TIDMD467
DOWNING FOUR VCT PLC
LEI: 21380035MV1VRYEXPR95
Final Results for the year ended 31 March 2021
6 July 2021
Financial Highlights
Unaudited Audited Audited
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30 June 2021 31 March 2021 31 March 2020
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Pence pence pence
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Generalist Share pool
Net Asset Value per
Generalist Share 67.5 67.2 61.7
Cumulative distributions 2.5 2.5 -
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Total Return per Generalist
Share 70.0 69.7 61.7
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Healthcare Share pool
Net Asset Value per
Healthcare Share 73.8 68.6 68.1
Cumulative distributions 2.5 2.5 -
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Net Asset Value and Total
Return per Healthcare
Share 76.3 71.1 68.1
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DSO D Share pool
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Net Asset Value per DSO D
Share 10.2 12.0
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Cumulative distributions 94.5 94.5
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Adjusted for Performance
Incentive estimate (0.5) (4.3)
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Total Return per DSO D
Share 104.2 (1) 102.2
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DP67 Share pool
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Net Asset Value per DP67
Share 18.4 18.8
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Cumulative distributions
(since original launch) 67.8 67.8
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Total Return per DP67 Share 86.2 86.6
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(1) Based on Total Return to Shareholders at 31 March 2021, a
Performance Incentive is expected to become due to management. The
Performance Incentive has been estimated at 0.5p per DSO D Share.
No provision has been included in the accounts as the conditions of
the Performance Incentive fee have not yet been met.
Chairman's Statement
Introduction
I present the Company's Annual Report for the year ended 31
March 2021.
This year has resembled no other in the Company's history. It
began in the midst of the first set of Covid lockdown restrictions.
Since then, coronavirus has affected most of our investee companies
and has understandably occupied much of the narrative in the
Company's reporting to Shareholders.
The Manager has had to focus on supporting the existing
businesses in the Evergreen portfolios over this difficult year,
with follow-on investments having been made where appropriate. The
Generalist and Healthcare Share Pools were also able to resume new
investment activity over the summer of 2020, and a number of new
businesses were added to the portfolios.
The Board and Investment Manager are now optimistic that the
Company's Evergreen and Planned Exit portfolios have largely
withstood the worst of the challenges accompanying the pandemic.
However, Shareholders should expect that it will take some time for
the Planned Exit portfolios to realise their remaining investments,
particularly those operating in the hospitality sector, as the
underlying venues need to be fully operational and re-establishing
trading records in order to seek optimal value for Shareholders on
exit.
I am pleased to report that most of the businesses in the
Evergreen portfolios have adapted well to the challenges they have
faced over the past year and have been able to continue to develop
in line with their plans. There has also been a first significant
success in both the Generalist and Healthcare Share Pools, which I
will come on to discuss.
Evergreen Share Pool review
Generalist Share pool
The task of building the Generalist portfolio continued during
the year, with GBP7.0m invested in sixteen VCT Qualifying
companies, six of which were new additions to the portfolio.
The Generalist Share Total Return stood at 69.7p at the year
end, representing an increase of 8.0p per Share or 13.0% over the
year. This is inclusive of the first Generalist dividend, of 2.5p
per Share, which was paid on 25 September 2020.
The NAV increase is largely attributable to a combination of
upward price movements within the portfolio of Liquidity
Investments, from which there has also been some redemption
activity, and a number valuation increases in the Venture Capital
portfolio, on the back of positive developments.
Positive developments include E-Fundamentals (Group) Limited,
Virtual Class Limited, Imagen Limited and Trinny London Limited,
which were uplifted by a combined GBP3.7m at the year end.
There have, however, also been some valuation reductions, most
notably Lignia Wood Company Limited which has badly affected by the
pandemic and is unlikely to recover. A full impairment provision
has been recognised as a result. Empiribox Holdings Limited and Upp
Technologies Group Limited were also reduced in value by a total of
GBP846,000 as at 31 March 2021.
There were also two full exits and two loan note conversions
during the period, which are set out in the Investment Manager's
Report. These transactions resulted in a total realised loss of
GBP382,000.
As Shareholders will be aware, the Generalist Share pool
invested a proportion of its funds awaiting deployment into
qualifying investments in an investment trust and OEICs managed by
Downing, which mainly focus on quoted small cap companies (together
termed the 'Liquidity investments'). Since the market correction in
March 2020, brought about by the coronavirus pandemic, this
portfolio has recovered well, generating realised and unrealised
valuation gains totalling GBP2.5 million for the year ended 31
March 2021. As noted in more detail in the Manager's report,
following redemptions from the Liquidity portfolio, the only
significant holding remaining at the year end was that of Downing
Strategic Micro-Cap Investment Trust plc, which has published some
positive updates since 31 March 2021.
A more detailed review of the Generalist Share pool is included
in the Investment Manager's Report.
Healthcare Share pool
The development of the Healthcare portfolio continued during the
year, with GBP3.5 million having been invested in eight VCT
Qualifying companies, four of which were new investments.
The Healthcare Share Total Return stood at 71.0p at the year
end, representing an increase of 2.9p per Share or 4.3% over the
year after adjusting for the first Healthcare dividend of 2.5p per
Share, which was paid on 25 September 2020.
The increase in the Healthcare NAV is the result of quoted price
increases in respect of the portfolio of Liquidity investments,
coupled with one positive development in the Venture Capital
portfolio.
As with the Generalist Share pool, the portfolio of Liquidity
investments held by the Healthcare Share pool has recovered well
since the March 2020 market correction, generating realised and
unrealised valuation gains totalling GBP629,000 for the year ended
31 March 2021. As noted in more detail in the Manager's report,
following redemptions from the Liquidity portfolio, the only
significant holding remaining at the year end was that of Downing
Strategic Micro-Cap Investment Trust plc.
Within the Healthcare Venture Capital portfolio, there is one
small valuation reduction to report as at 31 March 2021, while the
portfolio as a whole increased in value by GBP640,000. Destiny
Pharma plc was uplifted in value by GBP638,000 as at 31 March 2021,
based on the quoted share price at that date, which has increased
by more than 400% on 31 March 2020. The company raised a further
GBP10.4 million, via a placing of new shares in the market, to
support the acquisition of the global rights to a drug combatting
C. difficile. The company also successfully completed another
clinical trial phase in respect of its XF-73 nasal gel, which seeks
to prevent post-surgical infections.
It is disappointing to report that, after being materially
behind on its plans, ADC Biotechnology was exited in full during
the period, resulting in a realised loss of GBP430,000 against the
31 March 2020 valuation.
A more detailed review of the Healthcare Share pool is included
in the Investment Manager's Report.
Post Balance Sheet events
There is positive news to report for the Generalist and
Healthcare Share pool since the year end. On 3 June 2021 Arecor
undertook a successful IPO on AIM. The group raised a further GBP20
million as part of the IPO, taking the market capitalisation of the
company to approximately GBP62.5 million. The fundraising proceeds
will be used to accelerate research and development. On the basis
of the quoted bid price as at 30 June 2021, the value of the
Generalist and Healthcare share pools' investments in the business
increased by approximately GBP355,000 and GBP1.3 million
respectively.
The impact of these valuation increases is included in the 30
June 2021 NAVs stated in this report, shown under Financial
Highlights.
Planned Exit Share pools
DSO D Share pool
The DSO D Share portfolio held four remaining investments as at
31 March 2021. As Shareholders will be aware, the coronavirus
pandemic has caused significant disruption to the exit processes in
respect of these remaining investments. Plans to sell the two solar
businesses, Fresh Green Power Limited and Green Energy Production
Limited, have been delayed as onsite inspections by the prospective
buyer had not been possible due to coronavirus restriction, but are
now expected to take place in the coming months.
The realisation of the investments in Pearce and Saunders
Limited and Pearce and Saunders DevCo Limited now rests on the sale
of the remaining pub site in Eltham, which had been closed for much
of the last year. Sale plans will resume once the remaining site
has had the opportunity to achieve a period of good trading
activity once restrictions are fully lifted.
The DSO D Share NAV stood at 10.2p at the year end, a decrease
of 1.8p per Share over the year. However, owing to the delays in
exiting from the remaining investments, the estimated performance
incentive has also reduced from 31 March 2020, by 3.8p per Share.
As the reduction in the performance incentive has exceeded the
reduction in the reported NAV, the Total Return to DSO Shareholders
has increased from the level stated as at 31 March 2020, by 2.0p
per Share, or 16.7%. Total Return (net of the estimated performance
incentive) therefore now stands at 104.2p 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 have significant exposure to the
hospitality sector. The underlying venues have been closed for a
large proportion of the last year and will need to be fully
operational and trading well before sales plans can be resumed. The
Manager tentatively anticipates that these plans might resume
within the next twelve months.
As at 31 March 2021, DP67 Share NAV stood at 18.4p and Total
Return stood at 86.2p per share, a fall of 0.4p per share or 2.1%
since 31 March 2020.
A more detailed review of the DP67 Share pool is included in the
Investment Manager's Report.
Share buybacks
The Company operates a general 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.
During the year ended 31 March 2021, the Company appointed
Panmure Gordon as its corporate broker to assist in operating the
Share buyback process and ensuring that the quoted spread on the
Company's shares remains at a reasonable level. If you wish to sell
or buy shares in the Company, the contact details of Panmure Gordon
can be found on the Shareholder Information page of the Annual
Report.
No Shares were repurchased during the year ended 31 March
2021.
