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THAMES VENTURES VCT 2 PLC — Audit Report / Information 2022
Jul 29, 2022
4880_10-k_2022-07-29_8c113e6a-92e7-4f7a-b73a-b6bdc84f5fa3.html
Audit Report / Information
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Downing FOUR VCT plc
ReportandAccountsfortheyearended
31March2022
Shareholder Information
FinancialCalendar
27September2022 AnnualGeneralMeeting
30September2022 Paymentoffinaldividend
December2022 AnnouncementofHalf‐Yearlyfinancialresults
Sellingshares
TheCompany’ssharescanbeboughtandsoldinthesamewayasanyothercompanylistedontheLondonStock
Exchange,usingastockbroker.Disposingofsharesmayhavetaximplications,soShareholdersareurgedto
contacttheirindependentfinancialadviserbeforemakingadecision.
TheCompanyhasstatedthat
itwill,fromtimetotime,considermakingmarketpurchasesofitsownshares,in
accordancewiththepolicysetoutintheChairman’sStatement.Atpresent,theCompanyonlyoperatesashare
buybackpolicyinrespectofitsVentures,HealthcareandAIMShares,astheotherclassesarein
theprocessof
returningfundstoShareholdersthroughdividends.
ShareholderswhowishtoselltheirsharesshouldasktheirbrokertocontacttheCompany’sCorporateBroker,
PanmureGordon(UK)Limited(“PanmureGordon”).PanmureGordoncanbecontactedasfollows:
Dividends
DividendswillbepaidbytheregistraronbehalfoftheCompany.Shareholderswhowishtohavedividendspaid
directlyintotheirbankaccount,ratherthanbychequetotheirregisteredaddress,cancompleteamandateform
forthispurposeordothisviatheInvestorHubatdowning‐vct.cityhub.uk.com.
Queriesrelatingtodividends,
shareholdings,andrequestsformandateformsshouldbedirectedtotheCompany’sregistrar,whosedetailscan
befoundontheCompanyInformationpage.
Notificationofchangeofaddress
CommunicationswithShareholdersaremailedtotheregisteredaddressheldontheshareregister.Intheevent
ofachangeofaddressorotheramendmentsthisshouldbenotifiedtotheCompany’sregistrarorviathe
InvestorHub.
Sharescamwarning
WeareawarethatanumberofshareholdersofVCTscontinuetoreceiveunsolicitedtelephonecallsfroma
companypurportingtobeactingonbehalfofaclientwhoislookingtoacquiretheirVCTsharesatanattractive
price.Webelievethesecallstobepartofa“BoilerRoomScam”.Shareholdersarewarnedtobeverysuspicious
iftheyreceiveanysimilartypeoftelephonecall.
FurtherinformationcanbefoundonDowning’swebsite atwww.downing.co.uk/vctboilerroomscam.Ifyouhave
anyconcerns,pleasecontactDowningon02074167780.
OtherinformationforShareholders
Up‐to‐dateCompanyinformation(includingfinancialstatements,shareprices,anddividendhistory)maybe
obtainedfromDowning’swebsiteat:
www.downing.co.uk/d4
IfyouhaveanyqueriesregardingyourShareholdinginDowningFOURVCTplc,pleasecontacttheregistrar.
ChrisLloydPaulNolan
0207886271602078862717
[email protected][email protected]
Contents
Page
Companyinformation 1
Financialhighlights 2
InvestmentobjectivesandDirectors 3
Chairman’sStatement 4
VenturesSharepoolSummary 8
InvestmentManager’sReport–VenturesSharepool 9
Reviewofinvestments–VenturesSharepool 13
HealthcareSharepoolSummary 20
InvestmentManager’sReport–HealthcareSharepool 21
Reviewofinvestments–HealthcareSharepool 24
DSODSharepoolSummary 32
InvestmentManager’sReport–DSODSharepool 33
Reviewofinvestments–DSODSharepool 34
DP67SharepoolSummary 36
InvestmentManager’sReport–DP67Sharepool 37
Reviewofinvestments–DP67Sharepool 38
InvestmentManager’sApproachtoResponsibleInvestment 41
StrategicReport 43
ReportoftheDirectors 49
Directors’RemunerationReport 55
CorporateGovernanceStatement 59
IndependentAuditor’sReport 64
IncomeStatement 71
BalanceSheet 75
StatementofChangesinEquity 79
CashFlowStatement 80
NotestotheAccounts 82
NoticeofAnnualGeneralMeeting 101
1
Company Information
Registerednumber 6789187
Directors SirAubreyBrocklebankBt.(Chairman)
LordFlight(SeniorIndependentDirector)
ChrisAllner
StevenClarke
AndrewMackintosh
Secretaryandregisteredoffice GrantWhitehouse
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
LondonEC3R6HD
InvestmentandAdministrationManager DowningLLP
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
LondonEC3R6HD
www.downing.co.uk
InvestmentManager ForesightGroupLLP
(witheffectfrom5July2022excepttheHealthcare TheShard
shareclass) 32LondonBridgeStreet
LondonSE19SG
www.foresightgroup.eu
Auditor BDOLLP
55BakerStreet
London
W1U7EU
VCTstatusadvisers PhilipHare&AssociatesLLP
HamiltonHouse
1TempleAvenue,Temple
LondonEC4Y0HA
Registrar TheCityPartnership(UK)Limited
(witheffectfrom30July2021) TheMendingRooms
ParkValleyMills
MelthamRoad
Huddersfield
HD47BH
01484240
910
InvestorHub:downing‐vct.cityhub.uk.com
Corporatebroker PanmureGordon(UK)Limited
ChrisLloyd PaulNolan
02078862716 02078862717
[email protected] [email protected]
Bankers BankofScotlandplc
300Lawnmarket
EdinburghEH12PH
RoyalBankofScotlandplc
LondonVictoriaBranch
119/121
VictoriaStreet
LondonSW1E6RA
2
Financial Highlights
Audited Audited
31March
2022
31March
2021
Pence Pence
VenturesSharepool
NetAssetValue(“NAV”)perVenturesShare
68.20
67.2
Cumulativedistributions
5.25
2.5
TotalReturn
2
perVenturesShare
73.45
69.7
HealthcareSharepool
NetAssetValue(“NAV”)perHealthcareShare
84.40
68.5
Cumulativedistributions
5.25
2.5
TotalReturn
2
perHealthcareShare
89.65
71.0
AIMSharepool
NetAssetValue(“NAV”)perAIMShare
99.9
n/a
Cumulativedistributions
‐
n/a
TotalReturn
2
perAIMShare
99.9
n/a
DSODSharepool
NetAssetValue(“NAV”)perDSODShare
2.6
10.2
Cumulativedistributions
102.0
94.5
AdjustedforPerformanceIncentiveestimate
‐
(0.5)
TotalReturn
2
perDSODShare
104.6
1
104.2
DP67Sharepool
NetAssetValue(“NAV”)perDP67Share
26.8
18.4
Cumulativedistributions(sinceoriginallaunch)
67.8
67.8
TotalReturn
2
perDP67Share
94.6
86.2
1
BasedonTotalReturntoShareholdersat31March2022,noPerformanceIncentiveisexpectedtobecomeduetomanagement.
2
AlternativePerformanceMeasure(seepage43)
AfullexplanationofthePerformanceIncentivearrangementsforeachsharepoolisgivenonpages51to52and
page92.
3
Investment Objectives
TheCompany’sprincipalobjectivesareto:
investinaportfolioofventurecapitalinvestmentsandliquidityinvestments;
provideafullexitforPlannedExitShareholderswithinapproximatelysixyearsatnodiscounttoNAV;
maintainVCTstatus;and
targetanannualdividendofatleast4%oftherespectiveVenturesandHealthcareNAVs,fromthe
summerof2021onwards.
ThedetailedinvestmentpolicyadoptedtoachievetheinvestmentobjectivesissetoutintheStrategicReporton
page43.
Directors
SirAubreyBrocklebankBt.(Chairman)qualifiedasacharteredaccountantpriortoworkingforGuinnessMahon
from1981to1986,initiallyinitscorporatefinancedepartmentbeforehelpingtoestablishaspecialist
developmentcapitaldepartment.From1986to1990hewasadirectorofVentureFoundersLimited,managinga
£12million
venturecapitalfundandsubsequentlymanagedtheAvonEnterpriseFundLimited.SirAubrey
assumedhisfirstrolewithintheVCTindustryin1997andhassincegoneontobecomeoneofthemost
experiencedVCTdirectors.SirAubreymaintainsawiderangeofbusinessinterestsandhasbeena
directorofsix
AIMlistedcompanies.Heiscurrentlyalsoanon‐executivedirectorofEdgePerformanceVCTplc.
LordFlight(SeniorIndependentDirector)hasworkedinthefinancialservicesindustryforover40yearsandco‐
foundedGuinnessFlightGlobalAssetManagement.In1998,uponGuinnessFlight’sacquisitionbyInvestec,
he
becamejointchairmanofInvestecAssetManagementLimited.HewasMPforArundelandSouthDownsfrom
1997to2005andShadowChiefSecretarytotheTreasurybetween2000and2004.Hewasappointedtothe
HouseofLordsinJanuary2011.HeischairmanoftheEISAssociation
andCIMInvestmentManagement
Limited;andisadirectorofInvestecAssetManagementLimitedandofanumberofothercompaniesinthe
financialservicessector.HehasalsobeenaCommissioneroftheGuernseyFinancialServicesCommission.
AndrewMackintosh(appointed8September2021)hashadadistinguishedcareerinindustry
andinvestmentas
aformerCEOofFTSE250company,OxfordInstruments,beforelaterleadingthecreationoftheRoyalSociety
EnterpriseFund,apioneeringinitiativeinbringingtogetherscientificexpertiseandearly‐stageinvestment.He
wasaboardmemberoftheIntellectualPropertyOfficeandatrusteeofthe
DesignCouncil.Heisalsochairman
ofUKI2S,agovernment‐backedventurecapitalfundsupportingcompaniesfromtheUK’sscientificresearch
base.
AndrewhasalongstandinginterestinenhancingthecommercialisationandwidereconomicimpactofUK
researchandistheauthorofareport(‘TheMackintoshReport’)commissionedbyHM
Treasuryandpublishedin
April2021.
StevenClarke(appointed8September2021)has30years’experienceofinvestingintechnologyanddata
businessesincluding21yearsasaprivateequityinvestorwith3i,AugustEquityandICG.Stevennowsupports
foundersthroughfundraising,internationalgrowthandexitasaninvesting
non‐executivedirectorusually
alongsideagrowthequityfund.StevenisalsochairoftheinvestmentcommitteeforBethnalGreenVentures,a
TechforGoodimpactinvestor.
ChrisAllner(appointed8September2021)hasover35yearsofventurecapitalandprivateequityexperience
andiscurrentlyapartnerofDowning
LLPandchairstheirinvestmentcommittee.PriortojoiningDowning,he
wastheheadofprivateequityatOctopusInvestmentsaswellasadirectoratBeringeaandBridgepointwith
previousexperienceat3iandCharterhouse.Hehaspreviouslysatontheboardsofanumberofunquotedand
quoted
companiesacrossavarietyofcommercialsectors.
AlltheDirectorsarenon‐executiveand,withtheexceptionofChrisAllner,areindependentoftheInvestment
Manager.
4
Chairman’s Statement
Introduction
IpresenttheCompany’sAnnualReportfortheyear
ended31March2022.
AsIreportedtoyouinmyhalfyearStatement,this
hasbeenabusyyearforyourCompany,withthe
creationofthenewAIMshareclassandtheofferfor
subscriptionwhichlaunchedinSeptemberand
closedattheendofMay.Wealsohadsome
changesontheBoardandhavecontinuedtomake
goodprogressininvestingtheevergreenportfolios.
Asthepandemicrestrictionshavegraduallybeen
liftedoverthecourseoftheyear,wehaveseenan
increaseininvestmentactivityandimprovement
in
theperformanceofsomeinvestmentswhichhad
stalledundertheimpactofCovid.
ManagementArrangements
AsShareholdersmaybeaware,inJune2022,itwas
announcedthatDowningLLP,ourinvestment
manager,hadagreedtosellitstechnologyventures
divisiontoForesightGroupLLP(“Foresight”).Asa
result,themainexecutivesfromDowningLLP’s
technologyventuresteamwillmovetoForesight
andtheBoardhasconsented
tothenovationofthe
investmentmanagementagreementtoForesight.
TheBoardhadextensivediscussionswithDowning
LLPandForesightandsatisfieditselfthatthe
transactionwasinthebestinterestsofShareholders.
TheCompanywillbenefitinfuturefromthe
continuityofkeyinvestmentexecutivesaswellas
the
substantialresourcesoftheForesightGroup.
Alongwiththesechanges,theCompanyplansto
changeitsnameto:
ThamesVenturesVCT2plc
Thisisplannedtotakeplaceonoraround31August
2022.
Foresightisaquotedfundmanagementbusiness,
with£8.7billionoffundsundermanagementand
long
‐standingexperienceintheVCTsector.We
believethescaleofitsoperation,itsresourcesasa
quotedbusinessanditsexpertiseintheVCTmarket,
meansitiswellplacedtosupporttheongoing
developmentofDowningFOURVCTplc.Foresight
has12officesaroundtheUKandshould
beableto
sourcemorenewdealsthanatpresentandshould
havegreaterabilitytoraisefundsinfuture.
ThemanagementoftheHealthcaresharepoolwill
remainwithDowningLLP,asDowningretainsa
well‐resourcedhealthcareteam.DowningLLPwill
alsoprovideinvestmentmanagementservicesfor
thenon
‐venturesinvestments(primarilythoseinthe
plannedexitandAIMsharepools)and
administrationservicestotheCompanyforatleast
sixmonths.Thiswillcovertheperiodwhilethe
plannedexitsharepoolsarewoundup.
Fundraising
Asnotedinthehalfyearlyreport,anewofferfor
subscriptionwaslaunchedinSeptember2021.The
offerclosedaftertheyearend,on31May2022,
havingraised£11.6millionsplitbetweenthe
Ventures,HealthcareandnewAIMShareclasses.A
proportionofthesharesallottedundertheoffer
wereissuedaftertheyearend.
Duringtheyearended31March2022,the
Companyissued6,889,747VenturesSharesof0.1p
eachatanaveragepriceof69.29pperOrdinary
Share,3,136,178HealthcareSharesof0.1peachat
anaveragepriceof84.74pperOrdinaryShareand
2,034,990AIMShares
of0.1peachatanaverage
priceof1.0218pperOrdinaryShare.NoVenturesor
HealthcareManagementShareswereissuedduring
theyear.
EvergreenSharepoolreview
VenturesSharepool(formerlyGeneralist)
ThetaskofbuildingtheVenturesShareportfolio
continuedduringtheyear,with£2.0minvestedin
tenVCTQualifyingcompanies,twoofwhichwere
newadditionstotheportfolio.
TheVenturesShareTotalReturnstoodat73.45pat
theyearend,representinganincreaseof3.75p
per
shareor5.6%inNAVovertheyear.Thisisinclusive
ofthedividendof2.75ppershare,whichwaspaid
on24September2021.
TheNAVincreaseislargelyattributabletoanumber
ofvaluationincreasesinthequalifyinginvestments,
onthebackofimprovementsinperformanceas
the
economyhasstartedtonormaliseafterCovid.
PositivedevelopmentsincludeE‐Fundamentals
(Group)Limited,UppTechnologiesGroupLimited,
HackajobLimited,CambridgeTouchTechnologies
Limited,andAyarLabsInc,whichwereupliftedbya
combined£4.0millionovertheyear.
ArecorTherapeuticsplcundertookasuccessfulIPO
whichisdiscussedfurther
intheInvestment
Manager’sReportsfortheVenturesandHealthcare
poolsonpages10and21.
Therehave,however,alsobeensomevaluation
reductions,mostnotably£1.3millioninTrouva
(StreethubLimited)whichdidnotrecoverfromthe
impactofthepandemicandwassoldshortlyafter
theyearend.
EmpiriboxHoldingsLimitedreducedin
valueby£503,000andHummingbirdTechnologies
Limitedby£405,000asat31March2022.
5
Chairman’s Statement(continued)
EvergreenSharepoolreview(continued)
VenturesSharepool(formerlyGeneralist)
(continued)
Therewerealsofourfullexitsduringtheperiod,
whicharesetoutonpage14andintheInvestment
Manager’sReportonpage10.Furtherdeferred
considerationwasreceivedfromBridgeULimitedin
relationtotheexitin2021.Thesetransactions
resultedina
totalrealisedlossof£205,000.
WithintheVenturesLiquidityPortfolio,therewasa
furtherredemptionfromMIDowningUKMicro‐Cap
GrowthFund,whichisintheprocessof
windingup.TheholdinginDowningStrategic
Micro‐CapInvestmentTrustdecreasedinvalueby
£262,000inlinewithgeneralstock
market
movements.
AmoredetailedreviewoftheVenturesSharepool
isincludedintheInvestmentManager’sReporton
pages8to19.
HealthcareSharepool
ThedevelopmentoftheHealthcareShareportfolio
continuedduringtheyear,with£4.8millionhaving
beeninvestedinsevenVCTQualifyingcompanies,
twoofwhich
werenewinvestments.
TheHealthcareShareTotalReturnstoodat89.65p
attheyearend,representinganincreaseof18.65p
pershareor27.2%inNAVovertheyearafter
adjustingfortheHealthcaredividendof2.75pper
share,whichwaspaidon24September2021.
Thegrowthinthe
HealthcareNAVistheresultof
positivedevelopmentsintheVentureCapital
portfolio,inparticularArecorTherapeuticsplcwhich
isshowingasignificantincreaseof£2.7millionwith
thecompanylistingonAIMon3June2021.There
isfurtherinformationonthisinvestmentinthe
InvestmentManager’sReport.
Othersignificant
upliftsinAdaptixLimited,
GENinCodeplc(whichalsolistedonAIMduringthe
year)andOpenBionicsLimitedtotalled£1.6million.
AswiththeVenturesSharepool,theHealthcare
SharepoolreceivedafurtherredemptionfromMI
DowningUKMicro‐CapGrowthFund,whichisin
theprocessofwinding
up.DowningStrategic
Micro‐CapInvestmentTrustalsosuffereda
reductioninvaluationovertheyearof£44,000.
WithintheHealthcarequalifyingportfolio,thesole
valuationreductiontoreportwasDestinyPharma
plcwhichwasdowninvalueby£564,000asat31
March2022,basedonthequotedshareprice
atthat
date.
AmoredetailedreviewoftheHealthcareSharepool
isincludedintheInvestmentManager’sReporton
pages20to31.
AIMSharepool
TheAIMShareclassraisedatotalof£2.8million
undertheoffer,andwhilstthisislessthanwehad
hopedfor,itshouldnotcreate
anysignificantissues
forShareholdersasthenatureofthefundwillallow
co‐investmenttoensurethatareasonablydiverse
portfoliocanstillbebuilt.
Noinvestmentshavebeenmadetodatesothereis
noinvestmentManagersReportfortheAIMShare
Classincluded,althoughIlookforward
toupdating
youonthepoolsprogressatthehalfyearpoint.
PlannedExitSharepools
DSODSharepool
TheDSODShareportfolioheldtworemaining
investmentsasat31March2022.AsShareholders
willbeaware,theongoingimpactofthecoronavirus
pandemichascontinuedtocausedisruptiontothe
exitprocessesinrespectoftheseremaining
investments.
Thetwosolarbusinesses,FreshGreen
Power
LimitedandGreenEnergyProductionLimitedwere
soldduringtheyearatasmallloss.Thefunds
receivedweredistributedtoShareholderswitha
dividendof7.5ppersharepaidon7January2022.
TherealisationoftheinvestmentsinPearceand
SaundersLimitedandPearceandSaundersDevCo
Limitedstillrestsonthesaleoftheremainingpub
siteinEltham.Plansfortheirexitcontinueto
progressandshouldconcludebeforetheendofthe
year.
TheDSODShareNAVstoodat2.6pattheyear
end,adecreaseof0.1ppershareovertheyearafter
takingintoaccountthedividendof7.5p.However,
owingtothedelaysinexitingfromtheremaining
investments,noperformanceincentiveisnow
expectedtobepayable,resultingin
theTotalReturn
toDSOShareholdersincreasingfromthelevel
statedat31March2021by0.4ppershare,or4.1%.
TotalReturnthereforenowstandsat104.6pper
sharecomparedtothecostforShareholderswho
investedintheoriginalDSODShareofferof
100.0p,or70.0pper
sharenetofincometaxrelief.
AmoredetailedreviewoftheDSODSharepoolis
includedintheInvestmentManager’sReporton
page32.
6
Chairman’s Statement(continued)
PlannedExitSharepools(continued)
DP67Sharepool
TheremainingvalueintheDP67Shareportfoliois
spreadacrossthreeinvestmentswhichoperatein
thehospitalitysector.AstheUKeconomycontinues
torecoverfromtheimpactoftherestrictions,the
Managerisnowtargetingafinalexitin2023.
CadburyHouseHoldingshasseengood
performancesincereopeninginApril2021and
discussionswithmanagementareongoinginorder
toseekanexitassoonasreasonablypossible.
Asat31March2022,theDP67ShareNAVstoodat
26.8pandTotalReturnstoodat94.6ppershare,an
increaseof8.4p pershare, equivalent toa45.6% in
NAVtermsince31March2021.
AmoredetailedreviewoftheDP67Sharepoolis
includedintheInvestment
Manager’sReporton
page36.
Sharebuybacks
TheCompanyoperatesapolicyofbuyinginitsown
sharesthatbecomeavailableinthemarket,subject
toregulatoryandliquidityfactors.Anysuch
purchasesareundertakenatapriceapproximately
equaltoNAV(i.e.atanildiscount).
AsthefocusforthetworemainingPlannedExit
Sharepools
isonreturningfundstoShareholdersvia
distributions,theCompanywillnotundertakeany
furtherbuybacksinrespectofthoseshareclasses.
PanmureGordoncontinuestoactastheCompany’s
corporatebroker,operatingthesharebuyback
processandensuringthatthequotedspreadonthe
Company’ssharesremainsata
reasonablelevel.If
youwishtosellorbuysharesintheCompany,the
contactdetailsofPanmureGordoncanbefoundon
theShareholderInformationpage.
Duringtheyearended31March2022,the
Companyrepurchased86,425VenturesSharesatan
averagepriceof67.49pperShareand159,833
Healthcare
Sharesatanaveragepriceof85.28pper
Share.
Dividends
DowningFOURhasatargetofseekingtopay
annualdividendsfortheVenturesandHealthcare
shareclassesofatleast4%oftherespectiveNAVs
perannum.
TheBoardisproposingtopayfinaldividendsof
2.75pperVenturesShareand3.5pperHealthcare
Shareon30September2022,
toShareholderson
theregisterasat2September2022.Theproposed
dividendsaresubjecttoShareholderapprovalatthe
forthcomingAGM.Followingthepaymentofthe
proposeddividends,theCompanywillhavepaid
cumulativedividendsof8.0pperVenturesShareand
8.75pperHealthcareShare.
Furtherdividendsinrespectof
theCompany’s
PlannedExitSharepoolswillbepaidoncefurther
realisationshavetakenplace.Nodividendsare
expectedtobepaidbythenewAIM‐Shareclassin
theinitialyears.
Responsibleinvestment
TheBoardnotestheInvestmentManager,Downing
LLP’s,commitmenttobeinga“Responsible
Investor”.DowningLLPplacesEnvironmental,Social
andGovernance(ESG)criteriaattheforefrontofits
businessandinvestmentactivities,inlinewithbest
practice,inordertoenhancereturnsforinvestors.
TheBoardfurthernotesthattheForesight
Group
hasanequallyhighcommitmenttosustainabilityand
isconfidentthattheCompany’sinvestmentswill
continuetobemanagedinaresponsiblemannerin
future.
FurtherdetailonDowning’sapproachtoresponsible
investment,includingthekeyprinciplesand
screeningapproach,canbefoundonpages41and
42.
AnnualGeneralMeeting(“AGM”)
TheCompanyinvitesShareholderstoattendthis
year’sAGMinpersononcemore.TheAGMis
plannedtotakeplaceattheofficesofForesight
GroupLLP,TheShard,32LondonBridgeStreet,
London,SE19SGat3.30p.m.on27September
2022.
ShareholderswishingtoattendtheAGMare
requestedtopleasenotifyDowningLLPviaemail,to
[email protected].uk,incasetherearechangesto
arrangementswhichneedtobecommunicatedat
shortnotice.
Fouritemsofspecialbusinessareproposedatthe
AGMasfollows:
oneresolutioninrespectoftheauthoritytobuy
backsharesasnotedabove;
tworesolutionsinrespectofauthoritytoallot
sharesanddisapplypre‐emptionrightstogive
theCompanyflexibilityinrespectoffurther
fundraisingplans;and
oneresolutiontocancelthesharepremium
accountandcapitalredemptionreservetogive
theCompanytheabilitytousethereserve
createdtoacquiresharesinthemarketand,in
future,togiveflexibilityinpayingdividends.
7
Chairman’s Statement(continued)
AnnualGeneralMeeting(continued)
ThisyearShareholderswillbeablesubmitproxy
voteselectronically.Thedetailsrequiredforvoting
willbesenttoeachshareholder.Thedeadlinefor
proxyvotestobereceivedis3.30p.m.on
23September2022.
Boardchanges
AssetoutintheHalfYearlyReport,areviewofthe
boardcompositionwasundertakeninAugust2021
toensureitwaswellalignedwiththeCompany’s
needsgoingforward.
Ultimatelytwocandidatesfromthisprocesswere
invitedtojointheboard.StevenClarkeandAndrew
Mackintoshwereappointedas
non‐executive
directorson8September2021.Bothhave
significantexperienceinthescientificand
technologysectors,whichisnowthemainfocusof
theCompany’sinvestmentactivity.
Inadditiontotheabove,ChrisAllner,partnerof
DowningLLP,alsojoinedtheboardon8September
2021asanon‐executivedirector.Hisremuneration
willbebornebyDowningLLPforthefirst2yearsof
hisrole.
Alongsidetheaboveappointments,RussellCatley
steppeddownasanon‐executivedirectorofthe
Companyon8September2021.Russell joinedthe
Company’sboardfollowingthemergerwiththree
otherVCTsin2015.WethankRussellforhis
valuablecontributionsthroughouthistenureand
willmisshissageandintelligent
advice.Wewish
himalltheverybestinhisfutureactivities.
Also,LordFlightwillstepdownattheforthcoming
AGMandwillnotofferhimselfforre‐election.Lord
Flighthasbeenanon‐executivedirectorofthe
Companysinceitsinceptionin2009andwasits
first
chairman.MycolleaguesandIthankLordFlight
forhissignificantcontributionsinseveralroles
throughthevariousphasesoftheCompany’slifeto
date.Wewishhimeveryhappinessandsuccessin
hisotherventures.
Ibelievewenowhaveaboardofdirectorswitha
broadrangeofskills
andexperiencethatiswell
suitedtooverseetheCompanyduringthenext
yearsofitslife.
Outlook
Withthenewmanagementarrangements,therewill
clearlybesomechangestoyourCompanyoverthe
nextyear.TheBoardissatisfiedthatthesechanges
willbepositiveforallShareholderswithDowning
LLPcontinuingtomanagetheHealthcareShare
poolandprovidingsupportforagradualtransition
inthemanagement
ofthenon‐ventures
investments(primarilythoseintheplannedexitand
AIMsharepools).Foresightisasubstantialandwell‐
respectedfundmanagerandtheBoardbelievesthat
itsfurtherexpansionintotheunquotedventures
spacewilldelivergoodbenefitstoourshareholders.
TheBoardlooksforwardtoworking
theForesight
Groupandcontinuingtoworkwiththeexisting
venturesteamattheirnewhome.
Intermsoftheplannedexitportfolios,webelieve
thetaskofexitingfromtheremaininginvestments
DSODshareclassshouldcompletethisyear.Afinal
exitfromtheDP67shareclassisexpected
tofall
into2023.Thepandemichascausedsignificant
delaysbecauseofthetypeofassets,mainly
hospitality,ownedbythesepools.However,
progressisnowbeingmade,withexitplansfrom
CadburyHouseHoldingsnowbeingexplored
followinggoodpostpandemicresults.
InrespectoftheEvergreensharepools,
webelieve
thattheVenturesandHealthcarepoolsnowhavea
solidcoreofinvestmentsthataremakingprogress.
Bothpoolswillcontinuetomakenewinvestments
withfundsthatareavailableandthetaskof
investingthenewAIMSharepoolwillgetunderway
shortly.Foresightiscommittedtoraising
newfunds
fortheVenturesSharepool,asisDowningin
respectoftheHealthcareSharepool,sowelook
forwardtodevelopingtheportfolioswithattractive
newopportunities.
AlthoughtheimpactoftheCovidpandemicisnow
reducing,therearenewthreatsofincreasing
inflation,possiblerecessionandthe
conflictin
Ukraine.Asaresult,recentlywehaveseenfalling
stockmarketsandincreasingconcernaboutthe
short‐termoutlook.However,whileweneedtobe
mindfulofthepotentialimpactofthechallenges,
theseconditionscanpresentgoodopportunities.
Ilookforwardtoreportingonwhatisexpectedto
beabusyperiodinthehalfyearlyreportto30
September2022.
SirAubreyBrocklebankBt.
Chairman
25July2022
8
Ventures Share Pool
SharePoolSummary
31March
2022
31March
2021
Financialhighlights Pence Pence
NetAssetValueperVenturesShare 68.20 67.2
Cumulativedistributions 5.25 2.5
TotalReturnperVenturesShare 73.45 69.7
ForthcomingDividend
Aproposedfinaldividendof2.75pperVenturesSharewillbepaidon30September2022,toShareholdersonthe
registerat2September2022.
Dividendhistory
Periodend
Datepaid
Pence
pershare
2020Interim 25September2020 2.50
2021Interim 24September2021 2.75
5.25
Shareprices
TheCompany’ssharepricescanbefoundonvariousfinancialwebsiteswiththefollowingTIDM/EPICcodes:
VenturesShares
TIDM/EPICcodes D4G
Latestshareprice(22July2022) 68.0ppershare
PerformanceIncentivearrangements
MembersofthemanagementteamhavecommittedtosubscribeforanumberofVenturesSharesequalto20%
ofthetotalnumberofVenturesSharesinissue.Themembersofthemanagementteamhaveagreedtowaive
anydividendsontheseSharesuntiltheperformancehurdlesaremet.
Fortheyear
ended31March2022,thehurdleismetwhenTotalReturn(basedonauditedyearendresults)isin
excessof£1.06perVenturesShare.Forsubsequentyears,theTotalReturnhurdleincreasesby3pperannum
suchthatfortheyearended31March2023theTotalReturnhurdle
willbe£1.09,fortheyearended31March
2024thehurdlewillbe£1.12,etc.Ifthehurdleismetinanyyear,thenmembersofthemanagementteamwill
receive20%ofthedividendspaid.ThecurrentTotalReturnis73.45pandthereforenoprovisionfora
performanceincentive
feeisnecessary.
9
Investment Manager’s Report - Ventures Share Pool
i. Overview
Introduction
Wepresentareviewoftheinvestmentportfolio
andactivityfortheVenturesSharepoolfortheyear
ended31March2022.
ThisInvestmentManager’sReportissplitintothree
sectionscomprisingthisoverview,areviewof
VentureCapitalPortfolioandareportonthe
portfolioofLiquidityInvestments.
NetAssetValueandresults
Asat31March2022,theNAVofaVenturesShare
stoodat68.2p,anincreaseof3.75p(5.6%)forthe
yearafteraddingbacktheVenturesdividend,of
2.75ppershare,whichwaspaidon24September
2021.
ThereturnonordinaryactivitiesfortheVentures
Sharepoolfortheyearwas£1.8million(2021:£3.7
million),comprisingarevenuelossof£491,000
(2021:£91,000)andacapitalgainof£2.3million
(2021:£3.8million).
WhilstthereisstillaslowrecoveryintheNAVsince
31March2021,theTotalReturntoShareholdersas
at31March2022,of73.4p,continuestobe
consideredanunderperformanceagainstour
expectationsfortheVenturesSharepool.
Afinaldividendof2.75ppershareisproposedtobe
paidon30September2022,toShareholdersonthe
registerat2September2022.Thisisinlinewiththe
stateddividendtargetfortheVenturesSharepool,
topaydividendsofatleast4%ofnetassetsper
annum.
PortfolioOverview
Asat31March2022,theVenturesSharepoolheld
aportfolioof34VentureCapitalinvestmentsand
twoLiquidityinvestments,withacombinedvalueof
£31.3million.
Astherestrictionsofthepandemicwereslowly
liftedoverthecourseoftheyearended31March
2022,itcontinuedtobeaperiodofchallengesfor
businessesintheUKandtherestoftheWorld.We
havebeenpleasedtoseesignificantrecoveryin
someofthecompanies
intheportfolio,although
othersarestillstrugglingintheaftermath.
Thereareanumberofrisksemergingincludingboth
thesituationinUkraineandtheimpactofincreasing
inflationintheUK.Wewillcontinuetoworkclosely
withportfoliocompaniestoprovideguidanceand,
whereappropriate,additionalfunding
inorderto
deliversupportthroughtheseturbulenttimes.
Thevaluationmovementsduringtheperiodare
discussedinmoredetailinthefollowingsectionsof
thisInvestmentManager’sReport.
PortfolioPerformance
Overall,severallargervaluationreductionsinthe
VentureCapitalPortfolioweremorethanoffsetby
anumberofvaluationupliftsduringtheperiod,
resultinginanetvaluationupliftonthisportfolio,of
£2.4million.
ThecarryingvaluesoftheLiquidityInvestments
havebeenadjustedtoreflecttheirquotedpricesas
at31March2022.Thisresultedinavaluation
decreaseof£238,000fortheperiod.
ii. Venture Capital Portfolio
Investmentactivity
Duringtheperiod,atotalof£2.1millionwas
investedintenbusinesses,twoofwhicharenew
VCTQualifyinginvestments.
NewVentureCapitalinvestments
AdescriptionofeachofthenewVCTQualifying
investmentsmadeduringtheyearisshownbelow.
DSTBTDLimited(tradingasDistributedLimited)
(£275,000)hasbuiltaplatformthatconnects
enterpriseclientswithfullyremotedeveloperteams
acrosstheglobetoaddressdemandforoutsourced
softwaredevelopment.
BulbshareLimited(£245,000)hasdevelopedaSaaS
platformwhichenablesbrandstobuildcommunities
fromtheirexistingcustomers/fansbothtogather
insightsfromandtocreatearicherexperiencefor
thosecustomers.
Follow‐onVentureCapitalinvestments
Adescriptionofeachofthefollow‐oninvestments
madeintoexistingbusinessesintheVentureCapital
Portfolioisshownbelow.
CambridgeTouchTechnologiesLimited(£500,000)
isdevelopingpressuresensitivemultitouch
technologythatischeaperandsimplertointegrate
intouchscreenpanelsofmobile
devices.
10
Investment Manager’s Report - Ventures Share Pool (continued)
ii. Venture Capital Portfolio (continued)
Investmentactivity(continued)
NewVentureCapitalinvestments(continued)
On3June2021ArecorTherapeuticsplc(“Arecor”)
undertookasuccessfulIPOonAIM.Aspartofthe
IPO,theVenturesSharepool’sexistingloannote
holdingwasconvertedintoordinaryshares.
E‐FundamentalsGroupLimited(£166,000)isa
SoftwareasaService(SaaS)analyticscompany,
whichhasdevelopedandcommercialisedaSaaS
analyticstoolsolddirectlytocompaniestoenable
themtoaccuratelyassesstheperformanceoftheir
productswhenbeingsoldthroughthirdpartye‐
commercesites.
