Final Results

DOWNING FOUR VCT PLC
LEI: 21380035MV1VRYEXPR95
Final Results for the year ended 31 March 2022
25 July 2022

Financial Highlights

	Audited	Audited
	31 March 2022	31 March 2021
	pence	pence

Ventures Share pool
Net Asset Value (“NAV”) per Ventures Share	68.20	67.2
Cumulative distributions	5.25	2.5
Total Return per Ventures Share	73.45	69.7

Healthcare Share pool
Net Asset Value (“NAV”) per Healthcare Share	84.40	68.5
Cumulative distributions	5.25	2.5
Total Return per Healthcare Share	89.65	71.0

AIM Share pool
Net Asset Value (“NAV”) per AIM Share	99.9	n/a
Cumulative distributions	-	n/a
Total Return per AIM Share	99.9	n/a

DSO D Share pool
Net Asset Value (“NAV”) per DSO D Share	2.6	10.2
Cumulative distributions	102.0	94.5
Adjusted for Performance Incentive estimate	-	(0.5)
Total Return per DSO D Share	104.6	104.2

DP67 Share pool
Net Asset Value (“NAV”) per DP67 Share	26.8	18.4
Cumulative distributions (since original launch)	67.8	67.8
Total Return per DP67 Share	94.6	86.2

Chairman’s Statement
Introduction
I present the Company’s Annual Report for the year ended 31 March 2022.

As I reported to you in my half year Statement, this has been a busy year for your Company, with the creation of the new AIM share class and the offer for subscription which launched in September and closed at the end of May. We also had some changes on the Board and have continued to make good progress in investing the evergreen portfolios.

As the pandemic restrictions have gradually been lifted over the course of the year, we have seen an increase in investment activity and improvement in the performance of some investments which had stalled under the impact of Covid.

Management Arrangements
As Shareholders may be aware, in June 2022 it was announced that Downing LLP, our investment manager, had agreed to sell its technology ventures division to Foresight Group LLP (“Foresight”). As a result, the main executives from Downing LLP’s technology ventures team will move to Foresight and the Board has consented to the novation of the investment management agreement to Foresight.

The Board had extensive discussions with Downing LLP and Foresight and satisfied itself that the transaction was in the best interests of Shareholders. The Company will benefit in future from the continuity of key investment executives as well as the substantial resources of the Foresight Group. Along with these changes, the Company plans to change its name to:
Thames Ventures VCT 2 plc
This is planned to take place on or around 31 August 2022.

Foresight is a quoted fund management business, with £8.7 billion of funds under management and long-standing experience in the VCT sector. We believe the scale of its operation, its resources as a quoted business and its expertise in the VCT market, means it is well placed to support the ongoing development of Downing FOUR VCT plc. Foresight has 12 offices around the UK and should be able to source more new deals than at present and should have greater ability to raise funds in future.

The management of the Healthcare share pool will remain with Downing LLP, as Downing retains a well-resourced healthcare team. Downing LLP will also provide investment management services for the non-ventures investments (primarily those in the planned exit and AIM share pools) and administration services to the Company for at least six months. This will cover the period while the planned exit share pools are wound up.

Fundraising
As noted in the half yearly report, a new offer for subscription was launched in September 2021. The offer closed after the year end, on 31 May 2022, having raised £11.6 million split between the Ventures, Healthcare and new AIM Share classes. A proportion of the shares allotted under the offer were issued after the year end.

During the year ended 31 March 2022, the Company issued 6,889,747 Ventures Shares of 0.1p each at an average price of 69.29p per Ordinary Share, 3,136,178 Healthcare Shares of 0.1p each at an average price of 84.74p per Ordinary Share and 2,034,990 AIM Shares of 0.1p each at an average price of 1.0218p per Ordinary Share. No Ventures or Healthcare Management Shares were issued during the year.

Evergreen Share pool review
Ventures Share pool (formerly Generalist)
The task of building the Ventures Share portfolio continued during the year, with £2.0m invested in ten VCT Qualifying companies, two of which were new additions to the portfolio.

The Ventures Share Total Return stood at 73.45p at the year end, representing an increase of 3.75p per share or 5.6% in NAV over the year. This is inclusive of the dividend of 2.75p per share, which was paid on 24 September 2021.

The NAV increase is largely attributable to a number of valuation increases in the qualifying investments, on the back of improvements in performance as the economy has started to normalise after Covid.

Positive developments include E-Fundamentals
(Group) Limited, Upp Technologies Group Limited, Hackajob Limited, Cambridge Touch Technologies Limited, and Ayar Labs Inc, which were uplifted by a combined £4.0 million over the year.

Arecor Therapeutics plc undertook a successful IPO which is discussed further in the Investment Manager’s Reports for the Ventures and Healthcare pools.

There have, however, also been some valuation reductions, most notably £1.3 million in Trouva (Streethub Limited) which did not recover from the impact of the pandemic and was sold shortly after the year end. Empiribox Holdings Limited reduced in value by £503,000 and Hummingbird Technologies Limited by £405,000 as at 31 March 2022.

There were also four full exits during the period, which are set out below and in the Investment Manager’s Report. Further deferred consideration was received from BridgeU Limited in relation to the exit in 2021. These transactions resulted in a total realised loss of £205,000.