Dividends
Downing FOUR has a target of seeking to pay annual dividends of
at least 4% of the respective Generalist and Healthcare net asset
values per annum. As the Generalist and Healthcare portfolios are
still in a building phase and each has a considerable pipeline of
investment opportunities, the Board considers it appropriate to
propose final dividends for the year ended 31 March 2021 which are
in line with the base target of 4%.
The Board is proposing to pay final dividends of 2.75p per
Generalist Share and 2.75p per Healthcare Share on 24 September
2021, to Shareholders on the register as at 3 September 2021. 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 5.25p per
Generalist Share and 5.25p per Healthcare Share.
Further dividends in respect of the Company's Planned Exit Share
pools will be paid once the remaining realisations have taken
place.
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.
Further detail on the Investment Manager's approach to
responsible investment, including the key principles and screening
approach, can be found on pages 42 and 43 of the Annual Report.
Annual General Meeting ("AGM")
With coronavirus restrictions easing over recent months, I am
pleased to announce that it is the Company's intention to invite
Shareholders to attend this year's AGM in person. Should
restrictions imposed by the UK Government mean that this is no
longer possible, the Company will communicate a revised plan to
Shareholders.
The AGM is planned to take place at 6th Floor, St. Magnus House,
3 Lower Thames Street, London, EC3R 6HD at 11:00 a.m. on 8
September 2021.
One item of special business is to be proposed at the AGM, in
respect of the authority to buy back shares as noted above.
Shareholders are able to submit their proxy forms via email to
d4agm@downing.co.uk by 11:00 a.m. on 6 September 2021.
Board Composition
The Nomination Committee is currently carrying out a review of
the composition of the Board and Shareholders will be provided with
an update in due course.
Outlook
Now that the most severe of the coronavirus restrictions appear
to be behind us, I am optimistic that many of the businesses in the
Generalist and Healthcare portfolios can progress towards
delivering their potential. In line with expectations for
portfolios such as these, a number of, what we now know to be, the
weaker investments have shown that they are unlikely to be able to
deliver their business plans. As these fall away we should be left
with a portfolio of stronger businesses that can drive growth for
Shareholders.
As at 30 June 2021, the Generalist and Healthcare Share pool
NAVs had increased to 67.5p and 73.8p respectively.
The delays in exiting from the remaining investments in the
Planned Exit share pools have been frustrating and it is still not
clear when the Manager will be able to complete the process. Once
the economy has fully reopened, the options for realising the
hospitality investments are expected to become clearer.
Offers for subscription
During the 2021 tax year, the Company had open offers in respect
of its Generalist and Healthcare Share classes, principally to
allow the Company to continue to issue new Shares to ongoing
monthly investors. During the year ended 31 March 2021, the Company
raised GBP1.5 million under the Generalist Offers and GBP552,000
under the Healthcare Offers. On 5 April 2021, the Company raised a
further GBP495,000 from the issue of new Generalist and Healthcare
Shares.
Shareholders should be encouraged that I, along with members of
the Downing management team, subscribed for Generalist Shares under
the recent offers.
New fundraising plans
It is intended that the current non-prospectus Offers will be
replaced by a full prospectus offer in respect of both the
Generalist and Healthcare Share classes. The Directors believe that
there continues to be good opportunities to invest in young growth
companies and the Manager reports a good level of potential deal
flow.
As part of the new prospectus offer, the Company also plans to
launch a new AIM Share class, which would seek to invest in a
focused portfolio of VCT Qualifying companies quoted on AIM. The
Manager has a well-established team with significant experience in
investing in smaller quoted companies, and has reported that there
is a strong pipeline of potential deals which would be VCT
Qualifying.
It is intended that the Generalist, Healthcare and AIM Share
classes would each seek to raise an equal amount under the combined
prospectus offer.
As the fundraising plans described above are subject to
Shareholder approval at a General Meeting of the Company, the
Company will shortly publish a circular setting out these plans in
more detail.
Sir Aubrey Brocklebank Bt.
Chairman
Generalist Share Pool
Share Pool Summary
31 March 31 March
2021 2020
Financial highlights Pence pence
Net Asset Value per Generalist Share 67.2 61.7
Cumulative distributions 2.5 -
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Total Return per Generalist Share 69.7 61.7
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Investment Manager's Report - Generalist Share Pool
i. Overview
Introduction
We present a review of the investment portfolio and activity for
the Generalist Share pool for the year ended 31 March 2021.
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 2021, the NAV of a Generalist Share stood at
67.2p, an increase of 8.0p (13.0%) for the year after adding back
the first Generalist dividend, of 2.5p per Share, which was paid on
25 September 2020.
The return on ordinary activities for the Generalist Share pool
for the year was GBP3.8 million (2020: loss of GBP9.8 million),
comprising a revenue loss of GBP91,000 (2020: GBP582,000) and a
capital gain of GBP3.8 million (2020: loss of GBP9.2 million).
Whilst there has been some recovery in the NAV since 31 March
2020, the Total Return to Shareholders as at 31 March 2021, of
69.7p, continues to be considered an underperformance against our
expectations for the Generalist Share pool.
A proposed final dividend of 2.75p per share will be paid on 24
September 2021, to Shareholders on the register at 3 September
2021. This is in line with the stated dividend target for the
Generalist Share pool, to pay dividends of at least 4% of net
assets per annum.
Portfolio Overview
As at 31 March 2021, the Generalist Share Pool held a portfolio
of 36 Venture Capital investments and two Liquidity investments,
with a combined value of GBP31.8 million.
The year ended 31 March 2021 was one of significant challenge to
businesses in the UK and the rest of the World. During this period,
we have been working closely with portfolio companies to provide
guidance and, where appropriate, additional funding to support
these businesses in navigating the challenges brought about by the
coronavirus pandemic.
As Shareholders might expect, as the Generalist Share pool has
made investments in a range of different businesses, the pandemic
has impacted certain companies within the portfolio more so than
others.
However, we are pleased to report that the portfolio has
generally weathered the pandemic well and many of the businesses
within it are well positioned to continue to progress with their
plans. 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 GBP2.0 million.
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 31 March 2021. This
resulted in a valuation uplift of GBP1.35 million for the
period.
ii. Venture Capital Portfolio
Investment activity
During the period, a total of GBP7.3 million was invested in
sixteen businesses, six 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.
Cornelis Networks, Inc. (GBP1.4 million), is a spin out from
Intel Corporation which provides purpose-built interconnects
focused on high-performance computing, data analytics and
artificial intelligence. The Company's technology allows the
processing of huge volume of calculations at high speed.
Parsable, Inc. (GBP766,000) is a leading provider of software to
manufacturing industries. Its Connected Worker platform helps
improve safety, quality and productivity by connecting and
empowering frontline workers to optimise processes and execute work
more quickly, reducing waste and improving safety.
Ayar Labs, Inc. (GBP764,000) has developed components for high
performance computing and data centre applications to deliver
better bandwidth, better power, and reduced latency.
Carbice Corporation (GBP656,000) is a nanotechnology company
developing technologies to dissipate heat from electronic devices
such as phones and satellites that improve performance and
safety.
Trinny London Limited (GBP219,000) is an e-commerce-based beauty
and cosmetics brand launched by Trinny Woodall.
MIP Diagnostics Limited (GBP200,000) 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.
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.
During the period, the existing loan note investments (including
interest thereon) in Empiribox Holdings Limited, a provider of
equipment and training to primary schools across the UK, converted
into equity as part of a restructuring. The Generalist Share pool
also made a further equity investment of GBP250,000 during the
period.
A further GBP525,000 was invested in FundingXchange Limited. The
business is an SME funding platform and B2B technology provider
which enables online lending.
During the period, the existing GBP300,000 loan note investment
in Channel Mum Limited, the developer and operator of a
community-based online platform for parents, converted into equity
as part of a new funding round. At this point, the Generalist Share
pool also made a further equity investment of GBP175,000.
GBP434,000 was invested in Congenica Limited, a company which
has developed a genomics-based diagnostic decision support platform
which helps doctors identify rare diseases in patients.
A further GBP250,000 was invested in Virtual Class Limited,
trading as Third Space Learning. The company has developed an
online educational platform that provides mathematics tuition to
pupils studying for their Key Stage 2 exams.
GBP250,000 was invested in Hummingbird Technologies Limited, the
owner of an advanced crop analytics platform that is powered by
machine learning and aerial imagery to assess and predict crop
health.
GBP158,000 was invested in in Streethub Limited (trading as
Trouva), an online marketplace for a curated range of homeware and
lifestyle products.
A further GBP114,000 was invested in Arecor Limited the
developer of biopharmaceuticals and proprietary diabetes-related
products, including ultra-fast acting insulin to treat type 1 and 2
diabetes. In June 2021, Arecor admitted its shares to trading on
AIM and raised a further GBP20 million via a new placing. The
proceeds will be used to facilitate the development of its internal
proprietary diabetes and specialty hospital products.
GBP62,000 was invested in ADC Biotechnology Limited, in order to
support the business towards an exit. Following this investment,
the Generalist Share Pool's holding in the company was exited in
full, generating initial proceeds of GBP110,000, with a further
GBP115,000 to follow should the business achieve certain
milestones. As this second amount is contingent on events which are
outside of the control of the Company or Downing LLP, it has not
been included in the Generalist NAV or as part of the exit
proceeds.
A further GBP50,000 was invested in Exonar Limited, a developer
of software solutions which help ensure compliance with
data-centric regulations and imperatives, including GDPR.