FVRVSLimited(tradingasFundamentalVR)
(£125,000)hasdevelopedaplatform,Fundamental
Surgery,whichisthemarket
leadingmedical
educationplatformdeliveringmultimodalsimulation
andeducationacrosstetheredandall‐in‐oneVR,
mixedrealityandmobile,harnessingtheverylatest
AItechniques.Itistheonlyglobalplatformtohave
achievededucationalaccreditationfromleading
medicalinstitutionssuchastheAAOSandRoyal
CollegeofSurgeonsEngland.
RatedPeopleLimited(£100,000)isanonline
marketplaceconnectinghomeownerswithlocal
tradespeople.
MIPDiscoveryLimited(previouslyMIP
Diagnostics)(£100,000)isatechnologyleaderin
thefieldofMolecularlyImprintedPolymers(MIPs)‐
polymerbasedsyntheticantibodiesthatprovidea
viablealternativetoantibodiesfordiagnostic
immunoassayswhichareusedacross
avarietyof
sectorsincludingdiagnostics,sensors,foodtesting
andreagentpurification.
£71,000wasinvestedinStreethubLimited(trading
asTrouva)inordertosupportthebusinesstowards
anexit.Aftertheyearend,theVenturesSharePool
exitedinfullrecoveringonlythevalueofthislatest
investment.
ChannelMum
Limitedhasbeentradingwellin
recentmonthsandafurther£62,000wasinvested
inordertofacilitateanexit.
Thereweretwofullexitsduringtheyear.Xupes
Limited,apre‐ownedluxurygoodsretailer
generatedproceedsof£675,000ataprofitof
£384,000overthevalueat31
March2021.
JRNILimited,abusinesstobusiness
(B2B)softwareplatformthatenablescompaniesto
offeronlineappointmentsandeventbookingsfor
theircustomersandstaff,exitedat£23,000profit
overcost.
ItisdisappointingtoreportthatExonarLimitedand
GlownetLimitedbothexitedinfullfornilproceeds
duringtheyear,withacombinedlossof£379,000
againstthevalueheldat31March2021.
Deferredconsiderationof£301,000wasreceivedin
relationtotheexitofBridgeULimitedwhich
occurredintheyearended31March2021.
Portfoliovaluation
Duringtheperiod,theVentureCapitalportfolioof
theVenturesSharepoolincreasedinvaluebya
totalof£2.7million.Whilsttherehavebeena
numberofsignificantpositivedevelopmentswithin
theVentureCapitalportfolio,thiswasinpartoffset
bythereductioninvalueofseveralcompaniesdue
to
themnotprogressingaswehadhoped.
StreethubLimited(t/aTrouva)failedtorecover
aftertheimpactofthepandemicandiswellbehind
budget.TheVenturesSharePoolexitedafterthe
yearendandthevalueoftheinvestmenthas
thereforebeenreducedby£1.27milliontoreflect
the
amountrecovered.
E‐FundamentalsGroupLimited
continuesto
progresswellbothintheUKandintheUS,with
recurringrevenuescontinuingtogrow.Thisstrong
performancehasresultedinavaluationupliftof
£1.27millionasat31March2022.
UppTechnologiesLimited(previouslyVolo
Commerce)aproviderofmultichannele‐commerce
technology,wasincreasedinvalueby
£835,000as
itsperformancerecoversfollowingachangein
strategyandanewproductfocus.
AyarLabsinc.thedeveloperofcomponentsfor
highperformancecomputinganddatacentre
applications,wasupliftedinvaluationby£800,000
asat31March2022,includingtheimpactof
foreignexchange.Thisrevaluationis
theresultofa
calibrationtothepricesetunderarecentfunding
round.
11
Investment Manager’s Report - Ventures Share Pool (continued)
ii. Venture Capital Portfolio (continued)
Portfoliovaluation(continued)
ThevaluationofArecorwasupliftedby£723,000
asat31March2022.Furthervaluationcommentary
canbefoundonpage21,withinthereportonthe
Healthcareportfolio.
CambridgeTouchTechnologiesLimitedwas
upliftedby£508,000toalignwiththevaluationset
undertherecentroundoffunding.
HummingbirdTechnologies
Limitedtheownerof
anadvancedcropanalyticsplatformthatispowered
bymachinelearningandaerialimagery,was
reducedinvalueby£503,000asat31March2022,
onthebackofadowngradeinrevenue
forecasts.
TheremaininginvestmentsintheVentureCapital
Portfoliowereadjustedinvalue
byatotalnetuplift
of£314,000asat31March2022.
Outlook
Therehavebeenanumberofpositive
developmentsintheportfolio,astheinvestments
continuetorecoverintheaftermathofthe
pandemicandlifereturnsto‘normal’.
Wecontinuetoactivelyengagewiththese
companies,providingguidanceandsupportto
ensuretheyarewellpositionedtoachievetheir
milestones.
Liquidity Investments
ThecarryingvaluesoftheLiquidityInvestments
havebeenadjustedtoreflecttheirquotedpricesas
at31March2022.Thisresultedinatotalreduction
of£238,000fortheyear.
DowningStrategicMicro‐CapInvestment
Trustplc
ThevalueoftheVenturesSharepool’sholdingin
DowningStrategicMicro‐CapInvestmentTrustplc
(“DSM”)decreasedinvalueby£262,000duringthe
period.Asat31March2022,DSM’smid‐market
sharepricetradedatadiscounttoNAVof21.36%,
representingpotentialunrealisedvalueinthe
company’sshare
price.TheManagersofDSM
believethatthetrust’sportfolioalsohasalevelof
intrinsicvaluewhichisyettoberecognisedbythe
marketandbelievethatareturnofpositive
sentimenttovalueinvestingcouldfurtherenhance
this.
DSMreportedpositiveresultsforthefullyear
ended
28February2022.TheCompanyreporteda
5.3%increaseinNAV,and1%increaseintheshare
price,despitethevolatilityinmarketsduetothe
post‐Covidmacroeconomicbackdropandthe
conflictinUkraine.Themanagersremainpositiveon
theprospectsfortheCompany’sholdingswhichare
generallycheaper
thanthewidermarket,with
strongerbalancesheetsandgoodgrowthprospects
fromthecompellingproductsorservicesthey
provide.Typically,theseinvestmentshavegone
throughsignificantcatalyticchangesoverthelast
fewyearsandarethereforestrongerthanthey
wereprethisperiodofeconomicinstability.
DowningUKMicro‐CapGrowthFund
VenturesShareholderswillbeawareofthesmall
residualinvestmentinDowningMicro‐CapGrowth
Fund(“DMCG”).Since19thFebruary2021,the
ACD(AssociatedCorporateDirector)hasbeen
workingwiththeinvestmentmanagerDowningLLP
todisposeofandliquidateallassetsoftheFund
withtheintentionofreturningmonies
toinvestors
attheearliestopportunity.Thesecondroundof
capitaldistributionsweremadeinJune2021,
returningproceedsof£301,000,realisinggainsof
£31,000overthevaluationsasat31March2021.
Morethanthepricepershareatwhichthefund
wassuspendedhasnowbeenreturnedto
shareholders.
Overtheyearto31March2022,theVentures
Sharepool’sresidualholdinginDMCGincreasedin
valueby£24,000.
12
Investment Manager’s Report - Ventures Share Pool (continued)
Outlook
Theramificationsofthepandemiccontinuedto
disruptthroughoutthereportingperiod,and
marketshavebeenfacedwithextremedemand
/supplysideshocks,labourshortages,energyprice
crises,andfreightandlogisticalchallenges.The
macroeconomicbackdropremainsconcerningand
marketsarelikelytoremainvolatileinthemonths
aheadasrising
inflation,higherinterestratesand
thesituationinUkraineallcauseconcern.
Theyearaheadislikelytobemoredifficultthanlast
year,wherelingeringCovidissueswereoffsetby
massivestimulusandrecordhouseholdsavings
feedingademandspike.Supplychainissues
continuetohaveanimpact,Covid
isstillcrippling
partsofChinawheresomanygoodsare
manufactured,householdsavingsarebeingrapidly
erodedbytheunforeseencostoflivingcrisis,and
expansionarypolicyhasreversed.Confidenceislow
anduncertaintyishigh.However,theportfolio
containsgoodcompanies,withplentyofscopefor
strongbalancesheets,
andsignificantprospectsfor
growthoverthelong‐term.
AsyouwillhaveseenintheChairman’sStatement,
followingtheyearend,DowningLLPagreedtosell
itstechnologyVenturesbusinesstoForesight
GroupLLP.Aspartofthetransaction,the
InvestmentManagementagreementwasnovated
fromDowningtoForesight
on5July2022andthe
wholeoftheDowningVenturesteamandkey
supportstaffweretransferredtoForesight.
Welookforwardtomanagingtheassetsaspartof
theForesightGroup,ournewhome,andthenext
chapterfortheCompany.
DowningLLP–VenturesTeam
25July
2022
13
Review of Investments – Ventures Share Pool
Thefollowinginvestmentswereheldat31March2022:
Cost
Valuation
Valuation
movement
inperiod
%of
portfolio
Portfolioofinvestments £’000 £’000 £’000
VentureCapitalinvestments
E‐Fundamentals(Group)Limited
1,508 3,847 1,273 10.8%
RatedPeopleLimited
1,382 1,895 211 5.3%
VirtualClassLimited(ThirdSpaceLearning)
1,053 1,816 (60) 5.1%
ImagenLimited
1,000 1,763 (65) 5.0%
AyarLabs,Inc.
764 1,526 800 4.3%
HackajobLimited
784 1,523 739 4.3%
CornelisNetworks,Inc.
1,402 1,370 63 3.9%
CambridgeTouchTechnologiesLimited
959 1,369 508 3.8%
EcstaseLimited(t/aADAY)
1,000 1,257 257 3.5%
TrinnyLondonLimited
219 1,240 283 3.5%
ArecorTherapeuticsplc^
418 1,141 723 3.2%
UppTechnologiesGroupLimited(previouslyVoloCommerce) 1,077 1,077 835 3.0%
FireflyLearningLimited
1,047 1,047 ‐ 2.9%
LimitlessTechnologyLimited
757 920 ‐ 2.6%
FundingXchangeLimited
1,050 786 (264) 2.2%
CongenicaLimited
734 746 ‐ 2.1%
Parsable,Inc.
766 711 33 2.0%
MastersofPieLimited
667 667 ‐ 1.9%
CarbiceCorporation
656 639 30 1.8%
FVRVSLimited(t/aFundamentalVR)
375 484 109 1.4%
MaverickPubs(Holdings)Limited
1,000 450 ‐ 1.3%
FenkleStreetLLP*
301 405 17 1.1%
MIPDiscoveryLimited(previouslyMIPDiagnosticsLimited) 300 300 ‐ 0.8%
ChannelMumLimited
737 291 (49) 0.8%
DSTBTDLimited(t/aDistributedLimited)
275 275 ‐ 0.8%
HummingbirdTechnologiesLimited
750 250 (503) 0.7%
BulbshareLimited
249 249 ‐ 0.7%
DestinyPharmaplc^
500 153 (376) 0.4%
StreethubLimited(t/aTrouva)
1,279 71 (1,273) 0.2%
EmpiriboxHoldingsLimited 1,563 ‐ (405) 0.0%
LinetenLimited
400 ‐ (209) 0.0%
LigniaWoodCompanyLimited
1,778 ‐ ‐ 0.0%
LiveBetterWithLimited
1,211 ‐ ‐ 0.0%
OrmsboroughLimited
900 ‐ ‐ 0.0%
LondonCityShoppingCentreLimited*
30 ‐ ‐ 0.0%
28,891 28,268 2,677 79.4%
Liquidityinvestments
DowningStrategicMicro‐CapInvestmentTrustplc*^ 4,269 2,875
(262)
8.1%
MIDowningUKMicro‐CapGrowthFund*
123 116
24
0.3%
4,392 2,991
(238)
8.4%
33,283 31,259
2,439
87.8%
Cashatbankandinhand
4,321 12.2%
Totalinvestments
35,580
100.0%
*non‐qualifyinginvestment
^listedandtradedontheLondonStockExchange
AllVentureCapitalinvestmentsareincorporatedinEnglandandWales,exceptAyarLabs,Inc. CornelisNetworks,Inc.and
Parsable,Inc.whichareincorporatedinUSA.
14
Review of Investments – Ventures Share Pool (continued)
Investmentmovementsfortheyearended31March2022
Cost
Additions £’000
VentureCapitalinvestments
CambridgeTouchTechnologiesLimited 500
ArecorTherapeuticsplc^ 418
DSTBTDLimited(t/aDistributedLimited) 275
BulbshareLimited 249
E‐Fundamentals(Group)Limited 166
FVRVSLimited(t/aFundamentalVR) 125
RatedPeopleLimited 100
MIPDiscoveryLimited(previouslyMIPDiagnosticsLimited) 100
StreethubLimited(t/aTrouva) 71
ChannelMumLimited 62
ArecorLimited 4
2,070
Cost
Valuationat
01/04/21* Proceeds
(Loss)/Gain
vs.cost
Realised
gain/(loss)
Disposals £’000 £’000 £’000 £’000 £’000
VentureCapitalinvestments
XupesLimited 933 291 675 (258) 384
JRNILimited 525 525 548 23 23
ArecorLimited 418 418 418‐ ‐
GlownetLimited 741‐‐(741)‐
ExonarLimited 550 379‐(550) (379)
BridgeULimited***‐‐143 143 143
Liquidityinvestments
MIDowningUKMicro‐CapGrowthFund** 369 270 301 (68) 31
3,536 1,883 2,065 (1,451) (202)
*adjustedforadditionsintheyearasappropriate
**non‐qualifyinginvestment
***deferredproceedsnotrecognisedinpriorperiods
15
Review of Investments – Ventures Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheVenturesSharepool:
EFundamentals(Group)
Limited
www.ef.uk.com
Costat31/03/22: £1,508,000 Valuationat31/03/22: £3,847,000
Costat31/03/21: £1,342,000 Valuationat31/03/21: £2,408,000
Dateoffirstinvestment: Dec‐17 Valuationmethod: Discounted
CashFlow
Investmentcomprises:
Equity: £1,342,000 %oftotalsharesinissue/total
votingrights
10.6%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2020 2019
Netassets: £11.4m £10.0m
E‐Fundamentals(Group)Li mite disaSoftware as aSe rvice (SaaS)analytics company,
whichhasdeve lope dand commercialisedaSaaSanalyticstoolsolddirectlyto
companiestoenablethemtoaccuratelyassesstheperforma nceoftheirproducts
whenbeingsoldthroughthi rdpa rtye‐commercesites.
RatedPeopleLimited
www.ratedpeople.com
Costat31/03/22: £1,382,000 Valuationat31/03/22: £1,895,000
Costat31/03/21: £1,282,000 Valuationat31/03/21: £1,584,000
Dateoffirstinvestment: Nov‐18 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £1,382,000 %oftotalsharesinissue 1.3%
%oftotalvotingrights 3.2%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2020 2019
Turnover: £11.6m £13.4m
Profit/(Loss)beforetax: £0.2m (£3.8m)
Netliabilities: (£4.3m) (£5.2m)
RatedPeopleisanonlinehomeservicesmarketplacethataimstoconnect
homeownerswithhighquali ty localtradespeople.Th ecompanyoffersaccesstomore
than50,000trades people, representingover30trades,andcoveringthewholeofthe
UK.
VirtualClassLimited
(ThirdSpaceLearning)
www.thirdspacelearning.com
Costat31/03/22: £1,053,000 Valuationat31/03/22: £1,816,000
Costat31/03/21: £1,053,000 Valuationat31/03/21: £1,876,000
Dateoffirstinvestment: Apr‐18 Valuationmethod: Multiple
Investmentcomprises:
Equity: £1,053,000 %oftotalsharesinissue 4.5%
%oftotalvotingrights
7.8%
Summaryfinancialinformationfromstatutoryaccountsto31July:
2021 2020
Netassets: £1.8m £0.1m
ThirdSpaceLearninghasdevel opedanon lineeducationalpl atf orm thatprovides
mathematicstuitiontopu pils studyingfor theirexams,offeringonline1‐to‐1maths
interventionandhigh‐qualityreso urcesth athelpdevel opthebuildingblo cksto
successinmaths.
16
Review of Investments – Ventures Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheVenturesSharepool:
ImagenLimited
www.imagenevp.com
Costat31/03/22: £1,000,000 Valuationat31/03/22: £1,763,000
Costat31/03/21: £1,000,000 Valuationat31/03/21: £1,828,000
Dateoffirstinvestment: Dec‐18 Valuationmethod: Discounted
CashFlow
Investmentcomprises:
Equity: £1,000,000 %oftotalsharesinissue/total
votingrights
4.9%
Summaryfinancialinformationfromstatutoryaccountsto31May:
2021 2020
Net(liabilities)/assets: (£1.9m) £0.5m
ImagenisaSa aSvideomanagementpl atfo rmwhichholdsbothcur rentandarchive
footageformajorsportingorganisationsandnewsoutlets,includingPremierLeague,
WorldTennis AssociationandtheBBC.Theplatf ormhelpssports,mediaand
enterprisebusinessestomanagethei rexpandingvideoandcontentlibrarieson its
cloud‐basedtechnology.
Ayarlabs,Inc.
www.ayarlabs.com
Costat31/03/22: £764,000 Valuationat31/03/22: £1,526,000
Costat31/03/21: £764,000 Valuationat31/03/21: £726,000
Dateoffirstinvestment: Aug‐20 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £764,000 %oftotalsharesinissue/total
votingrights
5.0%
Summaryfinancialinformationnotpubliclyavailable.
AyarLabsisdevelopin gasolutiontoover comethepower/performancescaling
challengesofsemiconductorsaswellasth einterconnectbandwid thbottleneck
betweenthosede vices ,through theuseofitsOpticalI/Otechnology.
HackajobLimited
www.hackajob.co
Costat31/03/22: £784,000 Valuationat31/03/22: £1,523,000
Costat31/03/21: £784,000 Valuationat31/03/21: £784,000
Dateoffirstinvestment: Oct‐18 Valuationmethod: Multiple
Investmentcomprises:
Equity: £784,000 %oftotalsharesinissue/total
votingrights
4.7%
Summaryfinancialinformationfromstatutoryaccountsto31October:
2020 2019
Net(liabilities)/assets: (£1.2m) £0.5m
Hackajobisanonline recruitmentplat form for employe rsseekingdevelope rsand
engineers.Potentialemployees takepartinonl inetechnicalchallengesandare
matchedwithrelevant employ ersthr ough Hackajob’sau tomated testingfea ture sand
algorithms.FollowingexpansioninEurope,generating earlytractioninAms terdam ,
BerlinandParis,thebusinesshasshifte dawayfrom
asuccessfeemodeltoa
subscription‐basedmode.
17
Review of Investments – Ventures Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheVenturesSharepool:
CornelisNetworks,Inc.
www.cornelisnetworks.com
Costat31/03/22: £1,402,000 Valuationat31/03/22: £1,370,000
Costat31/03/21: £1,402,000 Valuationat31/03/21: £1,307,000
Dateoffirstinvestment: Sep‐20 Valuation
method:
Calibrationtopriceof
recentinvestment(inUSD)
Investmentcomprises:
Equity: £1,402,000 %oftotalsharesinissue/total
votingrights
3.3%
Summaryfinancialinformationnotpubliclyavailable.
CornelisNetworksisaproviderofpurp ose ‐built interconnects focusedonhigh
performan ce computing(HPC),highperformancedata analy tics(HPDA),andartificial
intelligence(AI).Cornelis Netw orks isan independentco mpanyspunout fromIntel ’s
Omni‐PathArchitectureBus iness.Omni‐PathArchitecture en ablesqui ck er processing
andoutputwithminimallagandpower
consumption–acriticalelementwith the
increasingdatarequirementsinnex t‐gentechnology.
CambridgeTouch
TechnologiesLimited
www.Camtouch3d.com
Costat31/03/22: £959,000 Valuationat31/03/22: £1,369,000
Costat31/03/21: £459,000 Valuationat31/03/21: £361,000
Dateoffirstinvestment: Jul‐19 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £959,000 %oftotalsharesinissue/total
votingrights
1.8%
Summaryfinancialinformationfromstatutoryaccountsto30September
2021 2020
Netassets:
£2.6m
£5.8m
CambridgeTouchTe chn ol ogy isdevelopi ngpressurese nsitivemultitouchtechn olo gy
thatischeape randsimplertoin tegrate intouchscreenpanelsofmobilede vices.
UltraTouchwillworkinrain,withgloves andunderwateron curved andfol dabl e
screens.
EcstaseLimited
(t/aADAY)
www.thisisaday.com
Costat31/03/22: £1,000,000 Valuationat31/03/22: £1,257,000
Costat31/03/21: £1,000,000 Valuationat31/03/21: £1,000,000
Dateoffirstinvestment: Nov‐19 Valuationmethod: Multiples
Investmentcomprises:
Equity: £1,000,000 %oftotalsharesinissue/total
votingrights
4.4%
Summaryfinancialinformationfromstatutoryaccountsto30June:
2021 2020
Netassets: £8.6m £9.0m
ADAYisane‐commerceclothingbrandcreatingversatile,seasonles sgarmentsusi ng
fabri csandfactorieswi thalowenvironmentalfootprint. Foundedin 2015,the
companycreatesandsellsdi rect toconsumermulti‐functi onal clothes for professional
womenus ing‘technical’fabricsmorecommonlyusedforsportsattire ,andwhere
possible,incorporatingthe
latestinnova tioninsus tainablematerialsandsustain able
manufacturing.
18
Review of Investments – Ventures Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheVenturesSharepool:
TrinnyLondonLimited
www.trinnylondon.com
Costat31/03/22: £219,000 Valuationat31/03/22: £1,240,000
Costat31/03/21: £219,000 Valuationat31/03/21: £957,000
Dateoffirstinvestment: Jul‐20 Valuationmethod: Multiples
Investmentcomprises:
Equity: £219,000 %oftotalsharesinissue/total
votingrights
0.5%
Summaryfinancialinformationfromstatutoryaccountsto30June:
2021 2020
Turnover: £44.2m £13.4m
Profitbeforetax: £2.7m £0.4m
Netassets: £7.1m £2.8m
TrinnyLondonisapremiumcosmeticandskincarebrandlaunchedin2016byTrinny
Woodall and Mark McGuinness‐Smith. The business’ online platf orm can match
customers withproductssuitingtheircomplexion.
Note: net asset, turnover and pre‐tax profit figures are stated where this information is publicly available. The
proportionofthetotalsharesinissue/totalvotingrightsarestatedonanindividualSharepoolbasis.
Summaryofloaninterestincomeandinterestonadvances
Loaninterestandinterestonadvancesreceivableintheyear £’000
EFundamentalsLimited 11
FundamentalVRLimited 7
ChannelMumLimited 2
StreetHubLimited 2
XupesLimited 1
23
Analysisofinvestmentsbytype
TheallocationoftheVenturesSharefundscomparedtothetargetsplitissummarisedasfollows:
Actual
portfoliosplitat
31March
2022**
Target
portfoliosplitat
31March
2022*
V
CTQualifyingInvestments
Qualifyingloans 1% 25%
Qualifyingequity 77% 60%
Total 78% 85%
Non‐QualifyingInvestments
LiquidityinvestmentsandNon‐Qualifyingloans 19% 5%
Total 97% 90%
Cash 3% 10%
100% 100%
*Witheffectfrom1April2021,themajorityofVenturesfundsaresubjecttothe80%VCTQualificationtest,andtheManageraims
tomaintainaVCTQualifyingpercentagecomfortablyinexcessoftheminimumrequired.
**ExcludesfundstowhichtheVCTQualificationtestwasyettoapply,asat31March2022.
ThesplitoftheVenturesSharepoolinvestmentportfoliobycommercialsector(bycostandbyvalueat31
March2022)areshownonthenextpage.
19
Review of Investments – Ventures Share Pool
(continued)
20
Healthcare Share Pool
SharePoolSummary
31March
2022
31March
2021
Financialhighlights Pence Pence
NetAssetValueperHealthcareShare 84.40 68.5
Cumulativedistributions 5.25 2.5
TotalReturnperHealthcareShare 89.65 71.0
ForthcomingDividend
Aproposedfinaldividendof3.5pperHealthcareSharewillbepaidon30September2022,toShareholderson
theregisterat2September2022.
Dividendhistory
Periodend
Datepaid
Pence
pershare
2020Interim 25September2020 2.50
2021Interim 24September2021 2.75
5.25
Shareprices
TheCompany’ssharepricescanbefoundonvariousfinancialwebsiteswiththefollowingTIDM/EPICcodes:
HealthcareShares
TIDM/EPICcodes D4H
Latestshareprice(22July2022) 83.0ppershare
PerformanceIncentivearrangements
MembersofthemanagementteamhavecommittedtosubscribeforanumberofHealthcareSharesequalto
20%ofthetotalnumberofHealthcareSharesinissue.Themembersofthemanagementteamhaveagreedto
waiveanydividendsontheseSharesuntiltheperformancehurdlesaremet.
Fortheyear
ended31March2022,thehurdleismetwhenTotalReturn(basedonauditedyearendresults)isin
excessof£1.06perHealthcareShare.Forsubsequentyears,theTotalReturnhurdleincreasesby3pperannum
suchthatfortheyearended31March2023theTotalReturnhurdle
willbe£1.09,fortheyearended31March
2024thehurdlewillbe£1.12,etc.Ifthehurdleismetinanyyear,thenmembersofthemanagementteamwill
receive20%ofthedividendspaid.ThecurrentTotalReturnis89.65pandthereforenoprovisionfora
performanceincentive
feeisnecessary.
21
Investment Manager’s Report- Healthcare Share Pool
i. Overview
Introduction
Wepresentareviewoftheinvestmentportfolio
andactivityfortheHealthcareSharepooloverthe
yearended31March2022.
ThisInvestmentManager’sReportissplitintothree
sectionscomprisingthisoverview,areviewof
VentureCapitalPortfolioandareportonthe
portfolioofLiquidityInvestments.
NetAssetValueandresults
Asat31March2022,theNAVofaHealthcare
sharestoodat84.4p,anincreaseof18.6p(27.2%)
overtheyearafteraddingbacktheHealthcare
dividend,of2.75ppershare,whichwaspaidon24
September2021.
ThereturnonordinaryactivitiesfortheHealthcare
Sharepoolforthe
yearwas£3.7million
(2021:£549,000),beingarevenuelossof£314,000
(2021:£113,000)andacapitalgainof£3.98million
(2021:£662,000).
TherehasnowbeensignificantrecoveryintheNAV
since31March2021whichwearepleasedwith,
althoughtheTotalReturntoShareholdersasat31
March2022,of89.7p,continuestobeconsidered
anunderperformanceagainstourexpectationsfor
theHealthcareSharepool.
Aproposedfinaldividendof3.5ppersharewillbe
paidon30September2022,toShareholdersonthe
registerat2September2022.Thisisinlinewiththe
stateddividendtarget
fortheHealthcareShare
pool,topaydividendsofatleast4%ofnetassets
perannum.
PortfolioOverview
Asat31March2022,theHealthcareSharepool
heldaportfolioof15VentureCapitalinvestments
andtwoLiquidityinvestments,withacombined
valueof£15.9million.
Wehavebeenpleasedtoseesignificantrecovery
acrossmuchoftheportfoliowithmanyofthe
establishedcompaniesincreasinginvaluein
the
periodandtwoIPOsdemonstratingthepotential
forsuccessintheportfolio.
However,thereareanumberofriskswhichhave
developedoverthelatterpartoftheyear,including
boththesituationinUkraineandtheimpactof
increasinginflationintheUK.Wewillcontinueto
monitor
thesituationalongsideourinvestee
companiesinordertominimisetheriskexposureas
muchaspossibleandtoprovideguidanceand
supportasnecessary.
Thevaluationmovementsduringtheperiodare
discussedinmoredetailinthefollowingsectionsof
thisInvestmentManager’sReport.
PortfolioPerformance
Therewereseveralvaluationmovementsinthe
VentureCapitalPortfolioduringtheyear,resulting
inanetvaluationupliftof£4.2millionasat31
March2022.
ThecarryingvaluesoftheLiquidityInvestments
havebeenadjustedtoreflecttheirquotedpricesas
at31March2022,resultinginavaluation
decrease
of£36,000fortheyear.
ii. VentureCapitalPortfolio
Investmentactivity
Duringtheyear,atotalof£4.8millionwasinvested
ineightbusinesses,twoofwhicharenewVCT
Qualifyinginvestments.
NewVentureCapitalinvestments
DIAImagingAnalysisEU(£415,000)isaleading
providerofadvancedAI‐basedsolutionsfor
ultrasoundanalysis.Theadditionalcapitalwill
enableDiAtoexpandits
portfolioofFDA‐cleared
andCE‐markedAI‐basedultrasoundsolutionsthat
enableclinicianstoidentifyclinicalabnormalities
withspeedandaccuracy.
ClosedLoopMedicineLimited(£650,000)has
developedanintegratedhealthcaretechnology
intendedtoimprovepatientoutcomesandhealth
systemperformancebycombiningdrugs/medicines
withitsdigitalplatformfor
greaterprecisionin
treatmentthatispersonalisedtotheindividual.
Follow‐onVentureCapitalinvestments
GENinCodeplc(“GENinCode”)developsproducts
andtechnologythathelpspatientsandhealthcare
practitionerstoassessandpredicttheonsetof
cardiovasculardisease,thrombosis,andthe
diagnosisofFamilialHypercholesterolemia.Aspart
oftheCompany’sIPOon
22July2021,the
HealthcareSharepoolmadeafollow‐oninvestment
of£302,000inthebusiness.
On3June2021ArecorTherapeuticsplc(“Arecor”)
undertookasuccessfulIPOonAIM(seeportfolio
valuationcommentary).Aspartofthe
IPO,theHealthcareSharepool’sexistingloannote
holdingwasconverted
intoordinaryshares.
22
Investment Manager’s Report- Healthcare Share Pool (continued)
ii. VentureCapitalPortfolio(continued)
Investmentactivity(continued)
Follow‐onVentureCapitalinvestments(continued)
£400,000wasinvestedinCambridgeRespiratory
InnovationsLimited,acompanythatcreates
innovativerespiratorytechnologies,includingits
award‐winningN‐Tidaldevicewhichhelpsmedical
professionalsdiagnoserespiratoryconditionsand
monitorlungfunctioninpatients.
Afurther£250,000wasinvestedinFVRVSLimited
(tradingas
FundamentalVR)whichprovidessurgery
simulationsoftwareforenterpriseclientsand
hospitals.
TheElectrospinningCompanyLimitedisasupplier
andmanufacturerofclinical‐gradebiomaterials,
whichcanbeusedtoactasasyntheticscaffoldfor
implantationwithinbodytissuetopromoterepair
posttraumaorsurgery.Duringtheperiod
the
HealthcareSharepoolinvestedafurther£200,000
inthebusiness.
MIPDiscoveryLimited(previouslyMIPDiagnostics
Limited)isamanufacturerofpolymerbased
syntheticantibodiesthatprovideaviablealternative
toantibodiesfordiagnosticimmunoassayswhich
areusedacrossavarietyofsectorsincluding
diagnostics,sensors,foodtestingandreagent
purification.Afurther£100,000wasinvestedin
theyearto31March2022.
Portfoliovaluation
Duringtheperiod,theVentureCapitalportfolioof
theHealthcareSharepoolincreasedinvaluebya
totalof£4.2million.
Wearepleasedtoreportthatthemajorityofthe
businessesintheportfoliohavebeenableto
navigatethechallengesbroughtaboutbythe
pandemicandwereableto
continuetoprogress
withtheirplansovertheperiod.
SinceitsIPO,Arecorhasmadeseveralpositive
updatesontheprogressofitsproducts,whichhave
bolstereditsshareprice.Asat31March2022,the
marketcapitalisationofArecorwas£101million.
Withthevaluationnowbeingbasedon
thequoted
bidprice,thevaluationoftheHealthcareShare
pool’sinvestmentinthegroupwasupliftedby£2.7
millionovertheyearto31March2022.
.
AdaptixLimitedincreasedinvalueby£758,000as
at31March2022,inlinewithcalibrationstothe
valuationssetundertheir
latestfundingrounds.The
companyisdevelopingaflatpanelX‐raysource
whichseekstoimprovetheaccuracyandmobilityof
3Dimaging
GENinCodeplcsuccessfullyadmitteditssharesto
tradingonAIMon22July2021,takingthemarket
capitalisationofthecompanytoapproximately£42
millionatthat
date.Inlinewiththequotedbid
priceasat31March2022,theHealthcare
Sharepool’sholdingwasincreasedinvalueby
£422,000.
OpenBionicsLimitedisanaward‐winningdesigner,
manufacturerandsupplierofbioniclimbs.The
companyuses3Dprintingandscanningtechnology
toproducecustom‐made
prostheticsatalower
manufacturingcostrelativetoexistingtechnologies.
Thevaluationofthebusinesshasbeenincreasedin
accordancewithanexternalvaluation.Theresulting
upliftfortheHealthcareSharepoolwas£379,000
asat31March2022.
ThevaluationsofFVRVSLimited(tradingas
FundamentalVR)andFutureHealth
WorksLimited
(tradingasMyRecovery)havebeenincreasedby
£218,000and£194,000respectivelyinorderto
calibratetothemostrecentfundingrounds.
ThevaluationoftheHealthcareSharepool’s
investmentinTheElectrospinningCompany
Limitedhasbeencalibratedtothepriceofthemost
recentfundingroundandincreased
by£124,000at
31March2022asaresult.
DestinyPharmaplc,whichislistedonAIM,was
reducedinvalueby£564,000.Thebusiness
continuestoprogresswithitsclinicalpipelineand
trials,howeverthequotedsharepricecontinuesto
fallonthebackoflimitedtradingvolumes.We
remain
confidentthattherewillbelong‐term
appreciationintheshareprice,askeymilestones
continuetobeachieved.
Therewerenoothervaluationmovementsinthe
VentureCapitalportfolio.
23
Investment Manager’s Report- Healthcare Share Pool (continued)
iii. LiquidityInvestments
ThecarryingvaluesoftheLiquidityInvestments
havebeenadjustedtoreflecttheirquotedpricesas
at31March2022,resultinginatotalreductionof
£36,000fortheyear.
DowningStrategicMicro‐CapInvestment
Trustplc
ThevalueoftheHealthcareSharepool’sholdingin
DowningStrategicMicro‐CapInvestmentTrustplc
(“DSM”)decreasedinvalueby£44,000duringthe
period.Asat31March2022,DSM’smid‐market
sharepricetradedatadiscounttoNAVof21.36%,
representingpotentialunrealisedvalueinthe
company’sshare
price.
DowningUKMicro‐CapGrowthFund
ThereremainsasmallresidualinvestmentinMI
DowningMicro‐CapGrowthFund(“DMCG”).Asat
31March2022,theVenturesSharepool’sresidual
holdinginDMCGincreasedinvalueby£8,000.
Seepage11oftheVenturesSharepoolInvestment
ManagersReportforfurtherinformationonthe
LiquidityInvestments.
Outlook
ThebuildingoftheportfoliooftheHealthcare
Sharepoolhasprogressedwellduringtheperiod
andisnowalmostfullyinvested.Thefocusison
workingwiththeexistingportfoliocompaniesto
helpthesebusinessesachievetheirplans,whilst
alsocontinuingtoaddappropriateVCTQualifying
investmentstotheHealthcare
Sharepool’s
portfolio.
WearepleasedthatthemajorityoftheHealthcare
VentureCapitalportfoliohascopedwellwiththe
repercussionsofthepandemic,withsomestrong
resultsinourmoreestablishedportfolio.Webelieve
thereismuchpotentialstilltoberealisedwithina
numberofthesebusinesses.