Within the Ventures Liquidity Portfolio, there was a further redemption from MI Downing UK Micro-Cap Growth Fund, which is in the process of winding up. The holding in Downing Strategic Micro-Cap Investment Trust decreased in value £262,000 in line with general stock market movements.

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

Healthcare Share pool
The development of the Healthcare Share portfolio continued during the year, with £4.8 million having been invested in seven VCT Qualifying companies, two of which were new investments.

The Healthcare Share Total Return stood at 89.65p at the year end, representing an increase of 18.65p per share or 27.2% in NAV over the year after adjusting for the Healthcare dividend of 2.75p per share, which was paid on 24 September 2021.

The growth in the Healthcare NAV is the result of positive developments in the Venture Capital portfolio, in particular Arecor Therapeutics plc which is showing a significant increase of £2.7million since the company listed on 3 June 2021. There is further information on this investment in the Investment Manager’s Report.

Other significant uplifts in Adaptix Limited, GENinCode plc (which also listed on AIM during the year) and Open Bionics Limited totalled £1.6 million.

As with the Ventures Share pool, the Healthcare Share pool received a further redemption from MIDowning UK Micro-Cap Growth Fund, which is in the process of winding up. Downing Strategic Micro-Cap Investment Trust also suffered a reduction in valuation at the year end of £44,000.

Within the Healthcare qualifying portfolio, the sole valuation reduction to report was Destiny Pharma plc which was down in value by £564,000 as at 31 March 2022, based on the quoted share price at that date.

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

AIM Share pool
The AIM Share class raised a total of £2.8 million under the offer, and whilst this is less than we had hoped for, it should not create any significant issues for Shareholders as the nature of the fund will allow co-investment to ensure that a reasonably diverse portfolio can still be built.

No investments have been made to date so there is no investment Managers Report for the AIM Share Class included, although I look forward to updating you on the pools progress at the half year point.

Planned Exit Share pools
DSO D Share pool
The DSO D Share portfolio held two remaining investments as at 31 March 2022. As Shareholders will be aware, the ongoing impact of the coronavirus pandemic has continued to cause disruption to the exit processes in respect of these remaining investments.

The two solar businesses, Fresh Green Power Limited and Green Energy Production Limited were sold during the year at a small loss. The funds received were distributed to Shareholders with a dividend of 7.5p per share paid on 7 January 2022.

The realisation of the investments in Pearce and Saunders Limited and Pearce and Saunders DevCo Limited still rests on the sale of the remaining pub site in Eltham. Plans for their exit continue to progress and should conclude before the end of the year.

The DSO D Share NAV stood at 2.6p at the year end, a decrease of 0.1p per share over the year after taking into account the dividend of 7.5p. However, owing to the delays in exiting from the remaining investments, no performance incentive is now expected to be payable, resulting in the Total Return to DSO Shareholders increasing from the level stated at 31 March 2021 by 0.4p per share, or 4.1%. Total Return therefore now stands at 104.6p 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
The remaining value in the DP67 Share portfolio is spread across three investments which operate in the hospitality sector. As the UK economy continues to recover from the impact of the restrictions, the Manager continues to target an exit by the end of the year.

Cadbury House Holdings has seen good performance since reopening in April 2021 and discussions with management are ongoing in order to seek an exit as soon as possible.

As at 31 March 2022, the DP67 Share NAV stood at 26.8p and Total Return stood at 94.6p per share, an increase of 8.4p per share, equivalent to a 45.6% in NAV term since 31 March 2021.

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

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

As the focus for the two remaining Planned Exit Share pools is on returning funds to Shareholders via distributions, the Company will not undertake any further buybacks in respect of those share classes.

Panmure Gordon continues to act as the Company’s corporate broker, operating the share buyback process and ensuring that the quoted spread on the Company’s shares remains at a reasonable level.

During the year ended 31 March 2022, the Company repurchased 86,425 Ventures Shares at an average price of 67.49p per Share and 159,833 Healthcare Shares at an average price of 85.28p per Share.

Dividends
Downing FOUR has a target of seeking to pay annual dividends for the Ventures and Healthcare share classes of at least 4% of the respective NAVs per annum.

The Board is proposing to pay final dividends of 2.75p per Ventures Share and 3.5p per Healthcare Share on 30 September 2022, to Shareholders on the register as at 2 September 2022. The proposed dividends are subject to Shareholder approval at the forthcoming AGM. Following the payment of the proposed dividends, the Company will have paid cumulative dividends of 8.0p per Ventures Share and 8.75p per Healthcare Share.

Further dividends in respect of the Company’s Planned Exit Share pools will be paid once further realisations have taken place. No dividends are expected to be paid by the new AIM-Share class in the initial years.

Responsible investment
The Board notes the Investment Manager, Downing LLP’s, commitment to being a “Responsible Investor”. Downing LLP places Environmental, Social and Governance (ESG) criteria at the forefront of its business and investment activities, in line with best practice, in order to enhance returns for investors. The Board further notes that the Foresight Group has an equally high commitment to sustainability and is confident that the Company investments will continue to be managed in a responsible manner in future.