Finally, BridgeU Corporation, an educational technology
business, was exited in full during the period, generating initial
proceeds of GBP462,000, resulting in a gain over holding value of
GBP48,000. It is likely that the Generalist Share Pool will receive
further proceeds of up to GBP143,000, however additional amounts
have, as yet, not been recognised as their recovery is subject to
events outside the Company's control.
Portfolio valuation
During the period, the Venture Capital portfolio of the
Generalist Share pool was increased in value by a total of GBP1.4
million. Whilst there have been a number of positive developments
within the Venture Capital portfolio, several companies were
reduced in value due to them not progressing as we had hoped.
Lignia Wood Company Limited has experienced material reductions
in demand since March 2020 as the restrictions on the movement of
goods have impacted the supply chain significantly. Given the
impact of coronavirus on the business' performance to date, the
business has not been able to raise further funds. As a result, we
believe that the business will now ultimately fail, and the value
of the Generalist Share pool's investment has therefore been
reduced to GBPnil, from GBP1,25 million as at 31 March 2020.
As noted previously, Empiribox Holdings Limited was restructured
during the period. The valuation of the Generalist Share pool's
investment in the business was reduced by GBP280,000 as at 31 March
2021, as the business continues to be behind on its plans following
delays caused by the pandemic.
E-Fundamentals (Group) Limited has progressed well both in the
UK and in the US, with recurring revenues continuing to grow. This
good performance has resulted in a valuation uplift of GBP1.1
million as at 31 March 2021.
Virtual Class Limited, trading as Third Space Learning, which
received further funding from the Generalist Share pool during the
period, was uplifted in value by GBP1.1 million as at 31 March
2021. The business has seen an increase in demand for its online
educational platform.
Imagen Limited, the developer of a cloud-based enterprise video
platform, continues to have a strong revenue pipeline and has
performed ahead of budget. As a result, the Generalist Share Pool's
investment in the business was uplifted by GBP828,000 as at 31
March 2021.
Trinny London Limited, the e-commerce-based beauty and cosmetics
brand in which the Generalist Share Pool made its first investment
in the summer of 2020, has been uplifted by GBP738,000 at the
period end as a result of the company performing significantly
ahead of budget.
Destiny Pharma plc, which is listed on London's Alternative
Investment Market (AIM), was uplifted by GBP425,000 as at 31 March
2021, in line with the prevailing quoted price at that date. The
company has published several positive updates during the year. In
particular, the company raised a further GBP10.4 million to
facilitate the acquisition of the global rights to NTCD-M3, a drug
preventing Clostridium difficile recurrence.
Upp Technologies Group Limited (previously Volo Commerce) a
provider of multichannel e-commerce technology, was reduced in
value by GBP566,000 as at 31 March 2021, on the back of its revenue
performance being behind the milestones in place at the time of
investment.
It is disappointing to report that we continue to anticipate no
recovery of value from Live Better With Limited, a developer of a
healthcare website aiming to help people with long term medical
conditions.
The remaining investments in the Venture Capital Portfolio were
reduced in value by a total of GBP56,000 as at 31 March 2021.
Outlook
There have been a number of positive developments in the
portfolio over the latter months of the year ended 31 March 2021,
as the vaccination rollout has progressed in the UK and
restrictions have eased on the back of this. We are encouraged by
many of the portfolio companies, with most having been able to
adapt their operations and continue with their plans during what
has been a difficult and uncertain year. We continue to actively
engage with these companies, providing guidance and support to
ensure they are well positioned to proceed with their
milestones.
iii. Liquidity Investments
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 31 March 2021. This
resulted in a total uplift of GBP1.35 million for the year.
Downing Strategic Micro-Cap Investment Trust plc
The value of the Generalist Share pool's holding in Downing
Strategic Micro-Cap Investment Trust plc ("DSM") increased in value
by GBP1.3 million during the period. As at 31 March 2021, DSM's
mid-market share price traded at a discount to NAV of 12.81%,
representing unrealised value in the company's share price. The
Managers of DSM also believe that the trust's portfolio also has a
level of intrinsic value which is yet to be recognised by the
market. The Managers estimated this to be 43% as at 10 May 2021,
and believe that a return of positive sentiment to UK small company
value could further enhance this.
The Managers believe the investee companies are all well
financed and should benefit from the end of lockdown and a return
to more normalised trading conditions. The Managers are focused,
alongside strong management teams, on the catalysts in the
portfolio which has now matured into a collection of well-run and
relevant businesses.
Downing Monthly Income Fund
The Generalist Share Pool's holding in Downing Monthly Income
Fund ("DMI") was redeemed in full during the year ended 31 March
2021. The redemptions generated proceeds of GBP3.3 million,
representing a loss against original cost of GBP612,000. The
proceeds generated were used to fund new and follow-on investments
in the Venture Capital Portfolio.
Downing UK Micro-Cap Growth Fund
As we noted in the Half-Yearly Report to 30 September 2020, in
October 2020 the ACD (Associated Corporate Director) and Downing
LLP took the decision to suspend Downing UK Micro-Cap Growth Fund
("DMCG") on the grounds of the fund's ongoing viability due to its
small size. Subsequently, the relevant parties agreed to proceed
with winding-up the fund and return capital to investors. The
majority of DMCG's portfolio was therefore realised in early 2021,
meaning that c.85% of the Generalist Share Pool's holding was
redeemed prior to 31 March 2021.
This majority redemption generated proceeds of GBP2.5 million
for the Generalist Share pool, representing a loss over cost of
GBP1.0 million. The remaining holding in DMCG was valued at
GBP362,000 as at 31 March 2021. This largely represents the value
of smaller unquoted holdings within the DMCG portfolio, which the
Managers are seeking to realise.
Outlook
As previously highlighted, GBP5.8 million of value was redeemed
from the Generalist Share pool's holdings in DMI and DMCG during
the year. The Managers are seeking to realise the remaining value
in DMCG over the remainder of 2021, to facilitate final redemptions
for investors.
Once the remaining DMCG value has been realised, the only
remaining holding in the Liquidity Investment Portfolio will be in
DSM. Since 31 March 2021, there have been several positive
developments in the DSM portfolio, most notably a significant loan
redemption through a corporate event, which returned more than
GBP5.3 million to DSM. The Managers report that DSM has a strong
pipeline of new investment opportunities, some of which have
already been executed.
Downing LLP
Review of Investments -- Generalist Share Pool
The following investments were held at 31 March 2021:
Valuation
movement % of
Cost Valuation in period portfolio
Portfolio of investments GBP'000 GBP'000 GBP'000
Venture Capital investments
---------------------------- ------- ---------- ---------- ----------
E-Fundamentals (Group)
Limited 1,342 2,408 1,066 7.60%
----------------------------- ------- ---------- ---------- ----------
Virtual Class Limited
(Third Space Learning) 1,053 1,876 1,080 5.90%
----------------------------- ------- ---------- ---------- ----------
Imagen Limited 1,000 1,828 828 5.80%
----------------------------- ------- ---------- ---------- ----------
Rated People Limited 1,282 1,584 302 5.00%
----------------------------- ------- ---------- ---------- ----------
Cornelis Networks, Inc. 1,402 1,307 (95) 4.10%
----------------------------- ------- ---------- ---------- ----------
Streethub Limited (t/a
Trouva) 1,208 1,273 14 4.00%
----------------------------- ------- ---------- ---------- ----------
FundingXchange Limited 1,050 1,050 - 3.30%
----------------------------- ------- ---------- ---------- ----------
Firefly Learning Limited 1,047 1,047 - 3.30%
----------------------------- ------- ---------- ---------- ----------
Ecstase Limited (t/a ADAY) 1,000 1,000 - 3.10%
----------------------------- ------- ---------- ---------- ----------
Trinny London Limited 219 957 738 3.00%
----------------------------- ------- ---------- ---------- ----------
Limitless Technology
Limited 757 920 117 2.90%
----------------------------- ------- ---------- ---------- ----------
Hackajob Limited 784 784 - 2.50%
----------------------------- ------- ---------- ---------- ----------
Hummingbird Technologies
Limited 750 753 85 2.40%
----------------------------- ------- ---------- ---------- ----------
Congenica Limited 734 746 12 2.30%
----------------------------- ------- ---------- ---------- ----------
Ayar Labs, Inc. 764 726 (38) 2.30%
----------------------------- ------- ---------- ---------- ----------
Parsable, Inc. 766 678 (88) 2.10%
----------------------------- ------- ---------- ---------- ----------
Masters of Pie Limited 667 667 - 2.10%
----------------------------- ------- ---------- ---------- ----------
Carbice Corporation 656 609 (47) 1.90%
----------------------------- ------- ---------- ---------- ----------
Destiny Pharma plc^ 500 529 425 1.70%
----------------------------- ------- ---------- ---------- ----------
JRNI Limited 525 525 - 1.70%
----------------------------- ------- ---------- ---------- ----------
Maverick Pubs (Holdings)
Limited 1,000 450 (50) 1.40%
----------------------------- ------- ---------- ---------- ----------
Arecor Limited 414 414 - 1.30%
----------------------------- ------- ---------- ---------- ----------
Empiribox Holdings Limited 1,563 405 (280) 1.30%
----------------------------- ------- ---------- ---------- ----------
Fenkle Street LLP* 301 388 (12) 1.20%
----------------------------- ------- ---------- ---------- ----------
Exonar Limited 550 379 (171) 1.20%
----------------------------- ------- ---------- ---------- ----------
Cambridge Touch
Technologies Limited 459 361 - 1.10%
----------------------------- ------- ---------- ---------- ----------
Xupes Limited 933 291 291 0.90%
----------------------------- ------- ---------- ---------- ----------
Channel Mum Limited 675 278 (197) 0.90%
