Downing FOUR VCT plc - Annual Financial Report

Downing FOUR VCT plc
LEI: 21380035MV1VRYEXPR95
Final Results for the year ended ended 31 March 2020
31 July 2020

Financial Highlights

	Unaudited	Audited		Audited
	30 June 2020	31 March 2020		31 March 2019
	pence	pence		pence

Generalist Share pool
Net Asset Value and Total Return per Generalist Share	64.1	61.7		83.5

Healthcare Share pool
Net Asset Value and Total Return per Healthcare Share	69.8	68.1		83.3

DSO D Share pool
Net Asset Value per DSO D Share		12.0		27.8
Cumulative distributions		94.5		76.5
Adjusted for Performance Incentive estimate		(4.3)		(3.9)
Total Return per DSO D Share		102.2	¹	100.4

DP67 Share pool
Net Asset Value per DP67 Share		18.8		48.5
Cumulative distributions (since original launch)		67.8		49.8
Total Return per DP67 Share		86.6		98.3

DP2011 General Share pool
Net Asset Value per DP2011 General Ordinary Share		-		-
Net Asset Value per DP2011 General A Share		-		13.3
Cumulative distributions (since original launch)		105.6		92.0
Total Return per DP2011 General Ordinary Share and DP2011 General A Share		105.6	²	105.3

DP2011 Structured Share pool
Net Asset Value per DP2011 Structured Ordinary Share		-		-
Net Asset Value per DP2011 Structured A Share		-		9.9
Cumulative distributions (since original launch)		105.1		95.0
Total Return per DP2011 Structured Ordinary Share and DP2011 Structured A Share		105.1	³	104.9

¹     Based on Total Return to Shareholders at 31 March 2020, a Performance Incentive is expected to become due to management. The Performance Incentive has been estimated at 4.3p per DSO D Share. No provision has been included in the accounts as the conditions of the Performance Incentive fee have not yet been met.
²     The Total Return to Shareholders at 31 March 2020 is shown net of the Performance Incentive paid to management. By virtue of the A Share dividends paid, members of the management team have received Performance Incentive payments equivalent to 5.1p per DP2011 General Ordinary Share.
³        The Total Return to Shareholders at 31 March 2020 is shown net of the Performance Incentive paid to management. By virtue of the A Share dividends paid, members of the management team have received Performance Incentive payments equivalent to 5.0p per DP2011 Structured Ordinary Share.

Chairman’s Statement

Introduction

I present the Company’s Annual Report for the year ended 31 March 2020. The outbreak and spread of Covid-19 has affected the world in ways which we could not have anticipated. The extent of the impact on both the UK and wider global economy has not yet been fully determined, although it is already significant and adverse.

Prior to the outbreak, we saw some progress in realising the remaining investments in the DSO D and DP67 planned exit share pools. Plans for the final realisations have however been severely disrupted by the pandemic and timing of when these will complete is now uncertain. The task of exiting from the final investments in the DP2011 General Share pool and DP2011 Structured Share Pool was completed, with final dividends paid in September 2019 to bring those pools to a close.

Good progress was made during the year in investing the proceeds of the funds raised in 2016/17 and 2018/19 for the Generalist and Healthcare share pools. As I am sure you are aware the VCT tax rules require us to invest in much earlier stage companies than in the past. It is usual that we see the failures before the winners (the lemons ripen before the plums). We would normally expect to see a drop in NAV but the pandemic has exacerbated this effect. However, we believe that there are some very exciting companies in the portfolio as described below.

Share pool review

As at 31 March 2020 the Company had four active share pools, being two planned exit pools and two evergreen pools. Brief reviews of the share pools which were active during the year are given below.

Evergreen Share pools

Generalist Share pool
The task of investing funds continued in the year under review with £10.5 million being deployed into a variety of young growth businesses.

The Generalist Share NAV and Total Return stood at 61.7p at the year end, representing a decrease of 21.8p per Share or 26.0% over the year.

There have been two main factors which have combined to produce the fall in NAV over the year. It is not unusual in a portfolio of young growth businesses that some of the weaker businesses become apparent before the stronger ones have ultimately proved themselves.

We have fully written down Xupes Limited and Live Better With Limited as both businesses do not appear to be able to achieve their business plans and their futures are now not clear. It is important when investing in early stage companies to cut ones’ losses as early as possible and resist the temptation to throw good money after bad. We have also made a number of partial write downs against several portfolio companies where the coronavirus pandemic has had an impact.

In line with the original plans, the share pool invested a proportion of its funds awaiting qualifying investments in an investment trust and OEICs managed by Downing which mainly focus on quoted small cap companies, referred to as the “Liquidity Funds”. The value of these holdings fell sharply at the start of the coronavirus pandemic, although they have recovered somewhat since the year end as displayed by the 30 June NAVs of 64.1p for the Generalist Shares (and 69.8p for the Healthcare Shares).

Although it is disappointing to have lost so much ground relatively early in the life of this share class, the Board believes there is a good prospect of recovery in the Liquidity Funds as conditions improve. The Liquidity Funds have specific exposure to small company “special situations”, where the Manager has been working with the underlying businesses, making changes to boards and enhancing the prospects for all shareholders. The Board has been monitoring the progress of these initiatives, which had been positively reflected in the NAVs of the Funds in the last quarter of 2019 and start of 2020. Just like private equity, these investments tend to have a ‘J’ curve performance which we had begun to witness before the pandemic.

We are reassured that all the strategic investments in the Funds either have net cash on the balance sheets, or are asset backed. All are niche with a ‘look through’ to a world after the pandemic where their services and products will continue to be needed. There is little if no exposure in the Funds to high street retail/leisure/travel within these portfolios. The Manager has a high level of engagement with these management teams, and believes that the underlying portfolio, after some hard work, now has the correct management teams at the operational level to continue the progress that had already begun to be demonstrated before the outbreak.

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

Healthcare Share pool
The Manager deployed £2.1 million in five VCT-qualifying investments during the year.

The Healthcare Share NAV and Total Return stood at 68.1p at the year end, representing a decrease of 15.2p per Share or 18.2% over the year.
As with the Generalist Share Pool, the decrease in the NAV is attributable mainly to write downs being required against some of the VCT-qualifying investments and the performance of the Liquidity Funds. Like the Generalist pool, the Healthcare pool has a holding in Live Better With Limited against which a full write down has been included as the business has not made sufficient headway. Also like the Generalist pool, the Liquidity Funds focused on the quoted small cap sector suffered significant falls in value just prior to the year end, although there has been some recovery since.

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

Planned Exit Share pools

DSO D Share pool
During the year the Manager made further progress in exiting from the remaining investments held by the DSO D Share pool. The remaining value is now mostly represented by a pub company and two renewable energy investments. We are optimistic that a transaction to exit from the renewable energy businesses can be completed once we start to see a return to more normal conditions. The prospects of an exit from the pub company are less clear with the pub recommencing trading mid July.

The DSO D Share NAV stood at 12.0p at the year end, an increase of 2.2p per Share or 6.4% over the year after adjusting for the dividend of 18.0p per Share paid in the year. The NAV after deducting the estimated performance incentive of 4.3p per share that may become payable is 7.7p per share. Total Return (net of the estimated performance incentive) now stands at 102.2p per share compared to the cost for Shareholders who invested in the original DSO D Share offer of 100.0p, or 70.0p per share net of income tax relief.

A more detailed review of the DSO D Share pool is included in the Investment Manager’s Report.

DP67 Share pool
One exit was achieved in the year being that of Snow Hill Developments LLP. The remaining value in the share pool is now held in three companies which hold stakes in the conferencing and hotel sector. With these venues only reopening this month, it is difficult to estimate when transactions that will provide an exit might take place.

The DP67 Share NAV stood at 18.8p at the year end, a decrease of 11.7p per Share or 24.1% over the year after adjusting for the dividend in the year of 18.0p. Total Return now stands at 86.6p per Share, compared to the original cost for Shareholders who invested in 2007 of 100.0p, or 70.0p net of income tax relief.

A more detailed review of the DP67 Share pool is included in the Investment Manager’s report.

DP2011 General and DP2011 Structured Share pools
The final distributions to DP2011 General Shareholders and DP2011 Structured Shareholders were made in September 2019. DP2011 General Shareholders received a total of 105.595p for a combined holding of one DP2011 General Ordinary Share and one DP2011 General A Share. DP2011 Structured General Shareholders received a total of 105.059p for a combined holding of one DP2011 Structured General Ordinary Share and one DP2011 Structured A Share. When compared against the original investment of 70.0p, the Board believes both pools produced a satisfactory outcome.

Fundraising

The Company undertook a share offer for both the Generalist and Healthcare Share pools which closed in October 2019 having raised gross proceeds of £12.0 million for the Generalist Share Pool and £5.4 million for the Healthcare Share Pool.

The Company also launched a small top-up offer for subscription in April 2020 to facilitate allotments for monthly subscription investors that arose from earlier offers.

There are no immediate plans for fundraising until the pandemic abates and the economic future becomes clearer.

