Downing FOUR VCT plc: Half-Yearly Report

Downing FOUR VCT plc
LEI: 21380035MV1VRYEXPR95
Half-Yearly Report for the six months ended 30 September 2018
19 December 2018

FINANCIAL HIGHLIGHTS

	18 Dec 2018			30 Sept 2018		31 Mar 2018		30 Sept 2017
	Pence			Pence		Pence		Pence
DSO D Share pool
Net Asset Value per DSO D Share				30.3		54.4		78.5
Cumulative dividends per DSO D Share				76.5		52.5		27.5
Estimated Performance Incentive *				(4.4)		(4.4)		(4.2)
Total Return per DSO D Share				102.4		102.5		101.8
DP67 Share pool
Net Asset Value per DP67 Share				50.5		50.0		68.7
Cumulative dividends per DP67 Share				49.8		49.8		29.8
Total Return per DP67 Share				100.3		99.8		98.5
DP2011 General Share pool
Net Asset Value per DP2011 Gen Ord Share				-		-		15.0
Net Asset Value per DP2011 Gen A Share				13.0		20.3		34.4
Cumulative dividends per DP2011 Gen Ord Share and Gen A Share				92.0		85.0		55.0
Total Return per DP2011 Gen Ord Share and Gen A Share				105.0*		105.3*		104.4*
Estimated remaining Performance Incentive (already included above) *				2.3		3.6		5.2
DP2011 Structured Share pool
Net Asset Value per DP2011 Struc Ord Share				-		-		5.0
Net Asset Value per DP2011 Struc A Share				9.8		15.0		34.5
Cumulative dividends per DP2011 Struc Share and Struc A Share				95.0		90.0		65.0
Total Return per DP2011 Struc Ord Share and Struc A Share				104.8*		105.0*		104.5*
Estimated remaining Performance Incentive (already included above) *				1.7		2.7		5.2
Generalist Share pool
Net Asset Value and Total Return per Generalist Share	87.0			92.7		95.5		98.7
Healthcare Share pool
Net Asset Value and Total Return per Healthcare Share	84.0			88.7		94.6		98.6

*A full explanation of the Performance Incentive arrangements for each Share pool will be shown in the Half-Yearly Report.

CHAIRMAN'S STATEMENT

Introduction
I am pleased to present the Company's Half-Yearly Report for the six months ended 30 September 2018.

Share pools
The Company now has six active share pools, four of which are winding down. This report includes sections covering the individual share pools and I will give a brief overview of each.

Planned exit Share pools
DSO D Share Pool
The DSO D Share NAV stood at 30.3p at 30 September 2018, a decrease of 0.1p per share or 0.2% over the period, after adjusting for the dividends paid in the period. Total Return now stands at 102.4p per share, compared to the cost for Shareholders who invested in the D Share offer, net of income tax relief, of 70.0p. Based on the current performance it is estimated that a performance fee equivalent to 4.4p per D Share may become payable to the Manager. This has been reflected in the Total Return figure shown above.
Following a number of disposals from the D Share Pool, the second major distribution of 24.0p per DSO D Share was paid on 13 August 2018. Realisation plans are progressing in respect of the remaining investments and we expect to be in a position to make a final distribution to Shareholders during 2019.

DP67 Share Pool
As at 30 September 2018, the NAV of the DP67 Shares stood at 50.5p per share. This represents an increase of 0.5p (1.0%) over the period. Total Return for DP67 shareholders now stands at 100.3p per share, compared to the cost for Shareholders who invested in the original offers, net of income tax relief, of 70.0p.

There are plans in place to exit from all of the remaining investments in the DP67 portfolio and, following the dividend of 20.0p per DP67 Share paid on 16 March 2018, we anticipate that the remaining value will be distributed to Shareholders through the payment of one final dividend, which we anticipate should be paid in the coming months.

DP2011 General Share Pool
The DP2011 General Share Pool is in the process of returning funds to Shareholders. After providing for an estimated Performance Incentive of 2.3p per DP2011 General Ordinary Share, as at 30 September 2018, the NAV of a combined holding of one DP2011 General Ordinary Share and one DP2011 General A Share stood at 13.0p per share. This represents a decrease of 0.3p or 1.5% after adjusting for dividends paid during the period, as well as the Performance Incentive estimate. Further details of the Performance Incentive arrangements are set out in the notes to the accounts.

Total Return for DP2011 General Shareholders now stands at 105.0p, compared to the cost for Shareholders who invested in the original offer, net of income tax relief, of 70.0p.

On 13 August 2018 a dividend of 7.0p per DP2011 General A Share was paid, bringing total dividends paid to Shareholders to 92.0p for a combined holding. As the portfolio now consists of a small number of investments, all with plans to exit, it is expected that the remaining proceeds will be distributed to Shareholders by way of one closing dividend in the first half of 2019.

DP2011 Structured Share Pool
The DP2011 Structured Share Pool is at a similar stage to the DP2011 General Share Pool. After providing for an estimated Performance Incentive of 1.7p per DP2011 Structured Ordinary Share, as at 30 September 2018, the NAV of a combined holding of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share stood at 9.8p per share. This represents a decrease of 0.2p or 1.3% after adjusting for dividends paid during the period, as well as the Performance Incentive estimate. Further details of the Performance Incentive arrangements are set out in the notes to the accounts.

Total Return for DP2011 Structured Shareholders now stands at 104.8p, compared to the cost for Shareholders who invested in the original offer, net of income tax relief, of 70.0p.

On 13 August 2018 a dividend of 5.0p per DP2011 Structured A Share was paid, bringing total dividends paid to Shareholders to 95.0p for a combined holding. As the portfolio now consists of a small number of investments, all with plans to exit, it is expected that the remaining proceeds will be distributed to Shareholders by way of one closing dividend in the first half of 2019.

Evergreen Share pools
Generalist Share pool
As at 30 September 2018, the Generalist Share NAV and Total Return stood at 92.7p, a decrease of 2.8p per share or 2.9% over the period. This fall is attributable to a combination of the unrealised holding losses on the Venture Capital portfolio and the 'cash-drag' of holding uninvested funds. Since the period end, there has been a significant decline in global stock markets.  This has impacted the valuation of Public Equity investments. At 18 December 2018, the Generalist NAV stood at 87.0p per share.

As detailed in the Investment Manager's Report, the process of building the Generalist portfolio is progressing well, with £5.2m having been invested in VCT Qualifying Investments during the six months to 30 September 2018. More than 40% of the funds are now invested in VCT Qualifying investments. The Manager has a good pipeline of investment opportunities from which the portfolio will continue to be built over the coming years.

Healthcare Share pool
As at 30 September 2018, the Healthcare Share NAV and Total Return stood at 88.7p, a decrease of 5.9p per share or 6.2% over the period. This fall is the result of unrealised holding losses in respect of the Venture Capital portfolio, coupled with the 'cash-drag' of holding uninvested funds. As with the Generalist Share pool, the falls in global stock markets have impacted the Public Equity investments and other quoted investments. At 18 December 2018, the Healthcare NAV stood at 84.0p per share.

As outlined in the Investment Manager's Report, the process of building the Healthcare portfolio is ongoing, with £2.7m invested in VCT Qualifying Investments during the six months to 30 September 2018. As this is a specialist sector, the process of investing Healthcare funds presents more challenges than that of the Generalist Share pool. However, the Manager has a good pipeline of investment opportunities from which the portfolio will continue to be built over the coming years.

Dividends
Dividends in respect of the planned exit Share pools will be announced as and when sufficient realisations have taken place.

No dividends have been declared with respect to Generalist and Healthcare Share pools, due to the effective restriction on paying dividends in the first three years following a share issue.

