THAMES VENTURES VCT 1 PLC

Quarterly Report • Nov 26, 2019

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*Downing ONE VCT plc*

Half-Yearly Report for the

six months ended 30 September 2019

FINANCIAL SUMMARY

		30 Sep	31 Mar	30 Sep	Nov
		2019	2019	2018	2013
		pence	pence	pence	pence
Net Asset Value per share (“NAV”)		75.5	78.3	87.7	100.4
Cumulative dividends paid since 12 Nov 2013		33.5	31.5	28.5	0.0
Total return		109.0	109.8	116.2	100.4
(NAV plus cumulative dividends paid per share)

CHAIRMAN’S STATEMENT

I present the Company’s half-yearly report for the six-month period ended 30 September 2019. The period saw a continued high level of investment activity as the task of deploying the company’s available funds continues, as well as a number of realisations from the existing investment portfolio.

The uncertain market conditions in the quoted portfolio, coupled with a small number of disappointing setbacks in the unquoted portfolio has resulted in a minor decrease in NAV (after adjusting for dividends paid) since the 31 March 2019 year end.

Net asset value and results

As at 30 September 2019, the Company’s NAV stood at 75.5p, a decrease of 0.8p (or 1.0%) compared to the 31 March 2019 year-end position, after adding back the 2.0p dividend paid during the period.

The return attributable to equity shareholders for the period was a loss of £1.1 million, comprising a revenue loss of £99,000 and a capital loss of £983,000.

Investment activity and performance

The Company has been an active investor during the period with ten qualifying investments and one non-qualifying investment made totalling £4.2 million. Four of these were new investments and seven were follow on investments into existing portfolio companies.  There were a number of disposals and part disposals in the period. Total realisations in the period generated proceeds of £6.6 million, resulting in a minor net realised loss of £4,000.

At the period end, the Company held a portfolio of 89 investments, with 29% (by value) held in quoted growth, 47% (by value) in unquoted income and 24% (by value) in unquoted growth. 30 investments are held in the quoted growth category which are either quoted on AIM or the NEX Exchange Growth Market and have a value of £23.7 million. The 59 unquoted investments have a value of £57.7 million.

At the period end the Board has reviewed the unquoted valuations and approved a number of adjustments. Net unrealised losses across the unquoted and quoted portfolio over the period were £730,000.

Further details of the investment activities of the Company are in the Investment Adviser’s Report below.

Dividends

The Company has a stated policy of seeking to pay dividends equivalent to at least 4% of net asset value each year. Consistent with this policy, the Board has declared an interim dividend of 2.0p which will be paid on 28 February 2020 to Shareholders on the register as at 7 February 2020.

This will take the total dividends paid since the merger in November 2013 to 35.5p.

Fundraising

The Company launched a new offer for subscription on 19 September 2019, seeking to raise up to £15 million, with the option of a further £25 million. The offer has been well received by the market in the three months that it has been opened, with £3.4 million being raised to date.

General Meeting

The Company held a General Meeting on 6 November 2019 seeking Shareholder approval for resolutions in connection with the new fundraising offer, to revise the investment strategy to align with future investment into young growth businesses and amend arrangements with the Investment Adviser. All resolutions proposed were approved.

In line with the resolutions, Downing LLP’s annual management charge has been increased from 1.8% to 2.0% per annum and the cap on annual running costs provided by Downing LLP has reduced from 2.75% to 2.6% with effect from 1 October 2019.

Share buybacks

The Company operates a policy of buying in its own shares that become available in the market at a 5% discount to NAV (subject to liquidity and any regulatory restrictions).

During the period, the Company purchased 1,159,749 shares at an average price of 73.5p per Ordinary Share, being a 5% discount to the latest announced NAV at the time of purchase.

VCT Qualification

From 1 April 2020, the proportion of funds required to be invested in VCT qualifying investments for the Company will increase from 70% to 80%. Currently, the VCT holds 76.4% of its total investments in qualifying assets. The Board continues to monitor the qualification level closely and is confident of exceeding the 80% target by the end of the current accounting period.

Outlook

In the period from the merger in 2013 to 30 September 2018, the Company experienced moderate but consistent growth in its Total Return. In the last 12 months, the Company has suffered from a number of factors that have impacted performance.