Share buybacks

The Company operates a general policy of buying in its own shares that become available in the market, subject to regulatory and liquidity factors. Any such purchases are undertaken at a price approximately equal to NAV (i.e. at a nil discount).

However, as the remaining planned exit share pools have initiated the process of returning funds to Shareholders, the Company will not undertake any further buybacks in respect of those share classes.

During the year ended 31 March 2020, 73,944 Generalist Shares and 19,704 Healthcare Shares were purchased and cancelled.

Since the year end, on 20 May 2020, the Company appointed Panmure Gordon as its corporate broker to assist in operating the share buyback process and ensuring that the quoted spread on the Company’s shares remains at a reasonable level. If you wish to sell or buy shares in the Company, Panmure Gordon can supply details of closed periods etc.

Annual General Meeting (“AGM”)

With the social distancing restrictions still in place as a result of the pandemic, it is difficult to make plans to hold an AGM as we would normally do. The government has recognised this problem and has made legislative changes to allow companies more flexibility in the way AGMs are held.

In line with what many companies are currently doing, we are therefore planning to hold a “closed AGM” which Shareholders will not be allowed to attend. The meeting will still comply with the minimum legal requirements for an AGM.

The closed AGM will take place on 9 September 2020 at 12:30pm. Shareholders are encouraged to vote by proxy and are invited to submit any questions for the Board or the Manager with their proxy form. The Board will seek to address topics raised in any submitted questions by publishing a statement with the AGM results. Full details included in the notice of AGM at the back of this Report.

Three items of special business are proposed at the AGM:

- one in respect of the authority to buy back shares as noted above; and
- two in respect of the authority to allot shares.

The authority to allot shares ensures the Company will be able to allot shares to monthly investors and also give the Board the opportunity to consider further fundraising options without having to necessarily incur the expense of seeking separate approval via a shareholder circular.

Any decision on future fundraising will, of course, give consideration to the level of uninvested funds already held by the Company and the rate of investment.

Shareholders are encouraged to submit their votes by proxy, as they will not be able to do so in person. We always welcome questions from our Shareholders at the AGM but this year, given the restrictions in place, please send any questions via email to d4agm@downing.co.uk by 5:00 pm on 2 September 2020. Answers to any questions received will be addressed on the website at www.downing.co.uk.

Outlook

As the disruption that the coronavirus pandemic has brought to everyday life starts to reduce, this should re-open the path for the Manager to secure exits from the remaining investments in the planned exit pools and conclude the task of returning funds to investors. At this point it is impossible to predict the timescale over which this can be achieved.

In respect of the Generalist and Healthcare pools, the next year, will no doubt, be a challenging one for many of our portfolio companies. However, I believe that there are some companies with very exciting potential which will be able to produce high returns for the Company. The Investment Manager will continue to provide as much support as it can to guide the portfolio companies through these difficult times. Inevitably, some may not be able to fully recover. However, some companies are benefiting from the current conditions by being forced to adapt their business models earlier than they might otherwise have done. Since the year end the quoted Liquidity Funds have seen their share prices increase somewhat. At 30 June 2020, the unaudited Generalist share NAV stood at 64.1p and the Healthcare Share NAV 69.8p.

Looking forward, with the last of the planned exit share pools expected to wind up in the foreseeable future, the Board is starting to consider the optimal structure for the Company in the long term. With a portfolio of young businesses which typically need several rounds of funding before they are successful, it is important that the Company is able to regularly raise new funds for investment. The Board is looking at how this might be best achieved.

I will report on developments in the Half-Yearly Report to 30 September 2020.

Sir Aubrey Brocklebank Bt.
Chairman

Generalist Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence

Net Asset Value and Total Return per Generalist Share	61.7	83.5

Investment Manager’s Report - Generalist Share Pool

Introduction

As at 31 March 2020, the Generalist Share Pool held a portfolio of 33 Venture Capital investments and three Liquidity investments, with a combined value of £24.6 million.

Net Asset Value and results

As at 31 March 2020, the NAV of a Generalist share stood at 61.7p, a decrease of 21.8p over the year. A number of factors have contributed to this disappointing performance, including the impact of the Covid-19 pandemic, which has resulted in a number of negative valuation adjustments being made at the year end.

13.3p of the fall arises from net losses in the Venture Capital portfolio, where two investments in particular have had significant write downs included against them, and several others across the portfolio have been negatively impacted. 6.4p of the decrease is attributable to the Liquidity investments, which encountered difficult market conditions. Reduced investor confidence arising from the high-profile mismanagement issues with the Woodford funds and the falls in global markets as a result of the pandemic both contributed to reduced fund valuations. The remaining 2.1p of the decrease has arisen from the surplus of running costs over income. Further details of these write downs are provided below.

The loss on ordinary activities for the Generalist Share pool for the year was £9.8 million (2019: £3.9 million), comprising a revenue loss of £582,000 (2019: £283,000) and a capital loss of £9.2 million (2019: £3.6 million).

This is the first year that the VCT regulations allow this relatively young share pool to make a dividend payment. Accordingly, an interim dividend of 2.5p will be paid on 25 September 2020, to investors on the register at 4 September 2020. This is in line with stated policy of the pool of paying between 4% and 5% dividends per annum.

The above results are the consequences of a number of factors. There has been a further reduction in the value of the liquidity funds, which although frustrating, is broadly in line with the sector. There are some significant write downs across the unquoted portfolio, largely as result of the common phenomenon of the weaker investments showing at this earlier stage in the investment cycle. Given time, the superior investments should become apparent. Finally, the cash drag of the initial investment phase and the effect of expenses not covered by income has also negatively impacted the performance of the fund, as seen by the fall in NAV and Total Return.

Compared to the starting NAV of 100p, the current total return of 61.7p is considered to be an underperformance against our expectations.

Investment activity

During the year we continued to make good progress in building the VCT Qualifying portfolio of the Generalist Share pool, having invested a total of £10.5 million in 19 companies.

New Venture Capital investments

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

StreetHub Limited (£1.3 million) trading as Trouva, is an online marketplace for a curated range of homeware and lifestyle products.

Ecstase Limited (£1.0 million) trading as ADAY, is a direct to consumer women’s clothing brand founded in 2014 that creates versatile and season-less garments with a low environmental footprint.

FundingXchange Limited (£525,000) is an SME funding platform and B2B technology provider which enables online lending.

JRNI Limited (£525,000) is a business to business (B2B) software platform that enables companies to offer online appointments and event bookings for their customers and staff.

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

Cambridge Touch Technologies Limited (£459,000) is developing pressure sensitive multi touch technology that is cheaper and simpler to integrate in touch screen panels of mobile devices.

Lineten Limited (£400,000) is a software platform that connects retailers to a range of on-demand and same-day delivery fleets to coordinate customer deliveries.

Congenica Limited (£300,000) has developed a genomics-based diagnostic decision support platform which helps doctors identify rare diseases in patients.

FVRVS Limited (£250,000) trading as Fundamental VR, provides surgery simulation software for enterprise clients and hospitals.

Snow Hill Developments (£1.2 million) is the developer of a hotel in Birmingham. The Generalist Share Pool acquired the DP2011 General Share Pool’s interest in the business for £1.2 million. This transaction allowed the Generalist Share Pool to add a yielding asset to its growing portfolio, whilst also enabling theDP2011 General Share Pool to make its final distribution to its investors. Snow Hill Developments LLP was subsequently refinanced during the period, and the Generalist Share Pool received proceeds of £1.4 million from its total investment of £1.3 million.

Follow-on Venture Capital investments
A description of each of the existing VCT Qualifying businesses to which the Generalist Share pool provided further funding, totalling £1.4 million during the year is shown below.

A further £667,000 was invested in Lignia Wood Company Limited, which makes a sustainably sourced softwood LIGNIA® impregnated with resin in order to produce similar appearance and properties as high value hardwoods such as oak and teak.

Limitless Technology Limited is the developer of an innovative crowd service platform allowing loyal customers to be rewarded for providing customer service and support as brand ambassadors. An additional £583,000 was invested during the year.

£510,000 was invested in Upp Technologies Group (previously Volo Commerce), a leading provider of multichannel e-commerce technology.

A further £500,000 was invested in Empiribox Holdings Limited, bringing the total invested to £1.5 million. The company provides equipment, lesson plans and CPD‐accredited support for teachers to deliver engaging and practical science lessons to UK primary school children.

Masters of Pie Limited is an early stage technology firm specialising in virtual and augmented reality software for manufacturing and wider enterprise solutions. An additional £500,000 was invested during the year.

£425,000 was invested in E Fundamentals (Group) Limited, bringing the total invested to £1,342,000. The company provides a data analytics service which provides online merchandising insights for brand owners, to enable them to improve their online revenues.

£403,000 was invested in ADC Biotechnology Limited, a company creating innovative new technology which aims to speed up, simplify and lower the costs of the processes involved in the production of new Antibody Drug Conjugates (ADCs).

A further £300,000 was invested in Channel Mum Limited, the developer of a community based platform for parents.

Xupes Limited is an online retailer of pre-owned luxury goods including designer watches, handbags, jewellery and antiques. A further £115,000 was invested in the year.