Share buybacks
The Company has a policy of buying in any Generalist and Healthcare Shares that become available in the market and will usually expect to do so at a price approximately equal to the latest NAV of the shares, subject to regulatory restrictions and other factors such as availability of liquid funds.

In respect of the planned exit pools, the Board does not intend to buy in any of those shares as exits for these Shareholders will be facilitated by way of distributions.

During the period the Company repurchased 14,400 Generalist Shares at an average price of 95.7p per Share. The Shares were subsequently cancelled.

Fundraising
The Company has launched further fundraisings in respect of the Generalist and Healthcare Share pools. The Company plans to raise approximately £20m of Generalist funds and £10m of Healthcare funds, with an over-allotment facility which could increase these totals to approximately £40m and £30m respectively.

Downing LLP, the Manager and Promoter, considers there to be a strong pipeline of investment opportunities available to the Company, and the decision to raise additional funds was recommended to Shareholders and the Board as a result.

I look forward to reporting on developments in my statement with the Annual Report to 31 March 2019, to be published in July 2019, by which time we expect that the planned exit processes will be substantially complete.

Board composition
The Directors review the composition and effectiveness of the Board at regular intervals to ensure that it continues to comply with the applicable regulations, is consistent with best practice and remains effective for Shareholders.

The new Corporate Governance Code will become effective for the Company at the start of the next financial year and introduces some changes. In order to ensure continued compliance, I will step down as chairman of the Company on 31 December 2018 but will continue on the Board as a non-executive director. I am pleased to announce that Sir Aubrey Brocklebank has agreed to chair the Company from 1 January 2019 onwards. Sir Aubrey joined the Board at the time of the merger with two other VCTs in 2015 and has extensive experience in the VCT sector. I am confident that that he will be an excellent chairman for the Company.

We believe that the three-person Board has operated effectively and efficiently since it was established in 2015 and continues to do so. With the changing landscape of the VCT regulation and the new focus of the investment activity, the Board will continue to regularly review the structure and, of course, consider adjustments if it concludes that they would be beneficial.

Outlook
For the remainder of this financial year, there will be a dual focus for the Board and Manager, of working to return funds to investors in the four remaining planned exit share pools, whilst also continuing to develop the Generalist and Healthcare portfolios.

Generally, the Board remains satisfied with the performance of the portfolio companies, which the Manager will continue to closely monitor.

Lord Flight
Chairman

INVESTMENT MANAGER'S REPORT
DSO D SHARE POOL

Portfolio valuation
As at 30 September 2018, the DSO D Share Pool had a portfolio of seven investments with a value of £1.5m.

The most significant valuation adjustment during the period was in respect of Apex Energy Limited, which has been written down by £200,000. Technical issues have impacted on operations of the business and the valuation has been adjusted to reflect the additional work required.

Other valuation movements amount to a net uplift of £24,000.

Portfolio activity
Three full realisations took place during the period, generating proceeds of £2.2m.

Goonhilly Earth Station Limited, the owner and operator of the afore-named Satellite Earth Station in Cornwall, was sold during the period, generating proceeds of £878,000 and a gain over cost of £163,000. Loan note interest of £49,000 was also recovered on exit.

Merlin Renewables Limited, the owner and operator of an Anaerobic Digestion plant in Norfolk, was also sold during the period, generating proceeds of £770,000 and realising a gain over cost of £270,000.

The final of the three realisations was in respect of Nightjar Sustainable Power Limited, the owner and operator of a run-of-river hydroelectric scheme in Scotland. The DSO D interest in the company was refinanced by existing investors for £600,000, resulting in a gain over cost of £115,000.

Results and Net Asset Value
The Net Asset Value ('NAV') per DSO D Share at 30 September 2018 stood at 30.3p, a decrease of 0.1p or 0.2% over the period after adjusting for dividends paid. Total Return stands at 102.4p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share.

The loss on ordinary activities after taxation for the period was £7,000, comprising a revenue loss of £29,000 and a capital gain of £22,000.

Dividends
In light of the realisations from the DSO D Share Pool during the period, the second significant distribution, being 24.0p per DSO D Share, was paid on 13 August 2018.

We expect that the remaining NAV will be distributed to Shareholders by way of one closing dividend, and we anticipate that this will be paid during the summer of 2019.

Outlook
Although the portfolio is now reasonably small in value, as it is made up of investments in seven different companies we expect that it will take some months to execute the realisation plans in place.

A further update on the progress of the realisation plans will be provided in the Annual Report to 31 March 2019.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
DSO D SHARE POOL
as at 30 September 2018

	Cost	Valuation	Unrealised gain  in period	% of portfolio by value
	£000	£000	£000
Venture Capital investments
Lambridge Solar Limited	500	605	(21)	25.1%
Pearce and Saunders Limited*	300	354	54	14.7%
Fresh Green Power Limited	189	231	-	9.6%
Apex Energy Limited	400	200	(200)	8.3%
Green Energy Production UK Limited	100	74	(6)	3.1%
Pearce and Saunders DevCo Limited**	126	20	-	0.8%
Fubar Stirling Limited	20	5	(3)	0.2%
	1,635	1,489	(176)	61.8%
Cash at bank and in hand		921		38.2%
Total investments		2,410		100.0%

*partially qualifying
**non-qualifying investment            

SUMMARY OF INVESTMENT MOVEMENTS
DSO D SHARE POOL
for the period ended 30 September 2018

Disposals	Cost	Valuation at 31/03/2018	Disposal proceeds	Total gain/ (loss) against cost	Realised gain in period
	£000	£000	£000	£000	£000
Venture Capital investments
Goonhilly Earth Station Limited	715	715	878	163	163
Merlin Renewables Limited	500	719	770	270	51
Nightjar Sustainable Power Limited	485	600	600	115	-
	1,700	2,034	2,248	548	214

DIVIDEND HISTORY
DSO D SHARE POOL

Period end	Date paid	Pence per share
2012 Final	28 September 2012	2.5
2013 Interim	25 January 2013	2.5
2013 Final	13 September 2013	2.5
2014 Interim	24 January 2014	2.5
2014 Final	30 September 2014	2.5
2015 Interim	30 January 2015	2.5
2015 Second interim	30 September 2015	2.5
2016 Interim	23 December 2015	2.5
2016 Final	30 September 2016	2.5
2017 Interim	6 January 2017	2.5
2017 Final	29 September 2017	2.5
2018 Special	2 November 2017	25.0
2018 Interim	13 August 2018	24.0
		76.5

INVESTMENT MANAGER'S REPORT
DP67 SHARE POOL

Portfolio valuation
As at 30 September 2018, the DP67 Share Pool had a portfolio of seven investments with a value of £4.6m.

The only valuation adjustment during the period was in respect of Fenkle Street LLP. The DP67 Share pool received profit distributions of £75,000, which have been recorded as income for the Share pool. In light of the receipt of this income, the valuation of the investment has been reduced by the same amount.

Results and Net Asset Value
The Net Asset Value ('NAV') per DP67 Share at 30 September 2018 stood at 100.3p, an increase of 0.5p (1.0%) over the period. Total Return stands at 100.3p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share.

The profit on ordinary activities after taxation for the period was £58,000, comprising a revenue gain of £77,000 and a capital loss of £19,000.

Dividends
The first significant distribution of 20.0p per DP67 Share was paid on 16 March 2018.

We expect that the remaining value will be distributed to Shareholders by way of one final dividend which we are optimistic can be paid in the coming months.

