THAMES VENTURES VCT 2 PLC

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**Downing FOUR VCT plc

LEI: 21380035MV1VRYEXPR95

Final Results for the year ended 31 March 2019**

25 July 2019

*FINANCIAL HIGHLIGHTS*


	31 March 2019		31 March 2018
	pence		pence
DSO D Share pool
Net Asset Value per DSO D Share	27.8		54.4
Cumulative distributions	76.5		52.5
Adjusted for Performance Incentive estimate	(3.9)		(4.4)
Total Return per DSO D Share	100.4	1	102.5

DP67 Share pool
Net Asset Value per DP67 Share	48.5		50.0
Cumulative distributions (since original launch)	49.8		49.8
Total Return per DP67 Share	98.3		99.8

DP2011 General Share pool
Net Asset Value per DP2011 General Ordinary Share	-		-
Net Asset Value per DP2011 General A Share	13.3		20.3
Cumulative distributions (since original launch)	92.0		85.0
Total Return per DP2011 General Ordinary Share and DP2011 General A Share	105.3	2	105.3

DP2011 Structured Share pool
Net Asset Value per DP2011 Structured Ordinary Share	-		-
Net Asset Value per DP2011 Structured A Share	9.9		15.0
Cumulative distributions (since original launch)	95.0		90.0
Total Return per DP2011 Structured Ordinary Share and DP2011 Structured A Share	104.9	3	105.0

Generalist Share pool
Net Asset Value and Total Return per Generalist Share	83.5		95.5

Healthcare Share pool
Net Asset Value and Total Return per Healthcare Share	83.3		94.6

1Based on Total Return to Shareholders at 31 March 2019, a Performance Incentive is expected to become due to management. The Performance Incentive has been estimated at 3.9p per DSO D Share.

2The Total Return to Shareholders at 31 March 2019 is shown net of the Performance Incentive due to management. By virtue of the A Share dividends paid to date, members of the management team have received Performance Incentive payments, to date, equivalent to 3.1p per DP2011 General Ordinary Share. The remaining Performance Incentive, expected to become payable to management, has been estimated at 2.4p per DP2011 General Ordinary Share.

3The Total Return to Shareholders at 31 March 2019 is shown net of the Performance Incentive due to management. By virtue of the A Share dividends paid to date, members of the management team have received Performance Incentive payments, to date, equivalent to 3.6p per DP2011 Structured Ordinary Share. The remaining Performance Incentive, expected to become payable to management, has been estimated at 1.7p per DP2011 Structured Ordinary Share.

*CHAIRMAN’S STATEMENT*

Introduction

I present the Company’s Annual Report for the year ended 31 March 2019.

We have seen further progress in the realisation of the remaining investments in the planned exit share pools, ahead of making final distributions to Shareholders. The Manager has also continued to make good progress in investing the proceeds of the 2016/17 and 2018/19 Generalist and Healthcare fundraisings.

Share pool review

As at 31 March 2019 the Company had six active Share pools, being four planned exit pools, which we expect will have completed the process of returning funds to Shareholders by the end of this calendar year, and two evergreen pools. Brief reviews of the Share pools which were active during the year are given below.

Planned Exit Share pools

DSO D Share pool

During the year the Manager made further progress in exiting from the remaining investments held by the DSO D Share pool. Exit plans are in place for the six investments held at the year end, and we expect the final realisations to take place in the coming months.

The DSO D Share NAV stood at 27.8p at the year end, a decrease of 2.6p per Share or 4.8% over the year after adjusting for the dividend of 24.0p per Share paid in the year. Total Return now stands at 100.4p per Share, after adjusting for the expected Performance Incentive of 3.9p. The cost for Shareholders who invested in the DSO D Share offer was 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 on page 7 of the Annual Report.

DP67 Share pool

During the year the Manager continued to work on exiting from the remaining investments held by the DP67 Share pool. Whilst a limited number of realisations took place during the year, exit plans are in place for all of the investments held at the year end, and we expect the final realisations to take place in the coming months.

The DP67 Share NAV stood at 48.5p at the year end, a decrease of 1.5p per Share or 3.0% over the year. Total Return now stands at 98.3p per Share, compared to the original cost for Shareholders who invested in 2007 of 100.0p, or 70.0p net of income tax relief.

A more detailed review of the DP67 Share pool is included in the Investment Manager’s report on page 13 of the Annual Report.

DP2011 General Share pool

The Manager continued the process of exiting from the remaining investments during the year. All of the investments held at the year-end have a clear path to exit and we expect to be in a position to make a final return of capital to Shareholders during the summer.

The NAV of a combined holding of one DP2011 General Ordinary Share and one DP2011 General A Share stood at 13.3p at 31 March 2019. The combined NAV has therefore remained unchanged from 31 March 2018, after adjusting for dividends paid during the year, of 7.0p per combined holding. Total Return now stands at 105.3p per Share, compared to the cost for Shareholders of 100.0p, or 70.0p net of income tax relief.

A more detailed review of the DP2011 General Share pool is presented in the Investment Manager’s report on page 18 of the Annual Report.

DP2011 Structured Share pool

The NAV of a combined holding of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share stood at 9.9p at the year end, a decrease of 0.1p or 0.7% for the year after adjusting for the dividends paid during the year, of 5.0p per combined holding. Total Return now stands at 104.9p per Share, compared to the cost for Shareholders of 100.0p or 70.0p net of income tax relief.

A more detailed review of the DP2011 Structured Share pool is presented in the Investment Manager’s Report on page 23 of the Annual Report.

Evergreen Share pools

Generalist Share pool

The first Generalist fundraising launched in December 2016 and closed during 2018, having raised £32.2 million. The subsequent Generalist Offer launched on 13 November 2018 and has raised a further £10.7 million to date. The cost for Shareholders who invested under the initial offer was 100.0p or 70.0p net of income tax relief.

The Manager has built a pipeline of suitable investment opportunities and made a number of initial and follow on investments, totalling £10.9 million, into a variety of VCT Qualifying entities during the year.

The Generalist Share NAV and Total Return stood at 83.5p at the year end, representing a decrease of 12.0p per Share or 12.6% over the year. The decrease in the NAV is attributable to a combination of factors. The most significant is the fall in value of the Liquidity investments, which have been impacted by the adverse global market conditions in the final quarter of 2018. The second factor is the cumulative impact of the provisions required in the Venture Capital portfolio, and in particular Ormsborough Limited and Glownet Limited.

As the Board and Manager anticipated when the Generalist Share pool was launched, there have been some businesses for which valuation reductions have been recognised at what is an early stage in the life of the Share pool. A typical feature of investing in young growth companies is that the weaker businesses in a portfolio tend to become visible before the stronger businesses prove themselves as such. It is therefore no surprise that some investments in the Generalist Share pool have underperformed and provisions have been made accordingly. The Manager continues to work closely with the management teams of all of the Generalist Share pool’s unquoted investments and believes that a number of these businesses have the potential to deliver good rewards to investors over time. Additionally, the Share pool held a sizable cash balance during the year, representing funds awaiting investment. As these funds were yet to be deployed into VCT Qualifying investments no income or capital growth could be achieved thereon.

A more detailed review of the Generalist Share pool is included in the Investment Manager’s Report on page 28 of the Annual Report.

Healthcare Share pool

The first Healthcare fundraising launched in December 2016 and closed during 2018, having raised £12.6 million. The subsequent Healthcare Offer launched on 13 November 2018 and has raised a further £4.9 million to date.

The Manager has been working on sourcing investment opportunities and has made good progress in this regard, having invested £4.9 million in six VCT Qualifying entities during the year.