The unquoted income-focussed investments suffered from a small number of major setbacks in the last financial year. The quoted investments have suffered from uncertain market conditions producing falls in share prices from which they have yet to recover significantly. Unfortunately, the VCT regulations now mostly prevent the Company from taking advantage of these lower prices by adding to the existing quoted holdings.

With the continued delay to Brexit, the political and economic uncertainty in the UK is expected to remain for some time. The Investment Adviser believes that the quoted portfolio share prices do not currently reflect the intrinsic value of the underlying businesses and there are therefore prospects for growth. However, any significant recovery is unlikely to take place until the outcome and full impact of Brexit are clear.

It is too early to form a view as to the ultimate success of the portfolio of young unquoted growth investments that the Company has made over the last couple of years. Weaker businesses in this sector tend to become apparent well before the stronger businesses prove themselves. This is the effect that we have started to see recently. The Investment Adviser works very closely with all of these businesses to ensure that the potential successes are identified and nurtured, while tough decisions about the businesses which ultimately may fail are taken at the earliest opportunity.

Funds raised under the new share offer will ensure that the Company is able to continue to add new businesses to the portfolio as well as support existing investments that require further funds.  The Company’s next report to Shareholders will be the Annual Report of the year ended 31 March 2020 which is expected to be published in July 2020.

Chris Kay

Chairman

INVESTMENT ADVISER’S REPORT - OVERVIEW

Introduction

We present a review of the investment portfolio and activity over the six months to 30 September 2019. Our review is split into three parts comprising this overview, an unquoted investments review and a report on the quoted investments.

Portfolio Overview

At 30 September 2019, the Company held a portfolio of 89 investments, valued in total at £81.4 million.

There have been some positives and negatives within the portfolio over the period, resulting in a fall in value across both the quoted and unquoted portfolios. Despite the decrease to investment valuations in the period, over three quarters of the portfolio remains held at a valuation either at or above cost.

Portfolio Performance

The net unrealised losses in the quoted portfolio totalled £434,000. The largest unrealised gains in the quoted portfolio were Inland Homes plc (£611,000), Cohort plc (£318,000) and Angle plc (£247,000). These were offset by unrealised losses on Bonhill Group plc (£438,000), Downing Strategic Micro-Cap Investment Trust plc (£328,000) and Tracsis plc (£270,000).

There were several valuation movements in the unquoted portfolio in the period totalling an unrealised loss over valuation of £296,000. Within the unquoted portfolio, the largest unrealised gains related to Baron House Developments LLP (£1.1 million) and Harrogate Street LLP (£657,000). These gains were offset but a small number of material unrealised losses in the unquoted portfolio, most notably to Empiribox Limited (£747,000), Jito Trading Limited (£727,000) and Live Better With Limited (£495,000).

Further details on these and other movements can be found within the quoted and unquoted Investment Adviser Reports below.

Portfolio Composition

As noted in the 2019 annual report, the underlying investments in the portfolio are expected to shift from income to growth investments, in line with changes in the VCT regulations. In the six months to 30 September 2019, this has not been proven as a result of a number of write downs in the period, mainly attributable to the growth portfolio, with the quoted growth and unquoted growth sectors returning an unrealised loss of 0.4p and 1.1p respectively, contrasting to a 0.9p unrealised gain in the unquoted income sector.

However, it is our expectation that the proportion of growth investments in the portfolio, particularly the unquoted growth investments, will increase over the coming years.

The diversified portfolio illustrates that that the main sectors that the Company are invested continue to be Alternative Energy, Leisure and Software and Computer Services, albeit the maximum exposure to any sector is 15%.

Net asset value and results

The net asset value per Share (“NAV”) at 30 September 2019 stood at 75.5p, compared to the NAV at 31 March 2019 of 78.3p. Total Return (NAV plus cumulative dividends paid since the merger in 2013) is 109.0p.

Outlook

In the period to 30 September 2019, the Company has demonstrated a high level of deal flow with £4.2 million being invested to date, which we expect to maintain over the remainder of the year.

It has been disappointing to report further write downs to a small number of the earlier stage companies. However, shareholders should be assured that the investment adviser has devoted notable resources to address the issues that have occurred. Uncertain market conditions have also resulted in falls in the quoted stocks, however we remain positive in the longer-term prospects for the existing portfolio.