Outlook
Our focus for this Share pool is on delivering the exit plans currently in place for each of its investments and making a final distribution to Shareholders.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
DP67 SHARE POOL
as at 30 September 2018

	Cost	Valuation	Unrealised gain  in period	% of portfolio by value
	£000	£000	£000
Venture Capital investments
Cadbury House Holdings Limited	1,409	1,613	-	31.8%
Snow Hill Developments LLP*	584	830	-	16.4%
Fenkle Street LLP*	405	603	(75)	11.9%
Gatewales Limited*	343	527	-	10.4%
Oak Grove Renewables Limited	820	492	-	9.7%
Yamuna Energy Limited	400	400	-	7.9%
London City Shopping Centre Limited*	99	99	-	2.0%
	4,060	4,564	(75)	90.1%
Cash at bank and in hand		501		9.9%
Total investments		5,065		100.0%

*  non-qualifying investment

DIVIDEND HISTORY
DP67 SHARE POOL

Period end	Date paid	Pence per share
Pre-merger dividends		21.8
2016 Interim	23 December 2015	2.0
2016 final	30 September 2016	2.0
2017 Interim	6 January 2017	2.0
2017 Final	29 September 2017	2.0
2018 Special	16 March 2018	20.0
		49.8

INVESTMENT MANAGER'S REPORT
DP2011 GENERAL SHARE POOL

Portfolio valuation
As at 30 September 2018, the DP2011 General Share Pool had a portfolio of seven investments with a value of £2.2m.

The value of the portfolio is materially unchanged from 31 March 2018, with a small overall reduction in value of £19,000 during the period.

Net Asset Value and results
The combined Net Asset Value ('NAV') of one DP2011 General Ordinary Share and one DP2011 General A Share at 30 September 2018 stood at 13.0p, a decrease of 0.3p or 1.5% over the period after adjusting for dividends paid. Total Return stands at 105.0p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per share.

The loss on ordinary activities after taxation for the period was £58,000, comprising a revenue loss of £22,000 and a capital loss of £36,000.

Dividends
The DP2011 General Share pool commenced the process of returning funds to Shareholders in late 2016. Following the dividend of 7.0p per DP2011 General A Share, paid on 13 August 2018, the Share pool is awaiting its final exits before announcing a closing dividend. We believe this can be achieved in the first half of 2019.

Outlook
Our focus for this Share pool is on completing the final investment realisations to allow the payment of a final distribution.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
DP2011 GENERAL SHARE POOL
as at 30 September 2018

		Cost	Valuation	Unrealised gain/(loss)  in period	% of portfolio by value
		£000	£000	£000
Venture Capital investments
Snow Hill Developments LLP*		750	1,178	-	48.4%
Wickham Solar Limited		550	635	(15)	26.1%
Oak Grove Renewables Limited		400	254	-	10.1%
London City Shopping Centre Limited**		88	88	-	3.6%
Mosaic Spa and Health Clubs Limited*		96	64	-	2.6%
Fubar Stirling Limited		133	5	(4)	0.2%
Odysian (Holdings) Limited		233	-	-	0.0%
		2,250	2,224	(19)	91.0%
Cash at bank and in hand			208		9.0%
Total investments			2,432		100.0%

*  non-qualifying investment
               
DIVIDEND HISTORY
DP2011 GENERAL SHARE POOL

Period end	Date paid	Pence per share
Pre-merger dividends		20.0
2016 Interim	23 December 2015	2.5
2016 Special	2 September 2016	22.5
2017 Special	14 February 2017	10.0
2018 Special	2 November 2017	30.0
2018 Interim	13 August 2018	7.0
		92.0

INVESTMENT MANAGER'S REPORT
DP2011 STRUCTURED SHARE POOL

Portfolio valuation
As at 30 September 2018, the DP2011 Structured Share Pool had a portfolio of seven investments with a value of £1.0m.

The value of the portfolio is materially unchanged from 31 March 2018, with a small overall reduction in value of £17,000 during the period.

Net Asset Value and results
The combined Net Asset Value ('NAV') of one DP2011 Structured Ordinary Share and one DP2011 Structured A Share at 30 September 2018 stood at 9.8p, a decrease of 0.2p or 1.3% over the period after adjusting for dividends paid. Total Return stands at 104.8p per share compared to an initial cost to Shareholders, net of income tax relief, of 70.0p per share. 
The loss on ordinary activities after taxation for the period was £33,000 comprising a revenue loss of £7,000 and a capital loss of £26,000.

Dividends
The DP2011 Structured Share pool commenced the process of returning funds to Shareholders in late 2016. Following the dividend of 5.0p per DP2011 Structured A Share, paid on 13 August 2018, the Share pool is awaiting its final exits before announcing a closing dividend. We believe this can be achieved in the first half of 2019.

Outlook
Our focus now is on completing the final investment realisations to allow the payment of a final distribution to Shareholders.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
DP2011 STRUCTURED SHARE POOL
as at 30 September 2018

		Cost	Valuation	Unrealised loss  in period	% of portfolio by value
		£000	£000	£000
Venture Capital investments
Wickham Solar Limited		550	635	(15)	51.1%
Oak Grove Renewables Limited		545	347	-	27.9%
Mosaic Spa and Health Clubs Limited		64	42	-	3.4%
Fubar Stirling Limited		90	4	(2)	0.3%
Odysian (Holdings) Limited		155	-	-	0.0%
		1,404	1,028	(17)	82.7%
Cash at bank and in hand			215		17.3%
Total investments			1,243		100.0%

DIVIDEND HISTORY
DP2011 STRUCTURED SHARE POOL

Period end	Date paid	Pence per share
Pre-merger dividends		20.0
2016 Interim	23 December 2015	2.5
2016 Special	2 September 2016	32.5
2017 Special	14 February 2017	10.0
2018 Special	2 November 2017	25.0
2018 Interim	13 August 2018	5.0
		95.0

INVESTMENT MANAGER'S REPORT
GENERALIST SHARE POOL

Portfolio activity
The ongoing process of building the Generalist portfolio has progressed well during the period, with six new and four follow-on investments totalling £5.2m made during since 31 March 2018.

VCT Qualifying Investments
£1.1m was invested in Lignia Wood Company Limited (formerly Fibre 7 UK Limited), a producer of modified sustainable wood based in Barry, Wales.

A further £991,000 was invested in Live Better With Limited, the developer of a healthcare platform aiming to help people with long-term medical conditions, focusing on non-medical products that make day-to-day life better for patients.

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

A further £639,000 was invested in E Fundamentals (Group) Limited, via two fundraising tranches. The company provides a data analytics service that helps brand owners improve their online revenues.

£525,000 was invested in Virtual Class Limited, trading as Third Space Learning. The Company has developed an online educational platform that provides mathematics tuition to pupils studying for their Key Stage 2 exams.

A further £417,000 was invested in BridgeU Corporation, the developer of a platform providing intelligent university and course matching which is tailored to the individual student.

£250,000 was invested in ADC Biotechnology Limited, a company creating innovative new technology which aims to speed up, simplify and lower the costs of the processes involved in the production of new Antibody Drug Conjugates (ADCs). This investment was made alongside £892,000 from the Healthcare Share pool.

£240,000 was invested in Arecor Limited, the developer of biopharmaceuticals and proprietary diabetes-related products, including ultra-fast acting insulin to treat type 1 and 2 diabetes. This investment was made alongside £880,000 from the Healthcare Share pool.

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

A further £150,000 was invested in Xupes Limited, an online retailer of pre-owned luxury goods including designer watches, handbags, jewellery and antiques.

Portfolio valuation
The carrying values of the Public Equity investments have been adjusted to reflect their quoted prices as at 30 September 2018, resulting in a net reduction of £5,000.