The Healthcare Share NAV and Total Return stood at 83.3p at the year end, representing a decrease of 11.3p per Share or 11.9% over the year. As with the Generalist Share Pool, the decrease in the NAV is attributable to several factors. Valuation adjustments in the Venture Capital portfolio have been the single largest factor, with significant provision required against ADC Biotechnology and a drifting share price for AIM-quoted Destiny Pharma plc. The Share pool has also been impacted by falls in the value of the Liquidity investments and the “cash-drag” of holding uninvested funds.

A more detailed review of the Healthcare Share pool is included in the Investment Manager’s Report on page 38 of the Annual Report.

Share buybacks

In the initial five-year period of each Share class, the Company operates a policy of buying in its own Shares that become available in the market, subject to regulatory and liquidity factors. Any such purchases are undertaken at a price approximately equal to NAV (i.e. at a nil discount).

As the planned exit Share pools have all initiated the process of returning funds to Shareholders, the Company will not undertake any further buybacks in respect of those Share classes.

The policy for buying in Shares is still in operation for the Generalist and Healthcare Shares.

14,400 Generalist Shares were purchased during the year ended 31 March 2019.

Annual General Meeting (“AGM”)

The Company’s ninth AGM will be held at 6th Floor, St. Magnus House, 3 Lower Thames Street, London, EC3R 6HD at 12:30 p.m. on 10 September 2019.

Resolution 9 is a special resolution seeking to renew the authority to allow the Company to make market purchases of its Shares.

Outlook

The remaining planned exit share pools are expected to complete their respective exit processes in the coming months and the Manager will work to ensure that remaining funds are promptly returned to Shareholders thereafter.

The focus of the Manager will also be on further building the Generalist and Healthcare investment portfolios and we expect new investment activity to continue at a similar rate during the year ended 31 March 2020. As many companies in the portfolio are young, we expect it to be some time before the stronger prospects can deliver any rewards for investors. We also expect that some investments may not be able to meet their plans and the Manager may therefore decide not to support them further.

I look forward to reporting on developments in the Half-Yearly Report to 30 September 2019.

Sir Aubrey Brocklebank

Chairman

INVESTMENT MANAGER’S REPORT - DSO D SHARE POOL

Introduction

The five-year anniversary of the DSO D Share pool has passed and the process of realising the investments and returning funds to Shareholders is underway.

Net Asset Value and results

The Net Asset Value (“NAV”) per DSO D Share at 31 March 2019 stood at 27.8p, a decrease of 2.6p or 4.8% over the year after adjusting for dividends paid. Total Return stands at 100.4p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The loss on ordinary activities after taxation for the year was £207,000 (2018: profit of £453,000), comprising a revenue loss of £49,000 (2018: profit of £57,000) and a capital loss of £158,000 (2018: gain of £396,000).

Venture Capital investments

As at 31 March 2019, the DSO D Share Pool held six Venture Capital investments with a total value of £1.3 million.

Portfolio activity

Four investments were fully exited during the year, generating total proceeds of £2.3 million and a gain over opening value of £214,000.

The largest realisation was the sale of Goonhilly Earth Station Limited, the owner of the Goonhilly Satellite Earth Station in Cornwall. The sale generated proceeds of £878,000 for the DSO D Share pool, resulting in a gain over cost and opening value of £163,000.

Merlin Renewables Limited, the owner and operator of an Anaerobic Digestion plant in Doncaster, was also sold during the year. The sale achieved proceeds of £770,000 for the DSO D Share pool, realising a gain over cost of £270,000.

The other substantial exit was from Nightjar Sustainable Power Limited, the owner and operator of a hydroelectric scheme in Scotland. A refinancing generated proceeds of £600,000 and resulted in a gain over cost of £115,000.

The DSO D Share pool also exited in full from Fubar Stirling Limited, a Scottish licensed leisure company. The loan note investment was being repaid over time and the £8,000 received marks the final instalment from the company. The Loss over cost of £118,000 is in relation to the equity interest in the company, to which no value ultimately accrued.

Portfolio valuation

During the year, the carrying value of the DSO D portfolio was reduced in value by £355,000.

Apex Energy Limited, the owner of a standby electricity generation plant, has experienced some significant technical problems in respect of its engines which have taken the site out of operation. The DSO D investment has been written down by £360,000 as a result.

Other portfolio valuation movements amounted to a net uplift of £5,000.

Outlook

The focus for the DSO D Share pool is now on realising the remaining investments. We anticipate that the remaining realisations will take place in the coming months and further dividends will be declared once this process has been completed.

Downing LLP

REVIEW OF INVESTMENTS - DSO D SHARE POOL

Portfolio of investments

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation movement in year	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Lambridge Solar Limited	500	605	(21)	27.4%
Pearce and Saunders Limited	300	376	76	17.0%
Fresh Green Power Limited	189	210	(21)	9.5%
Green Energy Production UK Limited	100	51	(29)	2.3%
Apex Energy Limited	400	40	(360)	1.8%
Pearce and Saunders DevCo Limited*	20	20	-	0.9%
	1,509	1,302	(355)	58.9%

Cash at bank and in hand		910		41.1%
Total investments		2,212		100.0%

* non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2019

DISPOSALS


	Cost	Valuation at 01/04/18	Proceeds	Profit/(loss) vs. cost	Realised gain
	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Merlin Renewables Limited	500	719	770	270	51
Goonhilly Earth Station Limited	715	715	878	163	163
Nightjar Renewables Limited	485	600	600	115	-
Fubar Stirling Limited	126	8	8	(118)	-
	1,826	2,042	2,256	430	214

INVESTMENT MANAGER’S REPORT - DP67 SHARE POOL

Introduction

The DP67 Share pool has now passed the five-year anniversary for those investors who took advantage of the Share Realisation and Reinvestment Scheme in 2013. Accordingly, the process of realising the investment portfolio and returning funds to investors is underway.

Net Asset Value and results

The Net Asset Value (“NAV”) per DP67 Share at 31 March 2019 stood at 48.5p, a decrease of 1.5p or 3.0% over the year. Total Return stands at 98.3p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The loss on ordinary activities after taxation for the year was £166,000 (2018: profit of £652,000), comprising a revenue profit of £127,000 (2018: £20,000) and a capital loss of £293,000 (2018: gain of £632,000).

Venture Capital investments

As at 31 March 2019, the DP67 Share pool held a portfolio of six Venture Capital investments, with a total value of £3.6 million.

Portfolio activity

One full and one partial divestment took place during the year, generating proceeds of £689,000 and a total gain over opening value of £41,000.

The largest realisation was the sale of Oak Grove Renewables Limited, the owner of an Anaerobic Digestion Plant in Norfolk. The sale achieved proceeds of £502,000, representing a gain over opening value of £10,000.

£187,000 was also received from Snow Hill Developments LLP. The DP67 Share pool has a membership interest in the business under which a fixed return accrues. The disposal marks the return of some of this fixed value to the Share pool. The investment in Snow Hill Developments LLP was also uplifted by £67,000 as at 31 March 2019, as the effect of discounting the future cash receipts continues to unwind over time.

Portfolio valuation

The DP67 portfolio was reduced in value by a total of £413,000 during the period.

The majority of the total valuation reduction is attributable to Yamuna Energy Limited, the owner and operator of a wood pelleting plant in Austria. The site experienced two fires during the year which halted production and led to a loss of key customers. Downing is working with the management team at present, however it is unlikely that any value will be recovered and the investment has been fully provided against as a result.

London City Shopping Centre Limited has also been reduced to £nil as the company was unable to secure the finance it required in order to progress with its development plans.

A Valuation uplift of £19,000 was also recognised in respect of Fenkle Street LLP, as the impact of discounting the expected future cash flows unwinds over time.

Outlook

The focus for the DP67 Share pool is now on realising the remaining investments. We anticipate that the remaining realisations will take place in the coming months and further dividends will be declared once this process has been completed.