Annual General Meeting (“AGM”)
The Company invites Shareholders to attend this year’s AGM in person once more. The AGM is planned to take place at the offices of Foresight Group LLP, The Shard, 32 London Bridge Street, London, SE1 9SG at 3.30 p.m. on 27 September 2022.

Shareholders wishing to attend the AGM are requested to please notify Downing LLP via email, to d4agm@downing.co.uk, in case there are changes to arrangements which need to be communicated at short notice.

Four items of special business are proposed at the AGM as follows:

one resolution in respect of the authority to buy back shares as noted above;
two resolutions in respect of authority to allot shares and disapply pre-emptions rights to give the Company flexibility in respect of further fundraising plans; and
one resolution to cancel the share premium account and capital redemption reserve to give the Company the ability to use the reserve created to acquire shares in the market and, in future, to give flexibility in paying dividends.

This year Shareholders will be able submit proxy votes electronically. The details required for voting will be sent to each shareholder. The deadline for proxy votes to be received is 3.30 p.m. on 23 September 2022.

Board changes
As set out in the Half Yearly Report, a review of the board composition was undertaken in August 2021 to ensure it was well aligned with the Company’s needs going forward.

Ultimately two candidates from this process were invited to join the board. Steven Clarke and Andrew Mackintosh were appointed as non-executive directors on 8 September 2021. Both have significant experience in the scientific and technology sectors, which is now the main focus of the Company’s investment activity.

In addition to the above, Chris Allner, partner of Downing LLP, also joined the board on 8 September 2021 as a non-executive director. His remuneration will be borne by Downing LLP for the first 2 years of his role.

Alongside the above appointments, Russell Catley stepped down as a non-executive director of the Company on 8 September 2021. Russell joined the Company’s board following the merger with three other VCTs in 2015. We thank Russell for his valuable contributions throughout his tenure and will miss his sage and intelligent advice. We wish him all the very best in his future activities.

Also, Lord Flight will step down at the forthcoming AGM and will not offer himself for re-election. Lord Flight has been a non-executive director of the Company since its inception in 2009 and was its first chairman. My colleagues and I thank Lord Flight for his significant contributions in several roles through the various phases of the Company’s life to date. We wish him every happiness and success in his other ventures.

I believe we now have a board of directors with a broad range of skills and experience that is well suited to oversee the Company during the next years of its life.

Outlook
With the new management arrangements, there will clearly be some changes to your Company over the next year. The Board is satisfied that these changes will be positive for all Shareholders with Downing LLP continuing to manage the Healthcare Share pool and providing support for a gradual transition in the management of the non-ventures investments (primarily those in the planned exit and AIM share pools). Foresight is a substantial and well-respected fund manager and the Board believes that its further expansion into the unquoted ventures space will deliver good benefits to our shareholders. The Board looks forward to with working the Foresight Group and continuing to work with the existing ventures team at their new home.

In terms of the planned exit portfolios, we believe the task of exiting from the remaining investments DSO D share class should complete this year. A final exit from the DP67 share class is expected to fall into 2023. The pandemic has caused significant delays because of the type of assets, mainly hospitality, owned by these pools. However, progress is now being made, with exit plans from Cadbury House Holdings now being explored following good post pandemic results.

In respect of the Evergreen share pools, we believe that the Ventures and Healthcare pools now have a solid core of investments that are making progress. Both pools will continue to make new investments with funds that are available and the task of investing the new AIM Share pool will get underway shortly. Foresight is committed to raising new funds for the Ventures Share pool as is Downing in respect of the Healthcare Share pool so we look forward to developing the portfolios with attractive new opportunities.

Although the impact of the Covid pandemic is now reducing, there are new threats of increasing inflation, possible recession and the conflict in Ukraine. As a result, recently we have seen falling stock markets and increasing concern about the short-term outlook. However, while we need to be mindful of the potential impact of the challenges, these conditions can present good opportunities.

I look forward to reporting on what is expected to be a busy period in the half yearly report to 30 September 2022.

Sir Aubrey Brocklebank Bt.
Chairman

Ventures Share Pool

Share Pool Summary

	31 March 2022	31 March 2021
Financial highlights	Pence	pence

Net Asset Value per Ventures Share	68.20	67.2
Cumulative distributions	5.25	2.5
Total Return per Ventures Share	73.45	69.7

Investment Manager’s Report - Ventures Share Pool

i. Overview
Introduction
We present a review of the investment portfolio and activity for the Ventures Share pool for the year ended 31 March 2022.

This Investment Manager’s Report is split into three sections comprising this overview, a review of Venture Capital Portfolio and a report on the portfolio of Liquidity Investments.

Net Asset Value and results
As at 31 March 2022, the NAV of a Ventures Share stood at 68.2p, an increase of 3.75p (5.6%) for the year after adding back the Ventures dividend, of 2.75p per share, which was paid on 24 September 2021.

The return on ordinary activities for the Ventures Share pool for the year was £1.8 million (2021: £3.7 million), comprising a revenue loss of £491,000 (2021: £91,000) and a capital gain of £2.3 million (2021: £3.8 million).