Liquidity Investments
As Shareholders will be aware, where the Generalist Share pool invests in other Downing-managed funds, Downing provides fee rebates to the Generalist Share pool such that its investors are not “double-charged”.

A small follow on investment of £169,000 was made into Downing Strategic Micro-Cap Investment Trust plc.

Portfolio valuation

Venture Capital portfolio
During the year the Venture Capital portfolio of the Generalist Share pool was reduced in value by a total of £6.0 million, following a number of disappointing developments.

Live Better With Limited, which operates a healthcare website aiming to help people with long-term medical conditions, has been reduced in value to nil as a result of significant underperformance and the current economic environment.

Empiribox Holdings Limited, the provider of equipment and training to primary schools across the UK was reduced in value by £1.1 million as a result of a number of factors, including operational issues experienced in the company and cash restrictions within primary schools which intensified as a result of the effective closure of UK schools from March to mid-June.

Xupes Limited, the online retailer of pre-owned luxury goods, has been written down to nil following uncertainty over its future as a result of operational issues and likelihood of existing investors refusing to further support the business. As the company has some borrowings, it is difficult to recover any value and consequently the investment has been fully provided against

Lignia Wood Company Limited, was written down by £617,000 as a result of expected reductions in demand (due to the UK lockdown) and restrictions on the movement of goods in its supply chain.

Maverick Pubs Limited has been written down by £400,000, reflecting the temporary closure of both pub sites in as a result of the coronavirus pandemic and the likely impact this may have upon the value of public houses.

BridgeU Corporation provides a system to help students and teachers manage the process of preparing for and completing global university applications. The value has been written down by £397,000 following the sale of the underlying business. The remaining value reflects the deferred consideration which is expected to be paid to the VCT.

The Share pool’s investment in Glownet Limited was also written off in full during the year, a charge of £185,000. The company ceased trading in March 2020 with no distributions anticipated.

The investment in ADC Biotechnology Limited was reduced in value by £191,000 during the year, in line with a new funding round, which was undertaken at a lower price to the earlier rounds under which the Share pool invested.

Destiny Pharma plc (“Destiny Pharma”), which is listed on London’s Alternative Investment Market (AIM), was also revalued downwards as at 31 March 2020, by £157,000 in line with the prevailing quoted price at that date. AIM prices typically fluctuate considerably in a given year and the reduction in the share price of the Destiny Pharma is symptomatic of this, as the business is progressing well.

Upp Technologies (formerly Volo) the e-commerce software provider, has been going through a significant transformation including widespread changes to the management team. Unfortunately, the company is yet to generate significant revenues from its latest customer proposition and our expectation is that target client numbers for this financial year will be below our investment case, the valuation has therefore been reduced in value by £269,000.

Other valuation movements in the Venture Capital portfolio amounted to a net valuation write down of £678,000.

Liquidity investments
The carrying values of the liquidity investments have been adjusted to reflect their quoted prices as at 31 March 2020. This resulted in a valuation reduction of £3.0 million for the year.

The year under review was another challenging period for equity investors, largely characterised by negative sentiment, a volatile economic backdrop, and slowing global growth. There was some recovery at the end of 2019 and into 2020 as the general election offered some certainty around Brexit. However, this recovery was short lived as fears over the potential social and economic impact of the coronavirus spread around the world, and markets sold off sharply in February.

The Covid-19 pandemic had a significant negative effect on share prices towards the end the reporting period. The ‘Covid discount’ on the Downing Strategic Micro-Cap Investment Trust has had a considerable impact, resulting in the average discount on the Trust widening from circa 3% since inception, to over 25% in March. The discount narrowed to nearer 19% post reporting period end, which is in line with other investment trusts and we would expect it to narrow as a more normalised trading environment returns. The Downing Micro-Cap Growth Fund underperformed the index in the period and the Managers have addressed this by modifying the mandate to provide the fund with more liquidity options. These changes include increasing the number of holdings from 25-30 to up to 40 and increasing the market capitalisation band up to £350 million. This has resulted in improved performance in recent months.

Given the difficult trading environment, the Managers of the Downing Monthly Income Fund are focusing on improving the quality of the portfolio as much as possible, looking at the more resilient earners and strength in their capital positions. This should result in a robust portfolio that is positioned for the more protracted economic headwinds that the Managers expect to take a grip over the coming weeks and months.

The Managers are concentrating on those businesses that have strong balance sheets to ensure that any storm can be weathered, avoiding the most vulnerable sectors such as leisure and travel where there was little exposure pre-crisis anyway, and targeting businesses that have high quality revenue streams that are unlikely to be affected by the pandemic. The portfolios retain cash which allows the Managers the flexibility to top up positions on bad days or invest in new situations where they believe prices are wrong.

Outlook

The falls experienced across the portfolio are frustrating to report. Although early unrealised losses within young growth companies are to be expected, these unprecedented times and the current economic situation have impaired valuations further than could have been predicted.

Across the portfolio investee companies have generally reacted promptly to the coronavirus pandemic, taking steps to secure their immediate survival and working to align themselves to the new normal. It is worth noting that a number of businesses are well positioned to potentially gain from the current economic climate, being pre aligned with emerging demands.

We are dedicating substantial resources to the portfolio companies, in order to provide additional support in these difficult times. We are ensuring that all investee companies benefit from the Government aid that is available and helping to make strong decisions as they deal with these unprecedented conditions, hoping to recover as much value as possible for investors.

Downing LLP

Review of Investments – Generalist Share Pool
The following investments were held at 31 March 2020:

	Cost	Valuation	Valuation movement in period	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
E-Fundamentals (Group) Limited	1,342	1,342	-	4.8%
Rated People Limited	1,282	1,282	-	4.6%
Lignia Wood Company Limited	1,778	1,250	(617)	4.5%
Firefly Learning Limited	1,047	1,047	-	3.7%
Trouva Limited	1,050	1,101	51	3.9%
Ecstase Limited	1,000	1,000	-	3.6%
Imagen Limited	1,000	1000	-	3.6%
Upp Technologies Group Limited (prev. Volo Commerce)	1,077	808	(269)	3.0%
Limitless Technology Limited	756	802	-	2.9%
Hackajob Limited	784	784	-	2.8%
Masters of Pie Limited	667	667	-	2.4%
Virtual Class Limited	803	546	2	2.0%
Funding Exchange Limited	525	525	-	1.9%
JRNI Limited	525	525	-	1.9%
Exonar Limited	500	500	-	1.8%
Maverick Pubs Limited	1,000	500	(400)	1.8%
ADC Biotechnology Limited	815	478	(191)	1.7%
Hummingbird Limited	500	418	(82)	1.5%
BridgeU Limited	811	414	(397)	1.5%
Lineten Limited	400	400	-	1.4%
Fenkle Street LLP	301	400	28	1.4%
Cambridge Touch Technologies Limited	459	361	(98)	1.3%
Empiribox Holdings Limited	1,528	325	(1,072)	1.2%
Arecor Limited	300	300	-	1.1%
Channel Mum Limited	500	300	(200)	1.1%
Congenica Limited	300	300	-	1.1%
FVRVS Limited	250	250	-	0.9%
Destiny Pharma plc^	500	104	(157)	0.4%
Glownet Limited	741	-	(185)	0.0%
Live Better With Limited	1,211	-	(1,284)	0.0%
Ormsborough Limited	900	-	(194)	0.0%
Xupes Limited	933	-	(933)	0.0%
	25,585	17,729	(5,998)	63.7%
Liquidity investments
MI Downing Monthly Income Fund*	3,950	2,712	(791)	9.7%
MI Downing UK Micro-Cap Growth Fund*	4,025	2,270	(1,057)	8.1%
Downing Strategic Micro-Cap Investment Trust plc*^	4,269	1,873	(1,207)	6.7%
	12,244	6,855	(3,055)	24.5%
	37,859	24,584	(10,076)	88.2%
Cash at bank and in hand		3,350		11.8%
Total investments		27,934		100.0%

All Venture Capital investments are incorporated in England and Wales.
*non-qualifying investment ^listed and traded on the London Stock Exchange

Investment movements for the year ended 31 March 2020

	Cost
Additions	£’000
Venture Capital investments
Streethub Limited (t/a Trouva)	1,300
Snow Hill Developments LLP*	1,225
Ecstase Limited (t/a ADAY)	1000
Lignia Wood Company Limited	667
Limitless Technology Limited	583
Funding Exchange Limited	525
JRNI Limited	525
Upp Technologies Group Limited (prev. Volo Commerce)	510
Hummingbird Limited	500
Empiribox Holdings Limited	500
Masters of Pie Limited	500
Cambridge Touch Technologies Limited	459
E-Fundamentals (Group) Limited	425
ADC Biotechnology Limited	403
Lineten Limited	400
Congenica Limited	300
Channel Mum Limited	300
FVRVS Limited (t/a Fundamental VR)	250
Xupes Limited	115

Liquidity Investments
Downing Strategic Micro-Cap Investment Trust plc*^	169
	10,656

	Cost	Valuation at 01/04/19	Proceeds	Profit/(loss) vs. cost	Realised gain
DISPOSALS	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Snow Hill Developments LLP*	1,289	1,317	1,417	128	100
Mosaic Spa and Health Clubs Limited*	32	17	18	(14)	1
Conversion of Loan Notes
Trouva Limited	250	250	250	-	-
	1,571	1,584	1,685	114	101

*non-qualifying investment
^listed and traded on the London Stock Exchange

Healthcare Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence

Net Asset Value and Total Return per Healthcare Share	68.1	83.3

Investment Manager’s Report- Healthcare Share Pool

Introduction

As at 31 March 2020, the Healthcare Share pool held a portfolio of 10 Venture Capital investments and three Liquidity investments, with a combined value of £7.2 million.