Downing LLP

REVIEW OF INVESTMENTS - DP67 SHARE POOL

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation movement in period	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Cadbury House Holdings Limited	1,409	1,613	-	33.4%
Snow Hill Developments LLP**	474	741	67	15.4%
Fenkle Street LLP**	405	697	19	14.4%
Gatewales Limited*	343	527	-	10.9%
Yamuna Renewables Limited	400	-	(400)	0.0%
London City Shopping Centre Limited**	99	-	(99)	0.0%

	3,130	3,578	(413)	74.1%

Cash at bank and in hand		1,251		25.9%
Total investments		4,829		100.0%

*partially qualifying investment

**non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2019

DISPOSALS


	Cost	Valuation at 01/04/18	Proceeds	(Loss)/ profit vs. cost	Realised gain
	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Oak Grove Renewables Limited	820	492	502	(318)	10
Snow Hill Developments LLP**	110	156	187	77	31
	930	648	689	(241)	41

*partially qualifying investment

**non-qualifying investment

INVESTMENT MANAGER’S REPORT - DP2011 GENERAL SHARE POOL

Introduction

The DP2011 General Share pool has made good progress in realising investments, with two full and two partial exits completed during the year.

Net Asset Value and results

The combined Net Asset Value (“NAV”) of one DP2011 General Ordinary Share and one DP2011 General A Share at 31 March 2019 stood at 13.3p, which has remained unchanged from 31 March 2018, after adjusting for dividends paid. Total Return stands at 105.3p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The profit on ordinary activities after taxation for the year was £4,000 (2018: £760,000) comprising a revenue loss of £47,000 (2018: of £112,000) and a capital gain of £51,000 (2018: £872,000).

Venture Capital investments

The DP2011 General Share pool began the year with £2.2 million of investments and ended with £1.9 million spread across a portfolio of five Venture Capital investments.

Investment activity

The process of exiting investments in the portfolio is underway. Two full and two partial exits occurred during the year, generating proceeds of £419,000 and a gain over opening value of £38,000.

The largest realisation was the sale of Oak Grove Renewables Limited, the owner of an Anaerobic Digestion Plant in Norfolk. The sale achieved proceeds of £254,000, representing a gain over opening value of £5,000.

£141,000 was also received from Snow Hill Developments LLP. The DP2011 General Share pool has a membership interest in the business under which a fixed return accrues. The disposal marks the return of some of this fixed value to the Share pool. The investment in Snow Hill Developments LLP was also uplifted by £138,000 as at 31 March 2019, as the effect of discounting the future cash receipts continues to unwind over time.

The residual investments in Fubar Stirling and Mosaic Spa & Leisure Limited were also exited in full during the year. The loan notes investments were being repaid over time and the amounts received during the year constitute the final settlements. The loss over cost in respect of Fubar Stirling Limited relates to the equity interest in the company, to which no value ultimately accrued.

Portfolio valuation

During the year, the carrying value of the DP2011 General portfolio was increased in value by £33,000.

Wickham Solar Limited owns a portfolio of ground mounted solar panels in Lincolnshire. The company is performing to budget and an uplift of £10,000 was recognised in the year as a result.

London City Shopping Centre Limited has been reduced to £nil, as the company was unable to secure the finance it required in order to progress with its plans.

The DP2011 General Share pool’s interest in Mosaic Spa and Health Clubs Limited has also been reduced in value, by £27,000, as the business is behind on its loan repayments.

Outlook

The focus for the Share pool is on realising the remaining investments at sensible valuations. We hope to be in a position to announce a final distribution to Shareholders during the summer.

Downing LLP

REVIEW OF INVESTMENTS - DP2011 GENERAL SHARE POOL

Portfolio of investments

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation Movement in period	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Snow Hill Developments LLP**	680	1,206	138	48.5%
Wickham Solar Limited	550	660	10	26.5%
Mosaic Spa and Health Clubs Limited*	86	29	(27)	1.2%
Odysian (Holdings) Limited	233	-	-	0.0%
London City Shopping Centre Limited**	88	-	(88)	0.0%
	1,637	1,895	33	76.2%
Cash at bank and in hand		594		23.8%
Total investments		2,489		100.0%

*partially qualifying investment

**non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2019

DISPOSALS


	Cost	Valuation at 01/04/18	Proceeds	(Loss)/profit vs. cost	Realised gain
	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Oak Grove Renewables Limited	400	254	259	(141)	5
Snow Hill Developments LLP	70	110	141	71	31
Fubar Stirling Limited	133	9	9	(124)	-
Mosaic Spa and Health Clubs Limited*	10	8	10	-	2
	613	381	419	(194)	38

*partially qualifying investment

INVESTMENT MANAGER’S REPORT - DP2011 STRUCTURED SHARE POOL

Introduction

The DP2011 Structured Share pool has made good progress during the year in realising investments, with one full exit and two partial exits having been completed.

As at 31 March 2019 the DP2011 Structured Share pool held a portfolio of three Venture Capital investments, with a total value of £0.7 million.

Net Asset Value and results

The Net Asset Value (“NAV”) of a combined holding of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share at 31 March 2019 stood at 9.9p, a decrease of 0.1p or 0.7% over the year after adjusting for dividends paid. Total Return stands at 104.9p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The loss on ordinary activities after taxation for the year was £26,000 (2018: profit of £405,000), comprising a revenue loss of £19,000 (2018: profit of £91,000) and a capital loss of £7,000 (2018: £496,000).

Venture Capital investments

Investment activity

The DP2011 Structured Share pool began the year with £1.0 million of investments and ended the year with £0.7 million spread across a portfolio of three Venture Capital investments.

One full and two partial disposals were made during the year, generating total proceeds of £366,000 and a total realised gain of £8,000.

The largest realisation was the sale of Oak Grove Renewables Limited, the owner of an Anaerobic Digestion Plant in Norfolk. The sale achieved proceeds of £353,000, representing a gain over opening value of £6,000.

Portfolio valuation

Valuation movements in the year resulted in a net reduction of £8,000.

Wickham Solar Limited owns a portfolio of ground mounted solar panels in Lincolnshire. The company is performing to budget and an uplift of £10,000 was recognised in the year as a result.

The DP2011 Structured Share pool’s interest in Mosaic Spa and Health Clubs Limited has also been reduced in value, by £18,000, as the business is behind on its loan repayments.

Outlook

The focus for the Share pool is on realising the remaining investments at values which maximise returns for Shareholders. We hope to be in a position to announce a final distribution to Shareholders during the summer.

Downing LLP

REVIEW OF INVESTMENTS - DP2011 STRUCTURED SHARE POOL

Portfolio of investments

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation Movement in period	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Wickham Solar Limited	550	660	10	53.0%
Mosaic Spa and Health Clubs Limited*	58	19	(18)	1.5%
Odysian (Holdings) Limited	155	-	-	0.0%
	763	679	(8)	54.5%

Cash at bank and in hand		566		45.5%
Total investments		1,245		100.0%

*partially qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2019

DISPOSALS


	Cost	Valuation at 01/04/18	Proceeds	(Loss)/profit vs. cost	Realised gain
	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Oak Grove Renewables Limited	545	347	353	(192)	6
Fubar Stirling Limited	90	6	6	(84)	-
Mosaic Spa and Health Clubs Limited*	6	5	7	1	2
	641	358	366	(275)	8

*partially qualifying investment

INVESTMENT MANAGER’S REPORT - GENERALIST SHARE POOL

Introduction

As at 31 March 2019, the Generalist Share Pool held a portfolio of 26 Venture Capital investments and three Liquidity investments, with a combined value of £24.7 million.

Net Asset Value and results

As at 31 March 2019, the NAV of a Generalist share stood at 83.5p, a decrease of 12.0p over the year. The fall in value arises from several areas. 5.4p of the decrease is attributable to the Liquidity investments which have been negatively impacted by the falls in global markets towards the end of 2018. 5.5p of the fall arises from net losses in the Venture Capital portfolio, where two investments in particular have had significant provisions made against them. The remaining 1.1p of the decrease has arisen from the surplus of running costs over income.