----------------------------- ------- ---------- ---------- ----------
FVRVS Limited (t/a
Fundamental VR) 250 250 - 0.80%
----------------------------- ------- ---------- ---------- ----------
Upp Technologies Group
Limited (prev. Volo
Commerce) 1,077 242 (566) 0.80%
----------------------------- ------- ---------- ---------- ----------
Lineten Limited 400 209 (191) 0.70%
----------------------------- ------- ---------- ---------- ----------
MIP Diagnostics Limited 200 200 - 0.60%
----------------------------- ------- ---------- ---------- ----------
Lignia Wood Company Limited 1,778 - (1,250) 0.00%
----------------------------- ------- ---------- ---------- ----------
Live Better With Limited 1,211 - - 0.00%
----------------------------- ------- ---------- ---------- ----------
Ormsborough Limited 900 - - 0.00%
----------------------------- ------- ---------- ---------- ----------
Glownet Limited 741 - - 0.00%
----------------------------- ------- ---------- ---------- ----------
30,283 25,134 1,973 79.20%
---------------------------- ------- ---------- ---------- ----------
Liquidity investments
---------------------------- ------- ---------- ---------- ----------
MI Downing UK Micro-Cap
Growth Fund* 492 362 83 1.1%
----------------------------- ------- ---------- ---------- ----------
Downing Strategic Micro-Cap
Investment Trust plc*^ 4,269 3,137 1,264 9.8%
----------------------------- ------- ---------- ---------- ----------
4,761 3,499 1,347 10.9%
---------------------------- ------- ---------- ---------- ----------
35,044 28,633 3,320 90.1%
---------------------------- ------- ---------- ---------- ----------
Cash at bank and in hand 3,141 9.9%
----------------------------- ------- ---------- ---------- ----------
Total investments 31,774 100.0%
----------------------------- ------- ---------- ---------- ----------
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 2021
Cost
Additions GBP'000
Venture Capital investments
--------------------------------------------- -------
Cornelis Networks, Inc. 1,402
--------------------------------------------- -------
Empiribox Holdings Limited** 685
--------------------------------------------- -------
Parsable, Inc. 766
--------------------------------------------- -------
Ayar Labs, Inc. 764
--------------------------------------------- -------
Carbice Corporation 656
--------------------------------------------- -------
FundingXchange Limited 525
--------------------------------------------- -------
Channel Mum Limited** 475
--------------------------------------------- -------
Congenica Limited 434
--------------------------------------------- -------
Virtual Class Limited (Third Space Learning) 250
--------------------------------------------- -------
Hummingbird Technologies Limited 250
--------------------------------------------- -------
Trinny London Limited 219
--------------------------------------------- -------
MIP Diagnostics Limited 200
--------------------------------------------- -------
Trouva Limited 158
--------------------------------------------- -------
Arecor Limited 114
--------------------------------------------- -------
ADC Biotechnology Limited 62
--------------------------------------------- -------
Exonar Limited 50
--------------------------------------------- -------
7,010
--------------------------------------------- -------
Valuation at Loss Realised
Cost 01/04/20 Proceeds vs. cost (loss)/gain
Disposals GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture Capital investments
------------------------------------------------------------- ---------------
Empiribox
Holdings
Limited** 650 325 325 - -
--------------- ------- -------------- -------- --------- ---------------
ADC
Biotechnology
Limited 877 540 110 (767) (430)
--------------- ------- -------------- -------- --------- ---------------
Channel Mum
Limited** 300 300 300 - -
--------------- ------- -------------- -------- --------- ---------------
BridgeU
Corporation 810 414 462 (348) 48
--------------- ------- -------------- -------- --------- ---------------
Liquidity
investments
--------------- ------- -------------- -------- --------- ---------------
MI Downing
Monthly Income
Fund* 3,950 2,712 3,338 (612) 626
--------------- ------- -------------- -------- --------- ---------------
MI Downing UK
Micro-Cap
Growth Fund* 3,533 1,991 2,494 (1,039) 503
--------------- ------- -------------- -------- --------- ---------------
10,120 6,282 7,029 (3,091) 747
--------------- ------- -------------- -------- --------- ---------------
*non-qualifying investment
**includes Loan Note conversion
Healthcare Share Pool
Share Pool Summary
31 March 31 March
2021 2020
Financial highlights Pence pence
Net Asset Value per Healthcare Share 68.5 68.1
Cumulative distributions 2.5 -
------------------------------------- -------- --------
Total Return per Healthcare Share 71.0 68.1
------------------------------------- -------- --------
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 2021.
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 2021, the NAV of a Healthcare share stood at
68.5p, an increase of 2.9p (4.3%) over the year after adding back
the first Healthcare dividend, of 2.5p per Share, which was paid on
25 September 2020.
The return on ordinary activities for the Healthcare Share pool
for the year was GBP549,000 (2020: loss of GBP2.7 million), being a
revenue loss of GBP113,000 (2020: GBP240,000) and a capital gain of
GBP662,000 (2020: loss of GBP2.5 million).
Whilst there has been some recovery in the NAV since 31 March
2020, the Total Return to Shareholders as at 31 March 2021, of
71.0p, continues to be considered an underperformance against our
expectations for the Healthcare Share pool.
A proposed final dividend of 2.75p per share will be paid on 24
September 2021, to Shareholders on the register at 3 September
2021. 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 2021, the Healthcare Share Pool held a portfolio
of 13 Venture Capital investments and two Liquidity investments,
with a combined value of GBP9.5 million.
The year ended 31 March 2021 saw the impact of the coronavirus
pandemic extend through all sectors of the UK economy. Whilst the
successes of some Healthcare businesses have been accelerated due
to the focus on developing coronavirus vaccines, many other
Healthcare businesses, such as those developing pharmaceuticals
unrelated to coronavirus, have experienced delays or
disruptions.
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
GBP640,000 as at 31 March 2021.
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 31 March 2021,
resulting in a valuation uplift of GBP241,000 for the year.
ii. Venture Capital Portfolio
Investment activity
During the year, a total of GBP3.5 million was invested in eight
businesses, four of which are new VCT Qualifying investments.
New Venture Capital investments
Genincode UK Limited, trading as GEN inCode (GBP900,000),
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.
Invizius Limited (GBP500,000) is seeking to improve patient
outcomes in dialysis and other extra-corporeal treatments. Its core
patented technology aims to reduce inflammatory responses which can
otherwise reduce the life expectancy of dialysis patients.
Cambridge Respiratory Innovations Limited (GBP400,000) is 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.
MIP Diagnostics Limited (GBP200,000) 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.
Follow-on Venture Capital investments
GBP500,000 was invested in Adaptix Limited, the developer of a
flat panel X-ray source which seeks to improve the accuracy and
mobility of 3D imaging. The company's technology will make
portable, low radiation dose 3D imaging more accessible and lower
cost than systems currently available on the market.
A further GBP434,000 was invested in Congenica Limited, a
business which has developed a genomics-based diagnostic decision
support platform which helps doctors identify rare diseases in
patients.
GBP419,000 was invested in Arecor Limited, the developer of
biopharmaceuticals and proprietary diabetes-related products,
including ultra-fast acting insulin to treat type 1 and 2 diabetes.
In June 2021, Arecor admitted its shares to trading on AIM and
raised a further GBP20 million via a new placing. The proceeds will
be used to facilitate the development of its internal proprietary
diabetes and specialty hospital products.
GBP105,000 was invested in ADC Biotechnology Limited, in order
to support the business towards an exit. Following this investment,
the Healthcare Share Pool's holding in the company was exited in
full, generating initial proceeds of GBP187,000, with a further
GBP195,000 to follow should the business achieve certain
milestones. As this second amount is contingent on events which are
outside of the control of the Company or Downing LLP, it has not
been included in the NAV or as part of the exit proceeds.
Portfolio valuation
During the period, the Venture Capital portfolio of the
Healthcare Share pool increased in value by a total of
GBP640,000.
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.
Destiny Pharma plc, which is listed on AIM, was uplifted by
GBP638,000 as at 31 March 2021, in line with the prevailing quoted
price at that date, which has increased by over 400% year on year.
The share price had stalled since early 2018 on the back of little
news flow from the company and was subsequently impacted by the
market correction in March 2020. However, we maintained confidence
in the company's longer-term prospects and its ability to execute
on its plans. During the year the company published several
positive updates. Notably, the company raised a further GBP10.4
million to facilitate the acquisition of the global rights to
NTCD-M3, a drug preventing Clostridium difficile recurrence. The
company also successfully recruited patients in December 2020 for
its phase 2b clinical trial in respect of its XF-73 nasal gel for
the prevention of post-surgical infections and is now working on
plans for a phase 3 clinical study.
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 reduced by GBP58,000 at 31
March 2021 as a result.
Adaptix Limited and Congenica Limited, in which the Healthcare
Share Pool made follow-on investments of GBP500,000 and GBP434,000
respectively during the year, were increased in value by GBP29,000
and GBP31,000 as at 31 March 2021, in line with calibrations to the
valuations set under their latest funding rounds.
There were no other valuation movements in the Venture Capital
portfolio.
Outlook
With GBP3.5 million having been invested in eight businesses
during the year, the building of the Venture Capital portfolio of
the Healthcare Share pool has progressed well during the period.
The focus for the Manager 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.