We remain satisfied with the composition of the portfolio for the period to 30 September 2019, as focus remains on the close monitoring of the current portfolio. In addition, we shall continue to utilise the remaining cash in the Company as well as the additional funds raised from the current offer and expect the Company to be an active investor over the remainder of the year.

INVESTMENT ADVISER’S REPORT – UNQUOTED PORTFOLIO

We present a review of the unquoted investment portfolio for the six months ended 30 September 2019.

Investment activity

At 30 September 2019, the unquoted portfolio was valued at £57.7 million, comprising 59 investments spread across a number of sectors.

During the period, the Company invested a total of £4.0 million in unquoted companies comprising four new investments and six follow-on investments.

The four new qualifying investments that were made during the six month period are as follows:

JRNI Limited (£525,000) is a leading, business to business (B2B) software platform that enables companies to offer online appointment and event booking to their customers and staff in real-time.

Hummingbird Technologies Limited (£500,000) is an advanced crop analytics platform that is powered by machine learning and aerial imagery to asses and predict crop health.

Cambridge Touch Technologies Limited (£459,000) is developing pressure sensitive multi touch technology that is simpler to integrate in touch panels such as mobile phone devices.

StreetHub Limited, trading as Trouva (£300,000) is an online marketplace for curated homeware and lifestyle products.

Follow on investments totalling £2.2 million were made into Limitless Limited (£584,000), Volo Commerce Limited (£510,000), Lignia Wood Company Limited (£333,000), Channel Mum Limited (£300,000), Empiribox Limited (£250,000) and E-Fundamentals Limited (£250,000).

Details of the small number of realisations in the year are set out below. Total proceeds of £2.9 million were generated, producing profits over holding value of £56,000.

Leytonstone Pub Limited, the owner of The Red Lion located in Leytonstone, London, was the largest disposal during the period after redeeming loans of £1.6 million in full.

One other notable exit was in Wickham Solar Limited, the owner of a 5.6MW ground mounted solar farm in Bourne, Lincolnshire which was exited in full, realising a gain over holding value of £56,000.

Portfolio valuation

A number of adjustments to carrying values have been made at the period end, resulting in an overall loss of £296,000. The most significant of which are summarised below.

The largest fall in value was in Empiribox Limited, the provider of equipment and training to primary schools across the UK. Due to operational issues experienced in the company and cash restrictions within primary schools in the UK, the equity value has been reduced to nil, resulting in an unrealised loss of £747,000.

Jito Trading Limited, the developer of a wood pelleting plant in Weitra, Austria has suffered a further write down of £727,000. This has arisen as a result of it becoming clear that the company’s projections were overoptimistic in terms of both costs to develop the plant and future trading prospects.

Live Better With Limited, a developer of a healthcare website aiming to help people with long-term medical conditions, has been reduced in value by £495,000 as a result of significant underperformance.

The losses encountered were partly offset by a number of gains across the portfolio. The most significant gain in the period related to Baron House Developments LLP, a company created to fund the purchase of a property opposite Newcastle station, which qualifies under the BPRA scheme. At the period end, an uplift of £1.1 million was recognised, following improved trading and an uplift in the value of the hotel site.

Outlook

We remain satisfied with the composition of the portfolio for the period to 30 September 2019, despite the significant challenges faced by a limited number of investments which has impacted performance.

We believe that the portfolio includes businesses that can deliver good rewards over time and expect to see further investment into a good pipeline of investment over the remainder of the period.

INVESTMENT ADVISER’S REPORT – QUOTED PORTFOLIO

Quoted investments

Investment activity

At 30 September 2019 the quoted portfolio was valued at £23.7 million comprising 30 active investments.

It was a relatively quiet period, during which the quoted portfolio made one full exit in Finsbury Food Group plc, a partial sale in Craneware plc, and a follow-on investment in the Downing Strategic Micro-Cap Investment Trust plc.

In August 2019, the boards of Sanderson Group plc and Aptean Bidco announced they had agreed terms of a recommended cash acquisition by Aptean Bidco to acquire the entire issued share capital of Sanderson Group. Following shareholder approval, shareholders were entitled to receive 140 pence per share.

Realisations of quoted investments generated proceeds of £128,000 and a gain over holding value of £6,000. The largest of these gains related to Finsbury Food Group plc, a leading UK speciality bakery manufacturer of cake, break and morning goods for the retail and foodservice channels, generating proceeds of £843,000 and producing a gain over holding value of £155,000.