Whilst there is still a slow recovery in the NAV since 31 March 2021, the Total Return to Shareholders as at 31 March 2022, of 73.4p, continues to be considered an underperformance against our expectations for the Ventures Share pool.

A final dividend of 2.75p per share is proposed to be paid on 30 September 2022, to Shareholders on the register at 2 September 2022. This is in line with the stated dividend target for the Ventures Share pool, to pay dividends of at least 4% of net assets per annum.

Portfolio Overview
As at 31 March 2022, the Ventures Share pool held a portfolio of 34 Venture Capital investments and two Liquidity investments, with a combined value of £31.3 million.

As the restrictions of the pandemic were slowly lifted over the course of the year ended 31 March 2022, it continued to be a period of challenges for businesses in the UK and the rest of the World. We have been pleased to see significant recovery in some of the companies in the portfolio, although others are still struggling in the aftermath.

There are a number of risks emerging including both the situation in Ukraine and the impact of increasing inflation in the UK. We will continue to work closely with portfolio companies to provide guidance and, where appropriate, additional funding in order to deliver support through these turbulent times.

The valuation movements during the period are discussed in more detail in the following sections of this Investment Manager’s Report.

Portfolio Performance
Overall, several larger valuation reductions in the Venture Capital Portfolio were more than offset by a number of valuation uplifts during the period, resulting in a net valuation uplift on this portfolio, of £2.4 million.

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022. This resulted in a valuation decrease of £238,000 for the period.

ii. Venture Capital Portfolio
Investment activity
During the period, a total of £2.1 million was invested in ten businesses, two of which are new VCT Qualifying investments.

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

DSTBTD Limited (trading as Distributed Limited) (£275,000) has built a platform that connects enterprise clients with fully remote developer teams across the globe to address demand for outsourced software development.

Bulbshare Limited (£245,000) has developed a SaaS platform which enables brands to build communities from their existing customers/fans both to gather insights from and to create a richer experience for those customers.

Follow-on Venture Capital investments
A description of each of the follow-on investments made into existing businesses in the Venture Capital Portfolio is shown below.

Cambridge Touch Technologies Limited (£500,000) is developing pressure sensitive multi touch technology that is cheaper and simpler to integrate
in touch screen panels of mobile devices.

On 3 June 2021 Arecor Therapeutics plc (“Arecor”) undertook a successful IPO on AIM. As part of the IPO, the Ventures Share pool’s existing loan note holding was converted into ordinary shares.

E-Fundamentals Group Limited (£166,000) is a Software as a Service (SaaS) analytics company, which has developed and commercialised a SaaS analytics tool sold directly to companies to enable them to accurately assess the performance of their products when being sold through third party e-commerce sites.

FVRVS Limited (trading as Fundamental VR) (£125,000) has developed a platform, Fundamental Surgery, which is the market leading medical education platform delivering multimodal simulation and education across tethered and all-in-one VR, mixed reality and mobile, harnessing the very latest AI techniques. It is the only global platform to have achieved educational accreditation from leading medical institutions such as the AAOS and Royal College of Surgeons England.

Rated People Limited (£100,000) is an online marketplace connecting homeowners with local tradespeople.

MIP Discovery Limited (previously MIP Diagnostics) (£100,000) is a technology leader in the field of Molecularly Imprinted Polymers (MIPs) - polymer based synthetic antibodies that provide a viable alternative to antibodies for diagnostic immunoassays which are used across a variety of sectors including diagnostics, sensors, food testing and reagent purification.

£71,000 was invested in Streethub Limited (trading as Trouva) in order to support the business towards an exit. After the year end, the Ventures Share Pool exited in full recovering only the value of this latest investment.

Channel Mum Limited has been trading well in recent months and a further £62,000 was invested in order to facilitate an exit.

There were two full exits during the year Xupes Limited, a pre-owned luxury goods retailer generated proceeds of £675,000 at a profit of £384,000 over the value at 31 March 2021.

JRNI Limited, a business to business (B2B) software platform that enables companies to offer online appointments and event bookings for their customers and staff, exited at £23,000 profit over cost.

It is disappointing to report that Exonar Limited and Glownet Limited both exited in full for nil proceeds during the year, with a combined loss of £379,000 against the value held at 31 March 2021.

Deferred consideration of £301,000 was received in relation to the exit of BridgeU Limited which occurred in the year ended 31 March 2021.

Portfolio valuation
During the period, the Venture Capital portfolio of the Ventures Share pool was increased in value by a total of £2.7 million. Whilst there have been a number of significant positive developments within the Venture Capital portfolio, this was in part offset by the reduction in value of several companies due to them not progressing as we had hoped.

Streethub Limited (t/a Trouva) failed to recover after the impact of the pandemic and is well behind budget. The Ventures Share Pool exited after the year end and the value of the investment has therefore been reduced by £1.27 million to reflect the amount recovered.

E-Fundamentals Group Limited continues to progress well both in the UK and in the US, with recurring revenues continuing to grow. This strong performance has resulted in a valuation uplift of £1.27 million as at 31 March 2022.

Upp Technologies Limited (previously Volo Commerce) a provider of multichannel e-commerce technology, was increased in value by £835,000 as its performance recovers following a change in strategy and a new product focus.