Whilst is it disappointing to report Live Better With as an
early loss in the portfolio, it is typically the case with young
growth companies that the failures will materialise much faster
than the successes, as the performance of stronger investments
tends be more incremental and therefore takes a longer time to
materialise. We are, however, pleased with how the majority of the
Healthcare Venture Capital portfolio has coped with the challenges
they have faced over the last year and we believe there is strong
potential within a number of these businesses.
iii. Liquidity Investments
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 31 March 2021,
resulting in a total uplift of GBP241,000 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") increased in value
by GBP535,000 during the period. As at 31 March 2021, DSM's
mid-market share price traded at a discount to NAV of 12.81%,
representing unrealised value in the company's share price. The
Managers of DSM also believe that the trust's portfolio also has a
level of intrinsic value which is yet to be recognised by the
market. The Managers estimated this to be 43% as at 10 May 2021,
and believe that a return of positive sentiment to UK small company
value could further enhance this.
The Managers believe the investee companies are all well
financed and should benefit from the end of lockdown and a return
to more normalised trading conditions. The Managers are focused,
alongside strong management teams, on the catalysts in the
portfolio which has now matured into a collection of well-run and
relevant businesses.
Downing Monthly Income Fund
The Healthcare Share Pool's holding in Downing Monthly Income
Fund ("DMI") was redeemed in full during the year ended 31 March
2021. The redemptions generated proceeds of GBP994,000,
representing a loss against original cost of GBP106,000. The
proceeds generated were used to fund new and follow-on investments
in the Venture Capital Portfolio.
Downing UK Micro-Cap Growth Fund
As we noted in the Half-Yearly Report to 30 September 2020, in
October 2020 the ACD (Associated Corporate Director) and Downing
LLP took the decision to suspend Downing UK Micro-Cap Growth Fund
("DMCG") on the grounds of the fund's ongoing viability due to its
small size. Subsequently, the relevant parties agreed to proceed
with winding-up the fund and return capital to investors. The
majority of DMCG's portfolio was therefore realised in early 2021,
meaning that c.85% of the Healthcare Share Pool's holding was
redeemed prior to 31 March 2021.
This majority redemption generated proceeds of GBP694,000 for
the Healthcare Share pool, representing a loss over cost of
GBP275,000. The remaining holding in DMCG was valued at GBP115,000
as at 31 March 2021. This largely represents the value of smaller
unquoted holdings within the DMCG portfolio, which the Managers are
seeking to realise.
Outlook
As previously highlighted, GBP1.9 million of value was redeemed
from the Healthcare Share pool's holdings in DMI and DMCG during
the year. The Managers are seeking to realise the remaining value
in DMCG over the remainder of 2021, to facilitate final redemptions
for investors.
Once the remaining DMCG value has been realised, the only
remaining holding in the Liquidity Investment Portfolio will be in
DSM. Since 31 March 2021, there have been several positive
developments in the DSM portfolio, most notably a significant loan
redemption through a corporate event, which returned more than
GBP5.3 million to DSM. The Managers report that DSM has a strong
pipeline of new investment opportunities, some of which have
already been executed.
Downing LLP
Review of Investments -- Healthcare Share Pool
The following investments were held at 31 March 2021:
Valuation
movement % of
Cost Valuation in period portfolio
Portfolio of investments GBP'000 GBP'000 GBP'000
------------------------------ ------- ---------- ---------- ----------
Venture Capital investments
------------------------------ ------- ---------- ---------- ----------
Arecor Limited 1,519 1,519 - 11.7%
------------------------------- ------- ---------- ---------- ----------
Congenica Limited 1,184 1,215 31 9.3%
------------------------------- ------- ---------- ---------- ----------
Adaptix Limited 1,056 1,085 29 8.3%
------------------------------- ------- ---------- ---------- ----------
Open Bionics Limited 1,000 1,000 - 7.7%
------------------------------- ------- ---------- ---------- ----------
Genincode UK Limited 900 900 - 6.9%
------------------------------- ------- ---------- ---------- ----------
Destiny Pharma plc^ 750 793 638 6.1%
------------------------------- ------- ---------- ---------- ----------
MyRecovery Limited 528 556 - 4.3%
------------------------------- ------- ---------- ---------- ----------
FVRVS Limited 500 500 - 3.8%
------------------------------- ------- ---------- ---------- ----------
Invizius Limited 500 500 - 3.8%
------------------------------- ------- ---------- ---------- ----------
Cambridge Respiratory
Innovations Limited 400 400 - 3.1%
------------------------------- ------- ---------- ---------- ----------
The Electrospinning Company
Limited 278 220 (58) 1.7%
------------------------------- ------- ---------- ---------- ----------
MIP Diagnostics Limited 200 200 - 1.5%
------------------------------- ------- ---------- ---------- ----------
Live Better With Limited 1,106 - - 0.0%
------------------------------- ------- ---------- ---------- ----------
9,921 8,888 640 68.2%
------------------------------ ------- ---------- ---------- ----------
Liquidity Investments
------------------------------ ------- ---------- ---------- ----------
MI Downing UK Micro-Cap
Growth Fund* 156 115 26 0.9%
------------------------------- ------- ---------- ---------- ----------
Downing Strategic Micro-Cap
Investment Trust plc*^ 729 535 215 4.1%
------------------------------- ------- ---------- ---------- ----------
885 650 241 5.0%
------------------------------ ------- ---------- ---------- ----------
10,806 9,538 881 73.2%
------------------------------ ------- ---------- ---------- ----------
Cash at bank and in hand 3,491 26.8%
------------------------------- ------- ---------- ---------- ----------
Total investments 13,029 100.0%
------------------------------- ------- ---------- ---------- ----------
*non-qualifying investment
^listed and traded on the London Stock Exchange
Investment movements for the year ended 31 March 2021
Cost
Additions GBP'000
------------------------------------------ -------
Venture Capital investments
------------------------------------------ -------
Genincode UK Limited 900
------------------------------------------ -------
Adaptix Limited 500
------------------------------------------ -------
Invizius Limited 500
------------------------------------------ -------
Congenica Limited 434
------------------------------------------ -------
Arecor Limited 419
------------------------------------------ -------
Cambridge Respiratory Innovations Limited 400
------------------------------------------ -------
MIP Diagnostics Limited 200
------------------------------------------ -------
ADC Biotechnology Limited 105
------------------------------------------ -------
3,458
------------------------------------------ -------
Valuation at Loss Realised
Cost 01/04/20 Proceeds vs. cost (loss)/gain
Disposals GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture Capital investments
------------------------------------------------------------- ---------------
ADC
Biotechnology
Limited 1,497 660 187 (1,310) (473)
--------------- ------- -------------- -------- --------- ---------------
Liquidity
investments
--------------- ------- -------------- -------- --------- ---------------
MI Downing
Monthly Income
Fund* 1,100 757 994 (106) 237
--------------- ------- -------------- -------- --------- ---------------
MI Downing UK
Micro-Cap
Growth Fund* 969 543 694 (275) 151
--------------- ------- -------------- -------- --------- ---------------
3,566 1,960 1,875 (1,691) (85)
--------------- ------- -------------- -------- --------- ---------------
*non-qualifying investment
DSO D Share Pool
Share Pool Summary
31 March 31 March
2021 2020
-------------------------------------------- -------- --------
Financial highlights Pence Pence
-------------------------------------------- -------- --------
Net Asset Value per DSO D Share 10.2 12.0
-------------------------------------------- -------- --------
Cumulative distributions 94.5 94.5
-------------------------------------------- -------- --------
Adjusted for Performance Incentive estimate (0.5) (4.3)
-------------------------------------------- -------- --------
Total Return per DSO D Share 104.2 102.2
-------------------------------------------- -------- --------
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
coronavirus pandemic.
Net Asset Value and results
The Net Asset Value ("NAV") per DSO D Share at 31 March 2021,
net of the estimated performance incentive fee, stood at 9.7p, an
increase of 2.0p or 16.7% over the period. Whilst the reported NAV
(prior to the deduction of the performance fee estimate) reduced by
1.8p during the year, the estimated performance incentive fee,
which is expected to become due to partners and staff of Downing
LLP, also reduced.
Total Return, net of the estimated performance fee, stands at
104.2p 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
GBP143,000 (2020: return of GBP175,000), comprising a revenue loss
of GBP31,000 (2020: return of GBP121,000) and a capital loss of
GBP112,000 (2020: return of GBP54,000).
Whilst it is unfortunate to report further delays in the
realisation process, the NAV of the DSO Share pool has not as yet
been materially impacted by the coronavirus pandemic. We believe
that there continue to be opportunities to exit from the remaining
investments, however we expect this process will take some time to
complete.
Venture Capital investments
As at 31 March 2021, the DSO D Share Pool held four Venture
Capital investments with a total value of GBP445,000.
Portfolio activity
Pearce and Saunders Limited, the owner of a freehold pub in
south east London, repaid loan note principal of GBP25,000 during
the period, along with a redemption premium of GBP75,000.
Pearce and Saunders DevCo Limited also repaid loan note
principal of GBP1,000.
Apex Energy Limited, the owner of a standby electricity
generation plant, was sold during the year ended 31 March 2021. The
sale generated proceeds of GBP3,000 and a loss against cost of
GBP397,000.
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
GBP102,000.
Pearce and Saunders Limited has been heavily impacted by the
restrictions and forced closures brought about by the coronavirus
pandemic. Accordingly, the valuation has been reduced by GBP166,000
as at 31 March 2021.
There were two valuation increases during the year, the larger
being an uplift of GBP51,000 in respect of Fresh Green Power
Limited, the owner of solar panels on the rooftops of domestic
properties in the UK. The business has been revalued in accordance
with a potential sale, which was put on hold during the height of
the pandemic.