Net Asset Value and results

As at 31 March 2020, the NAV of a Healthcare share stood at 68.1p, a decrease of 15.1p over the year. A number of factors have combined to produce this disappointing performance for the year.

8.9p of the decrease relates to investment revaluations in the Venture Capital portfolio, principally in relation to write down against the value of Live Better With Limited, although others across the portfolio have been negatively impacted. 3.9p relates to a reduction in value of the Liquidity Investments which continue to be negatively impacted by the falls in global markets at the beginning of 2020, a consequence of the pandemic. The remaining 2.3p of the NAV decrease is attributable to the surplus of running costs over income.

The return on ordinary activities for the Healthcare Share pool for the year was a loss of £2.7 million (2019: loss of £1.4 million), being a revenue loss of £240,000 (2019: loss of £198,000) and a capital loss of £2.5 million (2019: loss of £1.2 million).

Compared to the starting NAV of 100p, the current total return of 68.1pp is considered to be an underperformance against our expectations.

Investment activity

During the year a total of £2.1 million was invested in five venture capital investments, three new and two follow on.

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

Congenica Limited (£750,000) has developed a genomics-based diagnostic decision support platform which helps doctors identify rare diseases in patients.

FVRVS Limited (£500,000) trading as Fundamental VR, provides surgery simulation software for enterprise clients and hospitals.

The Electrospinning Company Limited (£278,000) is a supplier and manufacturer of clinical-grade biomaterials, which can be used to act as a synthetic scaffold for implantation within body tissue to promote repair post trauma or surgery.

Follow-on Venture Capital investments
Future Health Works Limited, is a developer of MyRecovery, a mobile app that informs and empowers patients throughout their orthopaedic treatment, customised to their procedure and hospital. A further £250,000 was invested in the year.

£338,000 was invested in ADC Biotechnology limited, a company creating innovative new technology which aims to speed up, simplify and lower the costs of the processes involved in the production of new Antibody Drug Conjugates (ADCs).

Liquidity Investments
As Shareholders will be aware, where the Healthcare Share pool invests in other Downing-managed funds, Downing provides fee rebates to the Healthcare Share pool such that its investors are not “double-charged”.

A small follow on investment of £29,000 was made into Downing Strategic Micro-Cap Investment Trust plc.

Portfolio valuation

Venture Capital portfolio
During the year the Venture Capital portfolio of the Healthcare Share pool was reduced in value by £1.6 million.

Live Better With Limited, a developer of a healthcare website aiming to help people with long-term medical conditions, has been reduced in value to nil as a result of significant underperformance and the current economic environment.

ADC Biotechnology Limited, was further reduced in value by £317,000 during the year. This was to bring the valuation in line with a new funding round, which was undertaken at a lower price to the first round under which the Share pool invested. The company is running behind plan as a result of delayed approvals on its production site. However, production is expected to commence shortly, and we continue to work closely with the management team.

Destiny Pharma plc (“Destiny Pharma”), which is listed on London’s Alternative Investment Market (AIM), was also revalued downwards as at 31 March 2020, by £237,000 in line with the prevailing quoted price at that date. AIM prices typically fluctuate considerably in a given year and the reduction in the share price of the Destiny Pharma is symptomatic of this, even though the business is progressing well.

Other movements in the Venture Capital portfolio amounted to a net uplift of £91,000.

Liquidity investments

The carrying values of the liquidity investments have been adjusted to reflect their quoted prices as at 31 March 2020. This resulted in a valuation reduction of £721,000 for the year. This decrease is largely due to adverse conditions in global markets, which have reduced quoted prices.

The Managers are concentrating on those businesses that have strong balance sheets and targeting businesses that have high quality revenue streams that are unlikely to be affected by the pandemic. The Liquidity Funds retain cash which allows the Managers the flexibility to top up positions on bad days or invest in new situations where they believe prices are wrong.

Outlook

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

Whilst the performance of Live Better With is disappointing, early unrealised losses within young companies such as this are to be expected, as weaker investments tend to be highlighted before the stronger businesses prove themselves.

The remainder of the unquoted portfolio has been largely unaffected by the coronavirus pandemic, and we will continue to support and advise these companies in order to ensure the maximum return to investors on the remainder of their investment.

Downing LLP

Review of Investments – Healthcare Share Pool

The following investments were held at 31 March 2020:

	Cost	Valuation	Valuation movement in period	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Arecor Limited	1,100	1,100	-	8.4%
Open Bionics Limited	1,000	1,000	-	7.7%
Congenica Limited	750	750	-	5.8%
Adaptix Limited	556	555	64	4.2%
Future Health Works Limited	528	555	27	4.2%
ADC Biotechnology	1,392	555	(317)	4.2%
FVRVS Limited	500	500	-	3.8%
The Electrospinning Company Limited	278	278	-	2.1%
Destiny Pharma plc^	750	155	(237)	1.2%
Live Better With Limited	1,106	-	(1,179)	0.0%
	7,960	5,448	(1,642)	41.6%
Liquidity Investments
MI Downing Monthly Income Fund*	1,125	632	(294)	4.8%
MI Downing UK Micro-Cap Growth Fund*	1,100	757	(221)	5.8%
Downing Strategic Micro-Cap Investment Trust plc*^	729	320	(206)	2.5%
	2,954	1,709	(721)	13.1%
	10,914	7,157	(2,363)	54.7%
Cash at bank and in hand		5,930		45.3%
Total investments		13,087		100.0%

*non-qualifying investment
^listed and traded on the London Stock Exchange

Investment movements for the year ended 31 March 2020

	Cost
Additions	£’000
Venture Capital investments
Congenica Limited	750
FVRVS Limited	500
ADC Biotechnology	338
The Electrospinning Company Limited	278
Future Health Works Limited	250

Liquidity Investments
Downing Strategic Micro-Cap Investment Trust plc*^	29
	2,145

DSO D Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence
Net Asset Value per DSO D Share	12.0	27.8
Cumulative distributions	94.5	76.5
Adjusted for Performance Incentive estimate	(4.3)	(3.9)
Total Return per DSO D Share	102.2	100.4

Investment Manager’s Report DSO D Share Pool

Introduction

The process of realising the investments and returning funds to Shareholders remains the focus of the DSO D Share pool, although this has been subject to delays as a result of the global pandemic.

Net Asset Value and results

The Net Asset Value (“NAV”) per DSO D Share at 31 March 2020 stood at 12.0p, an increase of 2.2p or 6.4% over the year after adjusting for dividends paid. Total Return stands at 102.2p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The gain on ordinary activities after taxation for the year was £175,000 (2019: loss of £207,000), comprising a revenue gain of £121,000 (2019: loss of £49,000) and a capital gain of £54,000 (2018: loss of £158,000).

Dividends paid during the year totalled 18.0p as the pool continues to return funds to investors.

Despite the delays in the realisation process, the NAV of the pool has not been significantly impacted by the ongoing pandemic, with income and realised gains compensating for the minor write downs. The Board is satisfied with the overall performance, as indicated by the NAV and Total Return, which remains in excess of £1. Whist delays in the exit process are unfortunate, we believe there will be opportunities to exit from the remaining investments at acceptable values once the disruption of the pandemic starts to subside.

Total Return of 102.2p is considered to be satisfactory performance when compared to the initial NAV of 100p.

Venture Capital investments

As at 31 March 2020, the DSO D Share Pool held five Venture Capital investments with a total value of £655,000.

Portfolio activity
Lambridge Solar, the owner of commercial solar arrays in Lincolnshire, was fully exited during the year, generating total proceeds of £716,000 and a gain over opening value of £111,000.

Plans were in place for the exit of the remaining portfolio companies. However, Shareholders should be aware that due to the impact of the global pandemic on the current market conditions, this may now take longer than originally anticipated.

Portfolio valuation
During the year, the carrying value of the DSO D portfolio was reduced by £42,000.

There were two small increases in value the period, the larger being an uplift of £21,000 on Fresh Green Power, the owner of solar panels on the rooftops of domestic properties in the UK, which has been revalued as part of a potential sale.

Apex Energy, the developer of a standby electricity generation plant in the East Midlands, was further reduced in value by £33,000 to reflect preliminary exit proceeds.

Pearce and Saunders Limited, the owner of freehold pubs in south east London was decreased by £33,000 in line with expected exit proceeds.

Other portfolio valuation movements amounted to a net uplift of £3,000.