Ormsborough Limited has been reduced in value by £279,000 as a result of the delays and cost overruns on the company's pub developments. We have now put in place a plan for the completion of these developments.

Both ADC Biotechnology Limited and Virtual Class Limited are currently behind on their respective plans and the carrying values of these investments have been reduced by £243,000 and £146,000 respectively. However, both investments are still in an early stage and we continue to work closely with the management teams.

Destiny Pharma plc has been revalued to reflect the quoted share price as at 30 September 2018, resulting in a downward revaluation of £89,000 during the period. The business is progressing well, with the reduction in the share price being attributable to limited trading volumes during the period.

Live Better With Limited has been increased in value by £73,000 to reflect the share price at which the Generalist Share pool most recently invested, alongside third parties.

Net Asset Value and results
At 30 September 2018, the NAV of a Generalist share stood at 92.7p, a decrease of 2.8p (2.9%) for the period. This fall is attributable to a combination of the unrealised holding losses on the Venture Capital portfolio and the 'cash-drag' of holding uninvested funds.

The loss on ordinary activities after taxation for the period was £896,000 comprising a revenue loss of
£130,000 and a capital loss of £766,000.

Outlook

The process of building the Generalist portfolio is progressing well and the Share pool is on target to meet the 80% VCT Qualifying threshold by the required date of 1 April 2020.

There is a strong pipeline of investment opportunities available to the Share pool, so Shareholders should expect further investment activity over the remainder of the financial year.

In addition, as the new Generalist Offer is now open, Shareholders should expect the average deal size to increase proportionately with the size of the Generalist Share pool.

Shareholders will be provided with a further update on the progress made in investing the Generalist funds in the Annual Report to 31 March 2019, to be published in July 2019.

Downing LLP

SUMMARY OF INVESTMENT ADDITIONS
GENERALIST SHARE POOL
for the period ended 30 September 2018

		Cost
Venture Capital investments		£000
Fibre 7 UK Limited		1,111
Live Better With Limited		991
Glownet Limited		741
E Fundamentals (Group) Limited		639
Virtual Class Limited		525
BridgeU Corporation		417
ADC Biotechnology Limited		250
Arecor Limited		240
Masters of Pie Limited		167
Xupes Limited		150
Total		5,231

All VCT Qualifying Investments are incorporated in England and Wales.

SUMMARY OF INVESTMENT PORTFOLIO
GENERALIST SHARE POOL
as at 30 September 2018

		Cost	Valuation	Unrealised gain/(loss) in period	% of portfolio
		£000	£000	£000
Venture Capital investments
Live Better With Limited		1,211	1,284	73	4.4%
Lignia Wood Company Limited		1,111	1,111	-	3.8%
Maverick Pubs (Holdings) Limited		1,000	1,000	-	3.5%
E-Fundamentals (Group) Limited		917	917	-	3.2%
BridgeU Corporation		811	811	-	2.8%
Empiribox Limited		750	750	-	2.6%
Xupes Limited		750	750	-	2.6%
Glownet Limited		741	741	-	2.6%
Ormsborough Limited		900	621	(279)	2.1%
Volo Commerce Limited		567	567	-	2.0%
Fenkle Street LLP*		321	321	-	1.1%
Virtual Class Limited		525	282	(243)	1.0%
Destiny Pharma plc^^		500	274	(89)	0.9%
Arecor Limited		240	240	-	0.8%
Limitless Technology Limited		173	173	-	0.6%
Masters of Pie Limited		167	167	-	0.6%
ADC Biotechnology Limited		250	104	(146)	0.4%
Snow Hill Developments LLP*		86	92	-	0.3%
Mosaic Spa and Health Clubs Limited*		37	37	-	0.1%
London City Shopping Centre Limited*		30	30	-	0.1%
		11,087	10,272	(684)	35.5%
Public Equity investments
MI Downing Monthly Income Fund*		3,950	3,995	172	13.8%
MI Downing UK Micro-Cap Growth Fund*		4,025	3,832	(28)	13.2%
Downing Strategic Micro-Cap Investment Trust plc*^		4,100	3,608	(164)	12.5%
MI Downing Diversified Global Managers Fund*		1,800	1,848	15	6.4%
		13,875	13,283	(5)	45.9%
Total		24,392	23,555	(689)	81.4%
Cash at bank and in hand			5,396		18.6%
Total investments			28,951		100.0%

*  non-qualifying investment
^ listed and traded on the Main Market of the London Stock Exchange
^^ listed and trade on AIM

INVESTMENT MANAGER'S REPORT
HEALTHCARE SHARE POOL

Portfolio activity

The building of the Healthcare portfolio has progressed further during the six months to 30 September 2018, with one follow-on investment and two new investments totalling £2.7m made during the period.

We has also added further resource to our Healthcare team during the period, with the recruitment of Dr Will Brooks. Will has 12 years of experience in medical research and development, academia and business in the UK and Germany. He led Healthcare investments for 15 years at Quest Management, a large European fund, where he was responsible for direct investments in Europe and the US, as well as investments in quoted companies. Will strengthens our Healthcare team significantly and, we believe, will be an invaluable asset as we continue to invest the Share pool's funds.

VCT Qualifying Investments
£892,000 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). The company has also been provided with an investment of £250,000 from the Generalist Share pool.

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

£880,000 was invested in Arecor Limited, the developer of biopharmaceuticals and proprietary diabetes-related products, including ultra-fast acting insulin to treat type 1 and 2 diabetes. This investment was made alongside £240,000 from the Generalist Share pool.

Portfolio valuation
The carrying values of the Public Equity investments have been adjusted to reflect their quoted prices as at 30 September 2018, resulting in a net uplift of £20,000.

ADC Biotechnology Limited is currently behind on its plans and the carrying value of this investment has been reduced by £520,000 as a result. However, this investment is still in an early stage and we continue to work closely with the management team.

Destiny Pharma plc has been revalued to reflect the quoted share price as at 30 September 2018, resulting in a downward revaluation of £89,000 during the period. The business is progressing well, with the reduction in the share price being attributable to limited trading volumes during the period. We remain confident that the business can deliver its potential.

Live Better With Limited has been increased in value by £73,000 to reflect the share price at which the Healthcare Share pool most recently invested.

Net Asset Value and results
At 30 September 2018, the NAV of a Healthcare share stood at 88.7p, a decrease of 5.9p (6.2%) for the period. This fall is attributable to a combination of the unrealised holding losses on the Venture Capital portfolio and the 'cash-drag' of holding uninvested funds.

The loss on ordinary activities after taxation for the period was £719,000 comprising a revenue loss of £93,000 and a capital loss of £626,000.

Outlook
The task of building the Healthcare Share portfolio is underway, with a total of £3.6m invested into VCT Qualifying investments to date. Shareholders should expect to see further investment activity over the remainder of the financial year, as the growing pipeline of investment opportunities continues to result in completed deals.

In addition, as the new Healthcare Offer is now open, Shareholders should expect the average deal size to increase proportionately with the size of the Healthcare Share pool.

Shareholders will be provided with a further update on the progress made in investing the Healthcare funds in the Annual Report to 31 March 2019, to be published in July 2019.

Downing LLP

SUMMARY OF INVESTMENT ADDITIONS
HEALTHCARE SHARE POOL
for the period ended 30 September 2018

		Cost
Venture Capital investments		£000
ADC Biotechnology Limited		892
Live Better With Limited		886
Arecor Limited		880
Total		2,658

All VCT Qualifying Investments are incorporated in England and Wales.