Portfolio valuation

Overall, the quoted portfolio produced unrealised losses of £434,000. The most notable movements are summarised below.

Cohort plc provides a wide range of services and products for domestic and export customers in defence and related markets. During the period its share price appreciated as the group announced positive progress, achieving a record adjusted operating profit and record order intake.

In addition, three significant new contract wins in the period enhanced the visibility of future group revenue. This resulted in an increase in market value of £318,000.

Inland Homes plc is a land developer focusing on residentially-led, mixed-use brownfield sites in the South of England. During the period, the group announced that it had received planning consent for its flagship site at Wilton Park Buckinghamshire, a site that has an estimated gross development value of £350 million. We believe that strategic land is now making a positive contribution to the group’s profitability. This led to an increase in market value of £611,000.

The most significant decrease in the period was to Bonhill Group plc (formerly Vitesse Media plc), a business to business (B2B) media company providing business information, live events and data and insight propositions to international business communities. The group reported that a challenging US market impacted trading at InvestmentNews, its US business. In addition, the lack of fund flows in the UK fund management industry and the ongoing issues in Hong Kong have impacted performance. Full year revenue and EBITDA will be below market expectations and this resulted in a decrease in market value of £437,000. However, we are confident that the group will enter 2020 in a stronger position.

Downing Strategic Micro-Cap Investment Trust plc also had a decrease in value across the period. We believe a combination of uncertainty, failing markets and poor sentiment towards UK smaller companies has driven micro-cap share prices down excessively over the last six months. The Trust’s share price fell and the discount to net asset value widened over the last reporting period. This has resulted in a decrease in market value over the period of £328,000. Given the upside that the manager sees in this portfolio, an additional investment of £197,000 was made to take advantage on the discount on the NAV.

Outlook

We believe the portfolio is well positioned to grow over the coming years, but the political and economic background remains challenging. This environment is particularly difficult for small and micro-cap companies that have been impacted by poor market sentiment and whose share prices have been driven down because they are generally perceived to raise most of their revenues from the domestic market.

However, despite the headwinds, we believe that the outlook for young and growing companies remains positive and should support future growth.

Downing LLP

UNAUDITED BALANCE SHEET

as at 30 September 2019

		30 Sep 2019		30 Sep 2018		31 Mar 2019
		£’000		£’000		£’000
Fixed assets
Investments		81,388		91,628		84,483
Current assets
Debtors		3,519		2,168		3,228
Cash at bank and in hand		16,517		24,021		17,222
		20,036		26,189		20,450
Creditors: amounts falling due within one year		(868)		(403)		(383)
Net current assets		19,168		25,786		20,067
Net assets		100,556		117,414		104,550
Capital and reserves
Called up share capital		1,329		1,338		1,334
Capital redemption reserve		1,608		1,586		1,597
Share premium		45,989		44,923		45,515
Funds held in respect of shares not yet allotted		237		60		114
Special reserve		51,965		60,390		52,526
Capital reserve – unrealised		(1,709)		8,899		1,343
Revenue reserve		1,137		218		2,121
Equity shareholders’ funds		100,556		117,414		104,550
Basic and diluted net asset value per share		75.5p		87.7p		78.3p

UNAUDITED INCOME STATEMENT

for the six months ended 30 September 2019

		Six months ended 30 September 2019					Six months ended  30 September 2018			Year ended 31 March 2019
		Revenue		Capital	Total		Revenue	Capital	Total
		£’000		£’000	£’000		£’000	£’000	£’000
Income		1,232		100	1,332		1,750	90	1,840
Gains on investments
- realised		-		(4)	(4)		-	39	39
- unrealised		-		(730)	(730)		-	3,890	3,890
		1,232		(634)	598		1,750	4,019	5,769
Investment management fees		(461)		(461)	(922)		(510)	(510)	(1,020)
Other expenses		(758)		-	(758)		(381)	-	(381)
Return on ordinary activities before tax		13		(1,095)	(1,082)		859	3,509	4,368
Tax on total comprehensive income and ordinary activities		(112)		112	-		(128)	128	-
Return attributable to equity shareholders		(99)		(983)	(1,082)		731	3,637	4,368
Basic and diluted return per share			(0.1p)	(0.7p)	(0.8p)		0.5p	2.7p	3.2p

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards (“FRS102”). There are no other items of comprehensive income. The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies (“AIC SORP”).

STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 September 2019

	Share  Capital			Capital redemption reserve	Share premium account	Funds held in respect of shares not yet allotted		Special reserve	Capital reserve -realised
	£’000			£’000	£’000	£’000		£’000	£’000
For the six months ended 30 September 2019
At 1 Apr 2019	1,334			1,597	45,515	114		52,526	-
Total comprehensive income		-		-	-	-		-	(253)
Realisation of revaluations from previous years*		-		-	-	-		-	1,752
Realisation of impaired valuations			-	-	-	-		-	570
Transfer between reserves**	-			-	-	-		298	(298)
Transactions with owners
Unallotted shares	-			-	-	123		-	-
Dividends paid	-			-	-	-		-	(1,771)
Issue of new shares			6	-	474	-		-	-
Share issue costs			-	-	-	-		(3)	-
Purchase of own shares	(11)			11	-	-		(856)	-
At 30 Sept 2019
1,329			1,608	45,989	237		51,965	-	(1,709)

* A transfer of £1.8 million representing previously recognised unrealised gains on disposal of investments during the period ended 30 September 2019 (year ended 31 March 2019: losses £1.6 million) has been made from the Capital reserve - realised to the Revaluation reserve. 

** A transfer of £298,000 representing realised gains on disposal of investments, less net investment impairments and the excess of capital expenses over capital income and capital dividends in the year (year ended 31 March 2019: £7.3 million) has been made from Capital Reserves - realised to Special reserve.

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2019

Share  Capital			Capital redemption reserve	Share premium account	Funds  held in respect of shares  not yet allotted	Special reserve	Capital reserve -realised	Revaluation reserve	Revenue reserve
	£’000		£’000	£’000	£’000	£’000	£’000	£’000	£’000
For the year ended 31 March 2019
At 1 Apr 2018	1,200		1,574	31,661	12,876	64,859	-	4,909	828
Total comprehensive income		-	-	-	-	-	(618)	(6,287)	2,634
Realisation of revaluations from previous years		-	-	-	-	-	(1,598)	1,598	-
Realisation of impaired valuations		-	-	-	-	-	(1,123)	1,123	-
Transfer between reserves		-	-	-	-	(10,018)	10,018	-	-
Transactions with owners
Unallotted shares		-	-	-	(12,762)	-	-	-	-
Dividends paid	-		-	-	-	-	(6,679)	-	(1,341)
Issue of new shares	157		-	13,854	-	-	-	-	-
Share issue costs	-		-	-	-	(470)	-	-	-
Purchase of own shares	(23)		23	-	-	(1,845)	-	-	-
At 31 Mar 2019	1,334		1,597	45,515	114	52,526	-	1,343	2,121

UNAUDITED CASH FLOW STATEMENT

for the six months ended 30 September 2019

		30 Sep 2019		30 Sep 2018		31 Mar 2019
		£’000		£’000		£’000
Cash flow from operating activities
Profit/(loss) on ordinary activities before taxation		(1,082)		4,368		(4,272)
(Gains)/loss on investments		734		(3,929)		6,317
Increase in debtors		(291)		(594)		(1,654)
(Decrease)/increase in creditors		279		(179)		(76)
Cash from operations
Corporation tax paid		-		-		-
Net cash (utilised)/generated from operating activities		(360)		(334)		315
Cash flow from investing activities
Purchase of investments		(4,208)		(6,300)		(12,501)
Proceeds from disposal of investments		6,570		189		3,289
Net cash (utilised)/generated from investing activities		2,362		(6,111)		(9,212)
Cash flows from financing activities
Proceeds from share issue		480		13,412		14,011
Funds held in respect of shares not yet allotted		123		(12,816)		(12,762)
Share issue costs		(3)		(468)		(470)
Purchase of own shares		(651)		(1,098)		(2,096)
Equity dividends paid		(2,656)		(4,020)		(8,020)
Net cash (utilised)/generated from financing activities		(2,707)		(4,990)		(9,337)
(Decrease)/increase in cash		(705)		(11,435)		(18,234)
Net increase in cash
Beginning of period		17,222		35,456		35,456
Net cash (outflow)/inflow		(705)		(11,435)		(18,234)
End of period		16,517		24,021		17,222