Outlook

The focus for the DSO D Share pool continues to be on realising the remaining investments. Although the exit processes have been delayed due to the coronavirus pandemic, we anticipate that the majority of the remaining realisations will take place before the end of the year, and we will continue to provide the investee companies with as much support as possible during this time. Further dividends will be declared once this process has been completed.

Downing LLP

Review of investments - DSO D Share Pool

The following investments were held at 31 March 2020:

	Cost	Valuation	Valuation movement in year	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Pearce and Saunders Limited	300	343	(33)	37.0%
Fresh Green Power Limited	189	231	21	24.9%
Green Energy Production UK Limited	100	54	3	5.8%
Pearce and Saunders DevCo Limited*	20	20	-	2.2%
Apex Energy Limited	400	7	(33)	0.8%
	1,009	655	(42)	70.7%
Cash at bank and in hand		272		29.3%
Total investments		927		100.0%

* non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2020

	Cost	Valuation at 01/04/19	Proceeds	Profit vs. cost	Realised gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Lambridge Solar Limited	500	605	716	216	111
	500	605	716	216	111

DP67 Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence
Net Asset Value per DP67 Share	18.8	48.5
Cumulative distributions	67.8	49.8
Total Return per DP67 Share	86.6	98.3

Investment Manager’s Report - DP67 Share Pool

Introduction

The DP67 Share pool continues to focus on the process of realising the investment portfolio and returning funds to investors. As may be expected, this process has been delayed as a result of the global pandemic.

Net Asset Value and results

The Net Asset Value (“NAV”) per DP67 Share at 31 March 2020 stood at 18.8p, a decrease of 11.7p or 24.8% over the year. Total Return stands at 86.6p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per Share.

The loss on ordinary activities after taxation for the year was £1.3 million (2019: loss of £166,000), comprising a revenue loss of £559,000 (2019: profit of £127,000) and a capital loss of £758,000 (2019: loss of £293,000).

Dividends totalling 18.0p were paid out during the year as the pool continues to return funds to investors.

The adverse performance of the pool is mainly attributable to the large exposure of the portfolio to the leisure and hospitality industry, which has been particularly badly affected by the ongoing pandemic. The delays to the exit process are also frustrating, but we believe that it will not be possible to realise the full value of these investments until more normal conditions have started to return.

When compared to the initial NAV of 100p the Total Return of 86.6p is considered to be an underperformance of the share pool against expectations.

Venture Capital investments

As at 31 March 2020, the DP67 Share pool held a portfolio of five Venture Capital investments, with a total value of £2.1 million.

Portfolio activity

One divestment from Snow Hill Developments took place during the year, generating proceeds of £788,000 and a total gain over opening value of £47,000.

The DP67 Share pool had a membership interest in the business under which a fixed return accrued. The disposal marks the return of the remainder of this fixed value to the Share pool.

Plans were progressing for the exit of the remaining portfolio companies. However, Shareholders should be aware that due to the impact of the global pandemic on the current market conditions, this may now take longer than originally anticipated.

Portfolio valuation
The DP67 portfolio decreased in value by a total of £769,000 during the year. This was principally due to a write down of £822,000 on Cadbury Holdings Limited. Although Cadbury House (Hotel and Spa) has now reopened (following the closure due to COVID-19), the value of the hotel has been written down to reflect the uncertainty surrounding the recovery of the hospitality sector. A weighted average of the closed valuation (80%) and mature trade valuation (20%) has been adopted, which has had a consequential impact upon the value of the DP67 share pool’s investment.

This is partially offset by an increase of £53,000 attributable to Fenkle Street LLP which was adjusted to reflect the anticipated proceeds which may be recoverable in 2021.

The other remaining investments are held at the same value as last year.

Outlook

The focus for the DP67 Share pool continues to be on realising the remaining investments. Although the exit processes have been delayed due to the coronavirus pandemic, we are hopeful that the remaining realisations will take place over the next 12 months and further dividends will be declared once this process has been completed.

Downing LLP

Review of Investments – DP67 Share PoolDP67

The following investments were held at 31 March 2020:

	Cost	Valuation	Valuation movement in year	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Cadbury House Holdings Limited	1,409	791	(822)	37.1%
Fenkle Street LLP**	405	750	53	35.2%
Gatewales Limited*	343	527	-	24.7%
Yamuna Renewables Limited	400	-	-	0.0%
London City Shopping Centre Limited**	99	-	-	0.0%
	2,656	2,068	(769)	97.1%
Cash at bank and in hand		62		2.9%
Total investments		2,130		100.0%

* partially qualifying investment ** non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2020

	Cost	Valuation at 01/04/19	Proceeds	(Loss)/ profit vs. cost	Realised gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Snow Hill Developments LLP**	474	741	788	314	47
	474	741	788	314	47

** non-qualifying investment

DP2011 General Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence
Net Asset Value per DP2011 General Ordinary Share	-	-
Net Asset Value per DP2011 General A Share	-	13.3
Cumulative distributions	105.6	92.0
Total Return per DP2011 General Ordinary Share and DP2011 General A Share	105.6	105.3

Investment Manager’s Report - DP2011 General Share Pool

Introduction

The process of realising the remaining investments held by the DP2011 General Share pool was completed during August 2019, and the final distribution of 13.595p per DP2011 General Ordinary Share was paid on 27 September.

Realisations

During the year, the remaining three investments were sold from the DP2011 General Share pool, generating total proceeds of £2.0 million at a gain over opening value of £75,000.

Final Results

Over the life of the DP2011 General Share pool, Shareholders who invested under the original offer achieved a Total Return of 105.6p.

The Board is satisfied with performance of this fund as evidenced by a Total Return of over £1 compared to a net investment after tax relief of 70p.

Following the final distributions, in accordance with the Articles of the Company, the DP2011 General Shares were converted into worthless deferred Shares and were duly cancelled on 15 November 2019.

Downing LLP

Review of Investments – DP2011 General Share Pool

Investment movements for the year ended 31 March 2020

	Cost	Valuation at 01/04/19	Proceeds	Profit/(loss) vs. cost	Realised gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Snow Hill Developments LLP**	680	1,206	1,225	545	19
Wickham Solar Limited	550	660	716	166	56

Mosaic Spa and Health Clubs Limited*	86	29	29	(57)	-
	1,316	1,895	1,970	654	75

* partially qualifying investment ** non qualifying investment

DP2011 Structured Share Pool

Share Pool Summary

	31 March 2020	31 March 2019
Financial highlights	pence	pence
Net Asset Value per DP2011 Structured Ordinary Share	-	-
Net Asset Value per DP2011 Structured A Share	-	9.9
Cumulative distributions	105.1	95.0
Total Return per DP2011 Structured Ordinary Share and DP2011 Structured A Share	105.1	104.9

Investment Manager’s Report- DP2011 Structured Share Pool

Introduction

The process of realising the remaining investments held by the DP2011 Structured Share pool was completed during August 2019 and the final distribution of 10.095p per DP2011 Structured Ordinary Share was paid on 27 September.

Realisations

During the year, the remaining two investments were sold from the DP2011 Structured Share pool, generating total proceeds of £735,000 at a profit over opening value of £56,000.

Final Results

Over the life of the DP2011 Structured Share pool, Shareholders who invested under the original offer achieved a Total Return of 105.1p.

The Board is satisfied with performance of this fund as evidenced by a Total Return of over £1 compared to a net investment after tax relief of 70p.

Following the final distributions, in accordance with the Articles of the Company, the DP2011 Structured Shares were converted into worthless deferred Shares and were duly cancelled on 15 November 2019.

Downing LLP
31 July 2020

Review of Investments – DP2011 Structured Share Pool

Investment movements for the year ended 31 March 2020

	Cost	Valuation at 01/04/19	Proceeds	Profit/(loss) vs. cost	Realised gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Wickham Solar Limited	550	660	716	166	56

Mosaic Spa and Health Clubs Limited*	58	19	19	(39)	-
	608	679	735	127	56

* partially qualifying investment

Directors’ responsibilities

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

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

In preparing these financial statements the Directors are required to:

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

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

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

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

Directors’ statement pursuant to the Disclosure Guidance and Transparency Rules

Each of the Directors, confirms that, to the best of each person’s knowledge:

- the financial statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

- the management report included within the Report of the Directors, Strategic report, Chairman’s Statement, Investment Manager’s Report, and Review of Investments includes a fair review of the development and performance of the business and the position of the company, together with a robust assessment of the principal risks and uncertainties that it faces.

