TIDMD467
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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