As
youwillhaveseenintheChairman’sStatement,
followingtheyearend,DowningLLPagreedtosell
itstechnologyVenturesportfoliobusinessto
ForesightGroupLLP.Themanagementofthe
HealthcaresharepoolwillremainwithDowningand
willcontinuetobemanagedbyDowning’s
expandingHealthcareteam.
Welookforward
tocontinuingtomanagethe
assetsalongsideForesightGroupwherethe
remainderoftheVCTwillbesettlingintoitsnew
home.
DowningLLP–HealthcareVenturesTeam
25July2022
24
Review of Investments – Healthcare Share Pool
Thefollowinginvestmentswereheldat31March2022:
Cost
Valuation
Valuation
movement
inperiod
%of
portfolio
Portfolioofinvestments £’000 £’000 £’000
VentureCapitalinvestments
ArecorTherapeuticsplc^1,533 4,186 2,653 22.7%
AdaptixLimited1,056 1,843 758 10.0%
GENinCodeplc^1,202 1,624 422 8.8%
OpenBionicsLimited1,000 1,379 379 7.5%
CongenicaLimited1,184 1,215 ‐ 6.6%
FVRVSLimited(t/aFundamentalVR)750 968 218 5.3%
CambridgeRespiratoryInnovationsLimited800 800 ‐ 4.3%
FutureHealthWorksLimited(t/aMyRecovery) 528 750 194 4.1%
ClosedLoopMedicineLimited650 650 ‐ 3.5%
TheElectrospinningCompanyLimited478 544 124 3.0%
InviziusLimited500 500 ‐ 2.7%
DiAImagingAnalysisEU415 429 14 2.3%
MIPDiscoveryLimited(previouslyMIP
DiagnosticsLimited)
300 300 ‐ 1.6%
DestinyPharmaplc^750 229 (564) 1.2%
LiveBetterWithLimited1,106 ‐ ‐ 0.0%
12,252 15,417 4,198 83.6%
LiquidityInvestments
DowningStrategicMicro‐CapInvestmentTrustplc*^ 729 491 (44) 2.7%
MIDowningUKMicro‐CapGrowthFund* 40 37 8 0.2%
769 528 (36) 2.9%
13,021 15,945 4,162 86.5%
Cashatbankandinhand2,483 13.5%
Totalinvestments 18,428 100.0%
*non‐qualifyinginvestment
^listedandtradedontheLondonStockExchange
25
Review of Investments – Healthcare Share Pool (continued)
Investmentmovementsfortheyearended31March2022
Cost
Additions
£’000
VentureCapitalinvestments
ArecorTherapeuticsplc^ 1,533
GENinCodeplc^ 1,202
ClosedLoopMedicineLimited 650
DiAImagingAnalysisEU 415
CambridgeRespiratoryInnovationsLimited 400
FVRVSLimited(t/aFundamentalVR) 250
TheElectrospinningCompanyLimited 200
MIPDiscoveryLimited(previouslyMIPDiagnosticsLimited) 100
ArecorLimited 14
4,764
Cost
Valuationat
01/04/21* Proceeds
Loss
vs.cost
Realised
gain
Disposals £’000 £’000 £’000 £’000 £’000
VentureCapitalinvestments
ArecorTherapeuticsplc^ 1,533 1,533 1,533‐ ‐
GENinCodeplc^ 900 900 900‐ ‐
Liquidityinvestments
MIDowningUKMicro‐CapGrowthFund** 116 86 96 (20) 10
2,549 2,519 2,529 (20) 10
*adjustedforadditionsintheyearasappropriate
**non‐qualifyinginvestment
26
Review of Investments – Healthcare Share Pool (continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheHealthcareSharepool:
ArecorTherapeuticsplc
www.arecor.com
Costat31/03/22: £1,533,000 Valuationat31/03/22: £4,186,000
Costat31/03/21:* £1,519,000 Valuationat31/03/21: £1,519,000
Dateoffirstinvestment: Sep‐18 Valuationmethod: Quoted
Investmentcomprises:
Equity £1,533,000 %oftotalsharesinissue/total
votingrights
5.5%
Summaryfinancialinformationfromstatutoryaccountsto31December:
20202019
Netassets: £0.9m £3.1m
Arecoris aleaderindevelopingsuperiorbioph arma ceuti cals thr ough theapplicationof
itsinnovativeformulationtechn olo gyplat form.Thecompanyal soprovidestheuseof
itsplatform asase rvicetodrugdevelopmentcustomers.
On3June2022,ArecoradmitteditssharestotradingonAIMandrai sedafurther£20
million
via anewpl acin g. Theproceedswillbeusedtofacilitatethedevel opment ofits
internalpropri etar ydiabetesandspecialtyhospitalproducts.
AdaptixLimited
www.adaptiximaging.com
Costat31/03/22: £1,056,000 Valuationat31/03/22: £1,843,000
Costat31/03/21: £1,056,000 Valuationat31/03/21: £1,085,000
Dateoffirstinvestment: Mar‐19 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £1,056,000 %oftotalsharesinissue 5.1%
%oftotalvotingrights 5.5%
Summaryfinancialinformationfromstatutoryaccountsto31March:
2021 2020
Turnover: £0.8m £0.2m
Lossbeforetax: (£1.1m) (£0.9m)
Netassets: £8.2m £6.9m
Adaptixhasdesignedafla tpa nelx‐raysourcetoimprove thea ccu racy andmobilityof
3Dimaging.Thecompany’stechn olo gywillmakeportable,lowradiation‐dose 3D
imagingmoreacce ssibleandlesscostlyth ansystemscurrentl yavail able onthemarket.
Thetechnol og ywillalsoallowhospitalstoprovidefasterandmore
definitive
diagnoses.
27
Review of Investments – Healthcare Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheHealthcareSharepool:
GENinCodeplc
www.genincode.com
Costat31/03/22: £1,202,000 Valuationat31/03/22: £1,624,000
Costat31/03/21: £900,000 Valuationat31/03/21: £900,000
Dateoffirstinvestment: Jul‐20 Valuationmethod: Quoted
Investmentcomprises:
Equity: £1,202,000 %oftotalsharesinissue/total
votingrights
0.9%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2020 2019
Turnover: £1.0m £1.9m
Lossbeforetax: (£1.1m) (£0.5m)
Netassets/(liabilities): £1.9m (£0.3m)
GENinCodeproductscombinege neti candclinical datatoriskassesspati ents and
providehealthcarepractitionerswithadvancedclinicalinforma tiontoevaluateand
predicttheonset ofca rdiov ascular disease.GE NinCode predict ivetec hnology provides
patients andphysicianswithgloballyleadingpreven tative careandtreatment
strategies.
On22July2021GENinCodeLim ite dadmittedits
sharestotradingonAIM.
OpenBionicsLimited
www.openbionics.com
Costat31/03/22: £1,000,000 Valuationat31/03/22: £1,379,000
Costat31/03/21: £1,000,000 Valuationat31/03/21: £1,000,000
Dateoffirst
investment:
Dec‐18 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £1,000,000 %oftotalsharesinissue/total
votingrights
8.1%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2021 2020
Netassets: £0.8m £2.1m
OpenBionics isaBristol‐bas edengineeringstart‐upthatdes ignsan dmanufactures
affordablebionicprosthetichands byusing3Dscanningandprinting.Foundedin
2014,theircurrentfocus isonbecomingthemarketleaderfo rbion ichands ,bef ore
enteringnew higher‐growt hpros theti c/o rth otic markets.
CongenicaLimited
www.congencia.com
Costat31/03/22: £1,184,000 Valuationat31/03/22: £1,215,000
Costat31/03/21: £1,184,000 Valuationat31/03/21: £1,215,000
Dateoffirstinvestment: Oct‐19 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity £1,184,000 %oftotalsharesinissue/total
votingrights
2.1%
Summaryfinancialinformationfromgroupstatutoryaccountsto31December:
2020 2019
Turnover: £1.5m £1.7m
Lossbeforetax: (£9.7m) (£8.3m)
Netassets: £35.0m £7.4m
Congenicahasdevelop edagenomics‐baseddiagnosti cdecisionsupportplatfo rm
whichhelpsdoctorsidentifyrarediseasesinpa tien ts.Theplatform analyses DNA
sequencedatatosuggestadiagnosis,speedupthe timetodiagnosis ,andsupport
clinicaltrialsanddrugdevelopment.Congenicahaspa rtner edwith leadinginstitutions
andcustomersinthe
UK,US,Chinaand Europetobe tte rservedifferentpatient
populationsand,asares ult,isrevenuegenerating.
28
Review of Investments – Healthcare Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheHealthcareSharepool:
FVRVSLimited
(t/aFundamentalVR)
www.FundamentalVR.com
Costat31/03/22: £750,000 Valuationat31/03/22: £968,000
Costat31/03/21: £500,000 Valuationat31/03/21: £500,000
Dateoffirstinvestment: Oct‐19 Valuation
method:
Calibrationtoprice
ofrecentinvestment
Investmentcomprises:
Equity: £500,000 %oftotalsharesinissue/total
votingrights
4.3%
LoanNotes:
£250,000
Summaryfinancialinformationfromstatutoryaccountsto31December:
2020 2019
Netassets: £1.3m £3.4m
FundamentalVRsupplyvi rtualrealityenabledsurgerysimulationsoftwareinto
hospitals,medicalschoolsand pharma ceutical companies.Thesoftwarehas
proprietaryin ‐built hapticsfunctionality(i.e.touchsensations closelymimicking real ‐
lifete xtures)andconnectsseamle sslyintooff ‐the‐shelfhardwarethat manyhospitals
alreadyhaveonsite.
CambridgeRespiratory
InnovationsLimited
www.camresp.com
Costat31/03/22: £800,000 Valuationat31/03/22: £800,000
Costat31/03/21: £400,000 Valuationat31/03/21: £400,000
Dateoffirstinvestment: Nov‐20 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £800,000 %oftotalsharesinissue/total
votingrights
7.7%
Summaryfinancialinformationfromstatutoryaccountsto31December:
20202019
Netliabilities:
£1.7m (£0.3m)
Cambridge RespiratoryInnovations (CRI), is a leading medtech company that creates
ground‐breakingrespiratorytechnologies. InDecember2021itreceivedfundingfrom
BGF and Downing Ventures to fast track research and developm ent of its award‐
winningN‐Tidaldevicetohelpmedicalprofessionalsdiagnoseandmonitorrespiratory
conditions. The N‐Tidal
device is a first‐in‐kind, conne cted, handheld capnometer
incorporatinguniquepatentedsensortechnology,thatcanaccuratelymeasurecarbon
dioxi de levels in exhaled breath during normal breathing. The data is transmitted
wirelessly using mobile ne tworks and is analysed using CRI’s intelligent cloud‐based
analytics software. This information can be used
to provide novel insights into lung
health.
FutureHealthWorks
Limited(t/a
MyRecovery)
www.myrecovery.ai
Costat31/03/22: £528,000 Valuationat31/03/22: £556,000
Costat31/03/21: £528,000 Valuationat31/03/21: £556,000
Dateoffirstinvestment: Nov18 Valuation
method:
Calibrationtoprice
ofrecentinvestment
Investmentcomprises:
Equity: £528,000 %oftotalsharesinissue 5.9%
%oftotalvotingrights 6.3%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2021 2020
Netassets: (£0.01m) £0.6m
FutureHeal thWorkshasdevelopedamobileappcalledmyrecovery,whichinforms
andempowerspatients thro ugheverystepoftheiror tho pae dictreatmentjourney,
customise dtotheirprocedureandhospital.Theappimprovesefficiencyacrossthe
healthcare valuechainan ddeliversactionableinsightth rough dat aanal ytics.Th e
productisdesi gnedtosave
mon eyandti meforbothpractiti oners andpa tients.
29
Review of Investments – Healthcare Share Pool
(continued)
FurtherdetailsofthetenlargestVentureCapitalinvestmentsheldbytheHealthcareSharepool:
ClosedLoopMedicine
Limited
www.closedloopmedicine.com
Costat31/03/22: £650,000 Valuationat31/03/22: £650,000
Costat31/03/21: n/a Valuationat31/03/21: n/a
Dateoffirstinvestment: Oct‐21 Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £650,000 %oftotalsharesinissue/total
votingrights
2.3%
Summaryfinancialinformationfromstatutoryaccountsto31December:
2020 2019
Netassets: £0.7m £0.9m
ClosedLoopMedicinehasdevelopedanintegratedhealthcaretechnology
intendedtoimprovepatientoutcomesandhealthsystemperformanceby
combiningdrugs/medicineswithitsdigitalplatformforgreaterprecisionin
treatmentthatispersonalisedtotheindividual.
TheElectrospinning
CompanyLimited
www.electrospinning.co.uk
Costat31/03/22: £478,000 Valuationat31/03/22: £544,000
Costat31/03/21: £278,000 Valuationat31/03/21: £220,000
Dateoffirstinvestment:
Apr‐19
Valuation
method:
Calibrationtopriceof
recentinvestment
Investmentcomprises:
Equity: £478,000 %oftotalsharesinissue/total
votingrights
4.7%
Summaryfinancialinformationfromstatutoryaccountsto30June:
2021 2020
Netassets: £4.7m £1.2m
TheElectrospinningCompanyisasupplierandmanufacturerofclinical‐grade
biomaterials.Abiomaterialisabiologicalorsyntheticsubstancethatcanbe
introducedintobodytissueaspartofanimplantedmedicaldeviceorusedto
replaceanorganorbodilyfunctionforawiderangeofmedicalusecases.
These
biomaterialsactassyntheticscaffoldsforimplantationwithinthebodytissueto
promoteandfacilitatetissuerepair,typicallypost‐traumaorsurgery.
Note: net asset, turnover and pre‐tax profit figures are stated where this information is publicly available. The
proportionofthetotalsharesinissue/totalvotingrightsarestatedonanindividualsharepoolbasis.
30
Review of Investments – Healthcare Share Pool (continued)
Summaryofloaninterestincomeandinterestonadvances
£’000
Loaninterestandinterestonadvancesreceivableintheyear
FundamentalVRLimited 15
15
Analysisofinvestmentsbytype
TheallocationoftheHealthcareSharefundsbycostcomparedtothetargetsplitissummarisedasfollows:
Actual
portfoliosplitat
31March
2022**
Target
portfoliosplitat
31March
2022*
V
CTQualifyingInvestments
Qualifyingloans 0% 25%
Qualifyingshares 86% 60%
Total 86% 85%
Non‐QualifyingInvestments
Liquidityinvestments 7% 5%
Total 93% 90%
Cash 7% 10%
100% 100%
*Witheffectfrom1April2021,themajorityofHealthcarefundsaresubjecttothe80%VCTQualificationtest,andtheManager
aimstomaintainaVCTQualifyingpercentagecomfortablyinexcessoftheminimumrequired.
**ExcludesfundstowhichtheVCTQualificationtestwasyettoapply,asat31March2022.
ThesplitoftheHealthcareSharepoolinvestmentportfoliobycommercialsector(bycostat31March2022)is
shownonthenextpage.
31
Review of Investments – Healthcare Share Pool
(continued)
32
DSO D Share Pool
SharePoolSummary
31March
2022
31March
2021
Financialhighlights Pence Pence
NetAssetValueperDSODShare 2.6 10.2
Cumulativedistributions 102.0 94.5
AdjustedforPerformanceIncentiveestimate ‐ (0.5)
TotalReturnperDSODShare 104.6 104.2
Dividendhistory
Periodend
Datepaid
Pence
pershare
2012Final 27September2012 2.5
2013Interim 25January2013 2.5
2013Final 13September2013 2.5
2014Interim 24January2014 2.5
2014Final 30September2014 2.5
2015Interim 30January2015 2.5
2015Secondinterim 30September2015 2.5
2016Interim 23December2015 2.5
2016Final 30September2016 2.5
2017Interim 6January2017 2.5
2017Final 29September2017 2.5
2018Special 2November2017 25.0
2018Interim 13August2018 24.0
2021Special 29November2019 18.0
2022Special 28January2022 7.5
102.0
Shareprices
TheCompany’ssharepricescanbefoundonvariousfinancialwebsiteswiththefollowingTIDM/EPICcodes:
DSODShares
TIDM/EPICcodes DO1D
Latestshareprice(22July2022) 3.25ppershare
Structureofshareholdings
TheCompany’sDSODShareofferforsubscriptionwasopenbetween31August2011and17August2012.For
every£1investedShareholdersreceivedoneDSODShare.
PerformanceIncentivearrangements
WhencumulativedividendstoDSODShareholdersexceed100.0pandtheIRRontheShareholders’investment
exceeds7%perannum,aPerformanceIncentivebecomespayabletothemanagementteam.Thefeeiscalculated
at3%onthefirst100.0pofShareholderproceeds,plus20%oftheexcessabove100.0p.Thefee
iscappedata
maximum of 7.0p per DSO D Share. Should the remaining investments be exited at their carrying value, it is
estimatedthatnoPerformanceIncentiveispayable.
33
Investment Manager’s Report - DSO D Share Pool
Introduction
Theprocessofrealisingtheinvestmentsand
returningfundstoShareholdersremainsthefocus
oftheDSODSharepool,althoughthishasbeen
subjecttosignificantdelaysasaresultofthe
continuedimpactofthecoronaviruspandemic.
NetAssetValueandresults
TheNetAssetValue(“NAV”)perDSODShareat
31March2022stoodat2.6p,anincreaseof0.4por
3.9%overtheperiod.WhilstthereportedNAV
(priortothedeductionoftheperformancefee
estimate)reducedby0.1pduringtheyear,the
estimatedperformanceincentivefeeisno
longer
expectedtobecomepayableandsothisdeduction
isnolongerapplicable(2021:£0.5p).Shouldthe
hurdlesultimatelybemet,aperformanceincentive
couldbecomedue.
TotalReturnstandsat104.6ppersharecompared
toinitialcosttoShareholders,netofincometax
relief,of70.0ppershare.We
considerthistobe
satisfactoryperformancewhencomparedtothe
initialNAVof100p.
Thelossonordinaryactivitiesaftertaxationforthe
yearwas£3,000(2021:£143,000),comprisinga
revenuelossof£16,000(2021:£31,000)anda
capitalgainof£13,000(2021:lossof£112,000).
Whilstitisunfortunateto
reportfurtherdelaysin
therealisationprocess,theNAVoftheDSOD
Sharepoolhasnotbeenmateriallyimpactedbythe
coronaviruspandemic.Webelievethatthere
continuetobeopportunitiestoexitfromthe
remaininginvestments,howeverthiswilltakealittle
moretimetocomplete.
VentureCapitalinvestments
Asat31March2022,theDSODSharepoolheld
twoVentureCapitalinvestmentswithatotalvalue
of£43,000.
Portfolioactivity
Bothsolarpanelcompanies,FreshGreenPower
LimitedandGreenEnergyproductionLimitedwere
exitedduringtheyear,generatingtotalproceedsof
£341,000atatotalof
£8,000belowthevalue
shownat31March2021.
Adividendof7.5pwaspaidtoshareholdersto
returntheserealisedfundstoinvestors.
PearceandSaundersLimited,theownerofa
freeholdpubinsoutheastLondon,repaidloannote
principalof£20,000duringtheperiod,alongwith
a
redemptionpremiumof£60,000.
Portfoliovaluation
Duringtheyear,thecarryingvalueoftheportfolio
ofVentureCapitalinvestmentsheldbytheDSOD
Sharepoolwasreducedby£33,000.
PearceandSaundersLimitedandPearceand
SaundersDevCoLimitedaretheonlyremaining
investmentsintheportfolio.Thefinalpubhasnow
beensold.Unfortunately,distributions
toinvestors
havebeendelayedasweawaitafinalsignofffrom
HMRC.Thevaluationhasbeenreducedby£33,000
asat31March2022toreflectlikelyfinalproceeds.
Therewerenoothervaluationmovementsinthe
DSODSharepoolportfolio.
Outlook
ThefocusfortheDSODSharepoolcontinuestobe
onexitingfromtheremaininginvestments,however
thepandemichassignificantlydelayedthese
processes,evenmorethanoriginallyforeseen.We
nowanticipatethattheseprocesseswillbe
completedbytheendof2022.Wewillcontinueto
monitorthecompanies
andseektomaximisethe
proceedsforDSODShareholders.Thefinal
distributionwillbemadeoncethefinalrealisations
havetakenplace.
DowningLLP
25July2022
34
Review of investments - DSO D Share Pool
Thefollowinginvestmentswereheldat31March2022:
Cost
Valuation
Valuation
movement
inyear
%of
portfolio
Portfolioofinvestments £’000 £’000 £’000
VentureCapitalinvestments
PearceandSaundersLimited 255 27 (30) 16.2%
PearceandSaundersDevCoLimited* 19 16 (3) 9.6%
274 43 (33)
Cashatbankandinhand124
Totalinvestments 167
*non‐qualifyinginvestment
AllVentureCapitalinvestmentsareincorporatedinEnglandandWales.
Investmentmovementsfortheyearended31March2022
Cost
Valuation
at01/04/21
Proceeds
Gain/(loss)
vs.cost
Realised
(Loss)/gain
Disposals £’000 £’000 £’000 £’000 £’000
VentureCapitalinvestments
FreshGreenPowerLimited 189 282 278 89 (4)
GreenEnergyProductionUKLimited 100 67 63 (37) (4)
PearceandSaundersLimited* 20 20 80 60 60
309 369 421 112 52
*non‐qualifyinginvestment
35
Review of Investments – DSO D Share Pool
(continued)
FurtherdetailsoftheVentureCapitalinvestmentsheldbytheDSODSharepool:
Pearce&SaundersLimited
Costat31/03/22: £255,000 Valuationat31/03/22: £27,000
Costat31/03/21: £275,000 Valuationat31/03/21: £77,000
Dateoffirstinvestment: Apr‐14 Valuationmethod: Discountedcash
flow–investment
Investmentcomprises:
Equity: £216,000 %oftotalsharesinissue 8.4%
%oftotalvotingrights 3.5%
Loannotes £39,000
Summaryfinancialinformationfromstatutoryaccountsto:
30Jun2020 31Dec2018
Netassets: £1.2m £2.2m
PearceandSaundersLimitedisafreeholdpubcompanythatismanagedbythe
AnticLondonteamandwasfundedbytheDowningVCTs.Itwasincorporatedto
acquirethefreeholdpubsofthreeSouthEastLondonsites.Allthreepubshave
nowbeensoldandwearenowawaitinga
finaltaxsignofffromHMRCbefore
makingdistributions.
Pearce&SaundersDevCo
Limited
Costat31/03/22: £19,000 Valuationat31/03/22: £16,000
Costat31/03/21: £19,000 Valuationat31/03/21: £19,000
Dateoffirstinvestment: Jun‐15 Valuationmethod: Discountedcash
flow–investment
Investmentcomprises:
Equity: £19,000 %oftotalsharesinissue 8.4%
%oftotalvotingrights 3.5%
Summaryfinancialinformationfromstatutoryaccountsto31August:
2020 2019
Netassets:£0.3m £0.3m
Pearce&SaundersDevCoLimitedwasestablishedforthepu rpose ofacquirin gand
developing apieceoflandadjacenttoTheElthamGPO,aDowning‐backedpublic
housemanagedbyAnticLondonandownedbyPearce&Saunders Limi ted.
Note:netasset,turnoverandpre‐taxprofitfiguresarestatedwherethisinformationispubliclyavailable.
Summaryofloaninterestincomeandinterestonadvances
Noamountsofloannoteinterestwererecordedasincomeduringtheyearended31March2022.
Portfoliobycommercialsector
ThesplitoftheDSODSharepoolinvestmentportfoliobycommercialsector(bycostandbyvalueat31March
2022)isasfollows:
36
DP67 Share Pool
SharePoolSummary
31March
2022
31March
2021
Financialhighlights Pence Pence
NetAssetValueperDP67Share 26.8 18.4
Cumulativedistributions 67.8 67.8
TotalReturnperDP67Share 94.6 86.2
Dividendhistory
Periodend
Datepaid
Pence
pershare
Pre‐mergerdividends 21.8
2016Interim 23December2015 2.0
2016Final 30September2016 2.0
2017Interim 6January2017 2.0
2017Final 29September2017 2.0
2018Special 16March2018 20.0
2021Special 29November2019 18.0
67.8
Shareprices
TheCompany’ssharepricescanbefoundonvariousfinancialwebsiteswiththefollowingTIDM/EPICcodes:
DP67Shares
TIDM/EPICcodes D467
Latestshareprice(22July2022) 11.7ppershare
Structureofshareholdings
TheoriginalShareoffersunderDowningPlannedExitVCT6plcandDowningPlannedExitVCT7plclaunched
inJuly2007andwerefollowedbyaShareRealisationandReinvestmentProgramme(“SRRP”)in2013,under
whichmanyinvestorscommittedforafurtherfiveyears.Forevery£1invested,Shareholdersreceived
one
DowningPlannedExitVCT6ShareoroneDowningPlannedExitVCT7Share.EachSharewasconvertedtoa
DowningFOURDP67ShareaspartofthemergerinJuly2015.
PerformanceIncentivearrangements
ThearenoPerformanceIncentivearrangementsinplaceinrespectofthisSharepool.
37
Investment Manager’s Report - DP67 Share Pool
Introduction
Theprocessofrealisingtheinvestmentsand
returningfundstoDP67Shareholdersremainsthe
focusforthisSharepool,althoughasShareholders
willbeaware,thiscontinuestobesubjectto
substantialdelaysasaresultofthecoronavirus
pandemic.
NetAssetValueandresults
TheNetAssetValue(“NAV”)perDP67Shareat31
March2022stoodat26.8p,anincreaseof8.4por
45.6%duringtheyear.TotalReturnstandsat94.6p
perDP67Share,comparedtoinitialcostto
Shareholders,netofincometaxrelief,of70.0pper
share.Comparedtotheinitial
NAVof100p,we
considertheTotalReturntobean
underperformanceagainsttheoriginalexpectations
fortheDP67Sharepool.
Thegainonordinaryactivitiesaftertaxationforthe
yearwas£934,000(2021:£31,000),comprisinga
revenuegainof£1.2million(2021:£76,000)anda
capitallossof£247,000
(2021:gain£45,000).
AsDP67Shareholderswillbeaware,theremaining
DP67portfoliohasahighlevelofexposuretothe
leisureandhospitalitysector,whichwas
significantlyimpactedbytherestrictionsand
closuresduringthepandemic.However,overthe
pastyeartherehasgenerallybeengoodrecovery
andweare
nowmakingprogresswiththeexit
processacrossthefinalinvestments.
VentureCapitalinvestments
Asat31March2022,theDP67Sharepoolhelda
portfolioofthreemainVentureCapitalinvestments,
withatotalvalueof£1.9million.
Portfolioactivity
Itisdisappointingtoreportthattherewereno
realisationsduringtheyearended31March2022.
Portfoliovaluation
TheDP67portfoliodecreased
invaluebyatotalof
£233,000duringtheyearended31March2022.
Thismovementisattributabletoadjustmentstothe
relateddiscountedcashflowassessments
conductedinrespectofFenkleStreetLLPand
GatewalesLimited.
Significantloannoteinteresthasbeenrecognisedin
theyear,resultinginthe
revenuegainof£1.2
millionfortheperiod.Weshortlyexpecttoreceive
firstroundoffersontheFenkleStreethotelin,and
nowconsidertheaccruedinterestontheseloansto
befullyrecoverable.
CadburyHouseHoldingshasseengood
performancesincereopeninginApril2021and
discussionswith
managementareongoinginorder
toseekanexitassoonaspossible.Thevaluation
willnotbeadjusteduntilwehaveaclearerpicture
ofhowthatexitwillbeachieved.
ThevaluationsoftheremainingVentureCapital
investmentsareunchangedfrom31March2021.
Outlook
ThefocusfortheDP67Sharepoolcontinuestobe
onexitingfromtheremaininginvestments.Itis
frustratingtoreportthatthisprocesshastakenso
longbutwehopethatitcanbecompletewithan
exitfromCadburyHousein2023.Duringthisnext
period,wewillcontinue
toworkwiththeportfolio
companiestoseektomaximiseproceedsforthe
DP67Sharepool.Furtherdividendswillbepaid
oncethefinalrealisationshavetakenplace.
DowningLLP
25July2022
38
Review of Investments – DP67 Share Pool
Thefollowinginvestmentswereheldat31March2022:
Cost
Valuation
Valuation
movement
inyear
%of
portfolio
Portfolioofinvestments £’000 £’000 £’000
VentureCapitalinvestments
CadburyHouseHoldingsLimited1,409 791 ‐ 41.5%
FenkleStreetLLP**405 759 32 39.9%
GatewalesLimited*343 344 (265) 18.1%
YamunaRenewablesLimited400 ‐ ‐ 0.0%
LondonCityShoppingCentreLimited**99 ‐ ‐ 0.0%
2,656 1,894 (233) 99.5%
Cashatbankandinhand10 0.5%
Totalinvestments 1,904 100.0%
*partiallyqualifyinginvestment
**non‐qualifyinginvestment
AllVentureCapitalinvestmentsareincorporatedinEnglandandWales.
Therewerenoinvestmentdisposalsduringtheperiod.
39
Review of Investments – DP67 Share Pool
(Continued)
FurtherdetailsoftheVentureCapitalinvestmentsheldbytheDP67Sharepool:
CadburyHouseHoldings
Limited
Costat31/03/22: £1,409,000 Valuationat31/03/22: £791,000
Costat31/03/21: £1,409,000 Valuationat31/03/21: £791,000
Dateoffirstinvestment: Oct‐06 Valuationmethod: Discountedcash
flow‐investment
Investmentcomprises:
Equity: £882,000 %oftotalsharesinissue/total
votingrights:
27.5%
Loannotes: £527,000 %ofloannotesheld: 13.1%
Summaryfinancialinformationfromstatutoryaccountsto:
30Sep2020 31Mar2019
Turnover: £10.4m £9.5m
Operatingprofit: £0.01m £1.4m
Netassets: £4.7m £6.5m
CadburyHouseHoldings Limitedownsandoperatesahealthclub, restauran tand
conferencece ntreatCadburyHouse,nearBristol.Therestaura nttradesasaMa rco
Pierre‐Whi teSteakhouseBarandGrill.
FenkleStreetLLP
Costat31/03/22: £405,000 Valuationat31/03/22: £759,000
Costat31/03/21: £405,000 Valuationat31/03/21: £727,000
Dateoffirstinvestment: Jun‐10 Valuationmethod: Discountedcash
flow‐investment
Investmentcomprises:
Loancapital: £405,000 %ofloancapitalheld: 27.9%
Summaryfinancialinformationfromstatutoryaccountsto30June:
2021 2020
Turnover: £nil £nil
Operatingprofit: £0.1m £0.1m
Netassets: £3.3m £2.8m
FenkleStreetLLPwascreatedtofun dthe purchas eofaproperty incent ral
Newcas tleandcarryoutitssubse quentrefu rbishme nt undertheBusinessPremis es
Renovati onAllowan ce(BPRA)scheme.
GatewalesLimited
Costat31/03/22: £343,000 Valuationat31/03/22: £344,000
Costat31/03/21: £343,000 Valuationat31/03/21: £609,000
Dateoffirstinvestment: Mar‐07 Valuationmethod: Discountedcash
flow‐investment
Investmentcomprises:
Equity: £nil %oftotalsharesinissue/total
votingrights
7.3%
Loannotes: £343,000 %ofloannotesheld: 84.9%
Summaryfinancialinformationfromstatutoryaccountsto31March:
2021 2020
Netliabilities: (£8.2m) (£6.5m)
GatewalesLimit edisamember ofFenkleStreetLLP,whichundertooka
refurbi shment contractonahotelinNewcastleduring2011and2012.Paymentfor
thiscontractdependson theperfo rm ance ofthehotelandisbein gpaidovertimeas
thebankdeb tisreduc ed.
Note:netasset,turnoverandpre‐taxprofitfiguresarestatedwherethisinformationispubliclyavailable.
40
Review of Investments – DP67 Share Pool
(Continued)
Summaryofloaninterestincomeandinterestonadvances
Loaninterestandinterestonadvancesreceivableintheyear £’000
CadburyHouseLimited 774
FenkleStreetLLP 55
GatewalesLimited 388
1,217
Portfoliobycommercialsector
ThesplitoftheDP67Sharepoolinvestmentportfoliobycommercialsector(bycostandbyvalu eat31March
2022)isasfollows:
41
Investment Manager’s Approach to Responsible Investment
Introduction
DowningLLP(“Downing”)actsasInvestment
ManagertoDowningFOURVCT,aswellasadviser
andmanagertoanumberofotherVCTs,investment
trusts,fundsandschemes.CentraltoDowning’s
ethosisacommitmenttobea"Responsible
Investor".Weaimtoprotectandenhancereturnsfor
ourfunds’investors
byplacingEnvironmental,Social
andGovernance(ESG)criteriaattheheartofour
businessandinvestmentactivities.
WeunderstandthatESGissuesrepresentrisksand
opportunities;andthattheseissuesarebecomingan
increasinglymaterialfactorwithinvestments.By
takingalong‐term,sustainableapproachwithour
analysis,decision‐makingandactiveasset
management,westrivetotaketheseintoaccount,
mitigaterisksandmaximiseopportunities,while
endeavouring
tofacilitatewidersocietaland
environmentalbenefits,whereverpossible.
Ourprinciples
AsInvestmentManagertoDowningFOURVCTplc,
weaimtosupportandactivelyseekoutinvestments
thatpromotetheprinciplesofESG,aswellascreate
long‐term,sustainablevalueandhaveapositive
impactonsocietyandtheeconomy.
Downing’sapproachtoinvestingisunderpinnedbya
seriesofESGprinciplesthatreflectourcommitment
toembedResponsibleInvestmentconsiderationsas
partofournormalbusinessoperations.Theseare:
Integration
Tomeetourobjectives,wewillintegrateour
ResponsibleInvestmentSystembothwithinour
businessandthroughoutthelifecycleofthe
investmentswemake.
Influence
Throughactiveownership,wewillendeavourto
engagewithandassistindividualbusinessesin
managingESGrisksandopportunitiesbetterthan
theircompetitorstocreate
valueandacompetitive
advantage,whilepromotingpositivebenefitsto
societyandtheenvironment.
Disclosure
Wewillseekappropriatemonitoringanddisclosure
ofESGmattersbyinvesteessothatwehavea
betterunderstandingofwhatweareinvestinginto,
andtheabilitytoassesstheirperformanceagainst
anyESGinitiativeswedecidetoimplement.
ContinualImprovement
Weareencouragedbythegrowingmomentumand
developmentsintheResponsibleInvestmentand
ESGareasandlookforwardtoworkingwiththe
investmentcommunitytodevelopsustainableways
ofconductingbusinessandleadingbyexample.
Screeningandexclusions–ourevolving
approach
Historically,Downinghastendedtoavoidanumber
ofsectors,companiesandinvestmentsbecausewe
believetheycauseharmtotheenvironmentand
societythatwecannotmitigateasresponsible
investors.Examplesofthisbeingweapons,fossil
fuelsandtobacco.
Thisapproachhasevolvedaswehavedeveloped
individualinvestmentstrategiesfordifferentasset
classes.Whereastrictnegativescreeningapproach
maynotbesuitable,anynewinvestmentinhigher
ESGrisksectorswewillhavetocarefullyconsider
(a)howinherentrisksarereflectedin
company/investmentvaluationand(b)our
levelof
influenceonmanagementteamstofosterchange
andvaluecreationthroughanactiveownership
approach.
42
Investment Manager’s Approach to Responsible Investment
(continued)
Screeningandexclusions(continued)
Inothersectors,withknownESGissueswemay
alsodecidetoscreenforbest‐in‐classinvestments,
identifyingandsupportingmanagementteams
thatwethinkarebetterplacedthantheir
competitorstodaytobecomesuccessfuland
sustainablebusinessesinthefuture.