SUMMARY OF INVESTMENT PORTFOLIO
HEALTHCARE SHARE POOL
as at 30 September 2018 

		Cost	Valuation	Unrealised (loss)/ gain in period	% of portfolio
		£000	£000	£000
Venture Capital investments
Live Better With Limited		1,106	1,179	73	10.8%
Arecor Limited		880	880	-	8.1%
Destiny Pharma plc^^		750	411	(134)	3.7%
ADC Biotechnology Limited		892	372	(520)	3.4%
		3,628	2,842	(581)	26.0%
Public Equity investments
MI Downing UK Micro-Cap Growth Fund*		1,125	1,067	(8)	10.2%
Downing Strategic Micro-Cap Investment Trust plc*^		700	616	(28)	9.8%
MI Downing Diversified Global Managers Fund*		950	970	8	8.9%
MI Downing Monthly Income Fund*		1,100	1,115	48	5.6%
		3,875	3,768	20	34.5%
Total		7,503	6,610	(561)	60.5%
Cash at bank and in hand			4,313		39.5%
Total investments			10,923		100.0%

*  non-qualifying investment
^ listed and traded on the Main Market of the London Stock Exchange
^^ listed and trade on AIM

All VCT Qualifying Investments are incorporated in England and Wales.

UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2018

	Six months ended 30 Sep 2018					Six months ended 30 Sep 2017			Year ended 31 Mar 2018
	Revenue		Capital	Total		Revenue	Capital	Total		Total
Company Total	£000		£000	£000		£000	£000	£000		£000
Income	215		115	330		545	-	545		765
Net gains on investments	-		(1,363)	(1,363)		-	1,440	1,440		1,425
	215		(1,248)	(1,033)		545	1,440	1,985		2,190
Investment management fees	(203)		(203)	(406)		(317)	(317)	(634)		(1,192)
Other expenses	(197)		-	(197)		(248)	-	(248)		(1,214)
Return/(loss) on ordinary activities before tax	(185)		(1,451)	(1,636)		(20)	1,123	1,103		(216)
Tax on total comprehensive income and ordinary activities	(19)		-	(19)		(14)	-	(14)		(160)
Return/(loss) attributable to equity shareholders, being total comprehensive income for the year	(204)		(1,451)	(1,655)		(34)	1,123	1,089		(376)
Return per DSO B Share	-		-	-		(0.4p)	0.5p	0.1p		-
Return per DSO C Share	-		-	-		-	-	-		-
Return per DSO D Share	(0.4p)		0.3p	(0.1p)		0.6p	4.3p	4.9p		5.8p
Return per DP67 Share	0.7p		(0.2p)	0.5p		0.5p	4.1p	4.6p		5.9p
Return per DP2011 Gen Ordinary Share		-	-	-		0.4p	3.4p	3.8p		-
Return per DP2011 Gen A Share	(0.1p)		(0.2p)	(0.3p)		-	-	-		4.1p
Return per DP2011 Struc Ordinary Share		-	-	-		0.4p	2.7p	3.1p		-
Return per DP2011 Struc A Share	-		(0.2p)	(0.2p)		-	-	-		3.4p
Return per DP2011 Low Carbon Share	-		-	-		1.1p	(5.0p)	(3.9p)		(9.7p)
Return per Generalist Share	(0.5p)		(2.9p)	(3.4p)		(0.9p)	(0.7p)	(1.6p)		(6.2p)
Return per Healthcare Share	(1.2p)		(8.5p)	(9.7p)		(1.3p)	(1.4p)	(2.7p)		(9.4p)

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above.

UNAUDITED INCOME STATEMENT(ANALYSED BY SHARE POOL)
for the six months ended 30 September 2018

	Six months ended 30 Sep 2018				Six months ended 30 Sep 2017			Year ended 31 Mar 2018
	Revenue	Capital	Total		Revenue	Capital	Total		Total
B Share pool	£000	£000	£000		£000	£000	£000		£000
Income	-	-	-		15	-	15		30
Gains on investments	-	-	-		-	121	121		120
	-	-	-		15	121	136		150
Investment management fees	-	-	-		(26)	(26)	(52)		(52)
Other expenses	-	-	-		(61)	-	(61)		(55)
(Loss)/return on ordinary activities before taxation	-	-	-		(72)	95	23		43
Taxation	-	-	-		(14)	-	(14)		(34)
(Loss)/return attributable to equity shareholders	-	-	-		(86)	95	9		9
	Revenue	Capital	Total		Revenue	Capital	Total		Total
D Share pool	£000	£000	£000		£000	£000	£000		£000
Income	2	-	2		96	-	96		166
Gains on investments	-	38	38		-	361	361		442
	2	38	40		96	361	457		608
Investment management fees	(16)	(16)	(32)		(22)	(22)	(44)		(92)
Other expenses	(15)	-	(15)		(29)	-	(29)		(53)
Return on ordinary activities before taxation	(29)	22	(7)		45	339	384		463
Taxation	-	-	-		-	-	-		(10)
Return attributable to equity shareholders	(29)	22	(7)		45	339	384		453

	Six months ended 30 Sep 2018				Six months ended 30 Sep 2017				Year ended 31 Mar 2018
	Revenue	Capital	Total		Revenue		Capital	Total		Total
DP67 Share pool	£000	£000	£000		£000		£000	£000		£000
Income	117	75	192		119		-	119		247
Gains on investments	-	(75)	(75)		-		482	482		683
	117	-	117		119		482	601		930
Investment management fees	(19)	(19)	(38)		(25)		(25)	(50)		(102)
Other expenses	(2)	-	(2)		(37)		-	(37)		(62)
Return on ordinary activities before taxation	96	(19)	77		57		457	514		766
Taxation	(19)	-	(19)		-		-	-		(114)
Return attributable to equity shareholders	77	(19)	58		57		457	514		652
	Revenue	Capital	Total		Revenue	Capital		Total		Total
DP2011 General Share pool	£000	£000	£000		£000	£000		£000		£000
Income	9	-	9		132	-		132		160
Gains on investments	-	(19)	(19)		-	573		573		947
	9	(19)	(10)		132	573		705		1,107
Investment management fees	(17)	(17)	(34)		(36)	(36)		(72)		(150)
Other expenses	(14)	-	(14)		(40)	-		(40)		(196)
Return on ordinary activities before taxation	(22)	(36)	(58)		56	537		593		761
Taxation	-	-	-		-	-		-		(1)
Return on ordinary activities before taxation	(22)	(36)	(58)		56	537		593		760

		Six months ended 30 Sep 2018				Six months ended 30 Sep 2017			Year ended 31 Mar 2018
		Revenue	Capital	Total		Revenue	Capital	Total		Total
DP2011 Structured Share pool		£000	£000	£000		£000	£000	£000		£000
Income		9	-	9		86	-	86		75
Gains on investments		-	(17)	(17)		-	309	309		535
		9	-	(8)		86	309	395		610
Investment management fees		(9)	(9)	(18)		(20)	(20)	(40)		(78)
Other expenses		(7)	-	(7)		(23)	-	(23)		(126)
Return/(losses) on ordinary activities before taxation		(7)	(26)	(33)		43	289	332		406
Taxation		-	-	-		-	-	-		(1)
Return/(losses) attributable to equity shareholders		(7)	(26)	(33)		43	289	332		405
		Revenue	Capital	Total		Revenue	Capital	Total		Total
DP2011 Low Carbon Share pool	£000		£000	£000		£000	£000	£000		£000
Income		-	-	-		112	-	112		16
Losses on investments		-	-	-		-	(370)	(370)		(252)
		-	-	-		112	(370)	(258)		(236)
Investment management fees		-	-	-		(15)	(15)	(30)		(54)
Other expenses		-	-	-		(15)	-	(15)		(442)
Return/(losses) on ordinary activities before taxation		-	-	-		82	(385)	(303)		(732)
Taxation		-	-	-		-	-	-		-
Return/(losses) attributable to equity shareholders		-	-	-		82	(385)	(303)		(732)