SUMMARY OF INVESTMENT PORTFOLIO

as at 30 September 2019

	Cost	Valuation	Valuation movement in period	% of portfolio by value
	£’000	£’000	£’000
Top twenty venture capital investments (by value)
Doneloans Limited	5,000	5,627	1	5.7%
Tracsis plc*	1,443	4,585	(270)	4.7%
Downing Care Homes Holdings Limited	3,880	4,495	-	4.6%
Baron House Developments LLP	2,695	3,773	1,078	3.9%
Downing Strategic Micro-Cap Investment Trust plc**	5,197	3,418	(328)	3.5%
Cadbury House Holdings Limited	3,082	3,075	-	3.1%
Pilgrim Trading Limited	2,594	2,594	-	2.6%
Inland Homes plc*	1,526	2,412	611	2.5%
Xupes Limited	2,250	2,250	-	2.3%
Leytonstone Pub Limited	361	2,061	(75)	2.1%
Harrogate Street LLP	1,400	2,057	657	2.1%
Anpario plc*	1,448	1,979	-	2.0%
Craneware plc*	353	1,877	61	1.9%
Avid Technologies Group Limited	1,351	1,659	-	1.7%
Pearce & Sanders Limited	1,320	1,605	(48)	1.6%
Lignia Wood Company Limited	1,444	1,533	-	1.6%
Pantheon Trading Limited	1,500	1,500	-	1.5%
Data Centre Response Limited	557	1,414	148	1.4%
Universe Group plc*	1,506	1,350	(11)	1.4%
Nomansland Biogas Limited	1,300	1,300	-	1.3%
	40,207	50,564	1,824	51.5%
Other venture capital investments	43,842	30,824	(2,554)	31.6%
	84,049	81,388	(730)	83.1%
Cash at bank and in hand		16,517		16.9%
Total investments		97,905		100%

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM    

** Listed and traded on the Main Market of the London Stock Exchange

SUMMARY OF INVESTMENT MOVEMENTS

for the six months ended 30 September 2019

Additions

	£’000
Quoted
Downing Strategic Micro-Cap Investment Trust plc	197
	197
Unquoted
Limitless Limited	584
JRNI Limited	525
Volo Commerce Limited	510
Hummingbird Technologies Limited	500
Cambridge Touch Technologies Limited	459
Lignia Wood Company Limited	333
Channel Mum Limited	300
StreetHub Limited	300
Empiribox Limited	250
E-Fundamentals Limited	250
	4,011
Total additions	4,208

Disposals

	Cost	Value at 31/03/19*	Disposal Proceeds	Gain/(loss) against cost	Realised gain in period
	£’000	£’000	£’000	£’000	£’000
Quoted
Sanderson Group plc	336	461	701	365	240
Finsbury Food Group plc	655	688	843	188	155
Craneware plc	497	2,550	2,095	1,598	(455)
	1,488	3,699	3,639	2,151	(60)
Unquoted
Including loan note redemptions
Wickham Solar Limited	473	660	716	243	56
Mosaic Spa and Health Clubs Limited	706	58	58	(648)	-
Pabulum Limited	607	607	607	-	-
Leytonstone Pub Limited	1,550	1,550	1,550	-	-
	3,336	2,875	2,931	(405)	56
	4,824	6,574	6,570	1,746	(4)

* adjusted for purchases in the period

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

for the six months ended 30 September 2019

1. General Information

Downing ONE VCT plc (“the Company”) is a Venture Capital Trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales.

2. Basis of accounting

The unaudited half-yearly financial results cover the six months to 30 September 2019 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2019, which were prepared in accordance with the Financial Reporting Standard 102 (“FRS102”) and in accordance with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies” revised November 2014 (“SORP”).

3. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

4. The comparative figures were in respect of the six months ended 30 September 2018 and the year ended 31 March 2019 respectively.