Ayar Labs inc. the developer of components for high performance computing and data centre applications, was uplifted in valuation by £800,000 as at 31 March 2022, including the impact of foreign exchange. This revaluation is the result of a calibration to the price set under a recent funding round.

The valuation of Arecor was uplifted by £723,000 as at 31 March 2022.

Cambridge Touch Technologies Limited was uplifted by £508,000 to align with the valuation set under the recent round of funding.

Hummingbird Technologies Limited the owner of an advanced crop analytics platform that is powered by machine learning and aerial imagery, was reduced in value by £503,000 as at 31 March 2022, on the back of a downgrade in revenue forecasts.

The remaining investments in the Venture Capital Portfolio were adjusted in value by a total net uplift of £314,000 as at 31 March 2022.

Outlook
There have been a number of positive developments in the portfolio, as the investments continue to recover in the aftermath of the pandemic and life returns to ‘normal’.

We continue to actively engage with these companies, providing guidance and support to ensure they are well positioned to proceed with their milestones.

Liquidity Investments
The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022. This resulted in a total reduction of £238,000 for the year.

Downing Strategic Micro-Cap Investment Trust plc
The value of the Ventures Share pool’s holding in Downing Strategic Micro-Cap Investment Trust plc (“DSM”) decreased in value by £262,000 during the period. As at 31 March 2022, DSM’s mid-market share price traded at a discount to NAV of 21.36%, representing unrealised value in the company’s share price. The Managers of DSM believe that the trust’s portfolio also has a level of intrinsic value which is yet to be recognised by the market and believe that a return of positive sentiment to value investing could further enhance this.

DSM reported positive results for the full year ended 28 February 2022. The Company reported a 5.3% increase in NAV, and 1% increase in the share price, despite the volatility in markets due to the post-Covid macroeconomic backdrop and the conflict in Ukraine. The managers remain positive on the prospects for the Company’s holdings which are generally cheaper than the wider market, with stronger balance sheets and good growth prospects from the compelling products or services they provide. Typically, these investments have gone through significant catalytic changes over the last few years and are therefore stronger than they were pre this period of economic instability.

Downing UK Micro-Cap Growth Fund
Ventures Shareholders will be aware of the small residual investments in Downing Micro‐Cap Growth Fund (“DMCG”). Since 19th February 2021, the ACD (Associated Corporate Director) has been working with the investment manager Downing LLP to dispose of and liquidate all assets of the Fund with the intention of returning monies to investors at the earliest opportunity. The second round of capital distributions were made in June 2021, returning proceeds of £301,000, realising gains of £31,000 over the valuations as at 31 March 2021. More than the price per share at which the fund was suspended has now been returned to shareholders.

As at 31 March 2022, the Ventures Share pool’s residual holding in DMCG increased in value by £24,000.

Outlook
The ramifications of the pandemic continued to disrupt throughout the reporting period, and markets have been faced with extreme demand /supply side shocks, labour shortages, energy price crises, and freight and logistical challenges. The macroeconomic backdrop remains concerning and markets are likely to remain volatile in the months ahead as rising inflation, higher interest rates and the situation in Ukraine all cause concern.

The year ahead is likely to be more difficult than last year, where lingering Covid issues were offset by massive stimulus and record household savings feeding a demand spike. Supply chain issues continue to have an impact, Covid is still crippling parts of China where so many goods are manufactured, household savings are being rapidly eroded by the unforeseen cost of living crisis, and expansionary policy has reversed. Confidence is low and uncertainty is high. However, the portfolio contains good companies, with plenty of scope for strong balance sheets, and significant prospects for growth over the long-term.

As you will have seen in the Chairman’s Statement, following the year end, Downing LLP agreed to sell its technology Ventures portfolio business to Foresight Group Holdings Limited. As part of the transaction, the Investment Management agreement was novated from Downing to Foresight on 5 July 2022 and the whole of the Downing Ventures team and key support staff were transferred to Foresight.

We look forward to managing the assets as part of the Foresight Group, our new home, and the next chapter for the Company.

Downing LLP – Ventures Team

Review of Investments – Ventures Share Pool
The following investments were held at 31 March 2022:

	Cost	Valuation	Valuation movement in period	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
E-Fundamentals (Group) Limited	1,508	3,847	1,273	10.8%
Rated People Limited	1,382	1,895	211	5.3%
Virtual Class Limited (Third Space Learning)	1,053	1,816	(60)	5.1%
Imagen Limited	1,000	1,763	(65)	5.0%
Ayar Labs, Inc.	764	1,526	800	4.3%
Hackajob Limited	784	1,523	739	4.3%
Cornelis Networks, Inc.	1,402	1,370	63	3.9%
Cambridge Touch Technologies Limited	959	1,369	508	3.8%
Ecstase Limited (t/a ADAY)	1,000	1,257	257	3.5%
Trinny London Limited	219	1,240	283	3.5%
Arecor Therapeutics plc^	418	1,141	723	3.2%
Upp Technologies Group Limited (previously Volo Commerce)	1,077	1,077	835	3.0%
Firefly Learning Limited	1,047	1,047	-	2.9%
Limitless Technology Limited	757	920	-	2.6%
FundingXchange Limited	1,050	786	(264)	2.2%
Congenica Limited	734	746	-	2.1%
Parsable, Inc.	766	711	33	2.0%
Masters of Pie Limited	667	667	-	1.9%
Carbice Corporation	656	639	30	1.8%
FVRVS Limited (t/a Fundamental VR)	375	484	109	1.4%
Maverick Pubs (Holdings) Limited	1,000	450	-	1.3%
Fenkle Street LLP*	301	405	17	1.1%
MIP Discovery Limited (previously MIP Diagnostics Limited)	300	300	-	0.8%
Channel Mum Limited	737	291	(49)	0.8%
DSTBTD Limited (t/a Distributed Limited)	275	275	-	0.8%
Hummingbird Technologies Limited	750	250	(503)	0.7%
Bulbshare Limited	249	249	-	0.7%
Destiny Pharma plc^	500	153	(376)	0.4%
Streethub Limited (t/a Trouva)	1,279	71	(1,273)	0.2%
Empiribox Holdings Limited	1,563	-	(405)	0.0%
Lineten Limited	400	-	(209)	0.0%
Lignia Wood Company Limited	1,778	-	-	0.0%
Live Better With Limited	1,211	-	-	0.0%
Ormsborough Limited	900	-	-	0.0%
London City Shopping Centre Limited*	30	-	-	0.0%
	28,891	28,268	2,677	79.4%
Liquidity investments
Downing Strategic Micro-Cap Investment Trust plc*^	4,269	2,875	(262)	8.1%
MI Downing UK Micro-Cap Growth Fund*	123	116	24	0.3%
	4,392	2,991	(238)	8.4%
	33,283	31,259	2,439	87.8%
Cash at bank and in hand		4,321		12.2%
Total investments		35,580		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 2022

	Cost
Additions	£’000
Venture Capital investments
Cambridge Touch Technologies Limited	500
Arecor Therapeutics plc^	418
DSTBTD Limited (t/a Distributed Limited)	275
Bulbshare Limited	249
E-Fundamentals (Group) Limited	166
FVRVS Limited (t/a Fundamental VR)	125
Rated People Limited	100
MIP Discovery Limited (previously MIP Diagnostics Limited)	100
Streethub Limited (t/a Trouva)	71
Channel Mum Limited	62
Arecor Limited	4
	2,070

	Cost	Valuation at 01/04/21*	Proceeds	(Loss)/ Gain vs. cost	Realised (loss)/gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Xupes Limited	933	291	675	(258)	384
JRNI Limited	525	525	548	23	23
Arecor Limited	418	418	418	-	-
Glownet Limited	741	-	-	(741)	-
Exonar Limited	550	379	-	(550)	(379)
BridgeU Limited ***	-	-	143	143	143
Liquidity investments
MI Downing UK Micro-Cap Growth Fund**	369	270	301	(68)	31
	2,078	1,067	862	(1,216)	(205)

*adjusted for additions in the year as appropriate
**non-qualifying investment
***deferred proceeds not recognised in prior periods

Healthcare Share Pool
Share Pool Summary

	31 March 2022	31 March 2021
Financial highlights	Pence	pence

Net Asset Value per Healthcare Share	84.40	68.5
Cumulative distributions	5.25	2.5
Total Return per Healthcare Share	89.65	71.0

Investment Manager’s Report- Healthcare Share Pool

i. Overview
Introduction
We present a review of the investment portfolio and activity for the Healthcare Share pool over the year ended 31 March 2022.

This Investment Manager’s Report is split into three sections comprising this overview, a review of Venture Capital Portfolio and a report on the portfolio of Liquidity Investments.

Net Asset Value and results
As at 31 March 2022, the NAV of a Healthcare share stood at 84.4p, an increase of 18.6p (27.2%) over the year after adding back the Healthcare dividend, of 2.75p per share, which was paid on 24 September 2021.

The return on ordinary activities for the Healthcare Share pool for the year was £3.7 million (2021: £549,000), being a revenue loss of £314,000 (2021: £113,000) and a capital gain of £3.98 million (2021: £662,000).

There has now been significant recovery in the NAV since 31 March 2021 which we are pleased with, although the Total Return to Shareholders as at 31 March 2022, of 89.7p, continues to be considered an underperformance against our expectations for the Healthcare Share pool.

A proposed final dividend of 3.5p per share will be paid on 30 September 2022, to Shareholders on the register at 2 September 2022. This is in line with the stated dividend target for the Healthcare Share pool, to pay dividends of at least 4% of net assets per annum.

Portfolio Overview
As at 31 March 2022, the Healthcare Share pool held a portfolio of 15 Venture Capital investments and two Liquidity investments, with a combined value of £15.9 million.

We have been pleased to see significant recovery across much of the portfolio with many of the established companies increasing in value in the period and two IPOs demonstrating the potential for success in the portfolio.

However, there are a number of risks which have developed over the latter part of the year, including both the situation in Ukraine and the impact of increasing inflation in the UK. We will continue monitor the situation alongside our investee companies in order to minimise the risk exposure as much as possible and to provide guidance and support as necessary.