	Six months ended 30 Sep 2018				Six months ended 30 Sep 2017			Year ended 31 Mar 2018
	Revenue	Capital	Total		Revenue	Capital	Total		Total
Generalist Share pool	£000	£000	£000		£000	£000	£000		£000
Income	61	40	101		10	-	10		62
Losses on investments	-	(729)	(729)		-	(24)	(24)		(718)
	61	(689)	(628)		10	(24)	(14)		(656)
Investment management fees	(77)	(77)	(154)		(135)	(135)	(270)		(470)
Other expenses	(114)	-	(114)		(56)	-	(56)		(208)
Losses on ordinary activities before taxation	(130)	(766)	(896)		(181)	(159)	(340)		(1,334)
Taxation	-	-	-		-	-	-		-
Losses attributable to equity shareholders	(130)	(766)	(896)		(181)	(159)	(340)		(1,334)
	Revenue	Capital	Total		Revenue	Capital	Total		Total
Healthcare Share pool	£000	£000	£000		£000	£000	£000		£000
Income	17	-	17		1	-	1		9
Losses on investments	-	(561)	(561)		-	(13)	(13)		(332)
	17	(561)	(544)		1	(13)	(12)		(323)
Investment management fees	(65)	(65)	(130)		(38)	(38)	(76)		(194)
Other expenses	(45)	-	(45)		(12)	-	(12)		(72)
Losses on ordinary activities before taxation	(93)	(626)	(719)		(49)	(51)	(100)		(589)
Taxation	-	-	-		-	-	-		-
Losses attributable to equity shareholders	(93)	(626)	(719)		(49)	(51)	(100)		(589)

UNAUDITED BALANCE SHEET
as at 30 September 2018

			As at 30 September 2018		As at 30 September 2017		As at 31 March 2018
			£000		£000		£000
Fixed assets
Investments			39,470		31,939		35,192
Current assets
Debtors			572		1,180		695
Cash at bank and in hand			11,554		40,931		21,063
			12,126		42,111		21,758
Creditors: amounts falling due within one year			(211)		(340)		(615)
Net current assets			11,915		41,771		21,143
Net assets			51,385		73,710		56,335
Capital and reserves
Called up Share capital			130		180		188
Capital redemption reserve			31		31		31
Special reserve			4,463		29,203		8,021
Share premium account			44,621		39,846		43,904
Funds held in respect of shares not yet allotted			234		1,127		420
Revaluation reserve			(1,637)		(1,198)		234
Capital reserve - realised			4,855		4,668		4,641
Revenue reserve			(1,312)		(147)		(1,104)
Total equity shareholders' funds			51,385		73,710		56,335
Basic and diluted Net Asset Value per Share:
DSO B Share			-		4.444p		-
DSO C Share			-		10.939p		-
DSO D Share			30.3p		78.5p		54.4p
DP67 Share			50.5p		68.7p		50.0p
DP2011 General Ordinary Share			-		15.0p		-
DP2011 General A Share			13.0p		34.4p		20.3p
DP2011 Structured Ordinary Share			-		5.0p		-
DP2011 Structured A Share			9.8p		34.5p		15.0p
DP2011 Low Carbon Share			-		39.1p		-
Generalist Share			92.7p		98.7p		95.5p
Healthcare Share			88.7p		98.6p		94.6p

The comparative balance sheet as at 30 September 2017 includes only the Share Pools in existence at that date.

UNAUDITED BALANCE SHEET (ANALYSED BY SHARE POOL)
as at 30 September 2018

DSO D Shares

			As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
			£000		£000		£000
Fixed assets
Investments			1,489		3,636		3,699
Current assets
Debtors			4		113		66
Cash at bank and in hand			921		2,479		582
			925		2,592		648
Creditors: amounts falling due within one year			(31)		(51)		(67)
Net current assets			894		2,541		581
Net assets			2,383		6,177		4,280
Capital and reserves
Called up share capital			8		8		8
Special reserve			2,629		6,205		4,201
Revaluation reserve			(39)		281		471
Capital reserve - realised			(148)		(266)		(362)
Revenue reserve			(67)		(51)		(38)
Total equity shareholders' funds			2,383		6,177		4,280

DP67 Shares

		As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
		£000		£000		£000
Fixed assets
Investments		4,564		4,890		4,639
Current assets
Debtors		627		621		552
Cash at bank and in hand		501		2,264		519
		1,128		2,885		1,071
Creditors: amounts falling due within one year		(40)		(55)		(116)
Net current assets		1,088		2,830		955
Net assets		5,652		7,720		5,594
Capital and reserves
Called up share capital		11		11		11
Capital redemption reserve		31		-		31
Special reserve		861		5,623		805
Revaluation reserve		504		603		579
Capital reserve - realised		3,581		1,308		3,581
Revenue reserve		664		175		587
Total equity shareholders' funds		5,652		7,720		5,594

DP2011 General Shares

		As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
		£000		£000		£000
Fixed assets
Investments		2,224		2,884		2,243
Current assets
Debtors		1		205		-
Cash at bank and in hand		208		5,675		1,569
		209		5,880		1,569
Creditors: amounts falling due within one year		(36)		(76)		(68)
Net current assets		173		5,804		1,501
Net assets		2,397		8,688		3,744
Capital and reserves
Called up share capital		16		16		16
Called up share capital - A Shares		18		18		18
Special reserve		903		7,489		2,209
Revaluation reserve		334		(278)		353
Capital reserve - realised		831		956		831
Revenue reserve		295		487		317
Total equity shareholders' funds		2,397		8,688		3,744

DP2011 Structured Shares

		As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
		£000		£000		£000
Fixed assets
Investments		1,028		1,398		1,045
Current assets
Debtors		3		120		3
Cash at bank and in hand		215		3,390		877
		218		3,510		880
Creditors: amounts falling due within one year		(20)		(44)		(37)
Net current assets		198		3,466		843
Net assets		1,226		4,864		1,888
Capital and reserves
Called up share capital - Ordinary Shares		11		11		11
Called up share capital - A Shares		13		13		13
Special reserve		566		4,348		1,204
Revaluation reserve		(136)		(514)		(119)
Capital reserve - realised		591		685		591
Revenue reserve		181		321		188
Total equity shareholders' funds		1,226		4,864		1,888

Generalist Shares

		As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
		£000		£000		£000
Fixed assets
Investments		23,555		12,562		19,053
Current assets
Debtors		94		77		73
Cash at bank and in hand		5,396		17,732		10,563
		5,490		17,809		10,636
Creditors: amounts falling due within one year		(129)		(164)		(215)
Net current assets		5,361		17,645		10,421
Net assets		28,916		30,207		29,474
Capital and reserves
Called up share capital		38		38		38
Special reserve		(331)		(140)		(240)
Share premium reserve		32,058		31,063		31,058
Revaluation reserve		(1,407)		(24)		(718)
Funds held in respect of shares not yet allotted		199		566		398
Revenue reserve		(1,641)		(1,296)		(1,512)
Total equity shareholders' funds		28,916		30,207		29,474

Healthcare Shares

		As at 30 September 2018		As at 30 September 2017		As at 31 March  2018
		£000		£000		£000
Fixed assets
Investments		6,610		3,361		4,513
Current assets
Debtors		3		-		1
Cash at bank and in hand		4,313		5,629		6,953
		4,316		5,629		6,954
Creditors: amounts falling due within one year		(115)		(46)		(112)
Net current assets		4,201		5,583		6,842
Net assets		10,811		8,944		11,355
Capital and reserves
Called up share capital		15		9		15
Special reserve		(165)		(41)		(100)
Share premium reserve		12,563		8,782		12,396
Revaluation reserve		(893)		(13)		(332)
Funds held in respect of shares not yet allotted		35		561		22
Revenue reserve		(744)		(354)		(646)
Total equity shareholders' funds		10,811		8,944		11,355

STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2018

	Called up Share capital		Capital Redempt -ion reserve	Special reserve	Share premium account	Funds held in respect of shares not yet allotted	Revaluati -on Reserve	Capital reserve -realised	Revenue reserve	Total
	£000		£000	£000	£000	£000	£000	£000	£000	£000
At 31 March 2017	144		31	30,620	10,074	16,137	(1,980)	3,331	1,055	59,412
Total comprehensive income	-		-	-	-	-	(225)	645	(796)	(376)
Transfer between reserves*	-		-	(22,576)	-	-	2,439	19,548	589	-
Unallotted shares	-		-	-	-	420	-	-	-	420
Transactions with owners
Dividend paid	-		-	-	-	-	-	(18,883)	(589)	(19,472)
Cancellation of shares	-		-	-	-	-	-	-	-	-
Purchase of own shares	-		-	(23)	-	-	-	-	-	(23)
Issue of shares	44		-	-	33,830	(16,137)	-	-	-	17,737
Share issue costs	-		-	-	-	-	-	-	(1,363)	(1,363)
At 31 March 2018	188		31	8,021	43,904	420	234	4,641	(1,104)	56,335
Total comprehensive income	-		-	-	-	-	(1,537)	86	(204)	(1,655)
Transfer between reserves*	-		-	(3,602)	-	-	(334)	3,934	-	(2)
Unallotted shares	-		-	-	-	(186)	-	-	-	(186)
Transactions with owners
Dividend paid	-		-	-	-	-	-	(3,806)	-	(3,806)
Cancellation of shares	(58)		-	58	-	-	-	-	-	-
Purchase of own shares	-		-	(14)	-	-	-	-	-	(14)
Issue of shares	-		-	-	717	-	-	-	-	717
Share issue costs	-		-	-	-	-	-	-	(4)	(4)
At 30 September 2018	130		31	4,463	44,621	234	(1,637)	4,855	(1,312)	51,385

*A transfer of £334,000 (31 March 2018: £2.4 million) representing previously recognised realised gains and losses on disposal of investments during the period has been made from the Revaluation Reserve to the Capital reserve-realised.  A transfer of £3.9 million (31 March 2018: £19.5 million) representing realised gains on disposal of investments, less capital expenses and capital dividends in the period was made from Capital Reserve - realised to Special reserve.

UNAUDITED STATEMENT OF CASH FLOWS

			Six months ended 30 September 2018
				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
Return on ordinary activities before taxation				(7)	77	(58)	(33)	(896)	(719)	(1,636)
(Gains)/losses on investments				(38)	75	19	17	689	561	1,323
Decrease/(increase) in debtors				62	(94)	(1)	-	(21)	(2)	(56)
Increase/(decrease) in creditors				(38)	(76)	(32)	(17)	(87)	4	(246)
Net cash (outflow)/inflow from operating activities				(21)	(18)	(72)	(33)	(315)	(156)	(615)
Corporation tax paid				-	-	-	-	-	-	-
New cash generated from operating activities				(21)	(18)	(72)	(33)	(315)	(156)	(615)
Cashflow from investing activities
Purchase of investments				-	-	-	-	(5,191)	(2,658)	(7,849)
Proceeds from disposal of investments				2,248	-	-	-	-	-	2,248
Net cash inflow/(outflow) from investing activities				2,248	-	-	-	(5,191)	(2,658)	(5,601)
Net cash inflow/(outflow) before financing				2,227	(18)	(72)	(33)	(5,506)	(2,814)	(6,216)
Cash flows from financing activities
Repurchase of shares				-	-	-	-	(14)	-	(14)
Issue of share capital				-	-	-	-	551	162	713
Unallotted shares				-	-	-	-	(198)	12	(186)
Equity dividends paid				(1,888)	-	(1,289)	(629)	-	-	(3,806)
Net cash (outflow)/inflow from financing activities				(1,888)	-	(1,289)	(629)	339	174	(3,293)
Net movement in cash				339	(18)	(1,361)	(662)	(5,167)	(2,640)	9,509
Cash and cash equivalents at start of period				582	519	1,569	877	10,563	6,953	21,063
Cash and cash equivalents at end of period				921	501	208	215	5,396	4,313	11,554
Cash and cash equivalents comprise
Cash at bank and in hand				921	501	208	215	5,396	4,313	11,554
Total cash and cash equivalents				921	501	208	215	5,396	4,313	11,554

 UNAUDITED STATEMENT OF CASH FLOWS

			Six months ended 30 September 2017
			DSO B Share pool	DSO D Share pool			DP67 Share pool	DP2011 Gen Share pool	DP2011 Struc Share pool	DP2011 LC Share pool	Generalist Share Pool	Healthcare Share Pool	Total	Year  ended 31 March 2018
			£000	£000			£000	£000	£000	£000	£000	£000	£000	£000
Cash flows from operating activities
Return on ordinary activities before taxation			23	384			514	593	332	(303)	(340)	(100)	1,103	(216)
(Gains)/losses on investments			(121)	(361)			(482)	(573)	(309)	370	24	13	(1,440)	(1,425)
Decrease/(increase) in debtors			35	141			(24)	380	244	(108)	(77)	-	591	1,244
Increase/(decrease) in creditors			5	(24)			(50)	(48)	(41)	(24)	155	41	14	28
Net cash (outflow)/ inflow from operating activities			(58)	140			(42)	352	226	(65)	(238)	(46)	268	(369)
Corporation tax paid			(58)	10			(505)	(16)	(7)	(6)	-	-	(582)	(637)
New cash generated from operating activities			(116)	150			(547)	336	219	(71)	(238)	(46)	(314)	(1,006)
Cashflow from investing activities
Purchase of investments			-	-			-	-	-	-	(12,361)	(3,350)	(15,711)	(24,366)
Proceeds from disposal of investments			1,358	2,091			640	5,073	3,143	-	-	-	12,305	17,696
Net cash inflow/(outflow) from investing activities			1,358	2,091			640	5,073	3,143	-	(12,361)	(3,350)	(3,406)	(6,670)
Net cash inflow/(outflow) before financing			1,242	2,241			93	5,409	3,362	(71)	(12,599)	(3,396)	(3,720)	(7,676)
Cash flows from financing activities
Repurchase of shares			-	-			-	-	-	-	-	-	-	(23)
Issue of share capital			-	-			-	-	-	-	22,552	6,089	28,641	16,793
Unallotted shares			-	-			-	-	-	-	(13,446)	(1,564)	(15,010)	-
Equity dividends paid			-	(197)			(225)	-	-	-	-	-	(422)	(19,472)
Net cash (outflow)/inflow from financing activities			-	(197)			(225)	-	-	-	9,106	4,525	13,209	(2,702)
Net movement in cash			1,242	2,044			(132)	5,409	3,362	(71)	(3,493)	1,129	9,490	(10,378)
Cash and cash equivalents at start of year			2,475	435			2,396	266	28	116	21,225	4,500	31,441	31,441
Cash and cash equivalents at end of year			3,717	2,479			2,264	5,675	3,390	45	17,732	5,629	40,931	21,063
Cash and cash equivalents comprise
Cash at bank and in hand			3,717	2,479			2,264	5,675	3,390	45	17,732	5,629	40,931	21,063
Total cash and cash equivalents			3,717	2,479			2,264	5,675	3,390	45	17,732	5,629	40,931	21,063

  
Comparative cash flows include the Share Pools in existence at those dates.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

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

Basis of accounting
The unaudited half-yearly financial results cover the six months to 30 September 2018 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 March 2018, which were prepared in accordance with the Financial Reporting Standard 102 ('FRS 102') and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' issued in November 2014 (revised in February 2018) ('SORP').