5. Return per share

Weighted average number of shares in issue			Revenue Return		Capital Gain/ (loss)
	£’000		£’000
Period ended 30 September 2019	133,357,325		(99)		(983)
Period ended 30 September 2018	133,284,857		731		3,637
Year ended 31 March 2019	133,474,895		2,634		(6,906)

6. Dividends paid in the period

		Six months ended 30 September 2019				Year ended 31 March 2019
		Revenue	Capital	Total		Total
	Date paid	£’000	£’000	£’000		£’000
2019 Final	30 August 2019: 2.0p	885	1,771	2,656		-
2019 Interim	22 February 2019: 3.0p	-	-	-		4,001
2018 Final	24 August 2018: 3.0p	-	-	-		4,019
		885	1,771	2,656		8,020

7. Basic and diluted net asset value per share

	Shares in issue		Net assets		NAV per share
			£’000		pence
Period ended 30 September 2019	132,902,307		100,556		75.5
Period ended 30 September 2018	133,822,737		117,414		87.7
Year ended 31 March 2019	133,444,807		104,550		78.3

8. Called up share capital

			Shares in issue		£’000
Period ended 30 September 2019			132,902,307		1,329
Period ended 30 September 2018			133,822,737		1,338
Year ended 31 March 2019			133,444,807		1,334

9. Reserves

The Special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends/capital distributions.

	30 Sep 2019		30 Sep  2018		31 Mar 2019
	£’000		£’000		£’000
Capital redemption reserve	1,608		1,586		1,597
Share premium account	45,989		44,923		45,515
Funds held in respect of shares not yet allotted	237		60		114
Special reserve	51,965		60,390		52,526
Revaluation reserve	(1,709)		8,899		1,343
Revenue reserve	1,137		218		2,121
Total reserves	99,227		116,076		103,216

Distributable reserves are calculated as follows:

	30 Sep 2019		30 Sep  2018		31 Mar 2019
	£’000		£’000		£’000
Special reserve	51,965		60,390		52,526
Revenue reserve	1,137		218		2,121
Unrealised gains/(losses) (excluding unrealised unquoted gains)	(10,144)		3,629		(5,989)
	42,958		64,237		48,658

10. Investments

The fair value of investments is determined using the detailed accounting policy as shown in the audited financial statements for the year ended 31 March 2019. The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level 1 Reflects financial instruments quoted in an active market (quoted companies and fixed interest bonds);

Level 2 Reflects financial instruments that have prices that are observable either directly or indirectly; and

Level 3 Reflects financial instruments that use valuation techniques that are not based on observable market data (investments in unquoted shares and loan note investments).

	Level 1	Level 2	Level 3	30 Sep 2019		Level 1	Level 2	Level 3	31 Mar 2019
	£’000	£’000	£’000	£’000		£’000	£’000	£’000	£’000
Quoted on AIM	19,203	-	-	19,203		23,027	-	-	23,027
Quoted on NEX	8	-	-	8		18	-	-	18
Quoted on Main market	4,499	-	-	4,499		4,600	-	-	4,600
Unquoted loan notes	-	-	22,330	22,330		-	-	21,645	21,645
Unquoted equity	-	-	35,348	35,348		-	-	35,193	35,193
	23,710	-	57,678	81,388		27,645	-	56,838	84,483

11. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 March 2019 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor’s report on those financial statements was unqualified.

12. Going concern

The Directors have reviewed the Company’s financial resources at the period end and concluded that the Company is well placed to manage its business risks.

The Directors confirm that they are satisfied that the Company has adequate resources to continue to operate for the foreseeable future. For this reason, the Directors believe that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

13. Risks and uncertainties

Under the Disclosure and Transparency Rules, the Board is required, in the Company’s half-year results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks are:

(i) compliance risk of failure to maintain approval as a VCT; and

(ii) investment risk associated with investing in small and immature businesses.

The Company’s compliance with the VCT regulations is continually monitored by the Adviser, who regularly reports to the Board on the current position. The Company also retains Philip Hare & Associates LLP to provide regular reviews and advice in this area.

In order to make VCT qualifying investments, the Company has to invest in small businesses which are often immature. It also has a limited period in which it must invest the majority of its funds into VCT qualifying investments. The Adviser follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible and, after an investment is made, closely monitoring the business.

The Board is satisfied that these approaches provide satisfactory management of the key risks.

14. The Directors confirm that, to the best of their knowledge, the half yearly financial report has been prepared in accordance with the “Statement: Half-Yearly Financial Reports” issued by the UK Accounting Standards Board as well as in accordance with FRS 104 Interim Financial Reporting and the half-yearly financial report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

15. Copies of the unaudited half-yearly financial results will be sent to Shareholders shortly. Further copies can be obtained from the Company’s Registered Office and will be available for download from www.downing.co.uk