expensed. Where an investee company has gone into receivership, liquidation or administration (where there is little likelihood of recovery), the loss on the investment, although not physically disposed of, is treated as being realised.

It is not the Company's policy to exercise significant influence or joint control over investee companies. Therefore, the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with FRS 102 sections 14 and 15 and the SORP, which do not require portfolio investments to be accounted for using the equity method of accounting.

Calibration to price of recent investment requires a level of judgment to be applied in assessing and reviewing any additional information available since the last investment date. The manager considers a range of factors in order to determine if there is any indication of decline in value or evidence of increase in value since the recent investment date. If no such indications are noted, the price of the recent investment will be used as the fair value for the investment.

Examples of signals which could indicate a movement in value are: -

   -- Changes in results against budget or in expectations of achievement of 
      technical milestones (patents/testing/regulatory approvals); 
 
   -- Significant changes in the market of the products or in the economic 
      environment in which it operates; 
 
   -- Significant changes in the performance of comparable companies; 
 
   -- Internal matters such as fraud, litigation or management structure. 

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.

Judgements in applying accounting policies and key sources of estimation uncertainty

The key estimate in the financial statements is the determination of the fair value of the unquoted investments by the Directors as it impacts the valuation of the unquoted investments at the balance sheet date.

Of the Company's assets measured at fair value, it is possible to determine their fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter, investments are measured at fair value in accordance with FRS 102 sections 11 and 12, together with the International Private Equity and Venture Capital Valuation Guidelines ("IPEV").

Income

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

Interest income is accrued on a time apportioned basis, by reference to the principal sum outstanding and at the effective rate applicable, and only where there is reasonable certainty of collection in the foreseeable future.

Distributions from investments in limited liability partnerships ("LLPs") are recognised as they are paid to the Company. Where such items are considered capital in nature they are recognised as capital income.

Arrangement fee rebates received from Downing LLP are treated as capital income following the date of investment.

Where previously accrued income is considered unrecoverable, a corresponding bad debt expense is recognised.

Expenses

All expenses are accounted for on an accruals basis, and are stated inclusive of any VAT charged. 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. 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. 

Expenses and liabilities not specific to a share class are generally allocated pro rata to the Net Asset Values of each share class.

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 which arises.

Deferred taxation, which is not discounted, 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 they crystallise, based on current tax rates and law. 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.

Other debtors and other creditors

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

Issue costs

Issue costs in relation to the shares issued for each share class have been deducted from the share premium account, special reserve or revenue reserve, as applicable, for the relevant share class.

Performance Incentive

Amounts payable in respect of Performance Incentive arrangements are recorded at such time that an obligation has been established. In respect of the DSO D Share, pool, should a Performance Incentive become payable it will be recorded as an expense item through the Income Statement. Performance Incentives in respect of all other Share classes are paid by way of dividends and will therefore be recognised in accordance with the dividend accounting policy. There is no Performance Incentive in place for the AIM Share class.

Dividends

Dividends payable are recognised as distributions in the financial statements when the company's liability to make payment has been established, typically once declared by the Board or approved by Shareholders at the AGM.

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.

3. Basic and diluted return per share

 
                       Weighted 
                        Average 
                        number                             Total        Basic and 
                       of shares   Revenue   Capital    Comprehensive    Diluted 
                          in        (loss)/   (loss)/      Income/      return per 
                        issue*      return     gain        (loss)         share 
                                   GBP'000   GBP'000      GBP'000         pence 
Return per share is calculated 
 on the following: 
Year ended 31 March 2022 
DSO D Shares            7,867,247      (16)        13             (3)          0.0 
DP67 Shares            11,192,136     1,181     (247)             934          8.3 
Ventures Shares        48,629,971     (491)     2,327           1,836          3.8 
Healthcare Shares      20,007,047     (314)     3,977           3,663         18.3 
AIM Shares                283,425       (4)       (2)             (6)        (2.3) 
Year ended 31 March 
2021 
DSO D Shares            7,867,247      (31)     (112)           (143)       (1.8p) 
DP67 Shares            11,192,136      (76)        45            (31)       (0.4p) 
Ventures Shares        45,988,062      (91)     3,812           3,721         8.0p 
Healthcare Shares      18,803,854     (113)       662             549         2.9p 
 
 

*Excluding Management Shares

As the Company has not issued any convertible securities or share options, there is no dilutive effect on the return per DSO D Share, DP67 Share, Ventures Share, Healthcare Share or AIM Share. The return per share disclosed therefore represents both the basic and diluted return per share for all classes of share.