The loss on ordinary activities for the Generalist Share pool for the year was £3.9 million (2018: £1.3 million), comprising a revenue loss of £283,000 (2018: £381,000) and a capital loss of £3.6 million (2018: £953,000).

Investment activity

During the year we made good progress in building the VCT Qualifying portfolio of the Generalist Share pool, having invested a total of £10.9 million in 17 companies.

New Venture Capital investments

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

£1.3 million was invested in Rated People Limited, an online home services marketplace that aims to connect homeowners with high quality local tradespeople.

£1.1 million was invested in Lignia Wood Company Limited (formerly Fibre 7 UK Limited). The company’s product, LIGNIA®, is produced by impregnating sustainably-sourced softwood with resin such that it has an appearance resembling a tropical hardwood with a better appearance, durability, stability and fire resistance than many high value hardwoods such as oak and teak.

£1.0 million was invested in Firefly Learning Limited, the developer of a suite of school learning tools which allow teachers to share lesson plans, assign and review homework and communicate with students and parents online.

£1.0 million was invested in Imagen Limited, the developer of a SaaS video management platform which holds both current and archive footage for major sporting organisations and news outlets, including Premier League, World Tennis Association and the BBC.

£803,000 was invested in Virtual Class Limited, trading as Third Space Learning, via two fundraising tranches. The Company has developed an online educational platform that provides mathematics tuition to pupils studying for their Key Stage 2 exams.

£784,000 was invested in Hackajob Limited, the developer of an online recruitment platform that allows companies to hire tech talent directly through a combination of domain-specific challenges, data and human intelligence.

£741,000 was invested in Glownet Limited, the developer of a technology solution for organisers of mass-attendance live events, which allows attendees to make cashless payments at the event.

£500,000 was invested in Exonar Limited, a developer of software solutions which help ensure compliance with data-centric regulations and imperatives, including GDPR.

£412,000 was invested in ADC Biotechnology Limited, a company creating innovative new technology which aims to speed up, simplify and lower the costs of the processes involved in the production of new Antibody Drug Conjugates (ADCs). This investment was made alongside £1.1 million from the Healthcare Share Pool.

£300,000 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. This investment was made alongside £1.1 million from the Healthcare Share Pool.

£200,000 was invested in Channel Mum Limited, the developer of a community-based online platform for parents.

£167,000 was invested in Masters of Pie Limited, an early-stage technology firm specialising in virtual and augmented reality software for manufacturing and wider enterprise solutions.

Follow-on Venture Capital investments

A description of each of the existing VCT Qualifying businesses to which the Generalist Share pool provided further funding during the year is shown below.

£991,000 was invested in Live Better With Limited, the developer of a healthcare platform aiming to help people with long-term medical conditions, focusing on non-medical products that make day-to-day life better for patients. The Generalist Share pool has now invested a total of £1.2 million in the business, alongside £1.1 million from the Healthcare Share pool.

£639,000 was invested in E Fundamentals (Group) Limited, via two fundraising tranches, bringing the total invested to £917,000. The company provides a data analytics service which provides online merchandising insights to brand owners, to enable them to improve their online revenues.

£417,000 was invested in BridgeU Corporation, the developer of a platform providing intelligent university and course matching which is tailored to the individual student. £811,000 has been invested by the Generalist Share pool to date.

A further £278,000 was invested in Empiribox Holdings Limited, bringing the total invested to £1.0 million. The company provides equipment, lesson plans and CPD‐accredited support for teachers to deliver engaging and practical science lessons to UK primary school children.

A further £218,000 was invested in Xupes Limited, bringing the total investment to £818,000. Xupes is an online retailer of pre-owned luxury goods including designer watches, handbags, jewellery and antiques.

Liquidity Investments

As Shareholders will be aware, where the Generalist Share pool invests in other Downing-managed funds, Downing provides fee rebates to the Generalist Share pool such that its investors are not “double-charged”. As MI Downing Diversified Global Managers Fund moved away from being under Downing’s management during the year, the decision was taken to exit from this investment, as the fee economies which the Generalist Share pool could previously take advantage of fell away. The exit generated proceeds of £1.8 million and resulted in a loss against cost of £23,000.

Portfolio valuation

Venture Capital portfolio

During the year the Venture Capital portfolio of the Generalist Share pool was reduced in value by a total of £1.7 million.

The largest valuation decrease was in respect of Ormsborough Limited. The company has experienced some significant challenges in respect of its pub developments, which have set the company back considerably. As a result, the Generalist Share pool’s investment in the company was been written down by £706,000 during the year. Downing to continue to work with the company to make improvements to its operations.

The Share pool’s investment in Glownet Limited was also written down during the year. The carrying value of the investment was reduced by £556,000, as a result of the company performing substantially behind budget and the impact this has had on its working capital.

Virtual Class Limited (Third Space Learning), the developer of an online educational platform was written reduced in value by £259,000 during the year, as a result of the company being behind budget. Steps are being taken to rationalise the business and we hope to see improvement in this regard.

The investment in ADC Biotechnology Limited was reduced in value by £146,000 during the year, in line with a new funding round, which was undertaken at a lower price to the first round under which the Share pool invested. The company is running behind plan as a result of delayed approvals on its production site. However, production is expected to commence shortly and we continue to work closely with the management team.

Empiribox Holdings Limited was reduced in value by £131,000 during the year, in view of the fact that the business has not met its sales targets and has therefore missed its budget.

Destiny Pharma plc (“Destiny Pharma”), which is listed on London’s Alternative Investment Market (AIM), was also revalued downwards as at 31 March 2019, by £102,000 in line with the prevailing quoted price at that date. AIM prices typically fluctuate considerably in a given year and the reduction in the share price of the Destiny Pharma is symptomatic of this, as the business is progressing well.

Other valuation movements in the Venture Capital portfolio amounted to a net valuation uplift of £157,000.

Liquidity investments

The carrying values of the liquidity investments have been adjusted to reflect their quoted prices as at 31 March 2019. This resulted in a valuation reduction of £1.7 million for the year. This decrease is largely due to adverse conditions in global markets during the end of 2018, which have impacted quoted prices.

MI Downing UK Micro-Cap Growth Fund and Downing Strategic Micro-Cap Investment Trust plc in particular, have a strategic approach to the underlying business in which they invest. Given this, we feel that there continues to be the potential for growth in these underlying businesses.

Outlook

The building of the Venture Capital portfolio of the Generalist Share pool progressed well during the year and we expect to see a similar level of investment activity over the coming year, as we work to deploy the proceeds from the 2018 Offer, in addition to the residual proceeds from the 2016 Offer.