Statement as to disclosure of information to Auditors

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

By order of the Board

Grant Whitehouse
Secretary of Downing FOUR VCT plc

Audited Income Statement
for the year ended 31 March 2020

	Year ended 31 March 2020			Year ended 31 March 2019

	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Income	272	69	341	378	230	608
Loss on investments	-	(11,837)	(11,837)	-	(5,091)	(5,091)
	272	(11,768)	(11,496)	378	(4,861)	(4,483)
Investment management fees	(561)	(562)	(1,123)	(386)	(386)	(772)
Other expenses	(711)	-	(711)	(468)	-	(468)
Loss on ordinary activities before tax	(1,000)	(12,330)	(13,330)	(476)	(5,247)	(5,723)
Tax on total comprehensive income and ordinary activities	(300)	-	(300)	7	-	7
Loss attributable to equity Shareholders, being total comprehensive income for the year	(1,300)	(12,330)	(13,630)	(469)	(5,247)	(5,716)

Basic and diluted return per share:
DSO D Share	1.5p	0.7p	2.2p	0.6p	2.0p	2.6p
DP67 Share	(5.0p)	(6.8p)	(11.8p)	1.1p	(2.6p)	(1.5p)
DP2011 General Share	-	-	-	-	-	-
DP2011 General A Share	(0.1p)	0.4p	0.3p	(0.3p)	0.3p	-
DP2011 Structured Share	-	-	-	-	-	-
DP2011 Structured A Share	(0.2p)	0.4p	0.2p	(0.2p)	(0.1p)	(0.3p)
Generalist Share	(1.4p)	(22.6p)	(24.0p)	(0.9p)	(11.1p)	(12.0p)
Healthcare Share	(1.3p)	(13.7p)	(15.0p)	(1.6p)	(9.7p)	(11.3p)

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standard 102 (“FRS 102”). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommenced Practice issued in February 2018 by the Association of Investment Companies (“AIC SORP”).

Income Statement
Analysed by Share pool – unaudited and non-statutory
for the year ended 31 March 2020

Split as:

	Year ended 31 March 2020				Year ended 31 March 2019

	Revenue		Capital	Total	Revenue		Capital	Total
DSO D Share pool	£’000		£’000	£’000	£’000		£’000	£’000
Income		142	-	142		14	-	14
Net gain/(loss) on investments		-	69	69		-	(141)	(141)
		142	69	211		14	(141)	(127)
Investment management fees		(15)	(15)	(30)		(17)	(17)	(34)
Other expenses		(16)	-	(16)		(46)	-	(46)
Return/(loss) on ordinary activities before tax		111	54	165		(49)	(158)	(207)
Tax on total comprehensive income and ordinary activities		10	-	10		-	-	-
Return/(loss) attributable to equity Shareholders, being total comprehensive income for the year		121	54	175		(49)	(158)	(207)

	Year ended 31 March 2020				Year ended 31 March 2019

	Revenue		Capital	Total	Revenue	Capital	Total
DP67 Share pool	£’000		£’000	£’000	£’000	£’000	£’000
Income		20	-	20	214	112	326
Net loss on investments		-	(722)	(722)	-	(372)	(372)
		20	(722)	(702)	214	(260)	(46)
Investment management fees		(36)	(36)	(72)	(33)	(33)	(66)
Other expenses		(229)	-	(229)	(26)	-	(26)
(Loss)/return on ordinary activities before tax		(245)	(758)	(1,003)	155	(293)	(138)
Tax on total comprehensive income and ordinary activities		(314)	-	(314)	(28)	-	(28)
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year		(559)	(758)	(1,317)	127	(293)	(166)

	Year ended 31 March 2020			Year ended 31 March 2019

	Revenue	Capital	Total	Revenue	Capital	Total
DP2011 General Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	3	-	3	4	-	4
Net gain on investments	-	75	75	-	71	71
	3	75	78	4	71	75
Investment management fees	(9)	(10)	(19)	(20)	(20)	(40)
Other expenses	(14)	-	(14)	(31)	-	(31)
(Loss)/return on ordinary activities before tax	(20)	65	45	(47)	51	4
Tax on total comprehensive income and ordinary activities	-	-	-	-	-	-
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(20)	65	45	(47)	51	4

	Year ended 31 March 2020			Year ended 31 March 2019

	Revenue	Capital	Total	Revenue	Capital	Total
DP2011 Structured Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	-	-	-	3	-	3
Net gain on investments	-	56	56	-	-	-
	-	56	56	3	-	3
Investment management fees	(4)	(4)	(8)	(7)	(7)	(14)
Other expenses	(16)	-	(16)	(15)	-	(15)
(Loss)/return on ordinary activities before tax	(20)	52	32	(19)	(7)	(26)
Tax on total comprehensive income and ordinary activities	-	-	-	-	-	-
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(20)	52	32	(19)	(7)	(26)

	Year ended 31 March 2020			Year ended 31 March 2019

	Revenue	Capital	Total	Revenue	Capital	Total
Generalist Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	64	69	133	114	118	232
Net loss on investments	-	(8,952)	(8,952)	-	(3,572)	(3,572)
	64	(8,883)	(8,819)	114	(3,454)	(3,340)
Investment management fees	(334)	(334)	(668)	(180)	(180)	(360)
Other expenses	(316)	-	(316)	(252)	-	(252)
Loss on ordinary activities before tax	(586)	(9,217)	(9,803)	(318)	(3,634)	(3,952)
Tax on total comprehensive income and ordinary activities	4	-	4	35	-	35
Loss attributable to equity Shareholders, being total comprehensive income for the year	(582)	(9,217)	(9,799)	(283)	(3,634)	(3,917)

	Year ended 31 March 2020			Year ended 31 March 2019

	Revenue	Capital	Total	Revenue	Capital	Total
Healthcare Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	43	-	43	29	-	29
Net loss on investments	-	(2,363)	(2,363)	-	(1,077)	(1,077)
	43	(2,363)	(2,320)	29	(1,077)	(1,048)
Investment management fees	(163)	(163)	(326)	(129)	(129)	(258)
Other expenses	(120)	-	(120)	(98)	-	(98)
Loss on ordinary activities before tax	(240)	(2,526)	(2,766)	(198)	(1,206)	(1,404)
Tax on total comprehensive income and ordinary activities	-	-	-	-	-	-
Loss attributable to equity Shareholders, being total comprehensive income for the year	(240)	(2,526)	(2,766)	(198)	(1,206)	(1,404)

Audited Balance Sheet
as at 31 March 2020

	2020	2019
	£’000	£’000
Fixed assets
Investments	34,464	39,394
Current assets
Debtors	548	800
Cash at bank and in hand	9,614	18,443
	10,162	19,243
Creditors: amounts falling due within one year	(801)	(485)
Net current assets	9,361	18,758
Net assets	43,825	58,152
8BCapital and reserves
Called up Share capital	98	138
Capital redemption reserve	58	-
Special reserve	39,433	47,040
Share premium account	17,971	7,172
Funds held in respect of Shares not yet allotted	535	4,772
Revaluation reserve	(13,302)	(4,158)
Capital reserve – realised	2,483	4,940
Revenue reserve	(3,451)	(1,752)
Total equity Shareholders’ funds	43,825	58,152
Basic and diluted Net Asset Value per Share:
DSO D Share	12.p	27.8p
DP67 Share	18.7p	48.5p
DP2011 General Ordinary Share	N/A	-
DP2011 General A Share	N/A	13.3p
DP2011 Structured Ordinary Share	N/A	-
DP2011 Structured A Share	N/A	9.9p
Generalist Share	61.7p	83.5p
Healthcare Share	68.1p	83.3p

The financial statements were approved and authorised for issue by the Board of Directors on 31 July 2020 and were signed on its behalf by:

Sir Aubrey Brocklebank Bt.
Chairman

Balance Sheet
Analysed by Share pool – unaudited and non-statutory
as at 31 March 2020

Split as:

	2020	2019
DSO D Share pool	£’000	£’000
Fixed assets
Investments	655	1,302
Current assets
Debtors	50	1
Cash at bank and in hand	272	910
	322	911
Creditors: amounts falling due within one year	(33)	(28)
Net current assets	289	883
Net assets	944	2,185
Capital and reserves
Called up share capital	8	8
Special reserve	900	2,259
Revaluation reserve	39	153
Capital reserve – realised	(37)	(148)
Revenue reserve	34	(87)
Total equity Shareholders’ funds	944	2,185

	2020	2019
DP67 Share pool	£’000	£’000
Fixed assets
Investments	2,068	3,578
Current assets
Debtors	49	669
Cash at bank and in hand	62	1,251
	111	1,920
Creditors: amounts falling due within one year	(83)	(70)
Net current assets	28	1,850
Net assets	2,096	5,428
Capital and reserves
Called up share capital	11	11
Special reserve	-	534
Revaluation reserve	(489)	547
Capital reserve – realised	2,419	3,622
Revenue reserve	155	714
Total equity Shareholders’ funds	2,096	5,428

	2020	2019
Generalist Share pool	£’000	£’000
Fixed assets
Investments	24,584	24,565
Current assets
Debtors	442	124
Cash at bank and in hand	3,350	8,661
	3,792	8,785
Creditors: amounts falling due within one year	(266)	(220)
Net current assets	3,526	8,565
Net assets	28,110	33,130
Capital and reserves
Called up share capital	56	43
Capital redemption reserve	58	-
Special reserve	27,666	31,111
Share premium account	12,505	4,692
Funds held in respect of Shares not yet allotted	410	3,396
Revaluation reserve	(10,201)	(4,209)
Capital reserve – realised	101	-
Revenue reserve	(2,485)	(1,903)
Total equity Shareholders’ funds	28,110	33,130