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

The comparative figures are in respect of the six months ended 30 September 2017 and the year ended 31 March 2018 respectively.

Net Asset Value per share at the period end has been calculated on the number of shares in issue at the period end as follows:

DSO D Shares	7,867,247		DP2011 Structured Shares	10,678,725
DP67 Shares	11,192,136		DP2011 Structured A Shares	12,572,817
DP2011 General Shares	15,644,066		Generalist Shares	38,477,754
DP2011 General A Shares	18,418,614		Healthcare Shares	15,138,059

Return per share for the period has been calculated on the average number of shares in issue in the period as follows:

DSO D Shares	7,867,247		DP2011 Structured Shares	10,678,725
DP67 Shares	11,229,211		DP2011 Structured A Shares	12,572,817
DP2011 General Shares	15,644,066		Generalist Shares	26,206,561
DP2011 General A Shares	18,418,614		Healthcare Shares	7,372,573

Dividends

	Six months ended 30 September 2018
	Revenue		Capital		Total
	£000		£000		£000
Paid in period
DSO D Shares	-		1,888		1,888
DP2011 General A Shares	-		1,289		1,289
DP2011 Structured A Shares	-		629		629

Reserves

	30 Sep 2018		30 Sep  2017		31 Mar 2018
	£000		£000		£000
Capital redemption reserve	31		31		31
Special reserve	4,463		29,203		8,021
Share premium account	44,621		39,846		43,904
Funds held in respect of shares not yet allotted	234		1,127		420
Capital reserve - realised	4,855		(1,198)		4,641
Revaluation reserve	(1,637)		4,668		234
Revenue reserve	(1,312)		(147)		(1,104)
Total reserves	51,255		73,530		56,147

The Revenue reserve, Special reserve and Capital reserve - realised are distributable reserves and are reduced by revaluation losses of £3.5 million. Distributable reserves at 30 September 2018 were £4.5 million.

In October 2018, the balances on the Share Premium account and the capital redemption reserve were cancelled and added to the special reserve, contributing an additional £44.7 million to distributable reserves. Whilst the distributable reserves of the Company have increased significantly, the VCT regulations prevent the Company from paying dividends in respect of the Generalist and Healthcare Share classes during the first three years of their lives.

Investments

The fair value of investments is determined using the detailed accounting policy as shown in the audited financial statements for the year ended 31 March 2018.  The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level 1   Reflects financial instruments quoted in an active market (quoted companies, investment funds and fixed interest bonds);
Level 2   Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level 3   Reflects financial instruments that use valuation techniques that are not based on observable market data (investments in unquoted shares and loan note investments).

		Level 1	Level 2	Level 3	30 Sep 2018		Level 1	Level 2	Level 3	31 Mar 2018
		£000	£000	£000	£000		£000	£000	£000	£000
Quoted equity		685	-	-	685		908	-	-	908
Public Equity investments	17,051		-	-	17,051		17,036	-	-	17,036
Unquoted loan notes		-	-	3,135	3,135		-	-	3,323	3,323
Unquoted equity		-	-	18,599	18,599		-	-	13,925	13,925
		17,736	-	21,734	39,470		17,944	-	17,248	35,192

The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies.

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

The Board has concluded that the key risks facing the Company over the remainder of the financial period are as follows:

-compliance risk of failure to maintain approval as a VCT;
-market, liquidity and counterparty risk associated with Public Equity investments; and
-investment risk associated with investing in small and immature businesses.

The Company's compliance with the VCT regulations is continually monitored by the Manager, who reports regularly to the Board on the current position. The Company also retains Phillip Hare & Associates LLP ('Phillip Hare') to provide regular reviews and advice in this area. Philip Hare have confirmed that all relevant tests have been complied with for the period under review. The Board considers that this approach reduces the risk of a breach of the VCT regulations.

With this approach, the Board believes that these risks are reduced.

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

Going concern
The Directors have reviewed the Company's financial resources at the period end and conclude that the Company is well placed to manage its business risks.

The Board confirms that it is satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, the Board believes that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

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

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

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

PERFORMANCE INCENTIVE ARRANGEMENTS
Performance Incentive arrangements are in place for each share pool except the DP67 pool.  The various schemes are summarised as follows:

DSO D Shares
The Performance Incentive in respect of the DSO D Shares is structured as a simple fee when the hurdle is met. A fee is payable when:
Shareholders receive total proceeds of at least 100.0p per DSO D Share (excluding income tax relief); and
Shareholders achieve a tax-free compound return of at least 7% per annum (after allowing for income tax relief on investment).

If the hurdle is met, the fee will be 3p per DSO D Share plus 20% of shareholder proceeds above 100.0p per D Share. The Performance Incentive is restricted to a maximum of 7.0p per DSO D Share.

As at 30 September 2018, the estimated performance fee is 4.4p per DSO D Share.

DP2011 General Shares/ DP2011 Structured Shares
The Performance Incentive arrangements in respect of the DP2011 General and DP2011 Structured pools enable payments, by way of distributions of income, to members of the management team who subscribed for 15% of the DP2011 General A Shares and DP2011 Structured A Shares at 6.5p per share.

As the proceeds paid to Shareholders have now exceeded 70.0p per DP2011 General Ordinary/A Share and DP2011 Structured Ordinary/A Share, a Performance Incentive equal to 15% of the dividends paid in respect of the A Shares becomes due to members of the management team.  No further incentive is paid to management once Shareholder proceeds exceed 120.0p per DP2011 General Ordinary/A Share and DP2011 Structured Ordinary/A Share.

By virtue of the dividends paid in respect of the DP2011 General A Shares and DP2011 Structured A Shares to date, of 22.0p and 25.0p respectively, members of the management team have received Performance Incentive payments, to date, of 3.1p per DP2011 General Ordinary Share and 3.6p per DP2011 Structured Ordinary Share.

As at 30 September 2018, the estimated remaining Performance Incentive due to management in respect of the DP2011 General and DP2011 Structured Share pools is equivalent to approximately 2.3p per DP2011 General Ordinary Share and 1.7p per DP2011 Structured Ordinary Share. This brings the total Performance Incentive to approximately 5.4p per DP2011 General Ordinary Share and 5.3p per DP2011 Structured Ordinary Share.

Generalist and Healthcare Share pools
A Performance Incentive scheme is in place in respect of the Generalist and Healthcare Management Shares, which will represent 20% of the total number of Generalist and Healthcare Shares in issue. As part of the arrangement,  in order to prevent dilution to the shareholders of the Generalist and Healthcare Shares,  the  management  team  will  waive  their  voting  rights  granted  by  these  Management  Shares  at  any  general  meeting  of  the  Company  and  income  or  capital  distributions  otherwise payable on these Management Shares will be waived unless the share class  has achieved a Total Return (based on audited year end results) in excess of £1 per share for the years ended 31 March 2018, 31 March 2019 and 31 March 2020. For subsequent years, the Total Return hurdle increases by 3p per annum such that for the year ended 31 March 2021 the hurdle is £1.03, and for the year ended 31 March 2022 the hurdle is £1.06.

The existing Performance Incentive scheme in respect of the Generalist and Healthcare Share pools, will also apply to the Shares issued under the new Offers.