4. Basic and diluted Net Asset Value per share

 
                                                  2022 Net Asset    2021 Net Asset 
                            Shares in issue            Value         Value 
                                                 Pence              Pence 
                                                   per                per 
                            2022        2021      share    GBP'000   share    GBP'000 
DSO D Shares              7,867,247   7,867,247     2.6        208    10.2        801 
DP67 Shares              11,192,136  11,192,136    26.8      2,998    18.4      2,064 
Ventures Shares          54,112,154  47,308,832    68.2     36,889    67.2     31,778 
Ventures Management 
 Shares                  11,216,391  11,216,391       -          -       -          - 
Healthcare Shares        22,206,436  19,230,091    84.4     18,746    68.5     13,165 
Healthcare Management 
 Shares                   4,605,472   4,605,472       -          -       -          - 
AIM Shares                2,034,990         n/a    99.9      2,029       -          - 
 
Funds held in respect of shares not 
 yet allotted                                                    7                241 
Net assets per Balance 
 Sheet                                                      60,876             48,049 
 
 

The Directors allocate the assets and liabilities of the Company between the DSO D Shares, DP67 Shares, Ventures Shares, Healthcare Shares and AIM Shares such that each share class has sufficient net assets to represent its dividend and return of capital rights.

As the Company has not issued any convertible shares or share options, there is no dilutive effect on the Net Asset Value per DSO D Share, per DP67 Share, per Ventures Share, per Healthcare Share or per AIM Share. The Net Asset Value per share disclosed therefore represents both the basic and diluted Net Asset Value per DSO D Share, per DP67 Share, per Ventures Share, per Healthcare Share and per AIM Share.

5. 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:

   -- Market 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:

Market 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 market risks is a fundamental part of investment activities undertaken by the Investment Manager and is overseen by the Board. The Manager monitors investments through regular contact with the management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Manager 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 market risks to which the Company is exposed are:

   -- Investment price risk; 
 
   -- Foreign exchange 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 market price movements in respect of quoted investments, and also changes in the fair value of unquoted investments that it holds.

Foreign exchange risk

The Company has exposure to fluctuations in the prevailing market rates of exchange between the US Dollar ("USD") and the British Pound ("GBP"), as a result of holding investments in companies which use USD as their functional and reporting currency. The valuations of such investments are first performed in USD and subsequently converted to the equivalent GBP values at each reporting date. As at 31 March 2022, cumulative unrealised foreign exchange gains of GBP171,000 (2021: cumulative loss GBP266,000) had been recognised in the Income Statement, representing the movements in the USD:GBP exchange rates between the date of each relevant investment and the reporting date. The Board continues to review the exposure to fluctuations in foreign currencies but has not sought to mitigate the exposure at this time. The Company does however have relationships with foreign exchange service providers and will seek to reduce the impact of foreign exchange fluctuations on future cash flows as they arise.

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 notes attract interest, predominately at fixed rates. A summary of the interest rate profile of the Company's investments is shown below.

There are three categories in respect of interest, which are attributable to the financial instruments held by the Company as follows:

   -- "Fixed rate" assets represent investments with predetermined yield 
      targets and comprise certain loan note investments and preference shares; 
 
   -- "Floating rate" assets predominantly bear interest at rates linked to 
      Bank of England base rate or LIBOR and comprise cash at bank; and 
 
   -- "No interest rate" assets do not attract interest and comprise equity 
      investments, certain loan note investments, Liquidity investments, loans 
      and receivables (excluding cash at bank) and other financial liabilities. 