Green Energy Production UK Limited owns a portfolio of
commercial solar panels on the rooftops of Chicken sheds in
Lincolnshire. The company is valued on a discounted cash flow basis
and has been increased in value by GBP13,000, reflecting the latest
assumptions on generation, energy pricing and operating costs for
the remaining life of the project.
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. We now anticipate that these
processes will be completed by the end of 2021. During this period,
we will continue to monitor the companies in the portfolio and seek
to maximise the proceeds for DSO D Shareholders. Further
distributions 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 2021:
Valuation
movement % of
Cost Valuation in year portfolio
Portfolio of investments GBP'000 GBP'000 GBP'000
---------------------------------- ------- ---------- --------- ----------
Venture Capital investments
---------------------------------- ------- ---------- --------- ----------
Fresh Green Power Limited 189 282 51 35.7%
---------------------------------- ------- ---------- --------- ----------
Pearce and Saunders Limited 275 77 (166) 9.8%
---------------------------------- ------- ---------- --------- ----------
Green Energy Production UK Limited 100 67 13 8.5%
---------------------------------- ------- ---------- --------- ----------
Pearce and Saunders DevCo Limited* 19 19 - 2.4%
---------------------------------- ------- ---------- --------- ----------
583 445 (102) 56.4%
---------------------------------- ------- ---------- --------- ----------
Cash at bank and in hand 344 43.6%
---------------------------------- ------- ---------- --------- ----------
Total investments 789 100.0%
---------------------------------- ------- ---------- --------- ----------
* non-qualifying investment
All Venture Capital investments are incorporated in England and
Wales.
Investment movements for the year ended 31 March 2021
Gain/
Valuation (loss) Realised
Cost at 01/04/20 Proceeds vs. cost loss
Disposals GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------- ------------ --------- --------- --------
Venture Capital
investments
----------------------- ------- ------------ --------- --------- --------
Pearce and Saunders
Limited 25 100 100 75 -
----------------------- ------- ------------ --------- --------- --------
Apex Energy Limited 400 7 3 (397) (4)
----------------------- ------- ------------ --------- --------- --------
Pearce and Saunders
DevCo Limited* 1 1 1 - -
----------------------- ------- ------------ --------- --------- --------
426 108 104 (322) (4)
----------------------- ------- ------------ --------- --------- --------
* non-qualifying investment
DP67 Share Pool
Share Pool Summary
31 March 31 March
2021 2020
Financial highlights pence pence
------------------------------- -------- --------
Net Asset Value per DP67 Share 18.4 18.8
------------------------------- -------- --------
Cumulative distributions 67.8 67.8
------------------------------- -------- --------
Total Return per DP67 Share 86.2 86.6
------------------------------- -------- --------
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 has been 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 2021
stood at 18.2p, a decrease of 0.4p or 2.1% during the year. Total
Return stands at 86.2p 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
of 86.2p to be underperformance against the original expectations
for the DP67 Share pool.
The loss on ordinary activities after taxation for the year was
GBP31,000 (2020: loss of GBP1.3 million), comprising a revenue loss
of GBP76,000 (2020: GBP559,000) and a capital gain of GBP45,000
(2020: loss of GBP758,000).
As DP67 Shareholders will be aware, the DP67 portfolio has a
high level of exposure to the leisure and hospitality sector, which
has been severely impacted by the restrictions and forced closures
brought about by the pandemic. It has not been possible to exit
from these types of investments during a period where the
underlying businesses have had irregular and intermittent trading
at reduced capacity. We continue to seek the best realisation
outcomes for DP67 Shareholders but anticipate that it will take
some time for these to be achieved.
Venture Capital investments
As at 31 March 2021, the DP67 Share pool held a portfolio of
five Venture Capital investments, with a total value of GBP2.1
million.
Portfolio activity
It is disappointing to report that there were no realisations
during the year ended 31 March 2021.
Portfolio valuation
The DP67 portfolio increased in value by a total of GBP59,000
during the year ended 31 March 2021. This movement is attributable
to adjustments to the related discounted cash flow assessments
conducted in respect of Fenkle Street LLP, and another of its
corporate members, Gatewales Limited.
The valuations of the remaining Venture Capital investments are
unchanged from 31 March 2020.
Outlook
The focus for the DP67 Share pool continues to be on exiting
from the remaining investments. It is frustrating to report that we
now expect these processes to be complete towards the end of 2022.
During this 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 2021:
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 - 37.0%
--------------------------------- ------- --------- --------- ----------
Fenkle Street LLP** 405 727 (23) 34.0%
--------------------------------- ------- --------- --------- ----------
Gatewales Limited* 343 609 82 28.5%
--------------------------------- ------- --------- --------- ----------
Yamuna Renewables Limited 400 - - 0.0%
--------------------------------- ------- --------- --------- ----------
London City Shopping Centre
Limited** 99 - - 0.0%
--------------------------------- ------- --------- --------- ----------
2,656 2,127 (59) 99.5%
-------------------------------- ------- --------- --------- ----------
Cash at bank and in hand 10 0.5%
--------------------------------- ------- --------- --------- ----------
Total investments 2,137 100.0%
--------------------------------- ------- --------- --------- ----------
* partially qualifying investment
** non-qualifying investment
All Venture Capital investments are incorporated in England and
Wales.
There were no investment disposals during the period.
Audited Income Statement
for the year ended 31 March 2021
Year ended 31 March 2021 Year ended 31 March 2020
----------------------------------------------------- ------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total
----------------------------------------------------- ------- ------- ------- ------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------- ------- ------- ------- -------- --------
Income 266 2 268 272 69 341
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Gain/(loss) on investments - 4,816 4,816 - (11,837) (11,837)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
266 4,818 5,084 272 (11,768) (11,496)
----------------------------------------------------- ------- ------- ------- ------- -------- --------
Investment management fees (411) (411) (822) (561) (562) (1,123)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Other expenses (97) - (97) (711) - (711)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
(Loss)/return on ordinary activities before tax (242) 4,407 4,165 (1,000) (12,330) (13,330)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Tax on total comprehensive income and ordinary
activities (69) - (69) (300) - (300)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
(Loss)/return attributable to equity Shareholders,
being total comprehensive income for the year (311) 4,407 4,096 (1,300) (12,330) (13,630)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Basic and diluted return per share:
------------------------------------------------------ ------- ------- ------- ------- -------- --------
DSO D Share (0.4p) (1.4p) (1.8p) 1.5p 0.7p 2.2p
------------------------------------------------------ ------- ------- ------- ------- -------- --------
DP67 Share (0.8p) 0.4p (0.4p) (5.0p) (6.8p) (11.8p)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Generalist Share (0.2p) 8.2p 8.0p (1.4p) (22.6p) (24.0p)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
Healthcare Share (0.6p) 3.5p 2.9p (1.3p) (13.7p) (15.0p)
------------------------------------------------------ ------- ------- ------- ------- -------- --------
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 Recommenced Practice
issued in October 2019 by the Association of Investment Companies
("AIC SORP").
Income Statement
Analysed by Share pool -- unaudited and non-statutory
for the year ended 31 March 2021
Split as:
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
DSO D Share pool GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------- ------- ------- -------- ------- -------
Income - - - 142 - 142
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Net (loss)/gain on investments - (106) (106) - 69 69
---------------------------------------------------- ------- ------- ------- ------- ------- -------
- (106) (106) 142 69 211
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Investment management fees (6) (6) (12) (15) (15) (30)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Other expenses (25) - (25) (16) - (16)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return on ordinary activities before tax (31) (112) (143) 111 54 165
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Tax on total comprehensive income and ordinary
activities - - - 10 - 10
---------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return attributable to equity Shareholders,
being total comprehensive income for the year (31) (112) (143) 121 54 175
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
DP67 Share pool GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- -------- ------- ------- ------- ------- -------
Income - - - 20 - 20
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Net gain/(loss) on investments - 59 59 - (722) (722)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
- 59 59 20 (722) (702)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Investment management fees (14) (14) (28) (36) (36) (72)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Other expenses (32) - (32) (229) - (229)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return on ordinary activities before tax (46) 45 (1) (245) (758) (1,003)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Tax on total comprehensive income and ordinary
activities (30) - (30) (314) - (314)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return attributable to equity Shareholders,
being total comprehensive income for the year (76) 45 (31) (559) (758) (1,317)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
Generalist Share pool GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Income 230 2 232 64 69 133
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Net gain/(loss) on investments - 4,067 4,067 - (8,952) (8,952)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
230 4,069 4,299 64 (8,883) (8,819)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Investment management fees (257) (257) (514) (334) (334) (668)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Other expenses (25) - (25) (316) - (316)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return on ordinary activities before tax (52) 3,812 3,760 (586) (9,217) (9,803)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Tax on total comprehensive income and ordinary
activities (39) - (39) 4 - 4
--------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return attributable to equity Shareholders,
being total comprehensive income for the year (91) 3,812 3,721 (582) (9,217) (9,799)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
Healthcare Share pool GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Income 36 - 36 43 - 43
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Net gain/(loss) on investments - 796 796 - (2,363) (2,363)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
36 796 832 43 (2,363) (2,320)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Investment management fees (134) (134) (268) (163) (163) (326)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Other expenses (15) - (15) (120) - (120)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return on ordinary activities before tax (113) 662 549 (240) (2,526) (2,766)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Tax on total comprehensive income and ordinary
activities - - - - - -
--------------------------------------------------- ------- ------- ------- ------- ------- -------
(Loss)/return attributable to equity Shareholders,
being total comprehensive income for the year (113) 662 549 (240) (2,526) (2,766)
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Audited Balance Sheet
as at 31 March 2021
2021 2020
GBP'000 GBP'000
---------------------------------------------------- ------- --------
Fixed assets
--------------------------------------------------- ------- --------
Investments 40,743 34,464
---------------------------------------------------- ------- --------
Current assets
--------------------------------------------------- ------- --------
Debtors 701 548
---------------------------------------------------- ------- --------
Cash at bank and in hand 6,986 9,614
---------------------------------------------------- ------- --------
7,687 10,162
--------------------------------------------------- ------- --------
Creditors: amounts falling due within one year (381) (801)
---------------------------------------------------- ------- --------
Net current assets 7,306 9,361
---------------------------------------------------- ------- --------
Net assets 48,049 43,825
---------------------------------------------------- ------- --------
Capital and reserves
--------------------------------------------------- ------- --------
Called up Share capital 102 98
---------------------------------------------------- ------- --------
Capital redemption reserve 58 58
---------------------------------------------------- ------- --------
Special reserve 29,417 39,433
---------------------------------------------------- ------- --------
Share premium account 20,010 17,971
---------------------------------------------------- ------- --------
Funds held in respect of Shares not yet allotted 241 535
---------------------------------------------------- ------- --------
Revaluation reserve (1,143) (13,302)
---------------------------------------------------- ------- --------
Capital reserve -- realised 3,132 2,483
---------------------------------------------------- ------- --------
Revenue reserve (3,768) (3,451)
---------------------------------------------------- ------- --------
Total equity Shareholders' funds 48,049 43,825
---------------------------------------------------- ------- --------
Basic and diluted Net Asset Value per Share:
---------------------------------------------------- ------- --------
DSO D Share 10.2p 12.0p
---------------------------------------------------- ------- --------
DP67 Share 18.4p 18.7p
---------------------------------------------------- ------- --------
Generalist Share 67.2p 61.7p
---------------------------------------------------- ------- --------
Healthcare Share 68.5p 68.1p
---------------------------------------------------- ------- --------
The financial statements were approved and authorised for issue
by the Board of Directors on 6 July 2021 and were signed on its
behalf by:
Sir Aubrey Brocklebank Bt.