Whilstourapproachtonegativescreeningmay
varybysector,wemaintainsomeminimum
standardswewouldexpectofanycompanyforit
toattractinvestmentbyDowningFOURVCTplc:
attheveryleastthatthebusinessmeetslocallaws
andregulations,thattheyaresafeplacestowork
and
thatthemanagementhasacodeofethics
and/oranticorruptionpolicyinplace.
Climate‐relatedmatters
WhilstneithertheCompanynortheInvestment
Adviserarecurrentlyrequiredtodiscloseclimate
relatedfinancialinformationinlinewiththeTask
ForceonClimaterelatedFinancialDisclosures
(“TCFD”),theyrecognisetheaimandimportance
oftheTCFDrecommendationstoprovidea
foundationtoimproveinvestors’abilityto
appropriatelyassessclimate
‐relatedriskand
opportunities.Disclosinginformationrelatedto
theTCFDrecommendationsremainsanobjective
oftheInvestmentManageraspartofitsESG
initiativesandprogresswillbemonitoredbythe
Directors.
Future
WithDowning’stechnologyVenturesportfolio
teammovingacrosstotheForesightGroup,ESG
considerationwillcontinuetobeamajorfocusof
themannerinwhichtheCompany’sinvestments
aremanagedandweexpectthisbeanareawhich
continuestodevelopsignificantly.
DowningLLP
25July2022
43
Strategic Report
TheDirectorspresenttheStrategicReportforthe
yearended31March2022.TheBoardhasprepared
thisreportinaccordancewiththeCompaniesAct
2006(StrategicReportandDirectors’Reports)
Regulations2013.
Principalobjectivesandstrategy
TheCompany’sprincipalinvestmentobjectiveisto
provideShareholderswithanattractiveleveloftax‐
freecapitalgainsandincomegeneratedfroma
portfolioofinvestmentsinarangeofdifferent
sectors.
TheCompany’sstrategyforachievingitsprincipal
investmentobjectiveisto:
investinaportfolioofVentureCapital
investmentsacrossarangeofdifferingsectors,
primarilyintheUKandEU;and
complywiththeVCTregulationstoenable
Shareholderstoretaintheinitialincometax
reliefandongoingtaxreliefs.
AsaVentureCapitalTrust,Investorsarerequiredto
holdtheirsharesforaminimumperiodoffiveyears
inordertoretaintheirincometaxrelief.
Businessreviewanddevelopments
VenturesSharepool
TheVenturesSharepoolbegantheyearwith£28.6
millionofinvestmentsandendedtheyearwith
£31.3millionspreadacrossaportfolioof36
VentureCapitalinvestmentsandtwoliquidity
investments.
TheSharepoolbegantheyearwithcashresources
of£3.1millionandendedtheyear
withcash
resourcesof£4.2million,afterpayingdividends
totalling£1.3million.
Thereturnonordinaryactivitiesaftertaxationfor
theyearwas£1.8million,comprisingarevenueloss
of£449,000andacapitalgainof£2.3million.
HealthcareSharepool
TheHealthcareSharepoolbegantheyearwith£9.5
millionofinvestmentsandendedtheyearwith
£15.9millionspreadacrossaportfolioof15
VentureCapitalinvestmentsandtwoliquidity
investments.
TheSharepoolbegantheyearwithcashresources
of£3.5millionandendedtheyear
withcash
resourcesof£2.5million,afterpayingdividendsof
£542,000.
Thereturnonordinaryactivitiesaftertaxationfor
theyearwas£3.7million,comprisingarevenueloss
of£314,000andacapitalgainof£4.0million.
AIMSharepool
TheAIMShareclasslaunchedduringtheyear,with
the
firstsharesallottedinJanuary2022.No
investmentshavebeenmadeyet.Thelosson
ordinaryactivitiesfortheyearwas£6,000,
comprisingarevenuelossof£4,000andacapital
lossof£2,000.
DSODSharepool
TheDSODSharepoolbegantheyearwith
£445,000ofinvestmentsand
endedtheyearwith
£43,000spreadacrossaportfoliooftwoVenture
Capitalinvestments.
Thelossonordinaryactivitiesaftertaxationforthe
yearwas£3,000,comprisingrevenuelossof
£16,000andacapitalgainof£13,000.
DP67Sharepool
TheDP67Sharepoolbegantheyearwith£2.1
million
ofinvestmentsandendedtheyearwith£1.9
millionspreadacrossaportfoliooffiveVenture
Capitalinvestments.
Thegainonordinaryactivitiesaftertaxationforthe
yearwas£934,000,comprisingarevenuegainof
£1.2millionandacapitallossof£247,000.
TheCompany’sbusinessanddevelopmentsduring
theyear
arereviewedfurtherwithintheChairman’s
Statement,InvestmentManager’sreportsandthe
ReviewofInvestmentsforeachSharepool.
Keyperformanceindicators
AteachBoardmeeting,theDirectorsconsidera
numberofperformancemeasurestoassessthe
Company’ssuccessinmeetingitsobjectives.The
BoardbelievestheCompany’skeyperformance
indicatorsareNetAssetValue,dividendspershare
(seeFinancialHighlightsonpage2)andTotal
Return(NAVpluscumulativedividendspaidto
date).Furtherconsiderationoftheabovekey
performanceindicatorsisincludedinthe
InvestmentManager’sreportsunderNetAsset
Valueandresults.
TheperformanceoftheVCT’sSharepools,
measuredbyhistoricSharePriceTotalReturn,is
showninthegraphsonpages57to58.
NetAssetValueper
shareandTotalReturnare
definedasAlternativePerformanceMeasuresas
theyarenotdefinedorspecifiedbyFRS102.The
Boardconsidersthesetwomeasurestobethe
primaryindicatorsoffutureandhistorical
performance.
TheChairman’sStatementandInvestment
Manager’sReportsincludefurthercommentaryon
theCompany’sactivitiesand
futureprospects.
44
Strategic Report(continued)
Principalrisksanduncertainties
TheBoardhascarriedoutarobustassessmentof
theprincipalrisksfacingtheCompany,including
thosethatwouldthreatenitsbusinessmodel,future
performance,solvencyandliquidity.TheBoardhas
ensuredthattherearepoliciesinplaceformanaging
eachoftheserisks.Theprincipalfinancialrisks
facedbythe
Company,whichincludeinterestrate,
investmentprice,creditandliquidityrisks,are
summarisedwithinnote15ofthefinancial
statements.Note15alsoincludesananalysisofthe
sensitivityoftheNAVtochangesininvestment
valuations.
OtherprincipalrisksfacedbytheCompanyhave
beenassessedbytheBoard
andgroupedintothe
keycategoriesoutlinedbelow:
Investmentperformance;
Regulatory;
Operational;and
Economic,politicalandotherexternalfactors.
Investmentperformance
TheCompanyholdsinvestmentsinunquotedand
quotedcompanies.Poorinvestmentdecisionsora
lackofeffectivemonitoringandmanagementof
investmentscouldresultinareductioninthe
carryingvaluesoftheCompany’sinvestments.
TheInvestmentManagerhassignificantexperience
ininvesting
inunquotedUKcompaniesandengages
reputableandexperiencedadvisersateachstageof
theinvestmentprocess.Furthermore,theBoard
regularlyreviewstheperformanceoftheportfolio.
Regulatory
TheCompany,asafullylistedcompanyonthe
LondonStockExchangewithapremiumlistingand
asaVentureCapitalTrust,
operatesinacomplex
regulatoryenvironmentandthereforefacesa
numberofrelatedrisks.AbreachoftheVCT
RegulationscouldresultinthelossofVCTstatus
andconsequentlossoftaxreliefscurrentlyavailable
toShareholders,andtheCompanybeingsubjectto
capitalgainstax.Seriousbreachesofother
regulations,suchastheListingRulesofthe
FinancialConductAuthority,andtheCompanies
Act,couldleadtosuspensionfromtheStock
ExchangeanddamagetotheCompany’sreputation.
TheBoardreceivesquarterlyreportsfromthe
InvestmentandAdministrationManager,Downing
LLP,andplacesrelianceonDowningLLPtoprovide
updatesintheinterveningperiods.Thesepolicies
haveremainedunchangedsincethebeginningof
thefinancialyear.
PhilipHare&Associatesprovidesregular
independentreviewsoftheCompany’sVCTstatus,
aswellasadviceonVCTcomplianceissuesasand
whentheyarise.
Inordertofurthermitigatethisrisk,theBoard
monitorsregulatoryandlegislativedevelopments.
TheCompanyalsohasastrongcomplianceculture
andsystemsinplacetoensurethattheCompany
complieswithallofitsregulatoryrequirements.
FurtherdetailonVCTStatusisprovidedonpage
50.
Operational
TheCompanyreliesontheInvestmentManager,
AdministrationManagerandotherthirdpartiesto
fulfilmanyofitsoperationalrequirementsand
duties.Aprovisionofinferiorservicesbyoneor
moreofthesepartiescouldleadtoinadequate
systemsandcontrolsorinefficientmanagementof
theCompany,itsassetsand
itsreporting
requirements.
TheCompany,theInvestmentManagerandthe
AdministrationManagerengageexperiencedand
reputableserviceproviders,theperformanceof
whichisreviewedonanannualbasisbytheBoard.
Inaddition,theAuditCommitteereviewsthe
InternalControlandCorporateGovernanceManual
onanannualbasis.
Economic,political
andotherexternalfactors
Fluctuationsinthestockmarketdueto
macroeconomicfactorscouldaffectthevaluations
ofquotedinvestments,evenifsuchcompaniesare
performingtoplan.WithrespecttotheLiquidity
investments,theimpactofthisismitigatedbythe
activemanagementanddiversificationofthe
underlyingportfolios.
Widerpoliticalandeconomiceventsalsohavethe
potentialtoimpacttheperformance,andtherefore
valuationsof,theunquotedcompaniesinthe
portfolioasaresultofadeteriorationinbusiness
andconsumerconfidence.Thisismitigatedby
holdingadiversifiedportfolioofinvestmentsacross
awiderangeofsectorsand
subsectors.
45
Strategic Report(continued)
Principalrisksanduncertainties(continued)
Emergingrisks
Geopolitical
TheconflictinUkraineandtheassociatedtrade
sanctionsimposedonRussianindividualsand
businessescouldnegativelyimpacttheinvestee
companies.
TheInvestmentManagercloselymonitorsthe
investeecompaniesandcontinuestoassessany
potentialexposuretotheongoingdevelopments.
TheBoardisconfidentthatthereisminimal
riskof
directimpactontheCompany’sperformance.Both
theBoardandtheManageraremonitoringthe
situationasitevolves.
Inflation
Investmentscouldbeimpactedbytheongoing
inflationincreaseswhichwillresultinwagesand
overheadcostsgrowingoverthecomingmonths.
TheManagerworkswithinvesteecompanies
to
ensurethatcostsaremonitoredandtheimpactof
increasingoverheadscanbecontrolledasmuchas
possible.Companiesassesswhethersuchincreases
canbepassedontotheendcustomer.Atpresent,
thesituationisconsideredtobemanageablebutwe
willcontinuetomonitormattersastheydevelop.
ClimateChange
Boththedirecteffectofclimatechangeandthe
indirecteffectofassociatedchangesinlegislation,
astheworldmovestowardsnetzeroemissions,
couldimpactthereturnsoftheCompany.
Asaninvestmententity,theCompanyhaslimited
exposuretoclimatechangerisks.TheManager
reviewsclimate
changeriskandtransitionsriskwith
investeecompanies,andexposuretosuchrisksis
consideredaspartoftheinvestmentprocess.The
riskprofileofthecurrentportfolioisconsideredto
bereasonableandtheManagercontinuesto
monitorchangesinlegislation.
Developmentsinaccountinganddisclosure
regulationsimpactingthecompany
aremonitored
bytheManagertoensurefullcompliance.
Coronaviruspandemic
InMarch2020,theWorldHealthOrganisation
declaredtheoutbreakofastrainofnovel
coronavirusdisease,Covid‐19,aglobalpandemic.
TheBoardrecognisesthattheresultingrestrictions
anduncertaintyhavenegativelyimpactedthe
operationsandperformanceof
anumberbusinesses
inwhichthecompanyhasinvested,particularly
thoseinthehospitalitysector.Whilstthereremains
uncertaintyconcerningnew
strainsandtheneedfor
boostervaccinations,theUKGovernment’s
vaccinationprogrammeiswellprogressed.
Viabilitystatement
InaccordancewithCorporateGovernancebest
practice,theDirectorshavecarriedoutarobust
assessmentoftheemergingandprincipalrisksof
theCompanyoveralongerperiodthanthe12
monthsrequiredbythe‘GoingConcern’provision.
TheBoardhasconductedthisreviewfortheperiod
coveringtheexpectedremaining
lifeofeachofthe
PlannedExitSharepools,andtheminimum
expectedholdingperiodinrespectofthetwo
EvergreenSharepools,encompassingallVentures
andHealthcareShareholders.Thelongerofthese
twotimehorizonsissixyearsfromthebalance
sheetdate.
Thesix‐yearreviewconsidersthe
principalrisks
facingtheCompany,whicharesummarisedonpage
45andwithinnote15,aswellastheCompany’s
cashflows,dividendcoverandVCTmonitoring
complianceovertheperiod.Thisincludesthe
impactofthecoronaviruspandemicandanyother
riskswhichmayadverselyimpactitsbusiness
model,future
performance,solvencyorliquidity.
Thesix‐yearreviewmakesassumptionsaboutthe
normallevelofcapitalrecyclinglikelytooccur,
whichincludethefollowing:‐
‐ Dividendsarepaidinaccordancewiththe4%
ofNAVtargetsfortheevergreensharepools;
‐ PlannedExitSharepooldistributionsarepaid
out
asrealisationstakeplacefromthe
portfolios;and
‐ Newandfollowoninvestmentsaremadeas
furthercapitalisraisedorexistinginvestments
areexited,whilstconsideringavailabilityof
cashforexpenses,whichareestimatedbased
ontheresultsto31March2022.
TheBoardhasconsideredtheCompany’s
cashflow
projectionsandfoundthesetoberealisticand
reasonable.Thisincludesforecastingthepotential
impactofcoronavirusontheCompany’scashflows.
TheDirectorsbelievethattheCompanyiswell
placedtomanageitsbusinessriskssuccessfully.
Basedontheresults,theBoardbelievesthat,taking
intoaccountthe
Company’scurrentposition,and
subjecttotheprincipalrisksfacedbythebusiness,
theCompanywillbeabletocontinueinoperation
andmeetitsliabilitiesastheyfallduefortheperiod
underreview.
46
Strategic Report(continued)
Businessmodel
TheCompanyoperatesasaVentureCapitalTrust
toensureitsShareholderscanbenefitfromtax
reliefsavailable.
ThebusinessoftheCompanyistoactasan
investmentcompany,investinginaportfoliowhich
meetstheconditionssetoutwithinitsinvestment
policy,asoutlinedbelow.
Investmentpolicy
Assetallocation
Itisintendedthatatleast80%ofeachofthe
Evergreensharepools’fundsareinvestedinVCT
QualifyingInvestments,withinthreeyearsofthe
closeoftherelevantOffer.Theremainderofthe
fundswillbeheldinNon‐Qualifyinginvestments,as
describedbelow.
ForthePlannedExitshare
pools,theManageris
workingonplanstoexitfromtheremaining
investments,suchthatfundscanbereturnedto
Shareholders.
VentureCapitalinvestments
NewVentureCapitalinvestmentswillnormally
compriseinvestmentsinbusinessesthatareless
thansevenyearsoldandrequirefundingtosupport
thegrowthofthe
business.Investmentsmaybeina
rangeofsectorswhichareallowableundertheVCT
Regulations.
TheCompanywillfocusondevelopmentand
expansionfundingforunquotedbusinessesandwill
notusuallyundertakeveryearlystageorstart‐up
investments.
SpecificsharepoolsmayhaveaVenturesfocusor
may
focusoncertain sectorsaccordingtothe
strategyofthatspecificsharepool.
VentureCapitalInvestmentsmade in2015and
earlierweremadeunderpreviousVCTRegulations
andfocusedoninvestmentsinUKbusinessesthat
ownsubstantialassets (overwhichachargecould
betakenbytheCompany)orhave
predictable
revenuestreamsfromfinanciallysound customers.
Non‐QualifyingInvestments
ThefundsnotemployedinVCTQualifying
investmentswillbeinvestedinNon‐Qualifying
investments,asallowedbytheVCTRegulations.
Thesewilltypicallybecashdepositsand
investmentsinquotedsecurities,investmenttrusts
orOEICS.
Liquidityinvestmentsaremade
withtheaimof
producingcapitalappreciationorincome.The
intendedprofitarisingfromthedisposalormaturity
ofliquidityinvestmentstypicallygivesrisetocapital
gains,whicharetax‐freefortheCompanyandcan
bedistributedtax‐freetoShareholders.
RiskDiversification
TheDirectorscontroltheoverallriskof
the
Company.TheInvestmentManagerensuresthat
theCompanyhasexposuretoadiversifiedrangeof
VCTQualifyinginvestmentsfromdifferentsectors
andadherestotheholdinglimitthatnoinvestment
inacompanymayrepresentmorethan15%by
valueoftheCompany’stotalinvestmentsatthe
timeof
investment.
ChangestotheVCTRegulationsinrecentyears
havesoughttostrengthentheavailabilityofcapital
forinnovativegrowthbusinessesintheUK.This
inherentlyincreasestheriskprofileofthenew
investmentsmadebytheEvergreensharepools,
whichstandincontrasttothoseinwhichthe
Company’sPlanned
Exitsharepoolshave
historicallyinvested.However,whilstnew
investmentswillgenerallybeinbusinesseswhich
arenotasset‐backed,andarethereforehigherrisk,
thesenewinvestmentswillhavethepotentialto
offergreaterrewards.Theprincipalrisksfacedby
theCompanyareconsideredinmoredetailonpage
44.
Pursuanttotheintroductionofthe80%VCT
Qualificationteston1April2021,thetarget
allocationoftheCompany’sfundsissummarisedas
follows:
VCTQualifyingInvestments 85%
Non‐QualifyingInvestments 15%
100%
Astwoofthefiveactivesharepoolsareinanexit
stage,ongoingadherencetotheVCTQualification
testhascometorestonthecombinedVCT
QualificationstatusoftheVenturesandHealthcare
Sharepools.Assuch,whenbuildingtheVentures
andHealthcareSharepools,theManagerisworking
towardsalongtermVCTQualificationtargetof
85%forthesepools,asoutlinedintherespective
ReviewsofInvestments.
47
Strategic Report(continued)
Investmentpolicy(continued)
Listingrules
Inaccordancewiththelistingrules:
(i) theCompanymaynotinvestmorethan10%in
aggregate,ofthevalueoftotalassetsofthe
Companyatthetimeaninvestmentismadein
otherlistedclosed‐endedinvestmentfunds,
exceptlistedclosed‐endedinvestmentfunds
whichhavepublished
investmentpolicies
whichpermitthemtoinvestnomorethan15%
oftheirtotalassetsinotherclosed‐ended
investmentfunds;
(ii) theCompanymustnotconductanytrading
activitywhichissignificantinthecontextof
theCompany;and
(iii) theCompanymust,atalltimes,investand
manage
itsassetsinawaywhichisconsistent
withitsobjectiveofspreadinginvestmentrisk
andinaccordancewithitspublished
investmentpolicysetoutinthisdocument.
VentureCapitalTrustRegulations
IncontinuingtomaintainitsVCTstatus,the
Companycomplieswithanumberofregulationsas
setout
inPart6oftheIncomeTaxAct2007.
Ananalysisofthecompliancewiththeapplicable
VCTregulationsfortheyearended31March2022
issetoutonpage50.
Statementonsection172
Undersection172oftheCompaniesAct2006,the
Boardhasadutytopromotethesuccessofthe
Company,andwhenmakingdecisionsforthelong
term,haveregardtoarangeofmattersincluding:
thelikelyconsequencesofanydecisioninthe
longterm;
theinterestoftheCompany’semployees;
theneedtofostertheCompany’sbusiness
relationshipswithsuppliers,customersand
others;
theimpactoftheCompany’soperationsonthe
environmentandcommunity;
thedesirabilityoftheCompanymaintaininga
reputationforhighstandardsofbusiness
conduct;and
theneedtoactfairlybetweenShareholdersof
theCompany.
However,theCompanyhasnoemployees(other
thanitsDirectors)andnocustomersinthe
traditionalsense.ItisnormalpracticeforVenture
CapitalTruststodelegateauthorityforday‐to‐day
managementandadministrationoftheCompanyto
thirdparties.
TheBoardwillthenengagewiththe
thirdpartiesinsetting,approvingandoverseeing
theexecutionofthebusinessstrategyandrelated
policies.InaccordancewiththeCompany’snature
asaVentureCapitalTrust,theBoard’sprincipal
concernhasbeen,andcontinuestobe,theinterest
oftheCompany’sShareholders
takenasawhole,as
wellascontinuingtomonitorportfoliomanagement
inlightoftheCompany’sobjectives.
Inadditiontothis,theBoardhasaresponsible
governancecultureandhasdueregardforbroader
matters,sofarastheyapplyincludingthe
expectationsofitsregulators.Specifically,theBoard
engages
withtheInvestmentManageratevery
Boardmeeting,whereitwillreviewthefinancialand
operationalperformance,aswellaslegaland
regulatorycompliance.TheBoardalsoreviewsits
relationshipswithotherserviceprovidersatleast
annually,aswellasotherareasoverthecourseof
thefinancialyearincluding
theCompany’skeyrisks;
stakeholder‐relatedmatters;diversityand
inclusivity;environmentalmatters;andcorporate
responsibilityandgovernance.
48
Strategic Report(continued)
Statementonsection172(continued)
TheInvestmentandAdministrationManager
engageswithShareholdersbyproducinghalf‐yearly
reportsandreportingbacktotheBoard.TheBoard
alsousuallyencouragesShareholderstoattendthe
AGMandwelcomesanyothercommunications
fromShareholders.Itsmainstakeholderstherefore
comprisetheShareholders,theInvestment
Manager,otherserviceprovidersandinvestee
companies.
Theprincipaldecisionsmadeorapprovedbythe
Directorsduringtheyeararesetoutbelow.In
takingthesedecisions,theDirectorsconsidered
theirdutiesundersection172oftheAct.Principal
decisionshavebeendefinedasthosethathavea
materialimpacttotheCompanyanditskey
stakeholders.
Dividenddeclarations
FortheVenturesandHealthcareShareclasses,the
Directorstargetanannualdividendofatleast4%of
netassetsperannum,subjecttosufficient
distributablereservesandcapitalresources.The
Boardcloselymonitorthelevelofdividendsand
proposetopayafinaldividendof2.75pper
VenturesShareand3.50pperHealthcareShare,
equivalentto4.0%basedontherespectiveopening
netassetvalues.
Launchofoffersforsubscription
FollowingShareholderapproval,anofferfor
subscriptionwaslaunchedinAugust2021,which
closedaftertheyearendhavingraised£5.8million
intheVenturesShareclass,
£3.0millioninthe
HealthcareShareclassand£2.8millioninthenewly
launchedAIMShareclass.Theadditionalfunds
raisedwillallowtheManagertoexpandthe
portfoliosandprovidesupportwherenecessaryto
theexistinginvesteecompanies.
CommunicationwithShareholders
AsaresultoftheCOVID‐19restrictionsinplaceat
thetime,theAGMin2020couldnotbeheldin
personandthedecisionwasmadetoholdtheAGM
virtually.TheBoardencouragesallShareholdersto
attendtheAGM,welcomescommunicationfrom
Shareholdersandwas
pleasedtoholdthe2021
AGMinpersonattheCompany’sregisteredoffice
tofacilitatethisinteraction.InpersonAGMswill
continue,wherepossible,toallowShareholdersto
askquestionsandhearupdatesfromtheBoardand
InvestmentManager.
Borrowings
UnderitsArticles,theCompanyhastheabilityto
borrowamaximumamountequalto15%ofthe
aggregateamountpaidonanysharesissuedbythe
Company(togetherwithanysharepremium
thereon),currentlyequaltoapproximately
£9.1million.
AlthoughtheBoarddoesnotintendtoborrow,it
hasthe
flexibilitytodoso.Inparticular,becausethe
Boardintendstominimisecashbalances,the
Companymayborrowonashort‐termbasisfor
cashflowpurposes.
Environmental,social,andhumanrights
policy
TheCompanyseekstoconductitsaffairs
responsibly.Whereappropriate,theBoardandthe
Managertakeenvironmental,socialandhuman
rightsfactorsintoconsiderationwhenmaking
investmentdecisions.Furtherdetailsonthe
InvestmentManager’sapproachtoresponsible
investmentcanbefoundonpages41to42.
TheFCAreportingrequirementsconsistent
withthe
TaskForceonClimate‐relatedFinancialDisclosures
(“TCFD”)donotcurrentlyapplytotheCompany.
TheBoardandInvestmentManageracknowledge
therecommendationswhichwillbereviewedover
futureperiods.
Directorsandseniormanagement
TheCompanydoesnothaveanyemployees,
includingseniormanagement,otherthantheBoard
offivenon‐executivedirectors.Alldirectorsare
male.
Eventsaftertheendofthereporting
period
ImportanteventsaffectingtheCompanysince31
March2022havebeendisclosedintheChairman’s
Statementandinnote20tothefinancial
statements.
Futureprospects
TheCompany’sfutureprospectsaresetoutinthe
Chairman’sStatementandInvestmentManager’s
Reports.
ByorderoftheBoard
GrantWhitehouse
SecretaryofDowningFOURVCTplc
Companynumber:06789187
Registeredoffice:
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
London,EC3R6HD
25July2022
49
Report of The Directors
TheDirectorspresenttheAnnualReportand
AccountsoftheCompanyfortheyearended31
March2022.
Sharecapital
Attheyearend,theCompanyhadinissue
7,879,639DSODShares,11,192,136DP67Shares,
65,328,545VenturesShares(includingManagement
Shares),26,811,908HealthcareShares(including
ManagementShares)and2,034,990AIMShares.
EveryShareholderisentitledtoreceivenoticeof,to
attend,speakandvoteatanygeneralmeeting.
Shareholderswho
arepresentinpersonorbyproxy
canvoteonashowofhandsandwillhaveonevote
each.Onapoll,everyShareholderpresentinperson
orbyproxyisentitledtothenumberofvotesper
shareassetoutinthetablebelow:
Classofshare
Numberofvotes
pershare
DSODShare 232
DP67Share 375
VenturesShare 860
HealthcareShare 860
AIMShare 1,146
IftheNetAssetValueoftheShareclassmovesby
morethan25%,thenumberofvotespershareshall
correspondinglyincreaseordecrease,assetoutin
theArticlesoftheCompany.
TheCompanyoperatesapolicy,subjecttocertain
restrictions,ofbuyingVenturesandHealthcare
Sharesthat
becomeavailableinthemarketataprice
equaltothelatestpublishedNAV(i.e.atanil
discount).Astheplannedexitpoolsareinanexit
phase,theCompanydoesnotintendtobuyin
sharesofanyotherclass.
DuringtheyeartheCompanyrepurchased86,425
VenturesShares
atanaveragepriceof67.5pand
159,833HealthcareSharesatanaveragepriceof
85.3p.Thesesharesweresubsequentlycancelled.
AttheAGMthattookplaceon8September2021,
theCompanywasauthorisedtomakemarket
purchasesofitssharesuptoalimitof1,172,220
DSOD
Shares,1,667,628DP67Shares,8,776,201
VenturesSharesand3,600,787HealthcareShares,
whichrepresentedapproximately14.9%ofthe
issuedDSODSharecapital,DP67Sharecapital,
VenturesSharecapitalandHealthcareSharecapital,
asatthedateoftheAGM.
Atthecurrentdate,authorityremainsfor1,172,220
DSODShares,1,667,628
DP67Shares,8,689,776
VenturesSharesand3,440,954HealthcareShares.
Aresolutiontorenewthisauthoritywillbeputto
ShareholdersattheAGMtakingplaceon27
September2022.
TheminimumpricewhichmaybepaidforaDSOD
Share,aDP67Share,aVenturesShare,Healthcare
Shareor
anAIMShareis0.1p,exclusiveofall
expenses,andthemaximumpricewhichmaybepaid
foraDSODShare,aDP67Share,aVenturesShare,
aHealthcareShareoranAIMShareisanamount,
exclusiveofallexpenses,equalto105%ofthe
averageofthe
middlemarketquotations.
Resultsanddividends
(Loss)/returnfortheyear:
£’000
Pence
pershare
DSODShare (3) 0.0
DP67Share 934 8.3
VenturesShare 1,836 3.8
HealthcareShare 3,663 18.3
AIMShare (6) 2.3
Dividendspaidduringthe
currentperiod:
£’000
Pence
pershare
VenturesShare 1,323 2.75p
HealthcareShare 542 2.75p
DSODShare 590 7.50p
Finaldividendsproposedtobepaid30Sept2022
VenturesShare 1,537 2.75p
HealthcareShare 800 3.50p
AsthePlannedExitsharepoolsareinanexitphase,
furtherdividendswillbedeclaredasandwhen
realisationsarecompleted.
50
Report of The Directors (continued)
Directors
TheDirectorsoftheCompanyduringtheyearand
theirbeneficialinterests(includingconnected
persons)intheissuedsharesoftheCompanyat31
March2022,andatthedateofthisreport,areas
follows:
No.ofsharesat31/03/22(audited)
Shareclass
LordFlight
SirAubrey
Brocklebank
Steven
Clarke*
DSOD 20,800‐
‐
DP67‐‐
‐
Ventures 14,836 32,679
‐
Healthcare 11,750 5,000
‐
AIM‐
‐ ‐
Shareclass
Chris
Allner*
Andrew
Mackintosh*
DSOD‐
‐
DP67‐
‐
Ventures8,000
‐
Healthcare2,000
‐
AIM‐
‐
*Appointed8September2021
InaccordancewiththeCompany’sDirectortenure
policyandcorporategovernancebestpractice,
Directorsaresubjecttore‐electionattheAGM
immediatelyfollowingtheirappointment,andevery
threeyearsthereafter.
Also,inaccordancewiththeDirectortenurepolicy
andcorporategovernancebestpractice,anyDirector
whohasservedonthe
BoardoftheCompanyforin
excessofnineyearswillbesubjecttoannualre‐
election.
Assuch,allofthedirectors,willretireatthe
forthcomingAGM,andwill,withtheexceptionof
LordFlight,beingeligible,offerthemselvesforre‐
election.
TheBoardrecommendsthatShareholderstake
into
considerationeachDirector’sconsiderable
experienceinVCTsandotherareas,asshownin
theirrespectivebiographiesonpage3,togetherwith
theresultsfortheperiodtodate,inordertosupport
theresolutionstore‐appointDirectors.
LordFlightenteredintoaletterofappointmentwith
theCompanydated
27January2009.SirAubrey
Brocklebankenteredintoaletterofappointmentin
July2016.StevenClarke,AndrewMackintoshand
ChrisAllnerwereappointedduringtheyearin
accordancewithlettersofappointmentdated8
September2021.Theappointmentsareterminable
onthreemonths’noticebyeitherside.EachDirector
isrequiredtodevotesuchtimetotheaffairsofthe
CompanyastheBoardreasonablyrequires.
TheCompanyprovidesDirectors’andOfficers’
liabilityinsurance,givingappropriatecoverforlegal
actionbroughtagainstitsDirectors,andhasalso
agreedtoindemnifyDirectorsincircumstances
wheretheyarenotconsideredto
beculpable.The
indemnity,whichisaqualifyingthird‐partyindemnity
provisionforthepurposeoftheCompaniesAct,is
forthebenefitofalloftheCompany’scurrent
Directors.
VCTstatus
TheCompanyhasretainedPhilipHare&Associates
LLPtoadviseitoncompliancewithVCT
requirements,includingevaluationofinvestment
opportunities,asappropriate,andregularreviewof
theportfolio.AlthoughPhilipHare&AssociatesLLP
workcloselywiththeInvestmentManager,they
reportdirectlytotheBoard.
Compliancewiththe
mainVCTregulations(as
describedintheInvestmentpolicy)asat31March
2022,andfortheyearthenended,issummarisedas
follows:
- 80%ofitsinvestmentsheldin
qualifyingcompanies;
91.9%
- Atleast70%oftheCompany’s
qualifyinginvestmentsareheld
in“eligibleshares”forfunds
raisedonorafter6April2011;
97.3%
- Atleast10%ofeachinvestment
inaqualifyingcompanyisheldin
eligibleshares;
Complied
4.
Atleast30%oftheofthe
proceedsofsharesissuedafter1
April2019mustbeinvestedin
VCTQualifyingcompanies
within12monthsofthenext
yearend;
Complied
- Noinvestmentconstitutesmore
than15%oftheCompany’s
portfolio;
Complied
- Incomefortheyearisderived
whollyor
mainlyfromsharesand
securities;and
100.0%
- TheCompanydistributes
sufficientrevenuedividendsto
ensurethatnotmorethan15%
oftheincomefromsharesand
securitiesinanyoneyearis
retained.
Complied
51
Report of The Directors (continued)
Investmentmanagementand
administrationfees
DowningLLP(“Downing”)providesinvestment
managementservicestotheCompany.Downingis
paidafeeequivalentto1.5%oftheDSODShare
netassetsperannum,1.35%ofDP67Sharenet
assetsperannum,2.0%ofVenturesSharenetassets
perannum,2.5%ofHealthcareSharenetassetsper
annum
and1.75%ofAIMSharenetassetsper
annum.DowningandForesighthaveagreedtoa
rebateofonequarter’sinvestmentmanagement
feesforthetransferringVentures,AIMandplanned
exitsharepools.
Followingtheperiodend,itwasannouncedthatthat
DowningLLPsolditstechnologyVenturesdivision
to
ForesightGroup.Asaresult,themainexecutives
fromDowningLLP’stechnologyVenturesteamhave
movedtoForesightandtheinvestmentmanagement
agreementwasnovatedtoForesight.
ThemanagementoftheHealthcareSharepoolwill
remainwithDowningLLP,whowillalsoprovide
investmentmanagementservicesforthenon‐
venturesinvestments
(primarilythoseintheplanned
exitandAIMsharepools)andadministration
servicestotheCompanyforatransitionalperiod.
Additionally,Downingcontinuestoprovide
administrationservicestotheCompanyforafee
calculatedasfollows:(i)abasicfeeof£40,000;(ii)A
feeof0.1%ofNAVper
annumonfundsinexcessof
£10million;(iii)£5,000peradditionalSharepool.
Theagreementisdated20July2015andmaybe
terminatedbyeithersidegivingnotlessthan12
months’noticeinwriting.
Duringtheyear,atotalof£1.2million(2021:
£822,000)waspayabletoDowning
forinvestment
managementandadministrationfees.
Duringtheyear,theVenturesSharepoolreceived
arrangementfeerebatesof£nil(2021:£2,000)from
Downing.Thisamountwaspaidin2021toensure
that,whereapplicable,afeeofnomorethan3.0%
oftheoriginalinvestmentamountwaschargedby
Downing,
oneachoftheinvestmentsmadebythe
VenturesandHealthcareSharepoolsduringthat
year.
Downingalsoreceivesarrangementandmonitoring
(non‐executivedirectorship)feesfromtheinvestee
companies.Duringtheyear,Downingreceived
arrangementfeesfromDowningFOURportfolio
companiesof£58,000(2021:£288,000)and
monitoringfeesof£697,000
(2021:£729,000).
Thesefeesalsorelatetoinvestmentsmadeinto
thesecompaniesbyotherfundsmanagedby
Downingandsoareonlypartlyattributableto
DowningFOURinvestments.
TheannualrunningcostsoftheCompany,forthe
year,arealsosubjecttoacapof3.0%ofnetassets
of
theCompanyforallSharepools,withthe
exceptionoftheDP67andHealthcareSharepools,
whicharesubjecttocapsof2.9%and3.5%,
respectively.Anyexcesscostsovereachofthe
relevantcapsaremetbyDowningthrougha
reductioninfees.