The valuation movements during the period are discussed in more detail in the following sections of this Investment Manager’s Report.

Portfolio Performance
There were several valuation movements in the Venture Capital Portfolio during the year, resulting in a net valuation uplift of £4.2 million as at 31 March 2022.

The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022, resulting in a valuation decrease of £36,000 for the year.

ii. Venture Capital Portfolio
Investment activity
During the year, a total of £4.8 million was invested in eight businesses, two of which are new VCT Qualifying investments.

New Venture Capital investments
DIA Imaging Analysis EU (£415,000) is a leading provider of advanced AI‐based solutions for ultrasound analysis. The additional capital will enable DiA to expand its portfolio of FDA‐cleared
and CE‐marked AI‐based ultrasound solutions that enable clinicians to identify clinical abnormalities with speed and accuracy.

Closed Loop Medicine Limited (£650,000) has developed an integrated healthcare technology intended to improve patient outcomes and health system performance by combining drugs/medicines with its digital platform for greater precision in treatment that is personalised to the individual.

Follow-on Venture Capital investments
GENinCode plc (“GENinCode”) develops products and technology that helps patients and healthcare practitioners to assess and predict the onset of cardiovascular disease, thrombosis, and the diagnosis of Familial Hypercholesterolemia. As part of the Company’s IPO on 22 July 2021, the Healthcare Share pool made a follow‐on investment of £302,000 in the business.

On 3 June 2021 Arecor Therapeutics plc (“Arecor”)
undertook a successful IPO on AIM (see portfolio valuation commentary). As part of the IPO, the Healthcare Share pool’s existing loan note holding was converted into ordinary shares.

£400,000 was invested in Cambridge Respiratory Innovations Limited, a company that creates innovative respiratory technologies, including its award-winning N-Tidal device which helps medical professionals diagnose respiratory conditions and monitor lung function in patients.

A further £250,000 was invested in FVRVS Limited (trading as Fundamental VR) which provides surgery simulation software for enterprise clients and hospitals.

The Electrospinning Company Limited 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. During the period the Healthcare Share pool invested a further £200,000 in the business.

MIP Discovery Limited (previously MIP Diagnostics Limited) is a manufacturer of polymer based synthetic antibodies that provide a viable alternative to antibodies for diagnostic immunoassays which are used across a variety of sectors including diagnostics, sensors, food testing and reagent purification. A further £100,000 was invested in the year to 31 March 2022.

Portfolio valuation
During the period, the Venture Capital portfolio of the Healthcare Share pool increased in value by a total of £4.2 million.

We are pleased to report that the majority of the businesses in the portfolio have been able to navigate the challenges brought about by the pandemic and were able to continue to progress with their plans over the period.

Since its IPO, Arecor has made several positive updates on the progress of its products, which have bolstered its share price. As at 31 March 2022, the market capitalisation of Arecor was £101 million. With the valuation now being based on the quoted bid price, the valuation of the Healthcare Share pool’s investment in the group was uplifted by £2.7 million as at 31 March 2022.

Adaptix Limited increased in value by £758,000 as at 31 March 2022, in line with calibrations to the valuations set under their latest funding rounds. The company is developing a flat panel X-ray source which seeks to improve the accuracy and mobility of 3D imaging

GENinCode plc successfully admitted its shares to trading on AIM on 22 July 2021, taking the market capitalisation of the company to approximately £42 million at that date. In line with the quoted bid price as at 31 March 2022, the Healthcare Share pool’s holding was increased in value by £422,000.

Open Bionics Limited is an award‐winning designer, manufacturer and supplier of bionic limbs. The company uses 3D printing and scanning technology to produce custom‐made prosthetics at a lower manufacturing cost relative to existing technologies. The valuation of the business has been increased in accordance with an external valuation. The resulting uplift for the Healthcare Share pool was £379,000 as at 31 March 2022.

The valuations of FVRVS Limited (trading as Fundamental VR) and Future Health Works Limited (trading as MyRecovery) have been increased by £218,000 and £194,000 respectively in order to calibrate to the most recent funding rounds.

The Electrospinning Company Limited 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. The valuation of the Healthcare Share pool’s investment has been calibrated to the price of the most recent funding round and increased by £124,000 at 31 March 2022 as a result.

Destiny Pharma plc, which is listed on AIM, was reduced in value by £564,000. The business continues to progress with its clinical pipeline and trials, however the quoted share price continues to fall on the back of limited trading volumes. We remain confident that there will be long‐term appreciation in the share price, as key milestones continue to be achieved.

There were no other valuation movements in the Venture Capital portfolio.

iii. Liquidity Investments
The carrying values of the Liquidity Investments have been adjusted to reflect their quoted prices as at 31 March 2022, resulting in a total reduction of £36,000 for the year.

Downing Strategic Micro-Cap Investment Trust plc
The value of the Healthcare Share pool’s holding in Downing Strategic Micro-Cap Investment Trust plc (“DSM”) decreased in value by £44,000 during the period. As at 31 March 2022, DSM’s mid-market share price traded at a discount to NAV of 21.36%, representing unrealised value in the company’s share price.