The Company monitors the level of income received from fixed and floating rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, if this should be required to ensure compliance with the VCT regulations.

The Bank of England base rate has been an average of 0.19% during the year. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and Total Return of the Company.

Credit risk

Credit risk is the risk that a 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 notes in investee companies, cash deposits and debtors. Credit risk relating to holdings of loan notes in investee companies is considered to be part of market risk.

The Manager manages credit risk in respect of loan notes with a similar approach as described under investment price risk. The management of credit risk, associated interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held with Royal Bank of Scotland plc, an A-rated financial institution. Consequently, the Directors consider that the credit risk associated with cash deposits is low.

There have been limited changes in fair value during the year that are 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 at their fair values when required, or from the inability to generate cash inflows as required.

The Company has a relatively low level of creditors, being GBP965,000 (2021: GBP381,000), all of which are payable within one year. The Company has no borrowings, and accordingly the Board believes that the Company's exposure to liquidity risk is low. Also, the 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 Manager in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

6. Controlling party and related party transactions

In the opinion of the Directors, there is no immediate or ultimate controlling party.

Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors' Remuneration Report and in the Report of the Directors in the Financial Statements. There were no amounts outstanding and due to the Directors as at 31 March 2022 (2021: nil).

Further related party transactions include Investment Management and Administration fees payable to Downing LLP,. In addition, Downing LLP was also paid promoter fees in connection with the offers for subscription which were open during the year. The total paid to Downing LLP during the year ended 31 March 2022 was GBP149,000 (2021: GBP32,000).

The Company also has an agreement to pay an ongoing trail fee annually to Downing LLP, in connection with applicable proceeds raised under previous offers for subscription, out of which Downing LLP has an obligation to pay trail commission to intermediaries. The total trail fee payable to Downing in respect of the year ended 31 March 2022 was GBP24,000, all of which was unpaid as at 31 March 2022 (2021; GBP24,000).

7. Events after the end of the reporting period

In the period between 31 March 2022 and the date of this report, the Company issued the following shares:

   -- 4,611,464 Ventures Shares, at an average price of 27.0p per share; and 
 
   -- 1,763,300 Healthcare Shares, at an average price of 31.6p per share; and 
 
   -- 660,813 AIM Shares, at an average price of 102.5p per share 

At the date of this report, there were 69,880,747 Ventures Shares, 28,560,321 Healthcare Shares and 2,695,803 AIM Shares in issue, including Management Shares.

On 13 June 2022, the Company announced that its investment manager, Downing LLP ("Downing"), agreed to sell its technology Ventures business to Foresight Group Holdings Limited ("Foresight"). As part of this transaction, the Investment Management agreement (with the exception of the management of the Healthcare share pool) was novated from Downing to Foresight at the completion of the sale on 5 July 2022. The management of the Healthcare share pool will be retained by Downing and continue to be managed by Downing's expanding Healthcare team. In order to ensure a smooth handover, Downing will also continue to provide administration services, and investment management services in respect of the AIM share pool and for non-ventures portfolio investments (primarily in the planned exit share pools which are being wound down) for a transitional period.

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 2022, but has been extracted from the statutory financial statements for the year ended 31 March 2022 which were approved by the Board of Directors on 25 July 2022 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 2021 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 2021 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at 6(th) Floor, St. Magnus House, 3 Lower Thames Street, London EC3R 6HD and will be available for download from and https://www.globenewswire.com/Tracker?data=ZKChqr1pnq3fijJrKt2MezMnGQP7IW8LdmSHUpzzPFdw1zIrRtqOtmQ1ubmtgzyI0oh4YgNJecRoCG5NztP2ugpGQ-xTDrb-ebXDv174pvY= www.downing.co.uk/d4.

 
 

(END) Dow Jones Newswires

July 25, 2022 13:28 ET (17:28 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.

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