TheOngoingChargesvaluefortheCompany
asa
wholefortheyear(calculatedinaccordancewiththe
AICguidance)was2.64%.
PerformanceIncentives
DSODSharepool
TheDSODSharesenableapayment,bywayofa
fee,ofthePerformanceIncentivetothe
managementteam.
NoPerformanceIncentivewillbepayableuntil
Shareholders:
i) receiveproceeds,bywayofdividends/
distributions/sharebuybacks(“TotalProceeds”),
ofatleast100.0pper£1invested;and
ii) achieveatax‐freecompoundreturnofatleast
7%perannum(afterallowingforincometax
reliefoninvestment).
Subjecttotheseconditions(“theHurdles”)beingmet,
thePerformanceIncentivewillbe3.0pperDSOD
Shareplus20%above100.0pperDSODShare,of
thefunds
availablefordistributiontoDSOD
Shareholders.
ThePerformanceIncentivewillonlybepaidtothe
extentthattheHurdlescontinuetobemetandwill
besubjecttoamaximumamount,overthelifeofthe
Company,equivalentto7.0pperDSODShare
(basedonthenumberofDSO
DSharesinissueat
thecloseoftheOffers).AftertheHurdleshavebeen
met,thePerformanceIncentivewillbededucted
fromtheTotalReturnfigure.
Asat31March2022,itisestimatedthata
PerformanceIncentiveof0.5pwillbecomepayable
tomembersofthemanagementteam.
Nofeeis
payableuntilcumulativedividendstoShareholders
exceed100.0pandaccordingly,noprovisionforthe
feeisincludedintheaccountsasthishurdlehasnot
yetbeenmet.
52
Report of The Directors (continued)
PerformanceIncentives(continued)
VenturesandHealthcareSharepools
APerformanceIncentiveschemeisinplacein
respectoftheVenturesandHealthcare
ManagementShares,whichwillrepresent20%of
thetotalnumberofVenturesandHealthcareShares
inissue.Aspartofthearrangement,inorderto
preventdilutiontotheShareholdersofthe
Ventures
andHealthcareShares,themanagementteamwill
waivetheirvotingrightsgrantedbythese
ManagementSharesatanygeneralmeetingof
theCompanyandincomeorcapitaldistributions
otherwisepayableontheseManagementShareswill
bewaivedunlesstheTotalReturnhurdleismet.
Fortheyearended31
March2022,thehurdleis
metwhenTotalReturn(basedonauditedyearend
results)isinexcessof£1.06pershare.For
subsequentyears,theTotalReturnhurdleincreases
by3.0pperannum,suchthatfortheyearended31
March2023theTotalReturnhurdlewillbe£1.09,
and
fortheyearended31March2024thehurdle
willbe£1.12.
AIMSharePool
Thereisnoperformanceincentiveschemeinplace
fortheAIMSharepool.
FurtherdetailsofthePerformanceIncentive
arrangementsaresetoutonpage92.
Ongoingpromoterfee(trailfee)
TheCompanyhasanagreementtopayanongoing
promoterfee(trailfee)annuallytoDowningin
connectionwithapplicablefundsraisedunderthe
Company’spreviousoffersforsubscription,outof
whichDowninghasanobligationtopayatrail
commissiontointermediaries.Thetrailfeeis
calculatedatbetween0.25%
and0.5%oftheNet
AssetValueofthoseoffersharesinrespectofwhich
advisercommissionispayableateachperiodend.
GoingConcern
TheDirectorsconfirmthattheyaresatisfiedthatthe
Companyhasadequateresourcestocontinuein
businessforatleastthenext12months,asfurther
detailedintheCorporateGovernanceStatement
reportonpage62.
Substantialinterests
Asat31March2022,andthedateofthisreport,the
Companyhadnotbeennotifiedofanybeneficial
interestexceeding3%oftheissuedsharecapital.
Auditor
AresolutionproposingthereappointmentofBDO
LLPastheCompany’sAuditorwillbesubmittedat
theAnnualGeneralMeeting.
AnnualGeneralMeeting
TheAGMwillbeheldattheofficesofForesight
GroupLLP,TheShard,32LondonBridgeStreet,
London,SE19SGat3.30p.m.on27September
2022.FulldetailsofthisareincludedintheNotice
oftheAnnualGeneralMeeting,whichcanbefound
atthebackofthis
document.
Directors’responsibilities
TheDirectorsareresponsibleforpreparingthe
ReportoftheDirectors,theDirectors’Remuneration
Reportandthefinancialstatementsinaccordance
withapplicablelawandregulations.TheDirectors
arealsoresponsibleforensuringthattheAnnual
ReportincludesinformationrequiredbytheListing
RulesoftheFinancialConductAuthority.
CompanylawrequirestheDirectorstoprepare
financialstatementsforeachfinancialyear.Under
thatlaw,theDirectorshaveelectedtopreparethe
financialstatementsinaccordancewithUnited
KingdomGenerallyAcceptedAccountingPractice
(UnitedKingdomaccountingstandardsand
applicablelaw)includingFinancialReporting
Standard102,thefinancialreportingstandard
applicable
intheUKandRepublicofIreland(FRS
102).Undercompanylaw,theDirectorsmustnot
approvethefinancialstatementsunlesstheyare
satisfiedthattheygiveatrueandfairviewofthe
stateofaffairsoftheCompanyandoftheprofitor
lossoftheCompanyfor
thatperiod.
Inpreparingthesefinancialstatements,the
Directorsarerequiredto:
selectsuitableaccountingpoliciesandthen
applythemconsistently;
makejudgmentsandaccountingestimates
thatarereasonableandprudent;
statewhetherapplicableUKaccounting
standardshavebeenfollowed,subjectto
anymaterialdeparturesdisclosedand
explainedinthefinancialstatements;
preparethefinancialstatementsonthe
goingconcernbasisunlessitisinappropriate
topresumethattheCompanywillcontinue
inbusiness;
prepareadirectors’report,astrategicreport
anddirectors’remunerationreportwhich
complywiththerequirementsofthe
CompaniesAct2006;and
carryoutarobustassessmentofthe
principalrisksfacingtheCompany,assetout
intheStrategicReportonpage42.
53
Report of The Directors (continued)
Directors’responsibilities(continued)
TheDirectorsareresponsibleforkeepingadequate
accountingrecordsthataresufficienttoshowand
explaintheCompany’stransactions,todisclosewith
reasonableaccuracyatanytimethefinancial
positionoftheCompanyandtoenablethemto
ensurethatthefinancialstatementscomplywiththe
CompaniesAct2006.Theyare
alsoresponsiblefor
safeguardingtheassetsoftheCompanyandhence
fortakingreasonablestepsforthepreventionand
detectionoffraudandotherirregularities.
Inaddition,eachoftheDirectorsconsidersthatthe
AnnualReport,takenasawhole,isfair,balanced
andunderstandableandprovidestheinformation
necessaryforShareholderstoassesstheCompany’s
position,performance,businessmodelandstrategy.
TheDirectorsareresponsibleforthemaintenance
andintegrityofthecorporateandfinancial
informationincludedontheCompany’swebsite.
LegislationintheUnitedKingdomgoverningthe
preparationanddisseminationofthefinancial
statementsandotherinformationincludedinthe
AnnualReportsmaydifferfromlegislationinother
jurisdictions.
Directors’statementpursuanttothe
DisclosureGuidanceandTransparency
Rules
EachoftheDirectors,whosenamesandfunctions
arelistedonpage3,confirmsthat,tothebestof
eachperson’sknowledge:
thefinancialstatements,whichhavebeen
preparedinaccordancewiththeapplicablesetof
accountingstandards,giveatrueandfairviewof
theassets,liabilities,financialpositionandprofit
orlossoftheCompany;and
themanagementreportincludedwithinthe
ReportoftheDirectors,Strategicreport,
Chairman’sStatement,InvestmentManager’s
Report,andReviewofInvestmentsincludesafair
reviewofthedevelopmentandperformanceof
thebusinessandthepositionofthecompany,
togetherwitharobustassessmentofthe
principalrisksanduncertaintiesthat
itfaces.
Websitepublication
Thedirectorsareresponsibleforensuringthe
AnnualReportandthefinancialstatementsare
madeavailableonawebsite.Financialstatements
arepublishedonthewebsiteoftheInvestmentand
AdministrationManager(www.downing.co.uk)in
accordancewithlegislationintheUnitedKingdom
governingthepreparationanddisseminationof
financialstatements,whichmay
varyfromlegislation
inotherjurisdictions.
TheDirectors'responsibilityalsoextendstothe
ongoingintegrityofthefinancialstatements
containedtherein.
CorporateGovernance
TheCompany’scompliancewith,anddepartures
from,theAICCodeofCorporateGovernance
(www.theaic.co.uk)isshownonpage62and63.
TheStatementonCorporateGovernancesetouton
page53intheReportoftheDirectorsbyreference.
ResponsibleInvesting
Theday‐to‐daymanagementoftheCompany’s
investmentsisdelegatedtotheInvestment
Manager,DowningLLP(“Downing”).Downing’s
reportonitsapproachtoresponsibleinvestmentis
includedonpages41to42.
StreamlinedEnergyandCarbonReporting
(‘SECR’)
Asthecompanyhasnoemployeesandprimarily
conductsitsbusinessattheLondonofficeofthe
InvestmentandAdministrationManager,Downing
LLP,thecompanyisnotdirectlyresponsibleforthe
consumptionofelectricityandgasintheUK,noris
thecompanydirectlyresponsibleforgreenhousegas
emissionsrelatedto
transportintheUK.Asthe
companydidnotconsumemorethan40,000kWhof
energyduringtheyearended31March2022,ithas
nothingtoreportundertheCompanies(Directors’
Report)andLimitedLiabilityPartnerships(Energy
andCarbonReport)Regulations2018.
54
Report of The Directors (continued)
Globalgreenhousegasemissions
TheCompanyhasnogreenhousegasemissionsto
reportfromitsoperations,nordoesithaveany
otheremissionproducingsourcesunderthe
CompaniesAct2006(StrategicReportand
Directors’Reports)Regulations2013.
Insurancecover
Directors’andOfficers’liabilityinsurancecoveris
heldbytheCompanyinrespectoftheDirectors.
Othermatters
Informationinrespectoffinancialinstruments,
principalrisks,futureprospects,dividendsand
subsequentevents,whichwerepreviouslydisclosed
withintheDirectorsReport,hasbeendisclosed
withintheStrategicReportonpages43to48.
Statementastodisclosureofinformation
toAuditors
TheDirectorsinofficeatthedateofthereporthave
confirmed,asfarastheyareaware,thatthereisno
relevantauditinformationofwhichtheAuditoris
unaware.EachoftheDirectorshasconfirmedthat
theyhavetakenallthestepsthattheyoughttohave
takenas
Directorsinordertomakethemselves
awareofanyrelevantauditinformationandto
establishthatithasbeencommunicatedtothe
Auditor.
ByorderoftheBoard
GrantWhitehouse
SecretaryofDowningFOURVCTplc
Companynumber:06789187
Registeredoffice:
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
London,EC3R6HD 25July2022
55
Directors’ Remuneration Report
TheBoardhaspreparedthisreportinaccordance
withtherequirementsofSections420to422ofthe
CompaniesAct2006.Aresolutiontoapprovethis
reportwillbeputtotheShareholdersattheAGMto
beheldon27September2022.
UndertherequirementsofSection497,the
Company’s
Auditorisrequiredtoauditcertain
disclosurescontainedwithinthereport.These
disclosureshavebeenhighlightedandtheaudit
opinionthereoniscontainedwithintheAuditor’s
Reportonpages64to70.
Directors’remunerationpolicy
BelowistheCompany’scurrentremunerationpolicy,
whichwaslastputtoaShareholdervoteattheAGM
in2020.
Inaccordancewithregulations,Shareholdersmust
voteontheremunerationpolicyeverythreeyearsor
sooneriftheCompanywantstomakechangestothe
policy.Thepolicywillnextbe
puttoShareholdersat
theAGMin2023.
Directors’remunerationiscalculatedinaccordance
withtheCompany’sArticlesofAssociationas
follows:
TheDirectorsshallbepaidoutofthefundsofthe
Company,bywayoffeesfortheirservices,an
aggregatesumnotexceeding£150,000per
annum.TheDirectorsshallalsoreceiveby,wayof
additionalfees,suchfurthersums(ifany)asthe
Company,inGeneralMeeting,mayfromtime
to
timedetermine.Suchfeesshallbedividedamong
theDirectorsinsuchproportionandmanneras
theymaydetermineand,indefaultofthe
determination,equally.
TheDirectorsshallbeentitledtoberepaidall
reasonabletravelling,hotelandotherexpenses
incurredbythemrespectivelyinoraboutthe
performanceoftheirdutiesasDirectors.This
includesanyexpensesincurredinattending
meetingsoftheBoard,CommitteesoftheBoard
orGeneralMeetings.If,intheopinion
ofthe
Directors,itisdesirablethatanyoftheirnumber
shouldmakeanyspecialjourneysorperformany
specialservicesonbehalfoftheCompanyorits
business,theDirectororDirectorsmaybepaid
reasonableadditionalremunerationandexpenses
astheDirectorsmayfromtimetotimedetermine.
Nopaymentforlossofofficewillbemadetoa
currentorformerDirectorexceptinexceptional
circumstances,andtheDirectorswillconsiderany
suchpositiononanad‐hocbasis.
TheCompany’spolicyisthatfees payabletoDire ctors
shouldre fl ectthe irexpertise,res ponsi biliti esandtime
spent
onCompanymatters.Indete rminin gthelevelof
remunerati on,marketequivalentsareconsideredin
comparisontotheoverallactivitiesandsizeofthe
Company.There isnope rfor mance relatedpa ycriteria
applicabletoDire ctors.
Servicecontracts
EachoftheDirectorshasenteredintoaconsultancy
agreementforthefixedtermofthreeyearsfromthe
dateoftheirappointmentandthereafteronathree‐
monthrollingnotice.
Directors’remuneration(audited)
Directors’remunerationfortheCompanyfortheyear
underreviewwasasfollows:
Current
annualfee
(excl.VAT)
£’000
2022
fee
£’000
%
Change
ingross
fee
1
2021
fee
£’000
%
Change
ingross
fee
2
SirAu brey
Brocklebank 30 20‐20‐
LordFligh t 25 20‐20‐
Andrew*
Mackintosh 24 12‐‐‐
Steven*
Clarke 24 12‐‐‐
ChrisAllner*^ 20‐‐‐‐
Russell**
Catley‐8‐18‐
VATonthe
above‐33
123 75‐61‐
1
betweentheyearsending31March2022and31March2021
2
betweentheyearsending31March2021and31March2020
*Appointed8September2021
**Resigned8September2021
^Underthetransferoftheinvestmentmanagement
agreementtoForesight,from1July2022ChrisAllnerisbeing
paidanannualfeeof£20,000whichisrechargeableto
DowningLLPfortwoyears.
Inviewoftheincreaseinthesizeofthefundsunder
managementandtheadditionofanewshareclass,
duringtheyearitwasagreedtoincreasethe
directors’remunerationtothelevelsshowninthe
tableaboveeffectivefrom1April2022.
Nootheremoluments,pensioncontributionsor
life
assurancecontributionswerepaidbytheCompany
to,oronbehalfof,anyDirector.TheCompanydoes
nothaveanyshareoptionsinplace.
56
Directors’ Remuneration Report
(continued)
StatementofvotingatAGM
Shareholders’viewsinrespectofDirectors’
remunerationcommunicatedattheCompany’sAGM
aretakenintoaccountinformulatingtheDirectors’
remunerationpolicy.
AtthelastAGMon8September2021,thevotesin
respectoftheresolutiontoapprovetheDirectors’
RemunerationReportwereasfollows:
Infavour 93.2%
Against 6.8%
Withheld‐
Atthe2020AGM,whentheremunerationpolicy
waslastputtoaShareholdervote,92.3%votedfor
theresolutionand7.7%against,showingsignificant
Shareholdersupport.
Relativeimportanceofspendonpay
Thedifference inactualspendbetwe entheyearende d
31March2021an dtheyearended31Ma rch2022on
remunerati onsfo rallemploy ees,incomparisonto
distribu tions (dividendsandsharebuyba cks )andother
significantspend,aresetoutin thegraph below:
Performancegraphs
Thechartsonthefollowingpagesrepresentthe
performanceoftheDSOD,DP67,Venturesand
HealthcareSharepoolsovertheperiodsincethe
shareswerefirstlistedontheLondonStock
Exchange,andcomparetheTotalReturnofthe
Company(NetAssetValueplusdividends)toa
rebasedFTSEAIM
AllShareIndex,including
dividendsreinvested.Theindexhasbeenrebasedto
100.0patthelaunchdateofeachrespectivepool.
TheAIMSharepoolisnotincludedasithasonlyjust
launched.
AsthereisnopubliclyavailableVCTindex,wehave
selectedtheFTSEAIMAllShare
Indexasa
comparisonasitisapubliclyavailablebroadequity
indexwhichfocusesonsmallercompaniesandis
morerelevantthanmostotherpubliclyavailable
indices.
StatementbytheChairmanofthe
RemunerationCommittee:LordFlight
TheRemunerationCommitteecomprisesSirAubrey
Brocklebank,LordFlight,AndrewMackintosh,
StevenClarkeandChrisAllner.Thecurrentfee
structurehasbeenineffectsincetheappointment
ofthenewestdirectorson8September2021.
Thecommitteereviewsthefeestructureasand
whenrequired,toensurethatthelevelsin
placeare
commensuratewiththesizeoftheCompanyandthe
timecommitmentsrequiredofeachoftheDirectors.
ByorderoftheBoard
GrantWhitehouse
CompanySe cr etary
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
London,EC3R6HD
25July2022
57
Directors’ Remuneration Report
(continued)
Performancegraphs(continued)
40
60
80
100
120
140
160
HealthcareShareperformancechart
FTSEAIMAllShareIndex HealthcareShareNAVTotalReturn HealthcareSharePriceTotalReturn
58
Directors’ Remuneration Report (continued)
Performancegraphs(continued)
Note:ItisarequirementtoshowtheabovechartsincludingSharePriceTotalReturnwithdividendsreinvested
attheprevailingsharepriceatthetimeofthedividend.ThismethodcangiveadistortedresultforthePlanned
ExitSharepools,astheyareintheprocess
ofreturningfundstoShareholders.
50
100
150
200
250
300
DSODShareperformancechart
FTSEAIMAllShareIndex DSODShareNAVTotalReturn DSODSharePriceTotalReturn
‐
20
40
60
80
100
120
140
160
180
200
DP67Shareperformancechart
FTSEAIMAllShareIndex DP67ShareNAVTotalReturn DP67SharePriceTotalReturn
59
Corporate Governance Statement
TheBoardhasconsideredtheprinciplesand
recommendationsoftheAICCodeofCorporate
Governance(“AICCode”),beingtheprinciplesof
goodgovernanceandthecodeofbestpractice,as
setoutintheannextotheListingRulesoftheUK
ListingAuthority.TheAICCodeaddressesall
principlesand
provisionssetoutintheUK
CorporateGovernanceCode,aswellassettingout
additionalprinciplesandrecommendationsonissues
thatareofspecificrelevancetotheCompany.
TheBoardconsidersthatreportingagainstthe
principlesandrecommendationsoftheAICCode,
willprovidebetterinformationtoShareholders.
TheBoard
TheCompanyhasaBoardcomprisingfivenon‐
executiveDirectors.TheChairmanisSirAubrey
BrocklebankandtheSeniorIndependentDirectoris
LordFlight.BiographicaldetailsofallBoard
membersareshownonpage3.
TheBoardhasassessedtheindependenceofeachof
theDirectors,allofwhichareconsidered
tobe
independent,withtheexceptionofChrisAllner,in
accordancewiththeprovisionsand
recommendationssetoutintheAICCode.
InaccordancewithCompanyPolicyandgood
CorporateGovernance,allfivedirectorswillretireat
theforthcomingAGM,andwill,beingeligible,offer
themselvesforre‐election.
Full
Boardmeetingstakeplacequarterlyand
additionalmeetingsareheldasrequired,toaddress
specificissues,includingconsidering
recommendationsfromtheInvestmentManager,
makingalldecisionsconcerningtheacquisitionor
disposalofinvestments,andreviewingperiodically
thetermsofengagementofallthird‐partyadvisers
(includingtheInvestmentandAdministration
Manager).
TheBoardhasaformalscheduleof
mattersspecificallyreservedforitsdecision.
AstheCompanyhasasmallBoardofnon‐executive
Directors,allDirectorssitoneachCommittee.The
ChairmanoftheAuditandRemuneration
CommitteesisLordFlightandtheChairmanofthe
NominationCommitteeisSir
AubreyBrocklebank.
TheAuditCommitteenormallymeetstwiceyearly,
andtheRemunerationandNominationCommittees
meetasrequired.AllCommitteeshavedefined
termsofreferenceandduties.
TheBoardhasalsoestablishedprocedureswhereby,
Directorswishingtodosointhefurtheranceoftheir
duties,maytakeindependentprofessionaladviceat
theCompany’sexpense.
AllDirectorshaveaccesstotheadviceandservices
oftheCompanySecretary.TheCompanySecretary
providestheBoardwithfullinformationonthe
Company’sassetsandliabilitiesandotherrelevant
informationrequestedbytheChairman,inadvance
ofeachBoardmeeting.
TheBoardhasauthorityto
makemarketpurchases
oftheCompany’sownshares.Thisauthorityforup
to14.9%oftheCompany’sissuedsharecapitalwas
grantedattheAGMon8September2021.A
resolutionwillbeputtoShareholderstorenewthis
authorityattheforthcomingAGM.
ThecapitalstructureoftheCompanyis
disclosedon
page49.
AuditCommittee
TheCompanyhasanAuditCommitteecomprising
LordFlight(Chairman),SirAubreyBrocklebank,
AndrewMackintosh,andSteven.ThisCommittee
hasdefinedtermsofreferenceandduties.
SirAubreyBrocklebankwasconsideredindependent
onappointmentasChairmanoftheCompanyin
January2019andisthereforealsoamemberofthe
Audit
Committee.
TheAuditCommitteeisresponsiblefor:
monitoringtheCompany’sfinancialreportingand
anyformalannouncementsrelatingtothe
company’sfinancialperformance;
providingadviceonwhethertheannualreport
andaccounts,takenasawhole,arefairbalanced
andunderstandable;
reviewinginternalcontrolsandriskmanagement
systems;and
mattersregardingauditandexternalauditors.
FinancialReporting
TheCommitteeisresponsibleforreviewingand
agreeingtheHalf‐YearlyandAnnualReports
(includingthosefigurespresentedwithin)before
theyarepresentedtotheBoardforfinalapproval.
Inparticular,theCommitteereviews,challenges
(whereappropriate)andagreesthebasisforthe
carryingvalueoftheunquotedinvestments,as
preparedbytheInvestmentManager,for
presentationwithintheHalf‐YearlyandAnnual
Reports.
TheCommitteealsotakesintocarefulconsideration
commentsonmattersregardingvaluation,revenue
recognitionanddisclosuresarisingfromtheAuditors
ReporttotheAuditCommittee,aspartofthe
finalisationprocessfortheAnnualAccounts.
60
Corporate Governance Statement (continued)
AuditCommittee(continued)
FinancialReporting(continued)
TheCommitteehasconsideredtheAnnualReport
fortheyearended31March2022andhasreported
totheBoardthatitconsidersittobefair,balanced
andunderstandable,providingtheinformation
necessaryforShareholderstoassesstheCompany’s
performance,businessmodelandstrategy.
Internalauditandcontrol
TheCommitteehasconsideredtheneedforan
internalauditfunctionandhasconcludedthatsucha
functionisnotappropriateforacompanyofthissize
andstructure.TheCommitteeseekstosatisfyitself
thatthereisapropersystemandallocationofthe
responsibilitiesfor
theday‐to‐daymonitoringof
financialcontrolsbyreceivingrepresentationsand
information(eitheruponrequestorvoluntarily)from
theInvestmentManager.Thisiscoveredmorefully
underRiskManagementandInternalControl.
Whistleblowingprocedures
AstheCompanyhasnostaff,otherthanDirectors,
therearenoproceduresinplace
relatingto
whistleblowing.TheAuditCommitteeunderstands
thattheInvestmentManagerhaswhistleblowing
proceduresinplace.
Externalauditor
TheCommitteereviewsandagreestheaudit
strategypaper,presentedbytheAuditorinadvance
oftheaudit,whichsetsoutthekeyriskareastobe
coveredduringtheaudit,confirmstheirstatusof
independenceandincludestheproposedauditfee.
TheCommitteeconfirmsthatthemainarea
ofrisk
fortheyearunderreviewisthevaluationof
unquotedinvestments.TheCommitteealsocarefully
examinesthetreatmentofquotedinvestmentsand
loannoteinterestrevenuerecognition.
TheCommittee,aftertakingintoconsideration
commentsfromtheInvestmentManager,Downing
LLP,regardingtheeffectivenessoftheaudit
process;immediatelybeforetheconclusionofthe
annualaudit,willrecommendtotheBoardeitherthe
re‐appointmentorremovaloftheauditors.
UndertheCompetitionandMarketsAuthority
regulations,thereis
arequirementthatanaudittender
processbecarriedouteverytenyearsandmandatory
rotationatleasteverytwentyyears.Thelastaudit
tendertookplaceinrespectoftheyearended31March
2020andthereforemandatorytenderwillberequiredin
respectoftheyearended31
March2030.Following
assurancesreceivedfromtheManagersatcompletionof
theauditfortheyearended31March2021,andtaking
discussionsheldwiththeengagementPartneratBDO
LLPintoconsideration,theCommitteehas
recommendedtheybere‐appointedattheforthcoming
AGM.
Non‐auditservices
TheCommitteewill
approvetheprovisionofad‐hoc
workandthemaximumexpectedfeebeforebeing
undertaken,toensuretheAuditorsobjectivityand
independencearesafeguarded.
Aspartofitsannualreviewprocedures,the
Committeehasobtainedsufficientassurancefrom
theirownevaluation,theauditfeedback
documentationandfromcorrespondenceand
discussions
withtheengagementpartnerofBDO
LLP.
Conflictsofinterest
Aconflictofinterestmayarisewhereassetsare
transferredbetweenSharepools,orfromone
Downingfundtoanother.TheBoardensuresthat
anysuchtransactionisat“arm’slength”andwill
obtainindependentvaluationswherenecessary.
BoardandCommitteemeetings
ThefollowingtablesetsouttheDirectors’
attendanceattheBoardandCommitteemeetings
heldduringtheyear.
Board
meetings
attended
Nomination
Committee
meetings
attended
Audit
Committee
meetings
attended
(4held)
(1held)
(2held)
SirAubrey
Brocklebank
4 1 2
LordFlight 4 1 2
Andrew
Mackintosh
*3‐1
StevenClarke *3‐1
ChrisAllner *3‐1
RussellCatley 2 1 1
*AppointedSeptember2021–allmeetingsattendedsince
appointment
RemunerationCommittee
TheCommitteemeetsasandwhenrequiredto
reviewthelevelsofDirectors’remuneration.Details
ofthespecificlevelsofremunerationtoeach
DirectoraresetoutintheDirectors’Remuneration
Reportonpage55.
NominationCommittee
TheNominationCommittee’sprimaryfunctionisto
makerecommendationstotheBoardonallnew
appointmentsandalsotoadvisegenerallyonissues
relatingtoBoardcompositionandbalance.The
Committeemeetsasandwhenappropriate.
61
Corporate Governance Statement (continued)
NominationCommittee(continued)
WhenconsideringanewappointmenttotheBoard,
theCommittee’sresponsibilityistoensurethat
Shareholdersaresafeguardedbyappointingthe
mostappropriatepersonfortheposition
(irrespectiveofgender),givingdueregardtopast
andpresentexperienceinthesectorsinwhichthe
Companyinvests.TheCompanythereforedoes
not
haveaspecificdiversitypolicyinplace.
Directortenurepolicy
GiventhesizeoftheCompanyandthecomplexity
oftheVCTregulations,theBoarddoesnotimposea
limitinrespectofthetenureoftheCompany’snon‐
executiveDirectors.InaccordancewithCorporate
Governancebestpractice,theDirectortenurepolicy
oftheCompanyrequiresthatanyDirectorwhohas
servedontheBoardforinexcessofnineyearsbe
subjecttoannualre‐election.Directorswhohave
servedontheBoardforlessthannineyearsare
subjecttore‐electionattheAGMimmediately
followingtheirappointment,andeverythreeyears
thereafter.
RelationswithShareholders
Shareholdershavetheopportunitytomeetthe
BoardattheAGM.TheBoardisalsohappyto
respondtoanywrittenqueriesmadeby
Shareholdersduringthecourseoftheyear,orto
meetwithShareholdersifsorequested.
InadditiontotheformalbusinessoftheAGM,
representativesofthe
InvestmentManagerandthe
Boardareavailabletoansweranyquestionsa
Shareholdermayhave.
SeparateresolutionsareproposedattheAGMon
eachsubstantiallyseparateissue.TheAdministration
Managercollatesproxyvotesandtheresults
(togetherwiththeproxyforms)areforwardedtothe
CompanySecretaryimmediatelypriorto
theAGM.
InordertocomplywiththeAICCode,proxyvotes
areannouncedattheAGM,followingeachvoteona
showofhands,exceptintheeventofapollbeing
called.ThenoticeofthenextAGMandproxyform
canbefoundattheendofthese
financial
statements.
ThetermsofreferenceoftheCommitteesandthe
conditionsofappointmentofnon‐executive
DirectorsareavailabletoShareholdersonrequest.
Financialreporting
TheDirectors’responsibilitiesforpreparingthe
financialstatementsaresetoutintheReportofthe
Directorsonpages52to53,andastatementbythe
Auditorabouttheirreportingresponsibilitiesisset
outintheIndependentAuditor’sreportonpage69.
Riskmanagementandinternalcontrol
TheBoardhasadoptedaCorporateGovernanceand
InternalControlManual(“Manual”)forwhichitis
responsible,whichhasbeencompiledinorderto
complywiththeAICCodeofCorporateGovernance
(“AICCode”).TheManualisdesignedtoprovide
reasonable,butnotabsoluteassuranceagainst
materialmisstatementorloss,which
itachievesby
detailingtheperceivedrisksandcontrolstomitigate
them.TheBoardreviewstheperceivedrisksinline
withrelevantguidance,onanannualbasis,and
implementsadditionalcontrolsasappropriate.
TheBoardreviewsaRiskRegisteronanannual
basis.Themainaspectsofinternalcontrolin
relation
tofinancialreportingbytheBoardwereasfollows:
ReviewofquarterlyreportsfromtheInvestment
Managerontheportfolioofinvestmentsheld,
includingadditionsanddisposals;
QuarterlyreviewsbytheBoardofthe
Company’sinvestments,otherassetsand
liabilities,revenueandexpenditureanddetailed
reviewofunquotedinvestmentvaluations;
QuarterlyreviewsbytheBoardofcompliance
withtheVentureCapitalTrustregulationsto
retainstatus,includingareviewofhalf‐yearly
reportsfromPhilipHare&AssociatesLLP;
AseparatereviewoftheAnnualReportand
Half‐YearlyreportbytheAuditCommitteeprior
toBoardapproval;and
AreviewbytheBoardofallfinancialinformation
priortopublication.
TheBoardisresponsibleforensuringthatthe
procedurestobefollowedbytheadvisersand
themselvesareinplace,andtheyreviewthe
effectivenessoftheManual,basedonthereport
fromtheAuditCommittee,onan
annualbasisto
ensurethatthecontrolsremainrelevantandwerein
operationthroughouttheyear.
AlthoughtheBoardisultimatelyresponsiblefor
safeguardingtheassetsoftheCompany,theBoard
hasdelegated,throughwrittenagreements,theday‐
to‐dayoperationoftheCompany(includingthe
FinancialReportingProcess)toDowning
LLP.
Anti‐briberypolicy
TheCompanyoperatesananti‐briberypolicyto
ensurethatitmeetsitsresponsibilitiesarisingfrom
theBriberyAct2010.Thispolicycanbefoundon
thewebsitemaintainedbytheManagerat
www.downing.co.uk.
62
Corporate Governance Statement (continued)
Goingconcern
TheCompany’sbusinessactivities,togetherwiththe
factorslikelytoaffectitsfuturedevelopment,
performanceandpositionaresetoutinthe
Chairman’sStatementonpage4,theInvestment
Manager’sReportsonpages9,21,33,and37,the
StrategicReportonpage43andtheReportofthe
Directorson
page49.Thefinancialpositionofthe
Company,itscashflows,liquiditypositionand
borrowingfacilitiesareshownintheBalanceSheet
onpage75,CashFlowStatementonpage80and
theStrategicReportonpage43.Aviability
statementissetoutonpage45consideringthe
longer
termprospectsofthecompanyinlightof
principlerisksandfacingtheCompany.Inaddition,
note15tothefinancialstatementsincludesthe
Company’sobjectives,policiesandprocessesfor
managingitscapitalandfinancialriskmanagement
objectives,detailsofitsfinancialinstruments,andits
exposurestocreditriskandliquidity
risk.
Thecoronaviruspandemicresultedinasignificant
correctioninglobalmarketspricesinMarch2020.
Whilstthelongtermimpactofthepandemic
continuestoevolve,marketpriceshavegenerally
improved.TheCompanyhasalimitedlevelof
exposuretopublicmarkets,withcashandunquoted
investmentsmakingup
approximately88%oftheof
theCompany’snetassetsasat31March2022.
Despitetheinevitablepermanentimpactonsomeof
theportfolio,theBoardarepleasedwithhowmany
ofthecompaniesdealtwiththechallengesthey
faced,andnowlookforwardtocontinuedrecovery
asweexitthe
pandemic.
TheconflictinUkraineandtheimpactofsanctions
onRussianindividualsandcompaniesisconsidered
tobeoflimitedrisktotheVCTandtheinvestee
companies,astheoverallexposureislow.The
BoardandManagercontinuetocloselymonitorthe
situationandtoworkwiththe
investeecompanies
toassessanyadditionalrisksastheymayarise.
ImpactontheCompany’sperformanceisnot
expectedtobesignificant.
Thereisanemergingriskrelatingtotheincreasing
rateofinflationintheUK.Investeecompaniesmay
beexposedtorisingcostsofoverheadsandwages
overthe
comingmonths.TheBoardissatisfiedthat
theManager’scloseworkingrelationshipwiththe
investeecompanieswillensurethatsuchcostsare
controlledasmuchaspossible,andthatwhere
conceivable,willbepassedontotheendcustomer.
TheBoardconsidersthenetimpacttobeata
manageable
level,withnoimpactonthegoing
concernofthecompany.
TheCompanyhasconsiderablefinancialresources
andholdsadiversifiedportfolioofinvestments.Asa
consequence,theDirectorsbelievethatthe
Companyiswellplacedtomanageitsbusinessrisks
effectively.
TheDirectorsconfirmthattheyaresatisfiedthat
the
Companyhasadequateresourcestocontinuein
businessforaperiodofatleasttwelvemonthsfrom
thedateofapprovalofthefinancialstatements.
Forthisreason,theBoardbelievesthatthe
Companycontinuestobeagoingconcernandthatit
isappropriatetocontinuetoapplythe
going
concernbasisinpreparingthefinancialstatements.
Sharecapital
Thecompanyhasfiveclassesofsharecapital:DSO
DShares,DP67Shares,VenturesShares,
HealthcareSharesandAIMShares.Therightsand
obligationsattachedtothoseshares,includingthe
poweroftheCompanytobuybackshares,and
detailsofanysignificantshareholdings,aresetoutin
theReportof
theDirectorsonpage49to50.