Downing LLP

REVIEW OF INVESTMENTS - GENERALIST SHARE POOL

Portfolio of investments

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation Movement in period	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Live Better With Limited	1,211	1,284	73	3.9%
Rated People Limited	1,282	1,282	-	3.9%
Lignia Wood Company Limited	1,111	1,200	89	3.6%
Firefly Learning Limited	1,047	1,047	-	3.2%
Imagen Limited	1,000	1,000	-	3.0%
E-Fundamentals (Group) Limited	917	917	-	2.7%
Maverick Pubs Limited	1,000	900	(100)	2.7%
Empiribox Holdings Limited	1,028	897	(131)	2.7%
Xupes Limited	818	818	-	2.5%
BridgeU Limited	811	811	-	2.4%
Hackajob Limited	784	784	-	2.4%
Volo Commerce Limited	567	567	-	1.7%
Virtual Class Limited	803	544	(259)	1.6%
Exonar Limited	500	500	-	1.5%
Fenkle Street LLP*	301	372	71	1.1%
Arecor Limited	300	300	-	0.9%
ADC Biotechnology Limited	412	266	(146)	0.8%
Destiny Pharma plc^	500	261	(102)	0.8%
Limitless Technology Limited	173	219	46	0.7%
Channel Mum Limited	200	200	-	0.6%
Ormsborough Limited	900	194	(706)	0.6%
Glownet Limited	741	185	(556)	0.6%
Masters of Pie Limited	167	167	-	0.5%
Snow Hill Developments LLP*	64	92	23	0.3%
Mosaic Spa and Health Clubs Limited*	32	17	(15)	0.1%
London City Shopping Centre Limited*	30	-	(30)	0.0%
	16,699	14,824	(1,743)	44.8%
Liquidity investments
MI Downing Monthly Income Fund*	3,950	3,503	(319)	10.5%
MI Downing UK Micro-Cap Growth Fund*	4,025	3,327	(534)	10.0%
Downing Strategic Micro-Cap Investment Trust plc*^	4,100	2,911	(861)	8.7%
	12,075	9,741	(1,714)	29.2%

	28,774	24,565	(3,457)	74.0%

Cash at bank and in hand		8,661		26.0%
Total investments		33,226		100.0%

All VCT Qualifying 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 2019

ADDITIONS


	Cost
	£’000
Venture Capital investments
Rated People Limited	1,282
Lignia Wood Company Limited	1,111
Firefly Learning Limited	1,047
Imagen Limited	1,000
Live Better With Limited	991
Virtual Class Limited	803
Hackajob Limited	784
Glownet Limited	741
E-Fundamentals (Group) Limited	639
Exonar Limited	500
BridgeU Limited	417
ADC Biotechnology Limited	412
Arecor Limited	300
Empiribox Holdings Limited	278
Xupes Limited	218
Channel Mum Limited	200
Masters of Pie Limited	167
	10,890

DISPOSALS


	Cost		Valuation at 01/04/18	Proceeds	(Loss)/ profit vs. cost
	£’000		£’000	£’000	£’000
Venture Capital investments
Fenkle Street LLP	60		60	-	(60)
Snow Hill Developments LLP	22		23	23	1
Mosaic Spa and Health Clubs Limited*	6		5	6	1
	87		88	29	(58)
Liquidity investments
MI Downing Diversified Global Managers Fund		1,800	1,833	1,777	(23)
	1,800		1,833	1,777	(23)

	1,887		1,921	1,806	(81)

*partially qualifying investment

INVESTMENT MANAGER’S REPORT - HEALTHCARE SHARE POOL

Introduction

As at 31 March 2019, the Healthcare Share pool held a portfolio of seven Venture Capital investments and three Liquidity investments, with a combined value of £7.4 million.

Net Asset Value and results

As at 31 March 2019, the NAV of a Healthcare share stood at 83.3p, a decrease of 11.3p over the year. 3.3p of the decrease relates to investment revaluations in the Venture Capital portfolio, where, as is to be expected, some of the early stage companies have fallen a little behind plan. 5.4p relates to a reduction in value of the Liquidity Investments which have been negatively impacted by the falls in global markets towards the end of 2018. The remaining 2.6p of the NAV decrease is attributable to the surplus of running costs over income.

The return on ordinary activities for the Healthcare Share pool for the year was a loss of £1.4 million (2018: £589,000), being a revenue loss of £198,000 (2018: £160,000) and a capital loss of £1.2 million (2018: £429,000).

Investment activity

During the year a total of £4.9 million was invested in six venture capital investments.

New Venture Capital investments

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

£1.1 million 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. This investment was made alongside £300,000 from the Generalist Share Pool.

£1.1 million was invested in ADC Biotechnology Limited, a company creating innovative new technology which aims to speed up, simplify and lower the costs of the processes involved in the production of new Antibody Drug Conjugates (ADCs). The company has also been provided with an investment of £412,000 from the Generalist Share Pool.

£1.0 million was invested in Open Bionics Limited, the designer and manufacturer of affordable bionic prosthetic hands by using 3D scanning and printing. The company’s current focus is on becoming the market leader for bionic hands, before entering the new higher-growth prosthetic/orthotic markets.

£556,000 was invested in Adaptix Limited, the developer of a new flatpanel x-ray source which will 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. The technology will also allow hospitals to provide faster and more definitive diagnoses.

£278,000 was invested in Future Health Works Limited, the developer of myrecovery, a mobile app that informs and empowers patients through every step of their orthopedic treatment journey, customised to their procedure and hospital. The app improves efficiency across the healthcare value chain and delivers actionable insight through data analytics. In the long term, myrecovery’s product is designed to save money and time to both practitioners and patients.

Follow-on Venture Capital investments

A further £886,000 was invested in Live Better With Limited, the developer of a healthcare platform aiming to help people with long-term medical conditions, focusing on non-medical products that make day-to-day life better for patients. The Healthcare Share pool has invested a total of £1.1 million to date, alongside £1.2 million from the Generalist Share pool.

Liquidity Investments

As Shareholders will be aware, where the Healthcare Share pool invests in other Downing-managed funds, Downing provides fee rebates to the Healthcare Share pool such that its investors are not “double-charged”. As MI Downing Diversified Global Managers Fund moved away from being under Downing’s management during the year, the decision was taken to exit from this investment, as the fee economies which the Healthcare Share pool could previously take advantage of fell away. The exit generated proceeds of £935,000 and resulted in a loss against cost of £15,000.

Portfolio valuation

Venture Capital portfolio

During the year the Venture Capital portfolio of the Healthcare Share pool was reduced in value by £1.0 million.

The largest valuation reduction was in respect of ADC Biotechnology Limited, with the Healthcare Share pool’s investment having been reduced in value by £520,000 during the year. This was to bring the valuation in line with a new funding round, which was undertaken at a lower price to the first round under which the Share pool invested. The company is running behind plan as a result of delayed approvals on its production site. However, production is expected to commence shortly and we continue to work closely with the management team.

Destiny Pharma plc (“Destiny Pharma”), which is listed on London’s Alternative Investment Market (AIM), was also revalued downwards as at 31 March 2019, by £153,000 in line with the prevailing quoted price at that date. AIM prices typically fluctuate considerably in a given year and the reduction in the share price of the Destiny Pharma is symptomatic of this, as the business is progressing well.

Other movements in the Venture Capital portfolio amounted to a net uplift of £8,000.

Liquidity investments

Outlook

The building of the Venture Capital portfolio of the Healthcare Share pool progressed well during the year and we expect to see a similar level of investment activity over the coming year, as we work to deploy the proceeds from the 2018 Offer, in addition to the residual proceeds from the 2016 Offer.

Downing LLP

REVIEW OF INVESTMENTS - HEALTHCARE SHARE POOL

Portfolio of investments

The following investments were held at 31 March 2019:


	Cost	Valuation	Valuation Movement in period	% of portfolio
	£’000	£’000	£’000
Venture Capital investments
Live Better With Limited	1,106	1,179	73	8.5%
Arecor Limited	1,100	1,100	-	8.0%
Open Bionics Limited	1,000	1,000	-	7.2%
ADC Biotechnology	1,054	534	(520)	3.9%
Adaptix Limited	556	491	(65)	3.5%
Destiny Pharma plc^	750	392	(153)	2.8%
Future Health Works Limited	278	278	-	2.0%
	5,844	4,974	(665)	35.9%
Liquidity Investments
MI Downing Monthly Income Fund*	1,100	978	(89)	7.1%
MI Downing UK Micro-Cap Growth Fund*	1,125	926	(149)	6.7%
Downing Strategic Micro-Cap Investment Trust plc*^	700	497	(147)	3.6%
	2,925	2,401	(385)	17.4%

	8,769	7,375	(1,050)	53.3%

Cash at bank and in hand		6,461		46.7%
Total investments		13,836		100.0%

*non-qualifying investment

^listed and traded on the London Stock Exchange

Investment movements for the year ended 31 March 2019

ADDITIONS


	Cost
	£’000
Venture Capital investments
Arecor Limited	1,100
ADC Biotechnology	1,054
Open Bionics Limited	1,000
Live Better With Limited	886
Adaptix Limited	556
Future Health Works Limited	278
	4,874

DISPOSALS


	Cost	Valuation at 01/04/18	Proceeds	Loss vs. cost	Realised loss
	£’000	£’000	£’000	£’000	£’000
Liquidity investments
Downing Diversified Global Managers Fund	950	962	935	(15)	(27)
	950	962	935	(15)	(27)

*partially qualifying investment

Directors’ responsibilities

The Directors are responsible for preparing the Report of the Directors, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law) including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland (FRS 102). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements the Directors are required to:

select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and
carry out a robust assessment of the principal risks facing the Company, as set out in the Strategic report on page 46 of the Annual Report.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s position, performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in the Annual Reports may differ from legislation in other jurisdictions.