Chairman
Balance Sheet
Analysed by Share pool -- unaudited and non-statutory
as at 31 March 2021
Split as:
2021 2020
DSO D Share pool GBP'000 GBP'000
------------------------------------------------- ------- -------
Fixed assets
------------------------------------------------- ------- -------
Investments 445 655
-------------------------------------------------- ------- -------
Current assets
------------------------------------------------- ------- -------
Debtors 29 50
-------------------------------------------------- ------- -------
Cash at bank and in hand 344 272
-------------------------------------------------- ------- -------
373 322
------------------------------------------------- ------- -------
Creditors: amounts falling due within one year (17) (33)
-------------------------------------------------- ------- -------
Net current assets 356 289
-------------------------------------------------- ------- -------
Net assets 801 944
-------------------------------------------------- ------- -------
Capital and reserves
------------------------------------------------- ------- -------
Called up share capital 8 8
-------------------------------------------------- ------- -------
Special reserve 966 900
-------------------------------------------------- ------- -------
Revaluation reserve (138) 39
-------------------------------------------------- ------- -------
Capital reserve -- realised (37) (37)
-------------------------------------------------- ------- -------
Revenue reserve 2 34
-------------------------------------------------- ------- -------
Total equity Shareholders' funds 801 944
-------------------------------------------------- ------- -------
2020 2020
DP67 Share pool GBP'000 GBP'000
------------------------------------------------- ------- -------
Fixed assets
------------------------------------------------- ------- -------
Investments 2,127 2,068
-------------------------------------------------- ------- -------
Current assets
------------------------------------------------- ------- -------
Debtors 1 49
-------------------------------------------------- ------- -------
Cash at bank and in hand 10 62
-------------------------------------------------- ------- -------
11 111
------------------------------------------------- ------- -------
Creditors: amounts falling due within one year (74) (83)
-------------------------------------------------- ------- -------
Net current assets (63) 28
-------------------------------------------------- ------- -------
Net assets 2,064 2,096
-------------------------------------------------- ------- -------
Capital and reserves
------------------------------------------------- ------- -------
Called up share capital 11 11
-------------------------------------------------- ------- -------
Special reserve (400) -
-------------------------------------------------- ------- -------
Revaluation reserve (30) (489)
-------------------------------------------------- ------- -------
Capital reserve -- realised 2,406 2,419
-------------------------------------------------- ------- -------
Revenue reserve 77 155
-------------------------------------------------- ------- -------
Total equity Shareholders' funds 2,064 2,096
-------------------------------------------------- ------- -------
2021 2020
Generalist Share pool GBP'000 GBP'000
--------------------------------------------------- ------- --------
Fixed assets
--------------------------------------------------- ------- --------
Investments 28,633 24,584
---------------------------------------------------- ------- --------
Current assets
--------------------------------------------------- ------- --------
Debtors 464 442
---------------------------------------------------- ------- --------
Cash at bank and in hand 3,141 3,350
---------------------------------------------------- ------- --------
3,605 3,792
--------------------------------------------------- ------- --------
Creditors: amounts falling due within one year (238) (266)
---------------------------------------------------- ------- --------
Net current assets 3,367 3,526
---------------------------------------------------- ------- --------
Net assets 32,000 28,110
---------------------------------------------------- ------- --------
Capital and reserves
--------------------------------------------------- ------- --------
Called up share capital 59 56
---------------------------------------------------- ------- --------
Capital redemption reserve 58 58
---------------------------------------------------- ------- --------
Special reserve 20,195 27,666
---------------------------------------------------- ------- --------
Share premium account 14,009 12,505
---------------------------------------------------- ------- --------
Funds held in respect of shares not yet allotted 222 410
---------------------------------------------------- ------- --------
Revaluation reserve (814) (10,201)
---------------------------------------------------- ------- --------
Capital reserve -- realised 847 101
---------------------------------------------------- ------- --------
Revenue reserve (2,576) (2,485)
---------------------------------------------------- ------- --------
Total equity Shareholders' funds 32,000 28,110
---------------------------------------------------- ------- --------
2021 2020
--------------------------------------------------- ------- -------
Healthcare Share pool GBP'000 GBP'000
--------------------------------------------------- ------- -------
Fixed assets
--------------------------------------------------- ------- -------
Investments 9,538 7,157
---------------------------------------------------- ------- -------
Current assets
--------------------------------------------------- ------- -------
Debtors 254 7
---------------------------------------------------- ------- -------
Cash at bank and in hand 3,491 5,930
---------------------------------------------------- ------- -------
3,745 5,937
--------------------------------------------------- ------- -------
Creditors: amounts falling due within one year (99) (419)
---------------------------------------------------- ------- -------
Net current assets 3,646 5,518
---------------------------------------------------- ------- -------
Net assets 13,184 12,675
---------------------------------------------------- ------- -------
Capital and reserves
--------------------------------------------------- ------- -------
Called up share capital 24 23
---------------------------------------------------- ------- -------
Special reserve 8,656 10,867
---------------------------------------------------- ------- -------
Share premium account 6,001 5,466
---------------------------------------------------- ------- -------
Funds held in respect of shares not yet allotted 19 125
---------------------------------------------------- ------- -------
Revaluation reserve (161) (2,651)
---------------------------------------------------- ------- -------
Capital reserve -- realised (84) -
---------------------------------------------------- ------- -------
Revenue reserve (1,271) (1,155)
---------------------------------------------------- ------- -------
Total equity Shareholders' funds 13,184 12,675
---------------------------------------------------- ------- -------
Statement of Changes in Equity
for the year ended 31 March 2021
Called Capital Share Capital
up Share Redemption Special premium Funds held in respect Revaluation reserve Revenue
capital reserve reserve account of Shares not yet 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 2019 138 - 47,040 7,172 4,772 (4,158) 4,940 (1,752) 58,152
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Total comprehensive
income - - - - - (12,227) (103) (1,300) (13,630)
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Transfer between
reserves* - - (7,530) - - 3,083 4,843 (399) -
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Unallotted Shares - - - - 535 - - - 535
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Transactions with
owners
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Dividend paid - - - - - - (7,200) - (7,200)
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Cancellation of
shares (58) 58 - - - - - - -
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Purchase of own
shares - - (77) - - - - - (77)
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Issue of shares 18 - - 11,178 (4,772) - - - 6,424
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Share issue costs - - - (379) - - - - (379)
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
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)
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
Cancellation of
Shares - - - - - - - - -
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
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
---------------------- -------- ----------- -------- -------- --------------------------- ----------- ----------- -------- ---------
* A transfer of GBP8,001,000 (2020: GBP3,083,000) 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
GBP10,022,000 (2020: GBP7,929,000) representing the total of:
realised losses on the disposal of investments, cumulative
impairment losses, capital expenses and capital dividends in the
period, has been made between the Capital Reserve - realised and
the Special reserve. A transfer of GBP6,000 (2020: GBP399,000),
representing the balance on the Revenue reserve relating to
previously cancelled share classes, has been made from the revenue
reserve to the Special reserve.