Compliancestatement
TheListingRulesrequiretheBoardtoreporton
compliancewiththeprovisionsoftheUKCorporate
GovernanceCodethroughouttheaccountingperiod.
TheFinancialReportingCouncil(FRC)confirmed
thatmembercompanieswhoreportagainsttheAIC
Codewillbemeetingtheirobligationsinrelationto
theUKCorporateGovernanceCode
andparagraph
9.8.6oftheListingRules.
Withtheexceptionofthelimiteditemsoutlined
below,theCompanyhascomplied,throughoutthe
accountingyearended31March2022,withthe
ProvisionssetoutintheAICCodeofCorporate
Governance:
TheCompanyhasnomajorShareholders,so
Shareholdersarenotgiventheopportunityto
meetanynewnon‐executiveDirectorsata
specificmeetingotherthantheAnnualGeneral
Meeting.(5.2.3);
63
Corporate Governance Statement (continued)
Compliancestatement(continued)
TheBoarddoesnotmonitorthelevelofshare
pricediscountorpremiuminrespectoftheDSO
DSharesorDP67Shares,asSharebuybacksare
notinoperationinrespectoftheseShareclasses.
Asnotedonpage91,theCompanyhasageneral
policyofbuyinginVentures,
HealthcareandAIM
Shareswhichbecomeavailableinthemarketata
nildiscounttoNAV.TheBoardcontinuesto
monitorthediscountorpremiuminrespectof
theVentures,HealthcareandAIMSharesand
hasdelegatedthedaytodaymanagementofthis
toPanmureGordon.(6.2.15);
DuetothesizeoftheBoardandthenatureof
theCompany’sbusiness,aformalandrigorous
performanceevaluationoftheBoard,its
Committees,theindividualDirectorsandthe
Chairmanhasnotbeenundertaken.Specific
performanceissuesaredealtwithastheyarise.
(7.2.22,8.2.29,9.2.37).
Byorderofthe
Board
GrantWhitehouse
CompanySe cr etary
6
th
Floor,St.MagnusHouse
3LowerThamesStreet
London,EC3R6HD 25July2022
64
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
Opiniononthefinancialstatements
Inouropinionthefinancialstatements:
giveatrueandfairviewofthestateoftheCompany’saffairsasat31March2022andofitsprofitfor
theyearthenended;
havebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccounting
Practice;
havebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006.
WehaveauditedthefinancialstatementsofDowningFOURVCTplc(the‘Company’)fortheyearended31
March2022whichcomprisetheAuditedIncomeStatement,theAuditedBalanceSheet,theStatementof
ChangesinEquity,theCash
FlowStatementandnotestothefinancialstatements,includingasummaryof
significantaccountingpolicies.Thefinancialreportingframeworkthathasbeenappliedintheirpreparationis
applicablelawandUnitedKingdomAccountingStandards,includingFinancialReportingStandard102The
FinancialReportingStandardapplicableintheUKandRepublicof
Ireland(UnitedKingdomGenerallyAccepted
AccountingPractice).
Basisforopinion
WeconductedourauditinaccordancewithInternationalStandardsonAuditing(UK)(ISAs
(UK))andapplicablelaw.Ourresponsibilitiesunderthosestandardsarefurtherdescribedinthe
Auditor’sresponsibilitiesfortheauditofthefinancialstatementssectionofourreport.Webelievethattheaudit
evidencewehaveobtainedissufficient
andappropriatetoprovideabasisforouropinion.Ourauditopinionis
consistentwiththeadditionalreporttotheauditcommittee.
Independence
Followingtherecommendationoftheauditcommittee,wewereappointedbytheBoardofDirectorstoaudit
thefinancialstatementsfortheyearended31March2010
andsubsequentfinancialperiods.Theperiodoftotal
uninterruptedengagementincludingretendersandreappointmentsis13years,coveringtheyearsended31
March2010to31March2022.WeremainindependentoftheCompanyinaccordancewiththeethical
requirementsthatarerelevanttoourauditofthefinancialstatementsin
theUK,includingtheFRC’sEthical
Standardasappliedtolistedpublicinterestentities,andwehavefulfilledourotherethicalresponsibilitiesin
accordancewiththeserequirements.Thenon‐auditservicesprohibitedbythatstandardwerenotprovidedto
theCompany.
Conclusionsrelatingtogoingconcern
Inauditingthefinancialstatements,wehaveconcludedthattheDirectors’useofthegoingconcernbasisof
accountinginthepreparationofthefinancialstatementsisappropriate.OurevaluationoftheDirectors’
assessmentoftheCompany’sabilitytocontinuetoadoptthegoingconcernbasisofaccountingincluded:
ObtainingtheVCTcompliancereportsduringtheyearandasatyearendandreviewingtheir
calculationstocheckthattheCompanywasmeetingitsrequirementstoretainVCTstatus;
ReviewingtheforecastedcashflowsthatsupporttheDirectors’assessmentofgoingconcernand
challengingmanagement’sassumptionsandjudgementsmadeintheforecasts,assessingthemfor
reasonableness.Inparticularweconsideredtheavailablecashresourcesrelativetotheforecast
expenditureandabilitytomeetVCTqualificationcriteria;and
Evaluatingtheappropriatenessofmanagement’smethodofassessingthegoingconcerninlightofworst
caseassumptionsandthepresentuncertaintiesduetotheCovid‐19pandemic.
Basedontheworkwehaveperformed,wehavenotidentifiedanymaterialuncertaintiesrelatingtoeventsor
conditionsthat,individuallyorcollectively,may
castsignificantdoubtontheCompany’sabilitytocontinueasa
goingconcernforaperiodofatleasttwelvemonthsfromwhenthefinancialstatementsareauthorisedforissue.
InrelationtotheCompany’sreportingonhowithasappliedtheUKCorporateGovernanceCode,wehave
nothingmaterial
toaddordrawattentiontoinrelationtotheDirectors’statementinthefinancialstatements
aboutwhethertheDirectorsconsidereditappropriatetoadoptthegoingconcernbasisofaccounting.
OurresponsibilitiesandtheresponsibilitiesoftheDirectorswithrespecttogoingconcernaredescribedinthe
relevantsectionsof
thisreport.
65
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
Overview
2022 2021
Keyauditmatters Valuationofunquotedinvestments Yes Yes
Materiality Companyfinancialstatementsasawhole
1,065,000(2021:£712,000)basedon1.75%ofnetassets(2021:1.75%offixedasset
investments).
Anoverviewofthescopeofouraudit
OurauditwasscopedbyobtaininganunderstandingoftheCompanyanditsenvironment,includingthe
Company’ssystemofinternalcontrol,andassessingtherisksofmaterialmisstatementinthefinancial
statements.Wealsoaddressedtheriskofmanagementoverrideofinternalcontrols,includingassessing
whethertherewasevidenceofbias
bytheDirectorsthatmayhaverepresentedariskofmaterialmisstatement.
Keyauditmatters
Keyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditof
thefinancialstatementsofthecurrentperiodandincludethemostsignificantassessedrisksofmaterial
misstatement(whetherornotduetofraud)thatweidentified,includingthosewhichhadthegreatesteffecton:
theoverallauditstrategy,theallocationofresourcesintheaudit,anddirectingtheeffortsoftheengagement
team.Thesematterswereaddressedinthecontextofourauditofthefinancialstatements
asawhole,andin
formingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.
Keyauditmatter Howthescopeofourauditaddressedthekeyaudit
matter
Valuation
of
unquoted
investments
Referto
note1and
9ofthe
financial
statements
Theunquoted
investmentsconsistof
bothequityandloan
noteinvestments.We
considerthevaluation
ofunquoted
investmentstobethe
mostsignificantaudit
areaasthereisahigh
levelofestimation
uncertaintyinvolved
in
determiningthe
unquotedinvestment
valuations.
Thereisaninherentrisk
ofmanagementoverride
arisingfromthe
unquotedinvestment
valuationsbeing
preparedbythe
InvestmentManager,
whoisremunerated
basedonthevalueof
thenetassetsofthe
fund,asshowninnote
3.
Oursampleforthetesting
ofunquotedinvestmentswasstratified
accordingtoriskconsidering,interalia,thevalueofindividual
investments,thenatureoftheinvestment,theextentofthefair
valuemovementandthesubjectivityofthevaluationtechnique.
ForallInvestmentsinoursamplewe:
Challengedwhetherthevaluationmethodologywasthemost
appropriate
inthecircumstancesundertheInternationalPrivate
EquityandVentureCapitalValuation(“IPEV”)Guidelinesandthe
applicableaccountingstandards.Wehavecheckedthatthe
valuationmethodologyremainsapplicablegiventheimpactofthe
Russia/UkrainecrisisandCovid‐19,andrecalculatedthevalue
attributabletotheCompany,havingregardtothe
applicationof
enterprisevalueacrossthecapitalstructuresoftheinvestee
companies.
Forinvestmentssampledthatwerevaluedusinglesssubjective
valuationtechniques(costandpriceofrecentinvestment
reviewedforchangesinfairvalue)we:
Verifiedthecostorpriceofrecentinvestmenttosupporting
documentation;
Consideredwhethertheinvestmentwasanarm’slength
transactionthroughreviewingthepartiesinvolvedinthe
transactionandcheckingwhetherornottheywerealready
investorsoftheinvesteeCompany;
66
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
Keyauditmatter Howthescopeofourauditaddressedthekeyaudit
matter
Consideredwhethertherewereanyindicationsthatthecostor
priceofrecentinvestmentwasnolongerrepresentativeoffair
valueconsidering,interalia,thecurrentperformanceofthe
investeecompanyandthemilestonesandassumptionssetout
intheinvestmentproposal;and
Consideredwhetherthepriceofrecentinvestmentis
supportedbyalternativevaluationtechniques.
Forinvestmentssampledthatwerevaluedusingmoresubjective
techniques(earningsmultiples,revenuemultiplesanddiscounted
cashflowforecasts)we:
Challengedandcorroboratedtheinputstothevaluationwith
referencetomanagementinformationofinvesteecompanies,
marketdataandourownunderstandingandassessedthe
impactoftheestimationuncertaintyconcerningthese
assumptionsandthedisclosureoftheseuncertaintiesinthe
financialstatements;
Reviewedthehistoricalfinancialstatementsandanyrecent
managementinformationavailabletosupportassumptions
aboutmaintainablerevenues,earningsorcashflowsusedin
thevaluations;
Consideredtherevenueorearningsmultiplesappliedandthe
discountsappliedbyreferencetoobservablelistedcompany
marketdata;and
Challengedtheconsistencyandappropriatenessof
adjustmentsmadetosuchmarketdatainestablishingthe
revenue,cashfloworearningsmultipleappliedinarrivingat
thevaluationsadoptedbyconsideringtheindividual
performanceofinvesteecompaniesagainstplanandrelativeto
thepeergroup,themarketandsectorinwhichthe
investee
companyoperatesandotherfactorsasappropriate.
Forasampleofloannoteinvestmentsheldatfairvalueincluded
above,we:
Vouchedsecurityheldtoloanagreement
Consideredtheassumptionthatfairvalueisnotsignificantly
differenttocostbychallengingtheassumptionthatthereisno
significantmovementinthemarketinterestratesince
acquisitionandconsideringthe“unitofaccount”concept
Reviewedthetreatmentofaccruedredemptionpremium/other
fixedreturnsinlinewiththeStatementofRecommended
Practice:FinancialStatementsofInvestmentTrustCompanies
andVentureCapitalTrusts(“theSORP”).
Whereappropriate,weperformedasensitivityanalysisby
developingourownpointestimatewhereweconsideredthat
alternativeinputassumptionscould
reasonablyhavebeenapplied
andweconsideredtheoverallimpactofsuchsensitivitiesonthe
portfolioofinvestmentsindeterminingwhetherthevaluationsas
awholearereasonableandfreefrombias.
Keyobservations:
Basedontheproceduresperformedweconsidertheinvestment
valuationstobeappropriateconsideringthelevelof
estimation
uncertainty.
67
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
Ourapplicationofmateriality
Weapplytheconceptofmaterialitybothinplanningandperformingouraudit,andinevaluatingtheeffectof
misstatements.Weconsidermaterialitytobethemagnitudebywhichmisstatements,includingomissions,could
influencetheeconomicdecisionsofreasonableusersthataretakenonthebasisofthefinancialstatements.
Inordertoreducetoanappropriatelylowleveltheprobabilitythatanymisstatementsexceedmateriality,we
usealowermaterialitylevel,performancemateriality,todeterminetheextentoftestingneeded.Importantly,
misstatementsbelowtheselevelswillnotnecessarilybeevaluatedasimmaterialaswealsotakeaccountofthe
nature
ofidentifiedmisstatements,andtheparticularcircumstancesoftheiroccurrence,whenevaluatingtheir
effectonthefinancialstatementsasawhole.
Basedonourprofessionaljudgement,wedeterminedmaterialityforthefinancialstatementsasawholeand
performancematerialityasfollows:
Companyfinancialstatements
2022 2021
Materialit
y
£1,065,000 £712,000
Basisfor
determining
materialit
y
1.75%ofnetassets 1.75%offixedassetinvestments.
Rationaleforthe
benchmarkapplied
TheprimaryfocusofInvestment
companiesofthisnatureislongand
shorttermcapitalappreciation.
Thereforetheusersofthefinancial
statementsareprimarilyfocusedonthe
netassetvalue,henceweconsiderthis
tobethemostappropriatebasisforour
materialitycalculations.
We
haveupdatedourmaterialitybasis
duringtheyearasinourjudgement,the
usersofthefinancialstatementsare
interestedinthenetassetpositionas
comparedtogrossassets.
Insettingmateriality,wehavehadregard
tothenatureandcompositionofthe
investmentportfolio.GiventhattheVCT’s
portfolioiscomprisedofquotedand
unquotedinvestmentswhichwould
typicallyhaveawiderspreadof
reasonablealternativepossiblevaluations,
wehaveappliedapercentageof1.75%of
netassets.
Performance
materialit
y
£799,000 £534,000
Basisfor
determining
performance
materiality
75%ofmateriality
Thelevelofperformancemateriality
appliedwassetafterhavingconsidered
anumberoffactorsincludingthe
expectedtotalvalueofknownandlikely
misstatements.
75%ofmateriality
Thelevelofperformancemateriality
appliedwassetafterhavingconsidereda
numberoffactors
includingtheexpected
totalvalueofknownandlikely
misstatements.
Lowertestingthreshold
WedeterminedthatforRevenuereturnbeforetax,amisstatementoflessthanmaterialityforthefinancial
statementsasawhole,couldinfluenceusersofthefinancialstatementsasitisameasureoftheCompany’s
performanceofincomegeneratedfromitsinvestmentsafterexpenses.Asaresult,wedetermineda
lower
testingthresholdforthoseitemsimpactingrevenuereturnof£146,000(2021:£89,000)basedon10%(2021:
10%)ofgrossexpenditure.
Reportingthreshold
WeagreedwiththeAuditCommitteethatwewouldreporttothemallindividualauditdifferencesinexcessof
£53,000(2021:£11,000).Wealsoagreedtoreportdifferencesbelowthisthresholdthat,inourview,warranted
reportingonqualitativegrounds.
68
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
Otherinformation
Thedirectorsareresponsiblefortheotherinformation.Theotherinformationcomprisestheinformation
includedintheReport&Accountsotherthanthefinancialstatementsandourauditor’sreportthereon.Our
opiniononthefinancialstatementsdoesnotcovertheotherinformationand,excepttotheextentotherwise
explicitlystatedin
ourreport,wedonotexpressanyformofassuranceconclusionthereon.Ourresponsibilityis
toreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistent
withthefinancialstatementsorourknowledgeobtainedinthecourseoftheaudit,orotherwiseappearstobe
materiallymisstated.Ifweidentifysuchmaterialinconsistenciesorapparentmaterialmisstatements,weare
requiredtodeterminewhetherthisgivesrisetoamaterialmisstatementinthefinancialstatementsthemselves.
If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisother
information,
wearerequiredtoreportthatfact.
Wehavenothingtoreportinthisregard.
Corporategovernancestatement
TheListingRulesrequireustoreviewtheDirectors’statementinrelationtogoingconcern,longer‐termviability
andthatpartoftheCorporateGovernanceStatementrelatingtotheCompany’scompliancewiththeprovisions
oftheUKCorporateGovernanceCodespecifiedforourreview.
Basedontheworkundertakenaspart
ofouraudit,wehaveconcludedthateachofthefollowingelementsof
theCorporateGovernanceStatementismateriallyconsistentwiththefinancialstatementsorourknowledge
obtainedduringtheaudit.
Goingconcern
andlonger‐
termviability
TheDirectors'statementwithregardstotheappropriatenessofadoptingthegoing
concernbasisofaccountingandanymaterialuncertaintiesidentified;and
TheDirectors’explanationastotheirassessmentoftheCompany’sprospects,theperiod
thisassessmentcoversandwhytheperiodisappropriate.
OtherCode
provisions
Directors'statementonfair,balancedandunderstandable;
Board’sconfirmationthatithascarriedoutarobustassessmentoftheemergingand
principalrisks;
Thesectionoftheannualreportthatdescribesthereviewofeffectivenessofrisk
managementandinternalcontrolsystems;and
Thesectiondescribingtheworkoftheauditcommittee.
OtherCompaniesAct2006reporting
Basedontheresponsibilitiesdescribedbelowandourworkperformedduringthecourseoftheaudit,weare
requiredbytheCompaniesAct2006andISAs(UK)toreportoncertainopinionsandmattersasdescribed
below.
Strategic
reportand
Directors’
report
Inouropinion,basedontheworkundertaken
inthecourseoftheaudit:
theinformationgivenintheStrategicreportandtheDirectors’reportforthefinancial
yearforwhichthefinancialstatementsarepreparedisconsistentwiththefinancial
statements;and
theStrategicreportandtheDirectors’reporthavebeenpreparedinaccordancewith
applicablelegalrequirements.
InthelightoftheknowledgeandunderstandingoftheCompanyanditsenvironment
obtainedinthecourseoftheaudit,wehavenotidentifiedmaterialmisstatementsinthe
strategicreportortheDirectors’
report.
Directors’
remuneration
Inouropinion,thepartoftheDirectors’remunerationreporttobeauditedhasbeen
properlypreparedinaccordancewiththeCompaniesAct2006.
69
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
OtherCompaniesAct2006reporting(continued)
Matterson
whichweare
requiredto
reportby
exception
Wehavenothingtoreportinrespectofthefollowingmattersinrelationtowhichthe
CompaniesAct2006requiresustoreporttoyouif,inouropinion:
adequateaccountingrecordshavenotbeenkept,orreturnsadequateforouraudithave
notbeenreceivedfrombranchesnotvisitedbyus;or
thefinancialstatementsandthepartoftheDirectors’remunerationreporttobeaudited
arenotinagreementwiththeaccountingrecordsandreturns;or
certaindisclosuresofDirectors’remunerationspecifiedbylawarenotmade;or
wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.
ResponsibilitiesofDirectors
AsexplainedmorefullyintheDirectors’responsibilities,theDirectorsareresponsibleforthepreparationofthe
financialstatementsandforbeingsatisfiedthattheygiveatrueandfairview,andforsuchinternalcontrolasthe
Directorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatare
freefrommaterial
misstatement,whetherduetofraudorerror.
Inpreparingthefinancialstatements,theDirectorsareresponsibleforassessingtheCompany’sabilityto
continueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoing
concernbasisofaccountingunlesstheDirectorseither
intendtoliquidatetheCompanyortoceaseoperations,
orhavenorealisticalternativebuttodoso.
Auditor’sresponsibilitiesfortheauditofthefinancialstatements
Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefree
frommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesour
opinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatan
auditconductedin
accordancewithISAs(UK)willalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarise
fromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybe
expectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisof
thesefinancialstatements.
Extenttowhichtheauditwascapableofdetectingirregularities,includingfraud
Irregularities,includingfraud,areinstancesofnon‐compliancewithlawsandregulations.Wedesignprocedures
inlinewithourresponsibilities,outlinedabove,todetectmaterialmisstatementsinrespectofirregularities,
includingfraud.Theextenttowhich
ourproceduresarecapableofdetectingirregularities,includingfraudis
detailedbelow:
WegainedanunderstandingofthelegalandregulatoryframeworkapplicabletotheCompanyandtheindustry
inwhichitoperates,andconsideredtheriskofactsbytheCompanywhichwerecontrarytoapplicablelawsand
regulations,
includingfraud.TheseincludedbutwerenotlimitedtocompliancewithCompaniesAct2006,the
FCAlistingandDTRrules,theprinciplesoftheUKCorporateGovernanceCode,industrypracticerepresented
bytheStatementofRecommendedPractice:FinancialStatementsofInvestmentTrustCompaniesandVenture
CapitalTrusts(“theSORP”)andupdated
inFebruary2018withconsequentialamendmentsandtheapplicable
financialreportingframework.WealsoconsideredtheCompany’squalificationasaVCTunderUKtax
legislation.
Ourproceduresincluded:
obtaininganunderstandingofthecontrolenvironmentinmonitoringcompliancewithlawsand
regulations;
agreementofthefinancialstatementdisclosurestounderlyingsupportingdocumentation;
enquiriesofmanagementandthosechargedwithgovernancerelatingtotheirknowledgeofanynon‐
compliancewithlawsandregulations;
obtainingtheVCTcompliancereportspreparedbymanagement’sexpertduringtheyearandasatyear
endandreviewingtheircalculationstocheckthattheCompanywasmeetingitsrequirementstoretain
VCTstatus;and
reviewingminutesofboardmeetingsandlegalcorrespondenceandinvoicesthroughouttheperiodfor
instancesofnon‐compliancewithlawsandregulationsandfraud.
Weassessedthesusceptibilityofthefinancialstatementtomaterialmisstatementincludingfraudand
consideredthefraudriskareastobethevaluationofunquotedinvestmentsand
managementoverrideof
controls.
70
Independent Auditor’s Report to the Members of
Downing FOUR VCT Plc
(continued)
Auditor’sresponsibilitiesfortheauditofthefinancialstatements(continued)
Ourtestsincluded,butwerenotlimitedto:
theproceduressetoutintheKeyauditmatterssectionabove;
obtainingindependentevidencetosupporttheownershipofasampleofinvestments;
enquiriesofmanagement,thosechargedwithgovernancerelatingtotheirknowledgeofanyfraud,
whethersuspectedoralleged
recalculatinginvestmentmanagementfeesintotal;
obtainingindependentconfirmationofbankbalances;and
testingjournalswhichmetadefinedriskcriteriabyagreeingtosupportingdocumentationand
evaluatingwhethertherewasevidenceofbiasbytheInvestmentManagerandDirectorsthat
representedariskofmaterialmisstatementduetofraud.
Wealsocommunicatedrelevantidentifiedlawsandregulationsandpotentialfraudriskstoall
engagementteam
membersandremainedalerttoanyindicationsoffraudornon‐compliancewithlawsandregulationsthroughout
theaudit.
Ourauditproceduresweredesignedtorespondtorisksofmaterialmisstatementinthefinancialstatements,
recognisingthattheriskofnotdetectingamaterialmisstatementduetofraud
ishigherthantheriskofnot
detectingoneresultingfromerror,asfraudmayinvolvedeliberateconcealmentby,forexample,forgery,
misrepresentationsorthroughcollusion.Thereareinherentlimitationsintheauditproceduresperformedand
thefurtherremovednon‐compliancewithlawsandregulationsisfromtheeventsandtransactions
reflectedin
thefinancialstatements,thelesslikelywearetobecomeawareofit.
AfurtherdescriptionofourresponsibilitiesisavailableontheFinancialReportingCouncil’swebsiteat:
www.frc.org.uk/auditorsresponsibilities.Thisdescriptionformspartofourauditor’sreport.
Useofourreport
ThisreportismadesolelytotheCompany’smembers,asabody,inaccordancewithChapter3ofPart16ofthe
CompaniesAct2006.OurauditworkhasbeenundertakensothatwemightstatetotheCompany’smembers
thosematterswearerequiredtostatetotheminan
auditor’sreportandfornootherpurpose.Tothefullest
extentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthantheCompanyandthe
Company’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.
Vanessa‐Jayne
Bradley(SeniorStatutoryAuditor)
ForandonbehalfofBDOLLP,StatutoryAuditor
London,UnitedKingdom
25July2022
BDOLLPisalimitedliabilitypartnershipregisteredinEnglandandWales(withregisterednumberOC305127).
71
Audited Income Statement
fortheyearended31March2022
Yearended31March2022 Yearended31March2021
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Income 2 1,296‐1,296 266 2 268
Gainoninvestments 9‐6,599 6,599 ‐4,816 4,816
1,296 6,599 7,895 266 4,818 5,084
Investmentmanagementfees 3 (531) (531) (1,062) (411) (411) (822)
Otherexpenses 4 (409)‐(409) (97)‐(97)
Return/(loss)onordinaryactivitiesbefore
tax
356 6,068 6,424 (242) 4,407 4,165
Taxontotalcomprehensiveincome
andordinaryactivities
6
‐
‐
‐
(69)
‐
(69)
Return/(loss)attributabletoequity
Shareholders,beingtotalcomprehensive
incomefortheyear
356
6,068
6,424
(311)
4,407
4,096
Basicanddilutedreturnpershare:
DSODShare 8 (0.2p) 0.2p 0.0p (0.4p) (1.4p) (1.8p)
DP67Share 8 10.5p (2.2p) 8.3p (0.8p) 0.4p (0.4p)
VenturesShare 8 (1.0p) 4.8p 3.8p (0.2p) 8.2p 8.0p
HealthcareShare 8 (1.6p) 19.9p 18.3p (0.6p) 3.5p 2.9p
AIMShare 8 (1.5p) (0.9p) (2.3p) n/a n/a n/a
ThetotalcolumnwithintheIncomeStatementrepresentstheStatementofTotalComprehensiveIncomeofthe
CompanypreparedinaccordancewithFinancialReportingStandard102(“FRS102”).Thesupplementary
revenuereturnandcapitalreturncolumnsarepreparedinaccordancewiththeStatementofRecommended
PracticeissuedinApril2021by
theAssociationofInvestmentCompanies(“AICSORP”).
72
Income Statement
Analysed by Share pool – unaudited and non-statutory
fortheyearended31March2022
Splitas:
Yearended31March2022 Yearended31March2021
Revenue Capital Total Revenue Capital Total
DSODSharepool £’000 £’000 £’000 £’000 £’000 £’000
Income ‐ ‐ ‐ ‐‐‐
Netgain/(loss)oninvestments ‐ 19 19 ‐(106) (106)
‐ 19 19 ‐(106) (106)
Investmentmanagementfees (6) (6) (12) (6) (6) (12)
Otherexpenses (10)‐(10) (25)‐(25)
(Loss)/returnonordinaryactivitiesbeforetax (16) 13 (3) (31) (112) (143)
Taxontotalcomprehensiveincomeand
ordinaryactivities
‐ ‐ ‐ ‐‐‐
(Loss)/returnattributabletoequity
Shareholders,beingtotalcomprehensive
incomefortheyear
(16) 13 (3) (31) (112) (143)
Yearended31March2022 Yearended31March2021
Revenue Capital Total Revenue Capital Total
DP67Sharepool £’000 £’000 £’000 £’000 £’000 £’000
Income 1,217‐1,217 ‐‐‐
Net(loss)/gainoninvestments ‐ (233) (233) ‐59 59
1,217 (233) 984 ‐59 59
Investmentmanagementfees (14) (14) (28) (14) (14) (28)
Otherexpenses (22)‐(22) (32)‐(32)
Return/(loss)onordinaryactivitiesbeforetax 1,181 (247) 934 (46) 45 (1)
Taxontotalcomprehensiveincomeand
ordinaryactivities
‐ ‐ ‐ (30)‐(30)
Return/(loss)attributabletoequity
Shareholders,beingtotalcomprehensive
incomefortheyear
1,181 (247) 934 (76) 45 (31)
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
73
Income Statement (continued)
Analysed by Share pool – unaudited and non-statutory
fortheyearended31March2022
Yearended31March2022 Yearended31March2021
Revenue Capital Total Revenue Capital Total
VenturesSharepool £’000 £’000 £’000 £’000 £’000 £’000
Income 58‐58 230 2 232
Netgainoninvestments ‐ 2,641 2,641 ‐4,067 4,067
58 2,641 2,699 230 4,069 4,299
Investmentmanagementfees (314) (314) (628) (257) (257) (514)
Otherexpenses (235)‐(235) (25)‐(25)
(Loss)/returnonordinaryactivitiesbeforetax (491) 2,327 1,836 (52) 3,812 3,760
Taxontotalcomprehensiveincomeand
ordinaryactivities
‐ ‐ ‐ (39)‐(39)
(Loss)/returnattributabletoequity
Shareholders,beingtotalcomprehensive
incomefortheyear
(491) 2,327 1,836 (91) 3,812 3,721
Yearended31March2022 Yearended31March2021
Revenue Capital Total Revenue Capital Total
HealthcareSharepool £’000 £’000 £’000 £’000 £’000 £’000
Income 21‐21 36‐36
Netgainoninvestments ‐ 4,172 4,172 ‐796 796
21 4,172 4,193 36 796 832
Investmentmanagementfees (195) (195) (390) (134) (134) (268)
Otherexpenses (140)‐(140) (15)‐(15)
(Loss)/returnonordinaryactivitiesbeforetax (314) 3,977 3,663 (113) 662 549
Taxontotalcomprehensiveincomeand
ordinaryactivities
‐ ‐ ‐ ‐‐‐
(Loss)/returnattributabletoequity
Shareholders,beingtotalcomprehensive
incomefortheyear
(314) 3,977 3,663 (113) 662 549
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
74
Income Statement (continued)
Analysed by Share pool – unaudited and non-statutory
fortheyearended31March2022
Yearended31March2022
Revenue Capital Total
AIMSharepool £’000 £’000 £’000
Income ‐ ‐ ‐
Netgainoninvestments ‐ ‐ ‐
‐ ‐ ‐
Investmentmanagementfees (2) (2) (4)
Otherexpenses (2)‐(2)
Lossonordinaryactivitiesbeforetax (4) (2) (6)
Taxontotalcomprehensiveincomeand
ordinaryactivities
‐ ‐ ‐
LossattributabletoequityShareholders,
beingtotalcomprehensiveincomeforthe
year
(4) (2) (6)
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
75
Audited Balance Sheet
asat31March2022
2022 2021
Note £’000 £’000
Fixedassets
Investments 9 49,141 40,743
Currentassets
Debtors 10 4,317 701
Cashatbankandinhand 8,384 6,986
12,701 7,687
Creditors:amountsfallingduewithinoneyear 11 (965) (381)
Netcurrentassets 11,736 7,306
Netassets 60,877 48,049
Capitalandreserves
CalledupSharecapital 12 113 102
Capitalredemptionreserve 13 58 58
Specialreserve 13 24,063 29,417
Sharepremiumaccount 13 29,284 20,010
Fundsheldinrespectofsharesnotyetallotted 13 7 241
Revaluationreserve 13 6,995 (1,143)
Capitalreserve–realised 13 3,769 3,132
Revenuereserve 13 (3,412) (3,768)
TotalequityShareholders’funds 14 60,877 48,049
BasicanddilutedNetAssetValuepershare:
DSODShare 14 2.6p 10.2p
DP67Share 14 26.8p 18.4p
VenturesShare 14 68.2p 67.2p
HealthcareShare 14 84.4p 68.5p
AIMShare 14 99.9p n/a
Thefinancialstatementsonpages71to100wereapprovedandauthorisedforissuebytheBoardofDirectorson
25July2022andweresignedonitsbehalfby:
SirAubreyBrocklebankBt.
Chairman
Companynumber:06789187
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
76
Balance Sheet
Analysed by Share pool – unaudited and non-statutory
asat31March2022
Splitas:
2022 2021
DP67Sharepool Note £’000 £’000
Fixedassets
Investments 1,894 2,127
Currentassets
Debtors 1,218 1
Cashatbankandinhand 10 10
1,228 11
Creditors:amountsfallingduewithinoneyear (124) (74)
Netcurrentassets 1,104 (63)
Netassets2,998 2,064
Capitalandreserves
Calledupsharecapital 12 11 11
Specialreserve (400) (400)
Revaluationreserve (263) (30)
Capitalreserve–realised 2,392 2,406
Revenuereserve 1,258 77
TotalequityShareholders’funds2,998 2,064
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
2022 2021
DSODSharepool Note £’000 £’000
Fixedassets
Investments 43 445
Currentassets
Debtors 61 29
Cashatbankandinhand 124 344
185 373
Creditors:amountsfallingduewithinoneyear (20) (17)
Netcurrentassets 165 356
Netassets208 801
Capitalandreserves
Calledupsharecapital 12 8 8
Specialreserve 423 966
Revaluationreserve (231) (138)
Capitalreserve–realised 22 (37)
Revenuereserve (14) 2
TotalequityShareholders’funds 208 801
77
Balance Sheet (continued)
Analysed by Share pool – unaudited and non-statutory
asat31March2022
2022 2021
VenturesSharepool Note £’000 £’000
Fixedassets
Investments 31,259 28,633
Currentassets
Debtors 1,801 464
Cashatbankandinhand 4,321 3,141
6,122 3,605
Creditors:amountsfallingduewithinoneyear (490) (238)
Netcurrentassets 5,632 3,367
Netassets36,891 32,000
Capitalandreserves
Calledupsharecapital 12 65 59
Capitalredemptionreserve 58 58
Specialreserve 16,291 20,195
Sharepremiumaccount 18,657 14,009
Fundsheldinrespectofsharesnotyetallotted 2 222
Revaluationreserve 3,457 (814)
Capitalreserve–realised 1,428 847
Revenuereserve (3,067) (2,576)
TotalequityShareholders’funds36,891 32,000
2022 2021
HealthcareSharepool Note £’000 £’000
Fixedassets
Investments 15,945 9,538
Currentassets
Debtors 633 254
Cashatbankandinhand 2,483 3,491
3,116 3,745
Creditors:amountsfallingduewithinoneyear (310) (99)
Netcurrentassets 2,806 3,646
Netassets18,751 13,184
Capitalandreserves
Calledupsharecapital 12 27 24
Specialreserve 7,752 8,656
Sharepremiumaccount 8,594 6,001
Fundsheldinrespectofsharesnotyetallotted 5 19
Revaluationreserve 4,031 (161)
Capitalreserve–realised (73) (84)
Revenuereserve (1,585) (1,271)
TotalequityShareholders’funds 18,751 13,184
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
78
Balance Sheet (continued)
Analysed by Share pool – unaudited and non-statutory
asat31March2022
2022
AIMSharepool Note £’000
Fixedassets
Investments ‐
Currentassets
Debtors 604
Cashatbankandinhand 1,446
2,050
Creditors:amountsfallingduewithinoneyear (21)
Netcurrentassets 2,029
Netassets2,029
Capitalandreserves
Calledupsharecapital 12 2
Specialreserve (2)
Sharepremiumaccount 2,033
Fundsheldinrespectofsharesnotyetallotted ‐
Revaluationreserve ‐
Capitalreserve–realised ‐
Revenuereserve (4)
TotalequityShareholders’funds2,029
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
79
Statement of Changes in Equity
fortheyearended31March2022
*A transferof £1,803,000 (2021:£8,001,000) representingpreviously recognisedrealisedgains and losses on
disposalofinvestmentsduringtheperiodhasbeenmadebetweentheRevaluationReserveandtheCapitalreserve
‐realised.Atransferof£5,159,000(2021:£10,022,000)representingthetotalof:realisedlossesonthedisposal
ofinvestments,cumulative
realisedlossesonpermanentfairvaluechange,capitalexpensesandcapitaldividends
intheperiod,hasbeenmadebetweentheCapitalReserve‐realisedandtheSpecialreserve.In2021atransferof
£6,000,representingthebalanceontheRevenuereserverelatingtopreviouslycancelledshareclasses,wasmade
fromthe
revenuereservetotheSpecialreserve.