Directors’ statement pursuant to the Disclosure Guidance and Transparency Rules

Each of the Directors, whose names and functions are listed on page 3 of the Annual Report, confirms that, to the best of each person’s knowledge:

the financial statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the management report included within the Report of the Directors, Strategic report, Chairman’s Statement, Investment Manager’s Report, and Review of Investments includes a fair review of the development and performance of the business and the position of the company, together with a robust assessment of the principal risks and uncertainties that it faces.

Statement as to disclosure of information to Auditors

The Directors in office at the date of the report have confirmed, as far as they are aware, that there is no relevant audit information of which the Auditor is unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the Auditor.

By order of the Board

Grant Whitehouse

Secretary of Downing FOUR VCT plc

INCOME STATEMENT

for the year ended 31 March 2019


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital
	£’000	£’000	£’000	£’000	£’000

Income	378	230	608	765	-

Net (loss)/gain on investments	-	(5,091)	(5,091)	-	1,425

	378	(4,861)	(4,483)	765	1,425

Investment management fees	(386)	(386)	(772)	(596)	(596)

Other expenses	(468)	-	(468)	(805)	(409)

(Loss)/return on ordinary activities before tax	(476)	(5,247)	(5,723)	(636)	420

Tax on total comprehensive income and ordinary activities	7	-	7	(160)	-

(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(469)	(5,247)	(5,716)	(796)	420

Basic and diluted return per share:
DSO B Share	-	-	-	(0.2p)	0.2p
DSO C Share	-	-	-	(0.2p)	0.2p
DSO D Share	0.6p	2.0p	2.6p	0.7p	5.1p
DP67 Share	1.1p	(2.6p)	(1.5p)	0.2p	5.7p
DP2011 General Share	-	-	-	-	-
DP2011 General A Share	(0.3p)	0.3p	-	(0.6p)	4.7p
DP2011 Structured Share	-	-	-	-	-
DP2011 Structured A Share	(0.2p)	(0.1p)	(0.3p)	(0.6p)	4.0p
DP2011 Low Carbon Share	-	-	-	(0.6p)	(9.1p)
Generalist Share	(0.9p)	(11.1p)	(12.0p)	(1.7p)	(4.5p)
Healthcare Share	(1.6p)	(9.7p)	(11.3p)	(2.5p)	(6.9p)

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 February 2018 by the Association of Investment Companies (“AIC SORP”).

INCOME STATEMENT (analysed by Share pool)

for the year ended 31 March 2019

Split as:

DSO D Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	14	-	14	166	-	166

Net (loss)/gain on investments	-	(141)	(141)	-	442	442

	14	(141)	(127)	166	442	608

Investment management fees	(17)	(17)	(34)	(46)	(46)	(92)

Other expenses	(46)	-	(46)	(53)	-	(53)

(Loss)/return on ordinary activities before tax	(49)	(158)	(207)	67	396	463

Tax on total comprehensive income and ordinary activities	-	-	-	(10)	-	(10)

(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(49)	(158)	(207)	57	396	453

DP67 Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	214	112	326	247	-	247

Net (loss)/gain on investments	-	(372)	(372)	-	683	683

	214	(260)	(46)	247	683	930

Investment management fees	(33)	(33)	(66)	(51)	(51)	(102)

Other expenses	(26)	-	(26)	(62)	-	(62)

Return/(loss) on ordinary activities before tax	155	(293)	(138)	134	632	766

Tax on total comprehensive income and ordinary activities	(28)	-	(28)	(114)	-	(114)
Return/(loss) attributable to equity Shareholders, being total comprehensive income for the year	127	(293)	(166)	20	632	652

DP2011 General Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	4	-	4	160	-	160

Net gain on investments	-	71	71	-	947	947

	4	71	75	160	947	1,107

Investment management fees	(20)	(20)	(40)	(75)	(75)	(150)

Other expenses	(31)	-	(31)	(196)	-	(196)

(Loss)/return on ordinary activities before tax	(47)	51	4	(111)	872	761

Tax on total comprehensive income and ordinary activities	-	-	-	(1)	-	(1)

(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(47)	51	4	(112)	872	760

DP2011 Structured Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	3	-	3	75	-	75

Net gain on investments	-	-	-	-	535	535

	3	-	3	75	535	610

Investment management fees	(7)	(7)	(14)	(39)	(39)	(78)

Other expenses	(15)	-	(15)	(126)	-	(126)

(Loss)/return on ordinary activities before tax	(19)	(7)	(26)	(90)	496	406

Tax on total comprehensive income and ordinary activities	-	-	-	(1)	-	(1)

(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(19)	(7)	(26)	(91)	496	405

Generalist Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	114	118	232	62	-	62

Net loss on investments	-	(3,572)	(3,572)	-	(718)	(718)

	114	(3,454)	(3,340)	62	(718)	(656)

Investment management fees	(180)	(180)	(360)	(235)	(235)	(470)

Other expenses	(252)	-	(252)	(208)	-	(208)

Loss on ordinary activities before tax	(318)	(3,634)	(3,952)	(381)	(953)	(1,334)

Tax on total comprehensive income and ordinary activities	35	-	35	-	-	-

Loss attributable to equity Shareholders, being total comprehensive income for the year	(283)	(3,634)	(3,917)	(381)	(953)	(1,334)

Healthcare Share pool


	Year ended 31 March 2019			Year ended 31 March 2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000

Income	29	-	29	9	-	9

Net loss on investments	-	(1,077)	(1,077)	-	(332)	(332)

	29	(1,077)	(1,048)	9	(332)	(323)

Investment management fees	(129)	(129)	(258)	(97)	(97)	(194)

Other expenses	(98)	-	(98)	(72)	-	(72)

Loss on ordinary activities before tax	(198)	(1,206)	(1,404)	(160)	(429)	(589)

Tax on total comprehensive income and ordinary activities	-	-	-	-	-	-

Loss attributable to equity Shareholders, being total comprehensive income for the year	(198)	(1,206)	(1,404)	(160)	(429)	(589)

BALANCE SHEET

as at 31 March 2019


	2019	2018
	£’000	£’000

Fixed assets
Investments	39,394	35,192

Current assets
Debtors	800	695
Cash at bank and in hand	18,443	21,063
	19,243	21,758

Creditors: amounts falling due within one year	(485)	(615)

Net current assets	18,758	21,143
Net assets	58,152	56,335

Capital and reserves
Called up Share capital	138	188
Capital redemption reserve	-	31
Special reserve	47,040	8,021
Share premium account	7,172	43,904
Funds held in respect of Shares not yet allotted	4,772	420
Revaluation reserve	(4,158)	234
Capital reserve – realised	4,940	4,641
Revenue reserve	(1,752)	(1,104)
Total equity Shareholders’ funds	58,152	56,335