Cash Flow Statement
for the year ended 31 March 2021
Unaudited non-statutory analysis Audited
----------------------------------------------
DSO D DP67 Generalist
Share Share Share Healthcare 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
-------------------- ------- ------- ---------- ---------------- --------
Gains/(losses) on
investments 106 (59) (4,067) (796) (4,816)
-------------------- ------- ------- ---------- ---------------- --------
(Decrease)/increase
in creditors (16) (8) (28) (321) (420)
-------------------- ------- ------- ---------- ---------------- --------
Decrease/(increase)
in debtors 21 16 (61) (248) (225)
-------------------- ------- ------- ---------- ---------------- --------
Net cash
(outflow)/inflow
from operating
activities (32) (52) (396) (816) (1,296)
-------------------- ------- ------- ---------- ---------------- --------
Corporation tax paid - - - - -
-------------------- ------- ------- ---------- ---------------- --------
Net cash generated
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 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
-------------------- ------- ------- ---------- ---------------- --------
Cash Flow Statement
for the year ended 31 March 2020
Unaudited non-statutory analysis Audited
DSO D DP67 DP2011 General DP2011 Structured
Share Share Share Share Generalist Healthcare
pool pool pool pool Share pool Share pool Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash flows from operating
activities
------------------------------- ------- -------------- ----------------- ----------- ----------- --------
Return/(loss) on
ordinary activities
before taxation 165 (1,003) 45 32 (9,803) (2,766) (13,330)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Losses/(gains) on
investments (69) 722 (75) (56) 8,952 2,363 11,837
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
(Decrease)/increase in
creditors 15 13 (31) (15) 46 298 326
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
(Increase)/decrease in
debtors (49) (147) 1 3 (314) (5) (217)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net cash
inflow/(outflow) from
operating activities 62 (121) (60) (36) (1,119) (110) (1,384)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Corporation tax paid - 159 - - - - 159
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net cash generated
from operating
activities 62 38 (60) (36) (1,119) (110) (1,225)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash flow from
investing activities
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Purchase of
investments - - - - (10,565) (2,145) (12,801)
--------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Proceeds from
disposal of
investments 716 788 1,970 735 1,685 - 5,894
--------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net cash
inflow/(outflow) from
investing activities 716 788 1,970 735 (8,971) (2,145) (6,907)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net cash
inflow/(outflow)
before financing 778 826 1,910 699 (10,090) (2,255) (8,132)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash flows from
financing activities
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Repurchase of shares - - - - (61) (16) (77)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Issue of share capital - - - - 4,707 1,715 6,424
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cost of issue of share
capital - - - - (277) (102) (379)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Funds held in respect
of shares not yet
allotted - - - - 410 125 535
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Equity dividends paid (1,416) (2,015) (2,504) (1,265) - - (7,200)
--------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net cash
(outflow)/inflow from
financing activities (1,416) (2,015) (2,504) (1,265) 4,779 1,724 (697)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Net change in cash (638) (1,189) (594) (566) (5,311) (531) (8,829)
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash and cash
equivalents at start
of the year 910 1,251 594 566 8,661 6,461 18,443
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash and cash
equivalents at end of
the year 272 62 - - 3,350 5,930 9,614
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash and cash
equivalents comprise
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Cash at bank and in
hand 272 62 - - 3,350 5,930 9,614
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Total cash and cash
equivalents 272 62 - - 3,350 5,930 9,614
---------------------- ------- ------- -------------- ----------------- ----------- ----------- --------
Notes to the Accounts
for the year ended 31 March 2021
1. 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 October 2019 ("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 estimates 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, the Performance Incentive is
expected to 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.
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.
2. Basic and diluted return per share
Weighted
Average
number Capital Total
of Shares in Revenue (loss)/ Comprehensive Basic and diluted
issue* (loss)/ return gain income return per share
GBP'000 GBP'000 GBP'000 pence
------------ ------------- --------------- -------- -------------- -----------------
Return per share is
calculated on the
following:
--------------------------- --------------- -------- -------------- -----------------
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)
------------ ------------- --------------- -------- -------------- -----------------
Generalist
Shares 45,988,062 (91) 3,812 3,721 8.0p
------------ ------------- --------------- -------- -------------- -----------------
Healthcare
Shares 18,803,854 (113) 662 549 2.9p
------------ ------------- --------------- -------- -------------- -----------------
Year ended
31 March
2020
------------ ------------- --------------- -------- -------------- -----------------
DSO D Shares 7,867,247 121 54 175 2.2p
------------ ------------- --------------- -------- -------------- -----------------
DP67 Shares 11,192,136 (559) (758) (1,317) (11.7p)
------------ ------------- --------------- -------- -------------- -----------------
DP2011
General
Ordinary
Shares 15,644,066 - - - -
------------ ------------- --------------- -------- -------------- -----------------
DP2011
General A
Shares 18,418,614 (20) 65 45 0.3p
------------ ------------- --------------- -------- -------------- -----------------
DP2011
Structured
Ordinary
Shares 10,678,725 - - - -
------------ ------------- --------------- -------- -------------- -----------------
DP2011
Structured
A Shares 12,572,817 (20) 52 32 0.2p
------------ ------------- --------------- -------- -------------- -----------------
Generalist
Shares 40,797,371 (582) (9,217) (9,799) (24.0p)
------------ ------------- --------------- -------- -------------- -----------------
Healthcare
Shares 18,483,433 (240) (2,526) (2,766) (15.0p)
------------ ------------- --------------- -------- -------------- -----------------
*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, Generalist Share or Healthcare Share. The return
per share disclosed therefore represents both the basic and diluted
return per share for all classes of share.
3. Basic and diluted Net Asset Value per share
Shares in issue 2021 Net Asset Value 2020 Net Asset Value
----------- ---------------------- ------------------------- -------------------------
Pence per Pence per
2021 2020 share GBP'000 share GBP'000
----------- ---------- ---------- --------- -------------- --------- --------------
DSO D
Shares 7,867,247 7,867,247 10.2 801 12.0 944
----------- ---------- ---------- --------- -------------- --------- --------------
DP67 Shares 11,192,136 11,192,136 18.4 2,064 18.8 2,096
----------- ---------- ---------- --------- -------------- --------- --------------
Generalist
Shares 47,308,832 44,865,567 67.2 31,778 61.7 27,700
----------- ---------- ---------- --------- -------------- --------- --------------
Generalist
Management
Shares 11,216,391 11,216,391 - - - -
----------- ---------- ---------- --------- -------------- --------- --------------
Healthcare
Shares 19,230,091 18,421,889 68.5 13,165 68.1 12,550
----------- ---------- ---------- --------- -------------- --------- --------------
Healthcare
Management
Shares 4,605,472 4,605,472 - - - -
----------- ---------- ---------- --------- -------------- --------- --------------
Funds held in respect of shares not
yet allotted 241 535
----------------------------------- --------- -------------- --------- --------------
Net assets
per
Balance
Sheet 48,049 43,825
----------- ---------- ---------- --------- -------------- --------- --------------
The Directors allocate the assets and liabilities of the Company
between the DSO D Shares, DP67 Shares, Generalist Shares and
Healthcare 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 Generalist Share or per Healthcare
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 Generalist Share and per Healthcare Share.
4. Principal Risks
The Company's investment activities expose the Company to a
number of risks associated with financial instruments and the
sectors in which the Company invests. The principal financial risks
arising from the Company's operations are:
-- 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 2021, cumulative unrealised foreign
exchange losses of GBP266,000 (2020: nil) 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 set at 0.1% per annum
since 19 March 2020. 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 risks above. 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
GBP353,000 (2020: GBP801,000), 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.
Although the Company's investments are not held to meet the
Company's liquidity requirements, the table below shows an analysis
of the assets, highlighting the length of time that it could take
the Company to realise its assets if it were required to do so.
As at 31 March 2020, of the loans classified as "past due",
GBP1,538,000 (2020: GBP3,019,000) relates to the principal of loans
where the principal had passed its maturity date. The total of
GBP1,538,000 (2020: GBP3,019,000) is comprised of GBPnil
(GBP3,019,000) which is within 1 year of the expected maturity date
and GBP2,653,000 (2020: GBPnil) relating to principal which is
between 1 and 2 years past due. Notwithstanding that the principal
remained outstanding passed its maturity date, the Directors did
not consider that the loan principal amounts had been impaired.
5. 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. There were
no amounts outstanding and due to the Directors as at 31 March 2021
(2020: 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 2021 was
GBP32,000 (2020: GBP286,000).
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 2021 was GBP24,000, all of which was unpaid as at 31 March
2021. During the year the Company also received GBP267,000 from
Downing LLP in respect of excess trail fees paid, relating to the
years ending 31 March 2018, 31 March 2019 and 31 March 2020. The
corrected trail fee in respect of the year ended 31 March 2020 was
GBP24,000.
6. Events after the end of the reporting period
In the period between 31 March 2021 and the date of this report,
the Company issued the following Shares:
-- 375,458 Generalist Shares, at an average price of 68.04p per Share; and
-- 330,796 Healthcare Shares, at an average price of 72.56p per Share.
At the date of this report, there were 58,900,681 Generalist
Shares and 24,166,359 Healthcare Shares in issue, including
Management Shares.
On 3 June 2021, Generalist and Healthcare portfolio company
Arecor undertook a successful IPO on AIM. The group raised a
further GBP20 million as part of the IPO, taking the market
capitalisation of the company to approximately GBP62.5 million. The
fundraising proceeds will be used to accelerate research and
development. On the basis of the quoted bid price as at 30 June
2021, the value of the Generalist and Healthcare share pools'
investments in the business increased by approximately GBP355,000
and GBP1.3 million respectively.
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 2021, but has been extracted from the statutory financial
statements for the year ended 31 March 2021 which were approved by
the Board of Directors on 24 June 2021 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 2020 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 www.downing.co.uk/d4.
(END) Dow Jones Newswires
July 06, 2021 12:30 ET (16:30 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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