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
Called
up
Share
capital
Capital
Redemption
reserve
Special
reserve
Share
premium
account
Funds
heldin
respect
ofshares
notyet
allotted
Revaluation
Reserve
(note9)
Capital
reserve
‐realised
Revenue
reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At31March2020 98 58 39,433 17,971 535 (13,302) 2,483 (3,451) 43,825
Totalcomprehensive
income
‐ ‐ ‐ ‐ ‐ 4,158 249 (311) 4,096
Transferbetween
reserves*
‐ ‐ (10,016)‐ ‐8,001 2,021 (6)‐
Unallottedshares‐ ‐‐‐(294)‐‐‐(294)
Transactionswithowners
Dividendpaid‐‐‐‐‐‐(1,621)‐(1,621)
Purchaseofown
shares
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Issueofshares 4‐‐2,097‐ ‐ ‐‐2,101
Shareissuecosts‐ ‐‐(58)‐ ‐ ‐‐(58)
At31March2021 102 58 29,417 20,010 241 (1,143) 3,132 (3,768) 48,049
Totalcomprehensive
income
‐
‐ ‐ ‐ ‐ 6,335 (267) 356 6,424
Transferbetween
reserves*
‐ ‐ (5,159)‐ ‐1,803 3,356‐‐
Unallottedshares ‐ ‐ ‐ ‐ (234)‐‐‐(234)
Transactionswithowners
Dividendpaid ‐ ‐ ‐ ‐ ‐ ‐ (2,452)‐(2,452)
Purchaseofown
shares
‐ ‐ (195)‐ ‐ ‐ ‐‐(195)
Issueofshares 11‐‐9,501‐ ‐‐‐9,512
Shareissuecosts ‐ ‐ ‐ (227)‐ ‐ ‐‐(227)
At31March2022 113 58 24,063 29,284 7 6,995 3,769 (3,412) 60,877
80
Cash Flow Statement
fortheyearended31March2022
Unauditednon‐statutoryanalysis Audited
DSOD
Share
pool
DP67
Share
pool
Ventures
Share
pool
Healthcare
Share
pool
AIM
Share
Pool Company
£’000 £’000 £’000 £’000 £’000 £’000
Cashflowsfromoperatingactivities
(Loss)/returnonordinaryactivitiesbeforetaxation (3) 934
1,836
3,663 (6) 6,424
(Gains)/lossesoninvestments (19) 233 (2,641) (4,172)‐(6,599)
Increaseincreditors 3 50 253 211 21 538
Increaseindebtors (32) (1,217) (1,337) (379) (604) (3,569)
Netcashoutflowfromoperatingactivities (51)‐(1,889) (677) (589) (3,206)
Corporationtaxpaid‐‐‐‐‐‐
Netcashgeneratedfromoperatingactivities (51)‐(1,889) (677) (589) (3,206)
Cashflowfrominvestingactivities
Purchaseofinvestments(note9)‐‐(2,070) (4,764)‐(6,834)
Proceedsfromdisposalofinvestments(note9) 421‐2,085 2,529‐5,035
Netcashinflow/(outflow)frominvestingactivities 421‐ 15 (2,235)‐(1,799)
Netcashinflow/(outflow)beforefinancing 370‐(1,874) (2,912) (589) (5,005)
Cashflowsfromfinancingactivities
Repurchaseofshares‐‐(58) (137)‐(195)
Issueofsharecapital‐‐4,775 2,658 2,079 9,512
Costofissueofsharecapital‐‐(122) (61) (44) (227)
Fundsheldinrespectofsharesnotyetallotted‐‐(220) (14)‐(234)
Equitydividendspaid(note7) (590)‐(1,321) (542)‐(2,453)
Netcash(outflow)/inflowfromfinancingactivities (590)‐3,054 1,904 2,035 6,403
Netchangeincash (220)‐1,180 (1,008) 1,446 1,398
Cashandcashequivalentsatstartoftheyear 344 10 3,141 3,491‐6,986
Cashandcashequivalentsatendoftheyear 124 10 4,321 2,483 1,446 8,384
Cashandcashequivalentscomprise
Cashatbankandinhand 124 10 4,321 2,483 1,446 8,384
Totalcashandcashequivalents 124 10 4,321 2,483 1,446 8,384
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
81
Cash Flow Statement
fortheyearended31March2021
Unauditednon‐statutoryanalysis Audited
DSOD
Share
pool
DP67
Share
pool
Ventures
Share
pool
Healthcare
Share
pool Company
£’000 £’000 £’000 £’000 £’000
Cashflowsfromoperatingactivities
(Loss)/returnonordinaryactivitiesbeforetaxation (143) (1) 3,760 549 4,165
Losses/(gains)oninvestments 106 (59) (4,067) (796) (4,816)
(Decrease)/increaseincreditors (16) (8) (28) (321) (373)
Decrease/(increase)indebtors 21 16 (61) (248) (272)
Netcashoutflowfromoperatingactivities (32) (52) (396) (816) (1,296)
Corporationtaxpaid‐‐‐‐‐
Netcashoutflowfromoperatingactivities (32) (52) (396) (816) (1,296)
Cashflowfrominvestingactivities
Purchaseofinvestments(note9)‐‐(7,010) (3,458) (10,468)
Proceedsfromdisposalofinvestments(note9) 104‐7,029 1,875 9,008
Netcashinflow/(outflow)frominvestingactivities 104‐ 19 (1,583) (1,460)
Netcashinflow/(outflow)beforefinancing 72 (52) (377) (2,399) (2,756)
Cashflowsfromfinancingactivities
Issueofsharecapital‐‐1,549 552 2,101
Costofissueofsharecapital‐‐(42) (16) (58)
Fundsheldinrespectofsharesnotyetallotted‐‐(189) (105) (294)
Equitydividendspaid(note7) ‐ ‐ (1,150) (471) (1,621)
Netcashinflow/(outflow)fromfinancingactivities‐‐168 (40) 128
Netchangeincash 72 (52) (209) (2,439) (2,628)
Cashandcashequivalentsatstartoftheyear 272 62 3,350 5,930 9,614
Cashandcashequivalentsatendoftheyear 344 10 3,141 3,491 6,986
Cashandcashequivalentscomprise
Cashatbankandinhand 344 10 3,141 3,491 6,986
Totalcashandcashequivalents 344 10 3,141 3,491 6,986
Theaccompanyingnotesformanintegralpartofthesefinancialstatements.
82
Notes to the Accounts
fortheyearended31March2022
- Accountingpolicies
Basisofaccounting
TheCompanyhasprepareditsfinancialstatementsinaccordancewiththeFinancialReportingStandard
102(“FRS102”)andinaccordancewiththeStatementofRecommendedPractice“FinancialStatementsof
InvestmentTrustCompaniesandVentureCapitalTrusts”revisedApril2021(“SORP”).
Thefinancialstatementsarepresentedinpoundssterling
androundedtothousands.TheCompany’s
functionalandpresentationalcurrencyispoundssterling.
Goingconcern
TheDirectorshavemadeanassessmentofthecompany’sabilitytocontinueasagoingconcernandare
satisfiedthatthecompanyhastheresourcestocontinueinbusinessfortheforeseeablefuture,beinga
periodof12monthsfromthedatetheseFinancialStatementswereapproved.Furthermore,theDirectors
arenotawareofanymaterialuncertaintiesthatmaycastsignificantdoubtuponthecompany’sabilityto
continueasagoingconcern,havingtakenintoaccounttheliquidityofthecompany’sinvestmentportfolio
andthecompany’s
financialpositioninrespectofitscashflowsandinvestmentcommitments.Therefore,
theFinancialStatementshavebeenpreparedonthegoingconcernbasis.
PresentationofIncomeStatement
InordertobetterreflecttheactivitiesofaVentureCapitalTrust,andinaccordancewiththeSORP,
supplementaryinformationwhichanalysesthe
IncomeStatementbetweenitemsofarevenueandcapital
naturehasbeenpresentedalongsidetheIncomeStatement.Therevenuereturnisthemeasurethe
DirectorsbelieveappropriateinassessingtheCompany’scompliancewithcertainrequirementssetoutin
Part6oftheIncomeTaxAct2007.
Reportablesegments
TheCompanyhas
onereportablesegmentasthesoleactivityoftheCompanyistooperateasaVCTandall
oftheCompany’sresourcesareallocatedtothisactivity.
Investments
Allinvestmentsaredesignatedas“fairvaluethroughprofitorloss”assetsduetoinvestmentsbeing
managedandperformanceevaluatedona
fairvaluebasis,inaccordancewithSection9.9B(a)ofFRS102.A
financialassetisdesignatedwithinthiscategoryifitisbothacquiredandmanagedonafairvaluebasis,with
aviewtosellingafteraperiodoftime,inaccordancewiththeCompany’sdocumentedinvestmentpolicy.
Itis
possibletodeterminethefairvalueswithinareasonablerangeofestimates.Thefairvalueofan
investmentuponacquisitionisdeemedtobecost.Thereafterinvestmentsaremeasuredatfairvaluein
accordancewithFRS102sections11and12,togetherwiththeInternationalPrivateEquityandVenture
Capital
ValuationGuidelines(“IPEV”).
Liquidityinvestmentsaremeasuredusingbidprices.
Forunquotedinvestments,fairvalueisestablishedbyusingtheIPEVguidelines.Thevaluation
methodologiesforunquotedentitiesusedbytheIPEVtoascertainthefairvalueofaninvestmentareas
follows:
Calibrationtopriceofrecentinvestment;
Multiples;
Netassets;
Discountedcashflowsorearnings(ofunderlyingbusiness);
Discountedcashflows(fromtheinvestment);and
Industryvaluationbenchmarks.
Themethodologyappliedtakesaccountofthenature,factsandcircumstancesoftheindividualinvestment
andusesreasonabledata,marketinputs,assumptionsandestimatesinordertoascertainfairvalue.The
valuationofinvestmentsisdetailedinNote9.
83
Notes to the Accounts(continued)
fortheyearended31March2022
1. Accountingpolicies(continued)
Investments(continued)
GainsandlossesarisingfromchangesinfairvalueareincludedintheIncomeStatementfortheyearasa
capitalitemandtransactioncostsonacquisitionordisposaloftheinvestmentareexpensed.Wherean
investeecompanyhasgoneintoreceivership,liquidationoradministration(wherethereislittle
likelihoodof
recovery),thelossontheinvestment,althoughnotphysicallydisposedof,istreatedasbeingrealised.
ItisnottheCompany’spolicytoexercisesignificantinfluenceorjointcontroloverinvesteecompanies.
Therefore,theresultsofthesecompaniesarenotincorporatedintotheIncomeStatementexcepttothe
extentofanyincomeaccrued.ThisisinaccordancewithFRS102sections14and15andtheSORP,which
donotrequireportfolioinvestmentstobeaccountedforusingtheequitymethodofaccounting.
Calibrationtopriceofrecentinvestmentrequiresalevelofjudgmenttobeappliedin
assessingand
reviewinganyadditionalinformationavailablesincethelastinvestmentdate.Themanagerconsidersa
rangeoffactorsinordertodetermineifthereisanyindicationofdeclineinvalueorevidenceofincreasein
valuesincetherecentinvestmentdate.Ifnosuchindicationsarenoted,theprice
oftherecentinvestment
willbeusedasthefairvaluefortheinvestment.
Examplesofsignalswhichcouldindicateamovementinvalueare:‐
Changesinresultsagainstbudgetorinexpectationsofachievementoftechnicalmilestones
(patents/testing/regulatoryapprovals);
Significantchangesinthemarketoftheproductsorintheeconomicenvironmentinwhichit
operates;
Significantchangesintheperformanceofcomparablecompanies;
Internalmatterssuchasfraud,litigationormanagementstructure.
InrespectofdisclosuresrequiredbytheSORPforthe10largestinvestmentsheldbytheCompany,the
mostrecentpubliclyavailableaccountsinformation,eitherasfiledatCompaniesHouse,orannouncedto
theLondonStockExchange,isdisclosed.Inthe
caseofunlistedinvestments,thismaybeabbreviated
informationonly.
Judgementsinapplyingaccountingpoliciesandkeysourcesofestimationuncertainty
Thekeyestimateinthefinancialstatementsisthedeterminationofthefairvalueoftheunquoted
investmentsbytheDirectorsasitimpactsthevaluationoftheunquotedinvestments
atthebalancesheet
date.
OftheCompany’sassetsmeasuredatfairvalue,itispossibletodeterminetheirfairvalueswithina
reasonablerangeofestimates.Thefairvalueofaninvestmentuponacquisitionisdeemedtobecost.
Thereafter,investmentsaremeasuredatfairvalueinaccordancewith
FRS102sections11and12,together
withtheInternationalPrivateEquityandVentureCapitalValuationGuidelines(“IPEV”).
Apricesensitivityanalysisoftheun quotedinvestmentsisprovidedinnote15,underInvestmentpricerisk.
Income
DividendincomefrominvestmentsisrecognisedwhentheShareholders’rightstoreceivepaymenthave
been
established,normallytheex‐dividenddate.
Interestincomeisaccruedonatimeapportionedbasis,byreferencetotheprincipalsumoutstandingandat
theeffectiverateapplicable,andonlywherethereisreasonablecertaintyofcollectionintheforeseeable
future.
Distributionsfrominvestmentsinlimitedliabilitypartnerships(“LLPs”)are
recognisedastheyarepaidtothe
Company.Wheresuchitemsareconsideredcapitalinnaturetheyarerecognisedascapitalincome.
ArrangementfeerebatesreceivedfromDowningLLParetreatedascapitalincomefollowingthedateof
investment.
84
Notes to the Accounts(continued)
fortheyearended31March2022
1. Accountingpolicies(continued)
Income(continued)
Wherepreviouslyaccruedincomeisconsideredunrecoverable,acorrespondingbaddebtexpenseis
recognised.
Expenses
Allexpensesareaccountedforonanaccrualsbasis,andarestatedinclusiveofanyVATcharged.Inrespect
oftheanalysisbetweenrevenueandcapitalitemspresentedwithintheIncomeStatement,allexpenses
havebeenpresentedasrevenueitemsexceptasfollows:
ExpenseswhichareincidentaltotheacquisitionofaninvestmentaredeductedfromtheCapital
Account;
Expenseswhichareincidentaltothedisposalofaninvestmentaredeductedfromthedisposal
proceedsoftheinvestment;
Expensesaresplitandpresentedpartlyascapitalitemswhereaconnectionwiththemaintenanceor
enhancementofthevalueoftheinvestmentsheldcanbedemonstrated.Investmentmanagement
feesareallocated50%torevenueand50%tocapital,inordertoreflecttheDirectors’expectedlong‐
termviewofthe
natureoftheinvestmentreturnsoftheCompany.
ExpensesandliabilitiesnotspecifictoashareclassaregenerallyallocatedproratatotheNetAssetValues
ofeachshareclass.
Taxation
ThetaxeffectsondifferentitemsintheIncomeStatementareallocatedbetweencapitalandrevenueon
the
samebasisastheparticularitemtowhichtheyrelate,usingtheCompany’seffectiverateoftaxforthe
accountingperiod.
DuetotheCompany’sstatusasaVentureCapitalTrust,andthecontinuedintentiontomeettheconditions
requiredtocomplywithPart6oftheIncomeTaxAct
2007,noprovisionfortaxationisrequiredinrespectof
anyrealisedorunrealisedappreciationoftheCompany’sinvestmentswhicharises.
Deferredtaxation,whichisnotdiscounted,isprovidedinfullontimingdifferencesthatresultinan
obligationatthebalancesheetdatetopaymoretax,oraright
topaylesstax,atafuturedate,atrates
expectedtoapplywhentheycrystallise,basedoncurrenttaxratesandlaw.Timingdifferencesarisefrom
theinclusionofitemsofincomeandexpenditureintaxationcomputationsinperiodsdifferentfromthosein
whichtheyareincludedinthe
accounts.
Otherdebtorsandothercreditors
Otherdebtors(includingaccruedincome)andothercreditorsareincludedwithintheaccountsatamortised
cost.
Issuecosts
Issuecostsinrelationtothesharesissuedforeachshareclasshavebeendeductedfromthesharepremium
account,specialreserveorrevenuereserve,asapplicable,
fortherelevantshareclass.
PerformanceIncentive
AmountspayableinrespectofPerformanceIncentivearrangementsarerecordedatsuchtimethatan
obligationhasbeenestablished.AnexplanationofeachofthePerformanceIncentivearrangementsisgiven
inNote12.InrespectoftheDSODShare,pool,shoulda
PerformanceIncentivebecomepayableitwillbe
recordedasanexpenseitemthroughtheIncomeStatement.PerformanceIncentivesinrespectofallother
Shareclassesarepaidbywayofdividendsandwillthereforeberecognisedinaccordancewiththedividend
accountingpolicy.ThereisnoPerformanceIncentiveinplace
fortheAIMShareclass.
Dividends
Dividendspayablearerecognisedasdistributionsinthefinancialstatementswhenthecompany’sliabilityto
makepaymenthasbeenestablished,typicallyoncedeclaredbytheBoardorapprovedbyShareholdersat
theAGM.
85
Notes to the Accounts(continued)
fortheyearended31March2022
1. Accountingpolicies(continued)
Fundsheldinrespectofsharesnotyetallotted
Cashreceivedinrespectofapplicationsfornewsharesthathavenotyetbeenallottedisshownas“Funds
heldinrespectofsharesnotyetallotted”andrecordedontheBalanceSheet.
- Income
2022 2021
£’000 £’000
Incomefrominvestments
Loaninterest 1,255 170
Dividendincome 41 80
1,296 250
Otherincome
Bankinterest ‐ 16
Feeincome ‐ 2
1,296 268
- Investmentmanagementfees
Themanagementfee,whichischargedtotheCompany,isbasedonanannualamountof1.50%oftheDSO
DSharepoolnetassets,1.35%oftheDP67Sharepoolnetassets,2.00%oftheVenturesSharepoolnet
assets,2.50%oftheHealthcareSharepoolnetassetsand1.75%
oftheAIMSharepoolnetassets.The
Manageralsoprovidesadministrationservicesforafeecalculatedasfollows:(i)abasicfeeof£40,000;(ii)A
feeof0.1%ofnetassetsperannumonfundsinexcessof£10million;(iii)£5,000peradditionalsharepool.
Feesin
relationtotheseservicesareshownwithinnote4.
2022 2021
£’000 £’000
Investmentmanagementfees 1,062 822
- Otherexpenses
2022 2021
£’000 £’000
Administrationservices 98 94
Trailfee 24 (243)
Directors’remuneration 75 61
Auditor’sremunerationforaudit 48 46
Registrars 48 33
LondonStockExchange 10 3
FCA 8 7
PrintingandPostage 19 13
Baddebtexpense 2 30
Insurance 22 28
Recruitment 24 ‐
Other 31 25
409 97
TheannualrunningcostsoftheCompanyaresubjecttoacapof3.0%ofnetassetsoftheCompanyforall
Sharepools,withtheexceptionoftheDP67andHealthcareSharepools,whicharesubjecttocapsof2.9%
and3.5%respectively.Fortheyearended31March
2022theexpensesfortheDSharepoolwere2.7%of
netassets,fortheDP67pool2.4%ofnetassets,fortheVenturespool2.6%ofnetassetsandforthe
Healthcarepool3.4%ofnetassets.
86
Notes to the Accounts(continued)
fortheyearended31March2022
- Directors’remuneration
DetailsofremunerationaregivenintheauditedpartoftheDirectors’RemunerationReportonpage55.
KeymanagementiscomprisedoftheDirectorsoftheCompany.
TheCompanyhadnoemployees(otherthanDirectors)duringtheyear.CostsinrespectoftheDirectorsare
showninnote4above.No
otheremolumentsorpensioncontributionswerepaidbytheCompanyto,oron
behalfof,anyDirector.Therewerenoamountsoutstandingattheyearend.
- Taxation
2022 2021
£’000 £’000
(a) Taxchargefortheyear
UKcorporationtaxat19%(2021:19%) ‐ ‐
Deferredtaxmovement ‐ 69
Chargefortheyear‐ 69
(b) Factorsaffectingtaxchargefortheyear
Returnonordinaryactivitiesbeforetaxation 6,424 4,165
Taxchargecalculatedonreturnonordinaryactivitiesbeforetaxationatthe
applicablerateof19%(2021:19%)
1,221 791
Effectsof:
Gainsoninvestments
(1,254) (916)
UKdividendincome
(8) (15)
LLPprofitsreceivableduringtheyear
(4) ‐
Lossescarriedforward
45 140
Taxontotalcomprehensiveincomeandordinaryactivities
‐ 69
Excessmanagementexpenses,whichareavailabletobecarriedforwardandsetoffagainstfuturetaxable
income,amountedto£4.6million(2021:£5.8million).Theassociateddeferredtaxassetof£1.4millionhas
notbeenrecognisedduetothefactthatitisunlikelythattheexcessmanagementfeeswillbe
setoff
againstfuturetaxableprofitsintheforeseeablefuture.
- Dividends
2022 2021 2022 2021
Pencepershare
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Dividendspaid
DSODShares
2021Special 7.50‐‐590 590 ‐ ‐ ‐
7.50‐‐590 590 ‐ ‐ ‐
87
Notes to the Accounts(continued)
fortheyearended31March2022
- Dividends(continued)
2022 2021 2022 2021
Pencepershare
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
VenturesShares
2021Final 2.75 ‐ ‐ 1,322 1,322 ‐ ‐ ‐
2020Interim ‐ 2.5 ‐ ‐ ‐ ‐1,150 1,150
2.75 2.5 ‐ 1,322 1,322 ‐1,150 1,150
HealthcareShares
2021Final 2.75 ‐ ‐ 542 542
2020Interim‐ 2.5 ‐ ‐ ‐ ‐471 471
2.75 2.5 ‐ 542 542 ‐471 471
Dividendsproposed
VenturesShares
2022Final 2.75 ‐ 500 1,037 1,537 ‐ ‐ ‐
2.75 ‐ 500 1,037 1,537 ‐ ‐ ‐
HealthcareShares
2022Final 3.50 ‐ ‐ 800 800 ‐ ‐ ‐
3.50 ‐ ‐ 800 800 ‐ ‐ ‐
- Basicanddilutedreturnpershare
Weighted
Average
number
ofsharesin
issue*
Revenue
(loss)/
return
Capital
gain/
(loss)
Total
Comprehensive
(loss)/
income
Basicand
diluted
returnper
share
£’000 £’000 £’000 Pence
Returnpershareiscalculatedonthefollowing:
Y
earended31March2022
DSODShares 7,867,247
(16) 13
(3) 0.0p
DP67Shares 11,192,136
1,181 (247)
934 8.3p
VenturesShares 48,629,971
(491) 2,327
1,836 3.8p
HealthcareShares 20,007,047
(314) 3,977
3,663 18.3p
AIMShares 283,425
(4) (2)
(6) (2.3p)
Yearended31March2021
DSODShares 7,867,247
(31) (112)
(143) (1.8p)
DP67Shares 11,192,136
(76) 45
(31) (0.4p)
VenturesShares 45,988,062
(91) 3,812
3,721 8.0p
HealthcareShares 18,803,854
(113) 662
549 2.9p
*ExcludingManagementShares
AstheCompanyhasnotissuedanyconvertiblesecuritiesorshareoptions,thereisnodilutiveeffectonthe
returnperDSODShare,DP67Share,VenturesShare,HealthcareShareorAIMShare.Thereturnpershare
disclosedthereforerepresentsboththebasicanddilutedreturnpershare
forallclassesofshare.
88
Notes to the Accounts(continued)
fortheyearended31March2022
- Fixedassets–investments
Liquidity
investments
QuotedVC
investments
UnquotedVC
investments
Total
£’000 £’000 £’000 £’000
Openingcostat1April2021
5,646 1,250 42,374 49,270
Unrealisedvaluation(losses)/gainsat1April2021
(1,497) 72 548 (877)
Unrealisedforeignexchangelossesat1April2021‐(266) (266)
Realisedlossesarisingonpermanentfairvaluechange
at1April2021
‐ ‐ (7,384) (7,384)
Openingfairvalueat1April2021
4,149 1,322 35,272 40,743
Movementsintheyear:
Purchasedatcost
‐ 3,153 3,681 6,834
Disposals‐proceeds
(397)‐(4,638) (5,035)
‐realisedgainsondisposals
41‐223 264
Unrealisedforeignexchangegains
‐ ‐ 171 171
Unrealisedvaluation(losses)/gainsintheIncome
Statement
(274) 2,858 3,580 6,164
Closingvalueat31March2022
3,519 7,333 38,289 49,141
Closingcostat31March2022
5,161 4,403 40,146 49,710
Unrealisedvaluation(losses)/gainsat31March2022 (1,642) 2,930 5,802 7,090
Unrealisedforeignexchangelossesat31March2022‐‐(95) (95)
Realisedlossesarisingonpermanentfairvaluechange
at31March2022
‐ ‐ (7,564) (7,564)
Closingvalueat31March2022
3,519 7,333 38,289 49,141
Nocostsincidentaltotheacquisitionsofinvestmentswereincurredduringtheyear.
TheCompanyhascategoriseditsfinancialinstrumentsusingthefairvaluehierarchyasfollows:
Level1 Reflectsfinancialinstrumentsquotedinanactivemarket;
Level2 Reflectsfinancialinstrumentsthathavepricesthatareobservableeither
directlyorindirectly;and
Level3 Reflectsfinancialinstruments thatusevaluationtechniqueswhich arenot basedonobservable
marketdata(unquotedequityinvestmentsandloannoteinvestments).
Level1 Level2 Level3 2022 Level1 Level2 Level3 2021
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Liquidityinvestments 3,519‐‐3,519 4,149‐‐4,149
Quotedequity 7,333‐‐7,333 1,322‐‐1,322
Unquotedloannotes ‐ ‐ 3,250 3,250 ‐‐3,667 3,667
Unquotedequity ‐ ‐ 35,039 35,039 ‐‐31,605 31,605
10,852‐38,289 49,141 5,471‐35,272 40,743
89
Notes to the Accounts(continued)
fortheyearended31March2022
- Fixedassetsinvestments(continued)
ReconciliationoffairvalueforLevel3financialinstrumentsheldattheyearend:
Unquoted
equity
Unquoted
loannotes
Total
£’000 £’000 £’000
Balanceat1April2021 31,605 3,667 35,272
MovementsintheIncomeStatement:
Unrealisedvaluationgains/(losses)intheincomestatement 3,808 (228) 3,580
Unrealisedforeignexchangegains 171 ‐ 171
Realised(losses)/gainsintheincomestatement (280) 503 223
Purchasesatcost 2,988 6933,681
Salesproceeds (3,253) (1,385)(4,638)
Balanceat31March2022 35,039 3,25038,289
Changingoneormoreoftheinputstoreasonablepossiblealternativevaluationassumptionscouldresultin
asignificantchangeinthefairvalueoftheLevel3investments.Thereisanelementofjudgmentinthe
choiceofassumptionsforunquotedinvestmentsanditispossiblethat,ifdifferentassumptionswere
used,
differentvaluationscouldhavebeenattributedtosomeoftheCompany’sinvestments.
TheBoardandtheInvestmentManagerbelievethatthevaluationsasat31March2022reflectthemost
appropriateassumptionsatthatdate,givingdueregardtoallinformationavailablefromeachinvestee
company.ValuationsaresubjecttofluctuationsinmarketconditionsandthesensitivityoftheCompanyto
suchchanges
isshownwithinnote15.
Significantinterests
DetailsofshareholdingsinportfoliocompanieswheretheCompany’sholding,asat31March2022,
representsgreaterthan20%ofthenominalvalueofanyshareclass.Thefiguresshownbelowrepresentthe
financialpositionandperformanceasofthelatestavailablefinancial
statements.TheCompanydoesnot
havesignificantinfluenceoveranyofitsportfoliocompanies.
Compan
y
Registeredoffice
Shareclass
Number
Proportionof
classheld
Capital
and
reserves
Profit/
(loss)for
theyear
CadburyHouseHoldingsLimited EC3R6HD Ordinary 678,522 27.5% 4,664 (1,877)
ChannelMumLimited RG11PL D1Ordinary 57,022 26.3% 311 *
CornelisNetworksInc EC4M8AL SeriesA‐3
Preferred
1,800,000 28.1% * *
E‐Fundamentals(Group)Limited SE19RX AOrdinary 604,263 38.4% 11,388 *
EmpiriboxHoldingsLimited OX144RT COrdinary 2,515,592 40.9% 1,685 *
DOrdinary 1,377,144 41.5%
EOrdinary 8,882,082 24.5%
LiveBetterWithLimited N18XB AOrdinary 119,892 68.1% 5,057 *
BOrdinary 383,796 21.6%
RatedPeopleLimited EC3A7LP COrdinary 30,171 21.4% (4,339) 150
VirtualClassLimited E18EW BOrdinary 3,282 50.0% 1,234 *
C2Ordinary 3,428 22.1%
*Profitfiguresnotpubliclyavailable.
90
Notes to the Accounts(continued)
fortheyearended31March2022
- Fixedassetsinvestments(continued)
The following summary shows the valuation of investments made by other funds managed or advised by
Downing,alongsidetheaggregatedvaluationsforallSharepoolswithinDowningFOURVCTplc.Allamounts
shownarestatedasat31March2022.
Totalinvestmentacrossall
DowningFOURVCTplc
Sharepools
£’000
Totalinvestment
acrossother
Downingfunds*
£’000
ArecorTherapeuticsplc^ 5,327 ‐
E‐Fundamentals(Group)Limited 3,847 3,847
DowningStrategicMicro‐CapInvestmentTrustplc 3,366 3,498
CongenicaLimited 1,961 1,094
RatedPeopleLimited 1,895 4,228
AdaptixLimited 1,843 3,549
VirtualClassLimited(ThirdSpaceLearning) 1,816 1,912
ImagenLimited 1,763 3,612
GENinCodeplc^ 1,624 1,082
AyarLabs,Inc. 1,526 4,578
HackajobLimited 1,523 5,731
FVRVSLimited(t/aFundamentalVR) 1,452 484
OpenBionicsLimited 1,379 1,066
CornelisNetworks,Inc. 1,370 3,502
CambridgeTouchTechnologiesLimited 1,369 4,704
EcstaseLimited(t/aADAY) 1,257 2,515
TrinnyLondonLimited 1,240 15,668
FenkleStreetLLP* 1,164 13,169
UppTechnologiesGroupLimited(previouslyVoloCommerce) 1,077 1,077
FireflyLearningLimited 1,047 2,271
LimitlessTechnologyLimited 920 2,897
CambridgeRespiratoryInnovationsLimited 800 1,700
CadburyHouseHoldingsLimited 791 1,688
FundingXchangeLimited 786 1,835
FutureHealthWorksLimited(t/aMyRecovery) 750 3,007
Parsable,Inc. 711 2,715
MastersofPieLimited 667 2,304
ClosedLoopMedicineLimited 650 1,350
CarbiceCorporation 639 3,967
MIPDiscoveryLimited 600 806
TheElectrospinningCompanyLimited 544 984
InviziusLimited 500 1,154
MaverickPubs(Holdings)Limited 450 1,800
DiAImagingAnalysisEU 429 713
DestinyPharmaplc^ 382 153
GatewalesLimited* 344 ‐
ChannelMumLimited 291 291
DSTBTDLimited(t/aDistributedLimited) 275 775
HummingbirdTechnologiesLimited 250 1,750
BulbshareLimited 249 1,249
MIDowningUKMicro‐CapGrowthFund* 153 2
StreethubLimited(t/aTrouva) 71 ‐
PearceandSaundersLimited* 27 123
PearceandSaundersDevCoLimited** 16 73
EmpiriboxHoldingsLimited ‐ ‐
LigniaWoodCompanyLimited ‐ ‐
LinetenLimited ‐ ‐
LiveBetterWithLimited ‐ ‐
OrmsboroughLimited ‐ ‐
YamunaEnergyLimited ‐ ‐
LondonCityShoppingCentreLimited** ‐ ‐
49,141 108,923
*Includesthevalueofinvestmentsmadebyallotherself‐managedanddiscretionarymanagedfundstowhichDowningLLPactedas
InvestmentManagerorAdviserasat31March2022.
91
Notes to the Accounts(continued)
fortheyearended31March2022
- Debtors
2022 2021
£’000 £’000
Prepaymentsandaccruedincome 1,275 42
Otherdebtors 3,042 659
4,317 701
- Creditors:amountsfallingduewithinoneyear
2022 2021
£’000 £’000
Taxationandsocialsecurity 5 1
Othercreditors 152 7
Accrualsanddeferredincome 808 373
965 381
- Calledupsharecapital
2022 2021
£’000 £’000
A
llotted,calledupandfull
y
paid:
7,867,247(2021:7,867,247)DSODSharesof0.1peach 8 8
11,192,136(2021:11,192,136)DP67Sharesof0.1peach 11 11
65,328,545(2021:58,525,223)VenturesSharesof0.1peach 65 59
26,811,908(2021:23,835,563)HealthcareSharesof0.1peach 27 24
2,034,990(2021:n/a)AIMSharesof0.1peach 2 ‐
113 102
TheCompany’scapitalismanagedinaccordancewithitsinvestmentpolicy,asshownintheStrategic
Report,inpursuitofitsprincipalinvestmentobjective,asstatedonpage43.Therehavebeennosignificant
changesintheobjectives,policiesorprocessesformanagingcapitalfromthepreviousperiod.
TheCompany
hastheauthoritytobuybackshares,asdescribedintheDirectors’Report.
Duringtheyearended31March2022,theCompanyissued6,889,747VenturesSharesof0.1peachatan
averagepriceof69.29pperOrdinaryShare,3,136,178HealthcareSharesof0.1peachatanaverageprice
of84.74pper
OrdinaryShareand2,034,990AIMSharesof0.1peachatanaveragepriceof1.0218pper
OrdinaryShare.NoVenturesorHealthcareManagementShareswereissuedduringtheyear.
Duringtheyearended31March2022,theCompanyrepurchased86,425VenturesSharesatanaverage
priceof67.49pperShare
and159,833HealthcareSharesatanaveragepriceof85.28pperShare.
92
Notes to the Accounts(continued)
fortheyearended31March2022
- Calledupsharecapital(continued)
VenturesandHealthcareSharepools
APerformanceIncentiveschemeisinplaceinrespectoftheVenturesandHealthcareManagementShares,
whichwillrepresent20%ofthetotalnumberofVenturesandHealthcareSharesinissue.Aspartofthe
arrangement,inordertopreventdilutiontotheShareholdersofthe
VenturesandHealthcareShares,the
managementteamwillwaivetheirvotingrightsgrantedbytheseManagementSharesatany
generalmeetingoftheCompanyandincomeorcapitaldistributionsotherwisepayableonthese
ManagementShareswillbewaivedunlesstherelevantshareclasshasachievedtherelevantTotalReturn
hurdle
(basedonauditedresults)ateachyearenddate.
ThePerformanceIncentivearrangementsarestructuredsuchthattheVenturesandHealthcare
ManagementShareswillreceive20%ofdividendspaidinrespectoftheCompany’sVenturesand
HealthcareSharepools,onlywhentheTotalReturnhurdleismet.Forthehurdleto
bemet,theTotal
ReturntoVenturesorHealthcareShareholdersmustexceed£1.06persharefortheyearended31March
2022.Forsubsequentyears,theTotalReturnhurdleincreasesby3.0pperannumsuchthatfortheyear
ended31March2023thehurdleis£1.09,andforthe
yearended31March2024thehurdleis£1.12.The
performanceincentivearrangementsinrespectoftheVenturesandHealthcareSharepoolsareassessedon
eachofthetwoSharepoolsindividually.