Basic and diluted Net Asset Value per Share:
DSO B Share	-	-
DSO C Share	-	-
DSO D Share	27.8p	54.4p
DP67 Share	48.5p	50.0p
DP2011 General Ordinary Share	-	-
DP2011 General A Share	13.3p	20.3p
DP2011 Structured Ordinary Share	-	-
DP2011 Structured A Share	9.9p	15.0p
DP2011 Low Carbon Share	-	-
Generalist Share	83.5p	95.5p
Healthcare Share	83.3p	94.6p

BALANCE SHEET (analysed by Share pool)

as at 31 March 2019

Split as:

DSO D Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	1,302	3,699
Current assets
Debtors	1	66
Cash at bank and in hand	910	582
	911	648
Creditors: amounts falling due within one year	(28)	(67)
Net current assets	883	581
Net assets	2,185	4,280

Capital and reserves
Called up share capital	8	8
Special reserve	2,259	4,201
Revaluation reserve	153	471
Capital reserve – realised	(148)	(362)
Revenue reserve	(87)	(38)
Total equity Shareholders’ funds	2,185	4,280

DP67 Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	3,578	4,639
Current assets
Debtors	669	552
Cash at bank and in hand	1,251	519
	1,920	1,071
Creditors: amounts falling due within one year	(70)	(116)
Net current assets	1,850	955
Net assets	5,428	5,594

Capital and reserves
Called up share capital	11	11
Capital redemption reserve	-	31
Special reserve	534	805
Revaluation reserve	547	579
Capital reserve – realised	3,622	3,581
Revenue reserve	714	587
Total equity Shareholders’ funds	5,428	5,594

DP2011 General Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	1,895	2,243
Current assets
Debtors	1	-
Cash at bank and in hand	594	1,569
	595	1,569
Creditors: amounts falling due within one year	(31)	(68)
Net current assets	564	1,501
Net assets	2,459	3,744

Capital and reserves
Called up share capital – Ordinary Shares	16	16
Called up share capital – A Shares	18	18
Special reserve	652	2,209
Revaluation reserve	636	353
Capital reserve – realised	867	831
Revenue reserve	270	317
Total equity Shareholders’ funds	2,459	3,744

DP2011 Structured Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	679	1,045
Current assets
Debtors	3	3
Cash at bank and in hand	566	877
	569	880
Creditors: amounts falling due within one year	(15)	(37)
Net current assets	554	843
Net assets	1,233	1,888

Capital and reserves
Called up share capital – Ordinary Shares	11	11
Called up share capital – A Shares	13	13
Special reserve	332	1,204
Revaluation reserve	109	(119)
Capital reserve – realised	599	591
Revenue reserve	169	188
Total equity Shareholders’ funds	1,233	1,888

Generalist Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	24,565	19,053
Current assets
Debtors	124	73
Cash at bank and in hand	8,661	10,563
	8,785	10,636
Creditors: amounts falling due within one year	(220)	(215)
Net current assets	8,565	10,421
Net assets	33,130	29,474

Capital and reserves
Called up share capital	43	38
Special reserve	31,111	(240)
Share premium account	4,692	31,508
Revaluation reserve	(4,209)	(718)
Funds held in respect of Shares not yet allotted	3,396	398
Revenue reserve	(1,903)	(1,512)
Total equity Shareholders’ funds	33,130	29,474

Healthcare Share pool


	2019	2018
	£’000	£’000
Fixed assets
Investments	7,375	4,513
Current assets
Debtors	2	1
Cash at bank and in hand	6,461	6,953
	6,463	6,954
Creditors: amounts falling due within one year	(121)	(112)
Net current assets	6,342	6,842
Net assets	13,717	11,355

Capital and reserves
Called up share capital	18	15
Special reserve	12,152	(100)
Share premium account	2,480	12,396
Revaluation reserve	(1,394)	(332)
Funds held in respect of Shares not yet allotted	1,376	22
Revenue reserve	(915)	(646)
Total equity Shareholders’ funds	13,717	11,355

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2019


	Called up Share capital		Capital Redemption reserve	Special reserve	Share premium account	Funds held in respect of Shares not yet allotted	Revaluation Reserve	Capital reserve - realised
	£’000		£’000	£’000	£’000	£’000	£’000	£’000
At 31 March 2017	144		31	30,620	10,074	16,137	(1,980)	3,331
Total comprehensive income	-		-	-	-	-	(225)	645
Transfer between reserves*	-		-	(22,576)	-	-	2,439	19,548
Unallotted Shares	-		-	-	-	420	-	-
Transactions with owners
Dividend paid	-		-	-	-	-	-	(18,883)
Purchase of own Shares	-		-	(23)	-	-	-	-
Issue of Shares	44		-	-	33,830	(16,137)	-	-
Share issue costs	-		-	-	-	-	-	-
At 31 March 2018	188		31	8,021	43,904	420	234	4,641
Total comprehensive income	-		-	-	-	-	(5,250)	3
Transfer between reserves*	-		-	(4,960)	-	-	858	4,102
Unallotted Shares	-		-	-	-	4,352	-	-
Transactions with owners
Dividend paid	-		-	-	-	-	-	(3,806)
Cancellation of Share Premium/ Capital Redemption Reserve		-	(89)	43,993	(43,904)	-	-	-
Cancellation of Shares	(58)		58	-	-	-	-	-
Purchase of own Shares	-		-	(14)	-	-	-	-
Issue of Shares	8		-	-	7,172	-	-	-
Share issue costs	-		-	-	-	-	-	-
At 31 March 2019	138		-	47,040	7,172	4,772	(4,158)	4,940

*A transfer of £858,000 (2018: £2.4 million), representing previously recognised unrealised gains and losses on disposal of investments during the year ended 31 March 2019, has been made between the Revaluation Reserve and the Special Reserve. A transfer of £4.1 million (2018: £19.5 million) representing realised gains and losses on disposal of investments, less capital expenses and capital dividends in the year was made between the Capital Reserve - realised and the Special reserve.

CASHFLOW STATEMENT

for the year ended 31 March 2019


	DSO D Share pool	DP67 Share pool	DP2011 General Share pool	DP2011 Structured Share pool	Generalist Share pool	Healthcare Share pool
	£’000	£’000	£’000	£’000	£’000	£’000
Cash flows from operating activities
(Loss)/return on ordinary activities before taxation	(207)	(138)	4	(26)	(3,952)	(1,404)
Losses/(gains) on investments	141	372	(71)	-	3,572	1,077
(Decrease)/increase in creditors	(39)	(74)	(37)	(22)	40	9
Decrease/(increase) in debtors	65	(117)	(1)	-	(50)	(1)
Net cash (outflow)/inflow from operating activities	(40)	43	(105)	(48)	(390)	(319)
Corporation tax paid	-	-	-	-	-	-
Net cash generated from operating activities	(40)	43	(105)	(48)	(390)	(319)

Cash flow from investing activities
Purchase of investments	-	-	-	-	(10,890)	(4,874)
Proceeds from disposal of investments	2,256	689	419	366	1,806	935
Net cash inflow/(outflow) from investing activities	2,256	689	419	366	(9,084)	(3,939)

Net cash inflow/(outflow) before financing	2,216	732	314	318	(9,474)	(4,258)

Cash flows from financing activities
Repurchase of Shares	-	-	-	-	(14)	-
Issue of share capital	-	-	-	-	4,589	2,412
Funds held in respect of Shares not yet allotted	-	-	-	-	2,997	1,354
Equity dividends paid	(1,888)	-	(1,289)	(629)	-	-
Net cash (outflow)/inflow from financing activities	(1,888)	-	(1,289)	(629)	7,572	3,766

Net change in cash	328	732	(975)	(311)	(1,902)	(492)
Cash and cash equivalents at start of the year	582	519	1,569	877	10,563	6,953
Cash and cash equivalents at end of the year	910	1,251	594	566	8,661	6,461