	2020	2019
Healthcare Share pool	£’000	£’000
Fixed assets
Investments	7,157	7,375
Current assets
Debtors	7	2
Cash at bank and in hand	5,930	6,461
	5,937	6,463
Creditors: amounts falling due within one year	(419)	(121)
Net current assets	5,518	6,342
Net assets	12,675	13,717
Capital and reserves
Called up share capital	23	18
Special reserve	10,867	12,152
Share premium account	5,466	2,480
Funds held in respect of Shares not yet allotted	125	1,376
Revaluation reserve	(4,651)	(1,394)
Capital reserve – realised	-	-
Revenue reserve	(1,155)	(915)
Total equity Shareholders’ funds	12,675	13,717

Statement of Changes in Equity
for the year ended 31 March 2020

	Called up Share capital				Capital Redemption reserve	Special reserve	Share premium account	Funds held in respect of Shares not yet allotted	Revaluation Reserve	Capital reserve - realised	Revenue reserve	Total
	£’000				£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 31 March 2018	188				31	8,021	43,904	420	234	4,641	(1,104)	56,335
Total comprehensive income		-			-	-	-	-	(5,250)	3	(469)	(5,716)
Transfer between reserves*	-				-	(4,960)	-	-	858	4,102	-	-
Unallotted Shares	-				-	-	-	4,352	-	-	-	4,352
*Transactions with owners*
Dividend paid	-				-	-	-	-	-	(3,806)	-	(3,806)
Cancellation of Share Premium/ Capital Redemption Reserve				-	(89)	43,993	(43,904)	-	-	-	-	-
Cancellation of Shares	(58)				58	-	-	-	-	-	-	-
Purchase of own Shares	-				-	(14)	-	-	-	-	-	(14)
Issue of Shares	8				-	-	7,172	-	-	-	-	7,180
Share issue costs	-				-	-	-	-	-	-	(179)	(179)
At 31 March 2019	138				-	47,040	7,172	4,772	(4,158)	4,940	(1,752)	58,152
Total comprehensive income			-		-	-	-	-	(12,227)	(103)	(1,300)	(13,630)
Transfer between reserves*	-				-	(7,530)	-	-	3,083	4,843	(399)	-
Unallotted Shares	-				-	-	-	535	-	-	-	535
*Transactions with owners*
Dividend paid	-				-	-	-	-	-	(7,200)	-	(7,200)
Cancellation of Shares	(58)				58	-	-	-	-	-	-	-
Purchase of own Shares	-				-	(77)	-	-	-	-	-	(77)
Issue of Shares	18				-	-	11,178	(4,772)	-	-	-	6,424
Share issue costs	-				-	-	(379)	-	-	-	-	(379)
At 31 March 2020	98				58	39,433	17,971	535	(13,302)	2,483	(3,451)	43,825

*A transfer of £167,000 (2019: £858,000), representing previously recognised unrealised gains and losses on disposal of investments during the year ended 31 March 2020, has been made between the Revaluation Reserve and the Special Reserve. A transfer of £7.5 million (2019: £4.1 million) representing realised gains and losses on disposal of investments, less capital expenses and capital dividends in the year and less a transfer to the revenue reserve on wind up of the DP2011 Share Classes was made between the Capital Reserve - realised and the Special reserve.

Cash Flow Statement
for the year ended 31 March 2020

	Unaudited non statutory analysis						Audited
	DSO D Share pool	DP67 Share pool	DP2011 General Share pool	DP2011 Structured Share pool	Generalist Share pool	Health- care Share pool	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cash flows from operating activities
Return/(loss) on ordinary activities before taxation	165	(1,003)	45	32	(9,803)	(2,766)	(13,330)
Losses/(gains) on investments	(69)	722	(75)	(56)	8,952	2,363	11,837
(Decrease)/increase in creditors	15	13	(31)	(15)	46	298	326
(Increase)/decrease in debtors	(49)	(147)	1	3	(314)	(5)	(217)
Net cash inflow/(outflow) from operating activities	62	(121)	(60)	(36)	(1,119)	(110)	(1,384)
Corporation tax paid	-	159	-	-	-	-	159
Net cash generated from operating activities	62	38	(60)	(36)	(1,119)	(108)	(1,225)
Cash flow from investing activities
Purchase of investments	-	-	-	-	(10,565)	(2,145)	(12,801)
Proceeds from disposal of investments	716	788	1,970	735	1,685	-	5,894
Net cash inflow/(outflow) from investing activities	716	788	1,970	735	(8,971)	(2,145)	(6,907)
Net cash inflow/(outflow) before financing	778	826	1,910	699	(10,090)	(2,255)	(8,132)
Cash flows from financing activities
Repurchase of Shares	-	-	-	-	(61)	(16)	(77)
Issue of share capital	-	-	-	-	4,707	1,715	6,424
Cost of issue of share capital	-	-	-	-	(277)	(102)	(379)
Funds held in respect of Shares not yet allotted	-	-	-	-	410	125	535
Equity dividends paid	(1,416)	(2,015)	(2,504)	(1,265)	-	-	(7,200)
Net cash (outflow)/inflow from financing activities	(1,416)	(2,015)	(2,504)	(1,265)	4,779	1,724	(697)
Net change in cash	(638)	(1,189)	(594)	(566)	(5,311)	(531)	(8,829)
Cash and cash equivalents at start of the year	910	1,251	594	566	8,661	6,461	18,443
Cash and cash equivalents at end of the year	272	62	-	-	3,350	5,930	9,614
Cash and cash equivalents comprise
Cash at bank and in hand	272	62	-	-	3,350	5,930	9,614
Total cash and cash equivalents	272	62	-	-	3,350	5,930	9,614

Cash Flow Statement
for the year ended 31 March 2019

	Unaudited non statutory analysis						Audited
	DSO D Share pool	DP67 Share pool	DP2011 General Share pool	DP2011 Structured Share pool	Generalist Share pool	Healthcare Share pool		Total
	£’000	£’000	£’000	£’000	£’000	£’000		£’000
Cash flows from operating activities
(Loss)/return on ordinary activities before taxation	(207)	(138)	4	(26)	(3,952)	(1,404)		(5,723)
Losses/(gains) on investments	141	372	(71)	-	3,572	1,077		5,091
(Decrease)/increase in creditors	(39)	(74)	(37)	(22)	40	9		(123)
Decrease/(increase) in debtors	65	(117)	(1)	-	(50)	(1)		(104)
Net cash (outflow)/inflow from operating activities	(40)	43	(105)	(48)	(390)	(319)		(859)
Corporation tax paid	-	-	-	-	-	-		-
Net cash generated from operating activities	(40)	43	(105)	(48)	(390)	(319)		(859)
Cash flow from investing activities
Purchase of investments	-	-	-	-	(10,890)	(4,874)		(15,764)
Proceeds from disposal of investments	2,256	689	419	366	1,806	935		6,471
Net cash inflow/(outflow) from investing activities	2,256	689	419	366	(9,084)	(3,939)		(9,293)
Net cash inflow/(outflow) before financing	2,216	732	314	318	(9,474)	(4,258)		(10,152)
Cash flows from financing activities
Repurchase of Shares	-	-	-	-	(14)	-		(14)
Issue of share capital	-	-	-	-	4,589	2,412		7,001
Funds held in respect of Shares not yet allotted	-	-	-	-	2,997	1,354		4,351
Equity dividends paid	(1,888)	-	(1,289)	(629)	-	-		(3,806)
Net cash (outflow)/inflow from financing activities	(1,888)	-	(1,289)	(629)	7,572	3,766		7,532
Net change in cash	328	732	(975)	(311)	(1,902)	(492)		(2,620)
Cash and cash equivalents at start of the year	582	519	1,569	877	10,563	6,953		21,063
Cash and cash equivalents at end of the year	910	1,251	594	566	8,661	6,461		18,443
Cash and cash equivalents comprise
Cash at bank and in hand	910	1,251	594	566	8,661	6,461		18,443
Total cash and cash equivalents	910	1,251	594	566	8,661	6,461		18,443

Notes to the Accounts
for the year ended 31 March 2020

1. Accounting policies

Basis of accounting
The Company has prepared its financial statements in accordance with the Financial Reporting Standard 102 (“FRS 102”) and in accordance with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” revised October 2019 (“SORP”).

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

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

Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust, and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Judgements in applying accounting policies and key sources of estimation uncertainty
Investments
All investments are designated as “fair value through profit or loss” assets due to investments being managed and performance evaluated on a fair value basis, in accordance with Section 9.9B(a) of FRS 102. A financial asset is designated within this category if it is both acquired and managed on a fair value basis, with a view to selling after a period of time, in accordance with the Company’s documented investment policy.

It is possible to determine the fair values within a reasonable range of estimates. The fair value of an investment upon acquisition is deemed to be cost. Thereafter investments are measured at fair value in accordance with FRS 102 sections 11 and 12, together with the International Private Equity and Venture Capital Valuation Guidelines (“IPEV”).

Liquidity investments are measured using bid prices.