DSODSharepool
ThePerformanceIncentiveinrespectoftheDSODSharesisstructuredasasimple
feewhenthehurdleis
met.Afeeispayablewhen:
(i) Shareholdersreceivetotalproceedsofatleast100.0pperDSODShare(excludingincometaxrelief);
and
(ii) Shareholdersachieveatax‐freecompoundreturnofatleast7%perannum(afterallowingforincome
taxreliefon
investment).
Ifthehurdleismet,thefeewillbe3.0pperDSODShareplus20%ofShareholderproceedsabove100.0p
perDShare.Themaximumperformancefeeislimitedto7.0pperDShare.
Asat31March2022,thereisnotexpectedtobeaperformanceincentive
payableperDSODShare.
TheCompanydoesnothaveanyexternallyimposedcapitalrequirements.
93
Notes to the Accounts(continued)
fortheyearended31March2022
- Reserves
2022 2021
£’000 £’000
Capitalredemptionreserve 58 58
Specialreserve 24,063 29,417
Sharepremiumaccount 29,284 20,010
Revaluationreserve 6,995 (1,143)
Capitalreserve–realised 3,769 3,132
Revenuereserve (3,412) (3,768)
Fundsheldinrespectofsharesnotyetallotted 7 241
60,764 47,947
Note:calledupsharecapitalnotincludedabove
TheSpecialreserve,Capitalreserve–realisedandRevenuereservearealldistributablereserves.The
distributablereservesarereducedbyunrealisedholdinglossesof£12.0million(2021:£13.0million),which
areincludedintheRevaluationreserve.
Capitalredemptionreserve
Thisreserveaccountsforamountsbywhichtheissuedsharecapital
isdiminishedthroughtherepurchase
andcancellationoftheCompany’sownshares.
Specialreserve
TheSpecialreserveisavailabletotheCompanytoenablethepurchaseofitsownsharesinthemarket
withoutaffectingitsabilitytopaycapitaldistributions.
Sharepremiumaccount
Thisreserveaccountsforthedifferencebetween
thepricesatwhichsharesareissuedandthenominal
valueoftheshares,lessissuecostsandtransferstotheotherdistributablereserves.
Revaluationreserve
Thisreserverepresentsthecumulativeincreasesanddecreasesinthevaluationsofinvestmentsheldat
eachyearend,againstcost.
Capitalreserve‐realised
The
followingaredisclosedinthisreserve:
gainsandlossesonthedisposalofinvestments;
foreignexchangedifferencesofacapitalnature;
expenses,togetherwiththerelatedtaxationeffect,chargedinaccordancewiththeaboveaccounting
policies;and
dividendspaidtoShareholders.
Revenuereserve
ThisreserveaccountsformovementswithintherevenuecolumnoftheIncomeStatement,thepaymentof
dividendsandothernon‐capitalrealisedmovements.
Fundsheldinrespectofsharesnotyetallotted
Thisreserverepresentsthefundraisingproceedswhichwereawaitingallotmentasatthe
BalanceSheet
date.
94
Notes to the Accounts(continued)
fortheyearended31March2022
- BasicanddilutedNetAssetValuepershare
Sharesinissue
2022NetAsset
Value
2021NetAsset
Value
2022 2021
Pence
per
share
£’000
Pence
per
share
£’000
DSODShares 7,867,247 7,867,247 2.6 208 10.2 801
DP67Shares 11,192,136 11,192,136 26.8 2,998 18.4 2,064
VenturesShares 54,112,154 47,308,832 68.2 36,889 67.231,778
VenturesManagementShares 11,216,391 11,216,391 ‐‐‐ ‐
HealthcareShares 22,206,436 19,230,091 84.418,746 68.513,165
HealthcareManagementShares 4,605,472 4,605,472 ‐‐‐ ‐
AIMShares 2,034,990 n/a 99.9 2,029 ‐ ‐
Fundsheldinrespectofsharesnotyetallotted 7 241
NetassetsperBalanceSheet 60,877 48,049
TheDirectorsallocatetheassetsandliabilitiesoftheCompanybetweentheDSODShares,DP67Shares,
VenturesShares,HealthcareSharesandAIMSharessuchthateachshareclasshassufficientnetassetsto
representitsdividendandreturnofcapitalrights,asdescribedinnote12.
AstheCompanyhas
notissuedanyconvertiblesharesorshareoptions,thereisnodilutiveeffectonthe
NetAssetValueperDSODShare,perDP67Share,perVenturesShare,perHealthcareShareorperAIM
Share.TheNetAssetValuepersharedisclosedthereforerepresentsboththebasicanddilutedNet
Asset
ValueperDSODShare,perDP67Share,perVenturesShare,perHealthcareShareandperAIMShare.
- Financialinstruments
TheCompany’sfinancialinstrumentscompriseinvestmentsheldatfairvaluethroughprofitorloss,being
equityandloaninvestmentsinunquotedcompanies,Liquidityinvestments,loansandreceivables,being
cashdepositsandshort‐termdebtors,andfinancialliabilities,beingcreditorsarisingfromitsoperations.The
mainpurposeofthesefinancialinstrumentsis
togeneratecashflows,revenuesandcapitalappreciationfor
theCompany’soperations.TheCompanyhasnogearingorotherfinancialliabilitiesapartfromshort‐term
creditors.
ThefairvalueofinvestmentsisdeterminedusingthedetailedaccountingpolicyasshowninNote1.The
compositionoftheinvestmentsissetout
inNote9.
Thefairvaluesofcashdepositsandshort‐termdebtorsandcreditorsequatetotheircarryingvalues.
TheCompany’sinvestmentactivitiesexposetheCompanytoanumberofrisksassociatedwithfinancial
instrumentsandthesectorsinwhichtheCompanyinvests.Theprincipalfinancialrisksarisingfromthe
Company’soperationsare:
Marketrisks;
Creditrisk;and
Liquidityrisk.
TheBoardregularlyreviewstheserisksandthepoliciesinplaceformanagingthem.Therehavebeenno
significantchangestothenatureoftherisksthattheCompanyisexposedtoovertheyearandtherehave
alsobeennosignificantchangestothepoliciesformanagingthose
risksduringtheyear.
95
Notes to the Accounts(continued)
fortheyearended31March2022
- Financialinstruments(continued)
TheriskmanagementpoliciesusedbytheCompanyinrespectoftheprincipalfinancialrisksandareviewof
thefinancialinstrumentsheldattheyearendareprovidedbelow:
Marketrisks
AsaVCT,theCompanyisexposedtoinvestmentrisksintheformofpotentiallossesandgainsthat
may
ariseontheinvestmentsitholds,inaccordancewithitsinvestmentpolicy.Themanagementofthese
marketrisksisafundamentalpartofinvestmentactivitiesundertakenbytheInvestmentManagerandis
overseenbytheBoard.TheManagermonitorsinvestmentsthroughregularcontactwiththemanagement
ofinvesteecompanies,
regularreviewofmanagementaccountsandotherfinancialinformationand
attendanceatinvesteecompanyboardmeetings.ThisenablestheManagertomanagetheinvestmentrisk
inrespectofindividualinvestments.Investmentriskisalsomitigatedbyholdingadiversifiedportfolio
spreadacrossvariousbusinesssectorsandassetclasses.
Thekeymarket
riskstowhichtheCompanyisexposedare:
Investmentpricerisk;
Foreignexchangerisk;and
Interestraterisk.
TheCompanyhasundertakensensitivityanalysisonitsfinancialinstruments,splitintotherelevant
componentparts,takingintoconsiderationtheeconomicclimateatthetimeofreviewinordertoascertain
theappropriateriskallocation.
Investmentpricerisk
Investmentpriceriskarisesfromuncertaintyaboutthefuturepricesandvaluationsoffinancialinstruments
heldinaccordancewiththeCompany’sinvestmentobjectives.Itrepresentsthepotentiallossthatthe
Companymightsufferthroughmarketpricemovementsinrespectofquotedinvestments,andalsochanges
inthefair
valueofunquotedinvestmentsthatitholds.
Quotedinvestments
TheCompany’ssensitivitytofluctuationsinthepricesofitsquotedinvestmentsissummarisedbelow.A
20%movementinthequotedpricesoftheseassets,whichisconsideredtobeareasonableannual
movementgiventhefluctuationsintheFTSEindices,
wouldhavethefollowingimpactonthecompany:
Riskexposureat
31March2022
Riskexposureat
31March2021
Liquidityinvestments(£’000) 3,5194,149
QuotedVentureCapitalinvestments(£’000) 7,3331,322
FTSE100Indexatthereportingdate 7,5166,714
MovementinFTSE100Index
Estimated
impacton
NAV/Total
Return
Estimated
impacton
NAV
Estimated
impacton
NAV/Total
Return
Estimated
impacton
NAV
£’000 Pence £’000 Pence
V
enturesShares
20%increaseto5,142(2021:4,834) 857 1.6p 806 1.7p
20%decreaseto3,428(2021:3,222) (857) (1.6p) (806) (1.7p)
HealthcareShares
20%increaseto7,880(2021:1,732) 1,313 5.9p 289 1.5p
20%decreaseto5,254(2021:1,154) (1,313) (5.9p) (289) (1.5p)
96
Notes to the Accounts(continued)
fortheyearended31March2022
15. Financialinstruments(continued)
Marketrisks(continued)
Investmentpricerisk(continued)
At31March2022,theunquotedportfoliowasvaluedat£38,289,000(2021:£35,272,000).Abreakdownof
theunquotedportfoliobyvaluationmethodusedisasfollows:
2022
£’000
Calibrationtopriceofrecentinvestment 23,439
Discountedcashflows(fromtheinvestment) 8,473
Discountedcashflowsorearnings(ofunderlyingbusiness) ‐
Multiples 6,377
38,289
AsthemajorityoftheCompany’sunquotedinvestmentsarevaluedusingcalibrationtopriceofrecent
investment,achangeinmarketconditionscouldimpactonthevaluationoftheequityinvestmentsheldin
theunquotedportfolio.Astheunquotedinvestmentsareacrossabroadrangeofsectorsandvaluedusing
differentvaluationtechniques,itisnotpossibletocreateameaningfulanalysisbychangingoneinputor
discountfactor.Asunquotedinvestmentsaretypicallystructuredaspartlyequityandpartlyloannotes,
investmentpriceriskoftheunquotedinvestmentsisconsideredasawhole.TheBoardhasconsideredthe
currentvolatile
marketconditionsarisingfromthecoronaviruspandemicindeterminingthereasonably
possiblemarketmovementsthatshouldbeillustratedwithsensitivityanalysis.Apositive20%andnegative
50%movementinthecarryingvalueoftheunquotedportfolioasawholeisconsideredtobeareasonable
maximumlevelinagiven
yearandwouldhavethefollowingimpact:
Movementinunquotedinvestmentvaluations
31March2022
+20%movement ‐50%movement
Impacton
netassets
Impacton
NAVper
share
Impacton
netassets
Impacton
NAVper
share
Sharepool £’000 Pence £’000 Pence
DSODShares 9 0.1p (22) (0.3p)
DP67Shares 379 3.4p (947) (8.5p)
VenturesShares 5,395 10.0p (13,487) (24.9p)
HealthcareShares 1,876 8.4p (4,689) (21.1p)
31March2021
+20%movement ‐50%movement
Impacton
netassets
Impacton
NAVper
share
Impacton
netassets
Impacton
NAVper
share
Sharepool £’000 Pence £’000 Pence
DSODShares 89 1.1p (222) (2.8p)
DP67Shares 425 3.8p (1,063) (9.5p)
VenturesShares 4,921 10.4p (12,303) (26.0p)
HealthcareShares 1,619 8.4p (4,047) (21.0p)
Thesensitivityanalysisforunquotedvaluationsaboveassumesthateachofthesubcategoriesoffinancial
instruments(ordinarysharesandloans)heldbytheCompanyproducesanoverallmovementofplus20%or
minus50%.Shareholdersshouldnotethatequalcorrelationbetweenthesesubcategoriesisunlikelytobe
the
caseinreality,particularlyinthecaseofloaninstruments.Wheresharepricesarefalling,theequity
instrumentcouldfallinvaluebeforetheloaninstrument.Itisnotconsideredpracticaltoassessthe
sensitivityoftheloaninstrumentstomarketpriceriskinisolation.
97
Notes to the Accounts(continued)
fortheyearended31March2022
15. Financialinstruments(continued)
Marketrisks(continued)
Foreignexchangerisk
TheCompanyhasexposuretofluctuationsintheprevailingmarketratesofexchangebetweentheUS
Dollar("USD")andtheBritishPound("GBP"),asaresultofholdinginvestmentsincompanieswhichuse
USDastheirfunctionalandreportingcurrency.Thevaluationsofsuchinvestmentsarefirstperformed
in
USDandsubsequentlyconvertedtotheequivalentGBPvaluesateachreportingdate.Asat31March
2022,cumulativeunrealisedforeignexchangegainsof£171,000(2021:cumulativeloss£266,000)had
beenrecognisedintheIncomeStatement,representingthemovementsintheUSD:GBPexchangerates
betweenthedateofeach
relevantinvestmentandthereportingdate.TheBoardcontinuestoreviewthe
exposuretofluctuationsinforeigncurrenciesbuthasnotsoughttomitigatetheexposureatthistime.The
Companydoeshoweverhaverelationshipswithforeignexchangeserviceprovidersandwillseektoreduce
theimpactofforeignexchangefluctuations
onfuturecashflowsastheyarise.
Interestraterisk
TheCompanyacceptsexposuretointerestrateriskonfloating‐ratefinancialassetsthroughtheeffectof
changesinprevailinginterestrates.TheCompanyreceivesinterestonitscashdepositsatarateagreedwith
itsbankers.Investmentsinloannotesattractinterest,predominatelyatfixedrates.A
summaryofthe
interestrateprofileoftheCompany’sinvestmentsisshownbelow.
Therearethreecategoriesinrespectofinterest,whichareattributabletothefinancialinstrumentsheldby
theCompanyasfollows:
“Fixedrate”assetsrepresentinvestmentswithpredeterminedyieldtargetsandcomprisecertainloan
noteinvestmentsandpreferenceshares;
“Floatingrate”assetspredominantlybearinterestatrateslinkedtoBankofEnglandbaserateor
LIBORandcomprisecashatbank;and
“Nointerestrate”assetsdonotattractinterestandcompriseequityinvestments,certainloannote
investments,Liquidityinvestments,loansandreceivables(excludingcashatbank)andotherfinancial
liabilities.
Average Averageperiod 2022 2021
interestrate untilmaturity £’000 £’000
Fixedrate 24.1% Pastdue 3,250 3,667
Floatingrate nil8,384 6,986
Nointerestrate49,242 37,396
60,876 48,049
TheCompanymonitorsthelevelofincomereceivedfromfixedandfloatingrateassetsand,ifappropriate,
maymakeadjustmentstotheallocationbetweenthecategories,inparticular,ifthisshouldberequiredto
ensurecompliancewiththeVCTregulations.
TheBankofEnglandbaseratehasbeenanaverageof0.19%duringtheyear.Anypotentialchangeinthe
baserate,atthecurrentlevel,wouldhaveanimmaterialimpactonthenetassetsandTotalReturnofthe
Company.
Creditrisk
Creditriskistheriskthatacounterpartytoafinancialinstrumentisunabletodischargeacommitmentto
theCompanymadeunderthatinstrument.TheCompanyisexposedtocreditriskthroughitsholdingsof
loannotesininvesteecompanies,cashdepositsanddebtors.Creditriskrelatingto
holdingsofloannotesin
investeecompaniesisconsideredtobepartofmarketrisk.
TheCompany’sfinancialassetsthatareexposedtocreditriskaresummarisedasfollows:
2022 2021
£’000 £’000
Investmentsinloannotes
3,250 3,667
Cashandcashequivalents
8,384 6,986
Interestandotherreceivables
4,316 701
15,950 11,354
98
Notes to the Accounts(continued)
fortheyearended31March2022
15. Financialinstruments(continued)
Creditrisk(continued)
TheManagermanagescreditriskinrespectofloannoteswithasimilarapproachasdescribedunder
investmentpricerisk.Themanagementofcreditrisk,associatedinterest,dividendsandotherreceivablesis
coveredwithintheinvestmentmanagementprocedures.
CashismainlyheldwithRoyalBankofScotlandplc,
anA‐ratedfinancialinstitution.Consequently,the
Directorsconsiderthatthecreditriskassociatedwithcashdepositsislow.
Therehavebeenlimitedchangesinfairvalueduringtheyearthataredirectlyattributabletochangesin
creditrisk.
Liquidityrisk
LiquidityriskistheriskthattheCompanyencountersdifficultiesinmeetingobligationsassociatedwithits
financialliabilities.Liquidityriskmayalsoarisefromei thertheinabilitytosellfinancialinstrumentsattheir
fairvalueswhenrequired,orfromtheinabilitytogeneratecashinflowsasrequired.
The
Companyhasarelativelylowlevelofcreditors,being£965,000(2021:£381,000),allofwhichare
payablewithinoneyear.TheCompanyhasnoborrowings,andaccordinglytheBoardbelievesthatthe
Company’sexposuretoliquidityriskislow.Also,thequotedinvestmentsheldbytheCompanyare
consideredtobe
readilyrealisable.TheCompanyalwaysholdssufficientlevelsoffundsascashandreadily
realisableinvestmentsinordertomeetexpensesandothercashoutflowsastheyarise.Forthesereasons,
theBoardbelievesthattheCompany’sexposuretoliquidityriskisminimal.TheCompany’sliquidityriskis
managedby
theInvestmentManagerinlinewithguidanceagreedwiththeBoardandisreviewedbythe
Boardatregularintervals.
AlthoughtheCompany’sinvestmentsarenotheldtomeettheCompany’sliquidityrequirements,thetable
belowshowsananalysisoftheassets,highlightingthelengthoftimethatitcouldtake
theCompanyto
realiseitsassetsifitwererequiredtodoso.
Thecarryingvaluesofloannoteinvestmentsheldandatfairvaluethroughprofitorlossasat31March
2022,analysedbyexpectedmaturitydate,areasfollows:
A
sat31March2022 Passed Notlater Between Between Between
maturit
y
than1 1and2 2and3 3and5
date year years years years Total
£’000 £’000 £’000 £’000 £’000 £’000
Fullyperformingloans ‐ 417‐‐258 675
Pastdueloans 1,411 1,164‐‐‐2,575
1,411 1,581‐‐258 3,250
Asat31March2021 Passed Notlater Between Between Between
maturit
y
than1 1and2 2and3 3and5
date year years years years Total
£’000 £’000 £’000 £’000 £’000 £’000
Fullyperformingloans‐541 335 138‐1,014
Pastdueloans 2,653‐‐‐‐2,653
2,653 541 335 138‐3,667
Asat31March2022,oftheloansclassifiedas“pastdue”,£1,411,000(2021:£2,653,000)relatestothe
principalofloanswheretheprincipalhadpasseditsmaturitydate.Thetotalof£2,575,000(2021:
£2,653,000)iscomprisedof£1,164,000(2021:£nil)whichiswithin1yearoftheexpectedmaturitydate
and£1,411,000(2021:£2,653,000)relatingtoprincipalwhichisbetween1and3yearspastdue.
Notwithstandingthattheprincipalremainedoutstandingpasseditsmaturitydate,theDirectorsdidnot
considerthattheloanprincipalamountshadbeenimpaired.
99
Notes to the Accounts(continued)
fortheyearended31March2022
- Deferredtaxation
2022 2021
£’000 £’000
Atthebeginningoftheyear ‐ 69
Chargedtotheincomestatement ‐ (69)
A
ttheendoftheyear‐‐
- Capitalmanagement
TheCompany’sobjectiveswhenmanagingcapitalaretosafeguardtheCompany’sabilitytocontinueasa
goingconcern,inlinewithitsplannedexitandevergreenstrategies,sothatitcancontinuetoprovide
returnsforShareholders,andtoprovideanadequatereturntotheShareholdersbyallocatingitscapitalto
assets,commensuratelywiththelevelofrisk.
Byitsnature,theCompanyhasanamountofcapital,atleast80%(asmeasuredunderthetaxlegislation)of
whichis,andmustremain,investedintherelativelyhigh‐riskassetclassofsmallUKcompanies,within
threeyearsofthatcapital
beingsubscribed.TheCompanyaccordinglyhaslimitedscopetomanageits
capitalstructureinthelightofchangesineconomicconditionsandtheriskcharacteristicsoftheunderlying
assets.Subjecttothisoverallconstraintuponchangingthecapitalstructure,theCompanymayadjustthe
amountofdividendspaidtoShareholders,
returncapitaltoShareholders,issuenewsharesorsellassets,if
sorequired,tomaintainasufficientlevelofliquidityinorderfortheCompanytoremainagoingconcern.
AstheInvestmentPolicyimplies,theBoardwouldconsiderlevelsofgearing,althoughtherearenocurrent
planstodoso.
ItregardsthenetassetsoftheCompanyastheCompany’scapital,asthelevelofliabilitiesis
smallandthemanagementofthemisnotdirectlyrelatedtomanagingthereturntoShareholders.Therehas
beennochangeinthisapproachfromthepreviousperiod.
- Contingencies,guaranteesandfinancialcommitments
Asat31March2022,theCompany’sVenturesSharepoolhadexitedfromJRNILimited.Ofthetotalsales
consideration,£84,000hadbeenwithheldfromtheCompanypendingwarrantyclaims.WhilsttheDirectors
consideritunlikelythatanysuchclaimswillbemade,theremainingfundswillnotbereleasedto
the
Companyuntiltheexpiryofthewarrantyperiod.Assuch,inaccordancewithFRS102(Section10.11.3),
thisamounthasnotbeenrecordedasareceivableinthesefinancialstatements,noraspartoftheexit
proceedsshownonpage14.
At31March2022,theCompanyhadno
othercontingencies,guaranteesorfinancialcommitments.
100
Notes to the Accounts(continued)
fortheyearended31March2022
- Controllingpartyandrelatedpartytransactions
IntheopinionoftheDirectors,thereisnoimmediateorultimatecontrollingparty.
FeespayableduringtheyeartotheDirectorsandtheirinterestinsharesoftheCompanyaredisclosedwithin
theDirectors’RemunerationReportonpage55andintheReportoftheDirectorsonpage50.
Therewere
noamountsoutstandingandduetotheDirectorsasat31March2022(2021:nil).
Further related party transactions include Investment Management and Administration fees payable to
Downing LLP, as disclosed in notes 3 and 4. In addition, Downing LLP was also paid promoter fees in
connectionwiththe
offersforsubscriptionwhichwereopenduringtheyear.ThetotalpaidtoDowningLLP
duringtheyearended31March2022was£149,000(2021:£32,000).
TheCompanyalsohasanagreementtopayanongoingtrailfeeannuallytoDowningLLP,inconnectionwith
applicableproceedsraisedunderprevious
offersforsubscription,outofwhichDowningLLPhasanobligation
topaytrailcommissiontointermediaries.ThetotaltrailfeepayabletoDowninginrespectoftheyearended
31March2022was£24,000,allofwhichwasunpaidasat31March2022(2021;£24,000).
- Eventsaftertheendofthereportingperiod
Intheperiodbetween31March2022andthedateofthisreport,theCompanyissuedthefollowingshares:
4,611,464VenturesShares,atanaveragepriceof27.0ppershare,including2,759,758management
sharesat0.1ppershare;and
1,763,300HealthcareShares,atanaveragepriceof31.6ppershare, including1,106,592
managementsharesat0.1ppershare;and
660,813AIMShares,atanaveragepriceof102.5ppershare
At the date of this report, there were 69,880,747 Ventures Shares, 28,560,321 Healthcare Shares and
2,695,803AIMSharesinissue,includingManagementShares.
On13June2022,theCompanyannouncedthatitsinvestmentmanager,DowningLLP(“Downing”),agreed
tosell
itstechnologyVenturesbusinesstoForesightGroupLLP(“Foresight”).Aspartofthistransaction,the
InvestmentManagementagreement(withtheexceptionofthemanagementof theHealthcaresharepool)
wasnovatedfromDowningtoForesightatthecompletionofthesaleon5July2022.Themanagementof
theHealthcare
sharepoolwillberetainedbyDowningandcontinuetobemanagedbyDowning’sexpanding
Healthcareteam.Inordertoensureasmoothhandover,Downingwillalsocontinuetoprovideadministration
services, and investment management services in respect of the AIM share pool and for non‐ventures
portfolioinvestments(primarilyin
theplannedexitsharepoolswhicharebeingwounddown)foratransitional
period.
101
Notice of the Annual General Meeting of
Downing FOUR VCT plc
NOTICEISHEREBYGIVENthattheAnnualGeneralMeetingofDowningFOURVCTplcwillbeheldatthe
officesofForesightGroupLLP,TheShard,32LondonBridgeStreet,London,SE19SGat3.30p.m.on27
September2022forthetransactionofthefollowingbusiness:
AsOrdinaryBusiness,
toconsiderand,ifthoughtfit,passthefollowingresolutionswhichwillbeproposedas
OrdinaryResolutions:
- ToreceiveandadopttheReportoftheDirectorsandAccountsoftheCompanyfortheyearended31
March2022,togetherwiththereportoftheAuditorthereon.
- Toapprove
theDirectors’RemunerationReport.
-
Toapprovethepaymentoffinaldividendsof2.75pperVenturesShareand3.50pperHealthcareShare.
-
Tore‐appointBDOLLPasAuditoroftheCompanytoholdofficeuntiltheconclusionofthenextAnnual
GeneralMeetingatwhichtheaccountsof
theCompanyarepresentedandtoauthorisetheDirectorsto
determinetheirremuneration.
- Tore‐electasDirector,SirAubreyBrocklebank,whoretiresand,beingeligible,offershimselfforre‐
election.
- Tore‐electasDirector,AndrewMackintosh,whoretiresand,beingeligible,offershimselfforre‐election.
7.
Tore‐electasDirector,StevenClarke,whoretiresand,beingeligible,offershimselfforre‐election.
- Tore‐electasDirector,ChrisAllner,whoretiresand,beingeligible,offershimselfforre‐election
AsSpecialBusiness,toconsiderand,ifthoughtfit,passthefollowing:
OrdinaryResolution
9.
That,inadditiontoanyexistingauthority(totheextentunused),theDirectorsbeandareherebygenerally
andunconditionallyauthorisedinaccordancewithSection551oftheCompaniesAct2006(the“Act”)to
exerciseallthepowersoftheCompanytoallotsharesortograntrightstosubscribe
forortoconvertany
securityintosharesintheCompanyuptoanaggregatenominalamountof£172,555,beingupto
58,651,026VenturesShares(plusVenturesManagementSharesofupto14,662,757)(representing
approximately105%oftheVenturesSharecapitalinissueattoday’sdate),upto47,393,365Healthcare
Shares
(plusHealthcareManagementSharesofupto11,848,341)(representingapproximately207%ofthe
HealthcareSharecapitalinissueattoday’sdate)andupto40,000,000AIMShares(representing
approximately1,484%oftheAIMSharecapitalinissueattoday’sdate),duringtheperiodcommencingon
thepassingofthisresolution
andexpiringattheconclusionoftheCompany'snextannualgeneralmeeting,
orontheexpiryof15m onthsfollowingthepassingoftheresolution,whicheveristhelater(unless
previouslyrevoked,variedorextendedbytheCompanyinageneralmeeting),butsothatthisauthority
shallallowtheCompany
tomakebeforetheexpiryofthisauthorityoffersoragreementswhichwouldor
mightrequiresharestobeallottedorrightstobegrantedtosubscribeforortoconvertanysecurityinto
sharesintheCompanyaftersuchexpiryandallpreviousauthoritiesgivenbytheDirectorsin
accordance
withsection551oftheActbeandareherebyrevoked,providedthatsuchrevocationshallnothave
retrospectiveeffect;
SpecialResolutions
- That,inadditiontoanyexistingauthority(totheextentunused),theDirectorsbeandarehereby
empowered,duringtheperiodcommencingonthepassingof
thisresolutionandexpiringattheconclusion
oftheCompany'snextannualgeneralmeeting,orontheexpiryof15monthsfollowingthepassingofthis
resolution,whicheveristhelater(unlesspreviouslyrevoked,variedorextendedbytheCompanyina
generalmeeting),pursuanttosection570oftheAct,
toallotequitysecurities(asdefinedinSection560(1)
oftheAct)forcashpursuanttotheauthoritygiveninaccordancewithSection551oftheAct,pursuantto
Resolution9above,asifsection561(1)oftheActdidnotapplytoanysuchallotmentbutsothatthis
authorityshallallowtheCompanytomakeoffersoragreementsbeforetheexpiryandtheDirectorsmay
allotequitysecuritiesinpursuanceofsuchoffersoragreementsasifthepowersconferredherebyhadnot
soexpired;
102
Notice of the Annual General Meeting of
Downing FOUR VCT plc
(continued)
- That,theCompanybeandisherebygenerallyandunconditionallyauthorisedtomakemarketpurchases
(withinthemeaningofSection693(4)oftheCompaniesAct2006)ofDSODSharesof0.1peach(“DSOD
Shares”),DP67Sharesof0.1peach(“DP67Shares"),VenturesSharesof0.1peach(“Ventures
Shares”),
HealthcareSharesof0.1peach(“HealthcareShares”)andAIMSharesof0.1peach(“AIMShares”)inthe
capitaloftheCompanyprovidedthat:
(i) themaximumnumberof1,172,220representingapproximately14.9%oftheissuedDSODShare
capital,1,667,628representingapproximately14.9%oftheissuedDP67Sharecapital,8,329,785
representingapproximately14.9%oftheissuedVenturesSharecapital,3,404,390representing
approximately14.9%oftheissuedHealthcareSharecapitaloftheCompanyand401,675representing
approximately14.9%oftheissuedAIMSharecapitaloftheCompany;
(ii) theminimumpricewhichmaybepaidforaDSODShare,DP67
Share,VenturesShare,Healthcare
ShareorAIMShareis0.1p,exclusiveofallexpenses;
(iii) themaximumpricewhichmaybepaidforaDSODShare,DP67Share,VenturesShare,Healthcare
ShareorAIMShareisanamount,exclusiveofallexpenses,equalto105%oftheaverageofthe
middle
marketquotationsoftherelevantshare,asderivedfromtheDailyOfficialListoftheLondonStock
Exchange,foreachofthefivebusinessdaysimmediatelyprecedingthedayonwhichtheshareis
contractedtobepurchased;and
(iv) theCompanymayvalidlymakeacontracttopurchase
itsownDSODShares,DP67Shares,Ventures
Shares,HealthcareSharesorAIMSharesundertheauthorityherebyconferredpriortotheexpiryof
suchauthoritywhichwillormaybeexecutedwhollyorpartlyaftertheexpiryofsuchauthority,and
mayvalidlymakeapurchaseofDSODShares,
DP67Shares,VenturesShares,HealthcareSharesor
AIMSharesinpursuanceofanysuchcontract;
andthispower,unlesspreviouslyvaried,revokedorrenewed,shallcometoanendattheconclusionofthe
AnnualGeneralMeetingoftheCompanynextfollowingthepassingofthisresolutionoronthe
expiryof15
monthsfromthepassingoftheresolution,whicheveristheearlier.
- That,subjecttothesanctionoftheHighCourt,theamountsstandingtothecreditofeachoftheshare
premiumaccountandcapitalredemptionreserveoftheCompany,asatthedateanorderis
made
confirmingsuchcancellationbytheHighCourtbecancelled.
ShareholderswishingtoattendtheAGMarerequestedtopleasenotifyDowningLLPviaemail,to
[email protected],incasetherearechangestoarrangementswhichneedtobecommunicatedatshort
notice.
ByorderoftheBoard
GrantWhitehouse
CompanySecretary
Registeredoffice:
6thFloor,St.MagnusHouse
3LowerThamesStreet
LondonEC3R6HD 25July2022
103
Notice of the Annual General Meeting of
Downing FOUR VCT plc
(continued)
Notes
(a) Tobevalid,aFormofProxyandthepowerofattorneyorotherwrittenauthority,ifany,underwhichitis
signedoranofficeornotariallycertifiedcopyoracopycertifiedinaccordancewiththePowersofAttorney
Act1971ofsuchpowerandwritten
authority,mustbedepositedattheofficesoftheCompany’sRegistrar,
TheCityPartnership(UK)Limited,Suite2ParkValleyHouse,ParkValleyMills,MelthamRoad,Huddersfield
HD4 7BH, or emailed to [email protected] or submitted electronically at proxy‐downingfour.cpip.io, in
each case not less than 48 hours (excluding weekends and public
holidays) before the time appointed for
holdingtheAnnualGeneralMeetingoradjournedmeetingatwhichthepersonnamedintheFormofProxy
proposestovote.
(b) InordertorevokeaproxyinstructionamemberwillneedtoinformtheCompanyusingoneofthefollowing
methods:
bysendingasignedhardcopynoticeclearlystatingtheintentiontorevoketheproxyappointmentto
The City Partnership (UK) Limited, Suite 2 Park Valley House, Park Valley Mills, Meltham Road,
HuddersfieldHD47BH.Inthecaseofamemberwhichisacompany,therevocationnoticemustbe
executed
underitscommonsealorsignedonitsbehalfbyanofficerofthecompanyoranattorney
forthecompany.Anypowerofattorneyoranyotherauthorityunderwhichtherevocationnoticeis
signed (or a duly certified copy of such power or authority) must be included with
the revocation
notice;or
bysendingane‐mailto[email protected].
In eithercase, the revocationnotice must be receivedby TheCityPartnership beforethe Annual General
Meeting or the holding of a poll subsequent thereto. If a member attempts to revoke his or her proxy
appointmentbuttherevocationisreceivedafterthe
timespecifiedthen,subjecttoNote(c)directlybelow,
theproxyappointmentwillremainvalid.
(c) PursuanttoRegulation41oftheUncertificatedSecuritiesRegulations2001,theCompanyhasspecifiedthat
onlythoseholdersoftheCompany’ssharesregisteredontheRegisterofMembersoftheCompanyasat3.30
p.m.on23September2022or,intheeventthattheAnnualGeneralMeetingisadjourned,ontheRegisterof
Members48hours(excludingweekendsandpublicholidays)beforethetimeofanyadjournedmeeting,shall
beentitledtovoteatthesaidAnnualGeneralMeetinginrespectofsuch
sharesregisteredintheirnameat
therelevanttime.ChangestoentriesontheRegisterofMembersafter3.30p.m.on23September2022or,
intheeventthattheAnnualGeneralMeetingisadjourned,ontheRegisterofMemberslessthan48hours
(excludingweekendsandpublicholidays)beforethe
timeofanyadjournedmeeting,shallbedisregardedin
determiningtherightofanypersontoattendandvoteattheAnnualGeneralMeeting.
(d) Asat9:00a.m.on 25July 2022,the Company’sissuedshare capitalcomprised 7,867,247DSODShares,
11,192,136DP67Shares,69,880,747VenturesShares,28,560,321
HealthcareSharesand2,695,803AIM
SharesthetotalnumberofvotingrightsintheCompany,excludingmanagementshares,was83,373,699,344.
Informationonthenumberofsharesandvotingrightsisincludedatwww.downing.co.uk.
(e) Avotewithheldisnotavoteinlaw,whichmeansthatthevotewillnot
becountedinthecalculationofvotes
fororagainsttheresolution.Ifnovotingindicationisgiven,theproxywillvoteorabstainfromvotingathis
orherdiscretion.Theproxywillvote(orabstainfromvoting)asheorshethinksfitinrelationtoanyother
matterwhichisputbeforetheAnnualGeneralMeeting.
(f) Except as provided above, members who have general queries about the Annual General Meeting should
writetotheChairmanattheregisteredofficesetoutonthepreviouspage.
(g) Members maynot use anyemail addressprovidedeitherin
thisnotice ofAnnualGeneralMeeting,orany
relateddocuments(includingtheChairman’sletterandFormofProxy),tocommunicatewiththeCompany
foranypurposesotherthanthoseexpresslystated.