Cash and cash equivalents comprise
Cash at bank and in hand	910	1,251	594	566	8,661	6,461
Total cash and cash equivalents	910	1,251	594	566	8,661	6,461

CASH FLOW STATEMENT

for the year ended 31 March 2018


	DSO B Share pool	DSO D Share pool	DP67 Share pool	DP2011 General Share pool	DP2011 Structured Share pool	DP2011 LC Share pool	Generalist Share pool	Healthcare Share pool
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cash flows from operating activities
Return/(loss) on ordinary activities before taxation	43	463	766	761	406	(732)	(1,334)	(589)
(Gains)/losses on investments	(120)	(442)	(683)	(947)	(535)	252	718	332
Decrease/(increase) in debtors	39	188	(40)	585	362	140	(29)	(1)
(Decrease)/increase in creditors	(111)	(18)	10	(60)	(50)	(54)	205	106
Net cash (outflow)/inflow from operating activities	(149)	191	53	339	183	(394)	(440)	(152)
Corporation tax paid	(40)	10	(534)	(16)	(8)	(5)	(44)	-
New cash generated from operating activities	(189)	201	(481)	323	175	(399)	(484)	(152)

Cash flow from investing activities
Purchase of investments	-	-	-	-	-	-	(19,546)	(4,820)
Proceeds from disposal of investments	1,872	2,109	1,090	6,089	3,723	2,813	-	-
Net cash inflow/(outflow) from investing activities	1,872	2,109	1,090	6,089	3,723	2,813	(19,546)	(4,820)

Net cash inflow/(outflow) before financing	1,683	2,310	609	6,412	3,898	2,414	(20,030)	(4,972)

Cash flows from financing activities
Repurchase of Shares	-	-	(23)	-	-	-	-	-
Issue of share capital	-	-	-	-	-	-	9,368	7,425
Equity dividends paid	(4,158)	(2,163)	(2,463)	(5,109)	(3,049)	(2,530)	-	-
Net cash (outflow)/inflow from financing activities	(4,158)	(2,163)	(2,486)	(5,109)	(3,049)	(2,530)	9,368	7,425

Net change in cash	(2,475)	147	(1,877)	1,303	849	(116)	(10,662)	2,453
Cash and cash equivalents at start of year	2,475	435	2,396	266	28	116	21,225	4,500
Cash and cash equivalents at end of year	-	582	519	1,569	877	-	10,563	6,953

Cash and cash equivalents comprise
Cash at bank and in hand	-	582	519	1,569	877	-	10,563	6,953
Total cash and cash equivalents	-	582	519	1,569	877	-	10,563	6,953

NOTES TO THE ACCOUNTS

for the year ended 31 March 2019

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 February 2018 (“SORP”).

The Company implements new Financial Reporting Standards (“FRS”) issued by the Financial Reporting Council when required.

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

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.

Judgements in applying accounting policies and key sources of estimation uncertainty

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:

-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.

Price of recent investment includes valuations resulting from provisions made against the price of a recent investment.

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. The valuation of investments is detailed in Note 9 of the Annual Report.

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.

The key source of estimation uncertainty is the selection of a multiple to be applied when valuing unquoted companies. Whilst there is a degree of subjectivity in the process of selecting a multiple, the Manager undertakes a rigorous internal valuations process, which involves challenging all relevant valuation inputs. The Board then challenges the proposed valuations once this process is complete.

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 disposal of an investment are deducted from the disposal proceeds of the investment; or

-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. The Company has adopted a policy of charging 50% of the investment management fees to the revenue account and 50% to the capital account, to reflect the Board’s estimated split of investment returns which will be achieved by the company over the long term.

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. An explanation of each of the Performance Incentive arrangements is given in Note 12 of the Annual Report. 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.

Acquisitions

Acquisitions made during the year are accounted for using the acquisition method. The purchase consideration is measured at the fair value of equity issued, compared to the fair value of the assets and liabilities acquired.

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.

Basic and diluted return per share


					Weighted Average number of Shares in issue*
Return per share is calculated on the following:

Year ended 31 March 2019				DSO D Shares	7,867,247
				DP67 Shares	11,192,136
	DP2011 General Shares				15,644,066
	DP2011 General A Shares				18,418,614
	DP2011 Structured Shares				10,678,725
	DP2011 Structured A Shares				12,572,817
	Generalist Shares				31,412,013
	Healthcare Shares				12,378,737

Year ended 31 March 2018				DSO B Shares	19,911,070
				DSO C Shares	29,926,070
				DSO D Shares	7,867,247
				DP67 Shares	11,229,211
			DP2011 General Shares		15,644,066
			DP2011 General A Shares		18,418,614
			DP2011 Structured Shares		10,678,725
		DP2011 Structured A Shares			12,572,817
		DP2011 Low Carbon Shares			7,575,419
		Generalist Shares			21,421,985
		Healthcare Shares			6,267,690

*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 B Share, DSO C Share, DSO D Share, DP67 Share, DP2011 General Share, DP2011 General A Share, DP2011 Structured Ordinary Share, DP2011 Structured A Share, DP2011 Low Carbon 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.

Basic and diluted Net Asset Value per share


			2019 Net Asset Value		2018 Net Asset Value
	Shares in issue		Pence per share	£’000	Pence per share	£’000
	2019	2018
DSO B Shares	-	19,911,070	-	-	-	-
DSO C Shares	-	29,926,070	-	-	-	-
DSO D Shares	7,867,247	7,867,247	27.8	2,185	54.4	4,280
DP67 Shares	11,192,136	11,192,136	48.5	5,428	50.0	5,594
DP2011 General Ordinary Shares	15,644,066	15,644,066	-	-	-	-
DP2011 General A Shares	18,418,614	18,418,614	13.3	2,459	20.3	3,744
DP2011 Structured Ordinary Shares	10,678,725	10,678,725	-	-	-	-
DP2011 Structured A Shares	12,572,817	12,572,817	9.9	1,233	15.0	1,888
DP2011 Low Carbon Shares	-	7,575,419	-	-	-	-
Generalist Shares	35,621,598	30,450,040	83.5	29,734	95.5	29,076
Generalist Management Shares	7,487,874	7,487,874	-	-	-	-
Healthcare Shares	14,821,564	11,974,285	83.3	12,341	94.6	11,333
Healthcare Management Shares	2,993,571	2,993,571	-	-	-	-
Funds held in respect of shares not yet allotted				4,772		420
Net assets per Balance Sheet				58,152		56,335

The Directors allocate the assets and liabilities of the Company between the DSO D Shares, DP67 Shares, DP2011 General Ordinary Shares, DP2011 General A Shares, DP2011 Structured Shares, DP2011 Structured A 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 described in note 12 of the Annual Report.

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 DP2011 General Ordinary Share, per DP2011 General A Share, per DP2011 Structured Ordinary Share, per DP2011 Structured A 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 DP2011 General Ordinary Share, per DP2011 General A Share, per DP2011 Structured Ordinary Share, per DP2011 Structured A Share, per Generalist Share and per Healthcare Share.

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 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 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; 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.

*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 stock attract interest predominately at fixed rates. A summary of the interest rate profile of the Company’s investments is shown below.

*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 stock in investee companies, cash deposits and debtors. Credit risk relating to holdings of loan stock in investee companies is considered to be part of market 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.

*Events after the reporting period*

In the period between 31 March 2019 and the date of this report, the Company issued the following Shares:

6,015,148 Generalist Shares, at an average price of 89.1p per Share; and
2,595,525 Healthcare Shares, at an average price of 86.7p per Share.

At the date of this report, there were 49,124,620 Generalist Shares and 20,410,660 Healthcare Shares in issue, including Management Shares.

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 2019 but has been extracted from the statutory financial statements for the year ended 31 March 2019 which were approved by the Board of Directors on 25 July 2019 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 2018 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.

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