For unquoted investments, fair value is established by using the IPEV guidelines. The valuation methodologies for unquoted entities used by the IPEV to ascertain the fair value of an investment are as follows:

- Calibration to price of recent investment;
- Multiples;
- Net assets;
- Discounted cash flows or earnings (of underlying business);
- Discounted cash flows (from the investment); and
- Industry valuation benchmarks.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item and transaction costs on acquisition or disposal of the investment are expensed. Where an investee company has gone into receivership, liquidation or administration (where there is little likelihood of recovery), the loss on the investment, although not physically disposed of, is treated as being realised.

It is not the Company’s policy to exercise significant influence or joint control over investee companies. Therefore, the results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with FRS 102 sections 14 and 15 and the SORP, which do not require portfolio investments to be accounted for using the equity method of accounting.

Calibration to price of recent investment requires a level of judgment to be applied in assessing and reviewing any additional information available since the last investment date. The manager considers a range of factors in order to determine if there is any indication of decline in value or evidence of increase in value since the recent investment date. If no such indications are noted the price of the recent investment will be used as the fair value for the investment.

Examples of signals which could indicate a movement in value are: -

- Changes in results against budget or in expectations of achievement of technical milestones (patents/testing/ regulatory approvals)
- Significant changes in the market of the products or in the economic environment in which it operates
- Significant changes in the performance of comparable companies
- Internal matters such as fraud, litigation or management structure.

Income
Dividend income from investments is recognised when the Shareholders’ rights to receive payment have been established, normally the ex-dividend date.

Interest income is accrued on a time apportioned basis, by reference to the principal sum outstanding and at the effective rate applicable, and only where there is reasonable certainty of collection in the foreseeable future.

Distributions from investments in limited liability partnerships (“LLPs”) are recognised as they are paid to the Company. Where such items are considered capital in nature they are recognised as capital income.

Arrangement fee rebates received from Downing LLP are treated as capital income following the date of investment.

Where previously accrued income is considered unrecoverable a corresponding bad debt expense is recognised.

Expenses
All expenses are accounted for on an accruals basis, and are stated inclusive of any VAT charged. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except as follows:

- Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment; or
- Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. The Company has adopted a policy of charging 50% of the investment management fees to the revenue account and 50% to the capital account, to reflect the Board’s estimated split of investment returns which will be achieved by the company over the long term.

Expenses and liabilities not specific to a share class are generally allocated pro rata to the Net Asset Values of each share class.

Taxation
The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate, using the Company’s effective rate of tax for the accounting period.

Due to the Company’s status as a Venture Capital Trust, and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the Company’s investments which arises.

Deferred taxation, which is not discounted, is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts.

Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included within the accounts at amortised cost.

Issue costs
Issue costs in relation to the Shares issued for each share class have been deducted from the share premium account, special reserve or revenue reserve, as applicable, for the relevant share class.

Performance Incentive
Amounts payable in respect of Performance Incentive arrangements are recorded at such time that an obligation has been established. In respect of the DSO D Share pool, the Performance Incentive is expected to be recorded as an expense item through the Income Statement. Performance Incentives in respect of all other Share classes are paid by way of dividends, and will therefore be recognised in accordance with the dividend accounting policy.

Dividends
Dividends payable are recognised as distributions in the financial statements when the company’s liability to make payment has been established, typically once declared by the Board or approved by Shareholders at the AGM.

Funds held in respect of Shares not yet allotted
Cash received in respect of applications for new Shares that have not yet been allotted is shown as “Funds held in respect of Shares not yet allotted” and recorded on the Balance Sheet.

Reportable segments
The Company has one reportable segment as the sole activity of the Company is to operate as a VCT and all of the Company’s resources are allocated to this activity.

2. Basic and diluted return per share

		Weighted Average number of Shares in issue*	Revenue return/ (loss)	Capital gain/ (loss)	Total Comprehensive income	Basic and diluted return per share
			£’000	£’000	£’000	pence
Return per share is calculated on the following:
Year ended 31 March 2020
DSO D Shares		7,867,247	121	54	175	2.2p
DP67 Shares		11,192,136	(559)	(758)	(1,317)	(11.7p)
DP2011 General Ordinary Shares		15,644,066	-	-	-	-
DP2011 General A Shares		18,418,614	(20)	65	45	0.3p
DP2011 Structured Ordinary Shares		10,678,725	-	-	-	-
DP2011 Structured A Shares		12,572,817	(20)	52	32	0.2p
Generalist Shares		40,797,371	(582)	(9,217)	(9,799)	(24.0p)
Healthcare Shares		18,483,433	(240)	(2,526)	(2,766)	(15.0p)
Year ended 31 March 2019
DSO D Shares		7,867,247	(49)	(158)	(207)	2.6p
DP67 Shares		11,192,136	127	(293)	166	(1.5p)
DP2011 General Ordinary Shares		15,644,066	-	-	-
DP2011 General A Shares		18,418,614	(47)	51	4	-
DP2011 Structured Ordinary Shares		10,678,725	-	-	-	-
DP2011 Structured A Shares		12,572,817	(19)	(7)	(26)	(0.3p)
Generalist Shares		31,412,013	(283)	(3,634)	(3,917)	(12.0p)
	Healthcare Shares	12,378,737	(198)	(1,206)	(1,404)	(11.3p)

*Excluding Management Shares

As the Company has not issued any convertible securities or share options, there is no dilutive effect on the return per DSO D Share, DP67 Share, Generalist Share or Healthcare Share. The return per share disclosed therefore represents both the basic and diluted return per Share for all classes of Share.

3. Basic and diluted Net Asset Value per share

	Shares in issue			2020 Net Asset Value		2019 Net Asset Value
	2020		2019	Pence per share	£’000	Pence per share	£’000
DSO D Shares	7,867,247		7,867,247	12.0	944	27.8	2,185
DP67 Shares	11,192,136		11,192,136	18.8	2,096	48.5	5,428
DP2011 General Ordinary Shares	-		15,644,066	N/A	N/A	-	-
DP2011 General A Shares	-		18,418,614	N/A	N/A	13.3	2,459
DP2011 Structured Ordinary Shares		-	10,678,725	N/A	N/A	-	-
DP2011 Structured A Shares	-		12,572,817	N/A	N/A	9.9	1,233
Generalist Shares	44,865,567		35,621,598	61.7	27,700	83.5	29,734
Generalist Management Shares	11,216,392		7,487,874	-	-	-	-
Healthcare Shares	18,421,889		14,821,564	68.1	12,550	83.3	12,341
Healthcare Management Shares	4,605,472		2,993,571	-	-	-	-

Funds held in respect of shares not yet allotted					535		4,772
Net assets per Balance Sheet					43,825		58,152

The Directors allocate the assets and liabilities of the Company between the DSO D Shares, DP67 Shares, Generalist Shares and Healthcare Shares such that each Share class has sufficient net assets to represent its dividend and return of capital rights.

As the Company has not issued any convertible shares or share options, there is no dilutive effect on the Net Asset Value per DSO D Share, per DP67 Share, per Generalist Share or per Healthcare Share. The Net Asset Value per share disclosed therefore represents both the basic and diluted Net Asset Value per DSO D Share, per DP67 Share, per Generalist Share and per Healthcare Share.

4. Principal Risks
The Company’s investment activities expose the Company to a number of risks associated with financial instruments and the sectors in which the Company invests. The principal financial risks arising from the Company’s operations are:

Market risks;
- Credit risk; and
- Liquidity risk.

The Board regularly reviews these risks and the policies in place for managing them. There have been no significant changes to the nature of the risks that the Company is exposed to over the year and there have also been no significant changes to the policies for managing those risks during the year.

The risk management policies used by the Company in respect of the principal financial risks and a review of the financial instruments held at the year end are provided below:

Market risks

As a VCT, the Company is exposed to investment risks in the form of potential losses and gains that may arise on the investments it holds, in accordance with its investment policy. The management of these market risks is a fundamental part of investment activities undertaken by the Investment Manager and is overseen by the Board. The Manager monitors investments through regular contact with management of investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Manager to manage the investment risk in respect of individual investments. Investment risk is also mitigated by holding a diversified portfolio spread across various business sectors and asset classes.

The key market risks to which the Company is exposed are:

- Investment price risk; and
- Interest rate risk.

The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation.

Investment price risk

Investment price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company’s investment objectives. It represents the potential loss that the Company might suffer through market price movements in respect of quoted investments, and also changes in the fair value of unquoted investments that it holds.

Interest rate risk

The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers. Investments in loan stock attract interest predominately at fixed rates

Credit risk

Credit risk is the risk that a counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its holdings of loan stock in investee companies, cash deposits and debtors. Credit risk relating to holdings of loan stock in investee companies is considered to be part of market risk.

Liquidity risk

Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments at their fair values when required, or from the inability to generate cash inflows as required.

5. Events after the reporting period

In the period between 31 March 2020 and the date of this report, the Company issued the following Shares:

- 668,377 Generalist Shares, at an average price of 62.61p per Share; and
- 191,150 Healthcare Shares, at an average price of 69.08p per Share.

At the date of this report, there were 56,750,335 Generalist Shares and 44,507,994 Healthcare Shares in issue, including Management Shares.

ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 31 March 2020 but has been extracted from the statutory financial statements for the year ended 31 March 2020 which were approved by the Board of Directors on 31 July 2020 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 March 2019 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.