Downing UK Micro-Cap Growth Fund
There remains a small residual investment in Downing Micro‐Cap Growth Fund. As at 31 March 2022, the Ventures Share pool’s residual holding in DMCG increased in value by £8,000.

Outlook
The building of the portfolio of the Healthcare Share pool has progressed well during the period and is now almost fully invested. The focus is on working with the existing portfolio companies to help these businesses achieve their plans, whilst also continuing to add appropriate VCT Qualifying investments to the Healthcare Share pool’s portfolio.

We are pleased that the majority of the Healthcare Venture Capital portfolio has coped well with the repercussions of the pandemic, with some strong results in our more established portfolio. We believe there is much potential still to be realised within a number of these businesses.

As you will have seen in the Chairman’s Statement, following the year end, Downing LLP agreed to sell its technology Ventures portfolio business to Foresight Group Holdings Limited. The management of the Healthcare share pool will remain with Downing and will continue to be managed by Downing’s expanding Healthcare team.

We look forward to continuing to manage the assets alongside Foresight Group where the remainder of the VCT will be settling into its new home.

Downing LLP – Healthcare Ventures Team

Review of Investments – Healthcare Share Pool
The following investments were held at 31 March 2022:

	Cost	Valuation	Valuation movement in period	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Arecor Therapeutics plc^	1,533	4,186	2,653	22.7%
Adaptix Limited	1,056	1,843	758	10.0%
GENinCode plc^	1,202	1,624	422	8.8%
Open Bionics Limited	1,000	1,379	379	7.5%
Congenica Limited	1,184	1,215	-	6.6%
FVRVS Limited (t/a Fundamental VR)	750	968	218	5.3%
Cambridge Respiratory Innovations Limited	800	800	-	4.3%
Future Health Works Limited (t/a MyRecovery)	528	750	194	4.1%
Closed Loop Medicine Limited	650	650	-	3.5%
The Electrospinning Company Limited	478	544	124	3.0%
Invizius Limited	500	500	-	2.7%
DiA Imaging Analysis EU	415	429	14	2.3%
MIP Discovery Limited (previously MIP Diagnostics Limited)	300	300	-	1.6%
Destiny Pharma plc^	750	229	(564)	1.2%
Live Better With Limited	1,106	-	-	0.0%
	12,252	15,417	4,198	83.6%
Liquidity Investments
Downing Strategic Micro-Cap Investment Trust plc*^	729	491	(44)	2.7%
MI Downing UK Micro-Cap Growth Fund*	40	37	8	0.2%
	769	528	(36)	2.9%
	13,021	15,945	4,162	86.5%
Cash at bank and in hand		2,483		13.5%
Total investments		18,428		100.0%

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

Investment movements for the year ended 31 March 2022

	Cost
Additions	£’000
Venture Capital investments
Arecor Therapeutics plc^	1,533
GENinCode plc^	1,202
Closed Loop Medicine Limited	650
DiA Imaging Analysis EU	415
Cambridge Respiratory Innovations Limited	400
FVRVS Limited (t/a Fundamental VR)	250
The Electrospinning Company Limited	200
MIP Discovery Limited (previously MIP Diagnostics Limited)	100
Arecor Limited	14
	4,764

	Cost	Valuation at 01/04/21*	Proceeds	Loss vs. cost	Realised (loss)/gain
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Arecor Therapeutics plc^	1,533	1,533	1,533	-	-
GENinCode plc^	900	900	900	-	-
Liquidity investments
MI Downing UK Micro-Cap Growth Fund**	116	86	96	(20)	10
	2,549	2,519	2,529	(20)	10

*adjusted for additions in the year as appropriate
**non-qualifying investment

DSO D Share Pool

Share Pool Summary

	31 March 2022	31 March 2021
Financial highlights	Pence	Pence
Net Asset Value per DSO D Share	2.6	10.2
Cumulative distributions	102.0	94.5
Adjusted for Performance Incentive estimate	-	(0.5)
Total Return per DSO D Share	104.6	104.2

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 significant delays as a result of the continued impact of the coronavirus pandemic.

Net Asset Value and results
The Net Asset Value (“NAV”) per DSO D Share at 31 March 2022 stood at 2.6p, an increase of 0.1p or 3.9% over the period. Whilst the reported NAV (prior to the deduction of the performance fee estimate) reduced by 0.1p during the year, the estimated performance incentive fee is no longer expected to become payable and so this deduction is no longer applicable (2021: £0.5p). Should the hurdles ultimately be met, a performance incentive could become due.

Total Return stands at 104.6p per share compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share. We consider this to be satisfactory performance when compared to the initial NAV of 100p.

The loss on ordinary activities after taxation for the year was £3,000 (2021: £143,000), comprising a revenue loss of £16,000 (2021: £31,000) and a capital gain of £13,000 (2021: loss of £112,000).

Whilst it is unfortunate to report further delays in the realisation process, the NAV of the DSO D Share pool has not been materially impacted by the coronavirus pandemic. We believe that there continue to be opportunities to exit from the remaining investments, however this will take a little more time to complete.

Venture Capital investments
As at 31 March 2022, the DSO D Share pool held two Venture Capital investments with a total value of £43,000.

Portfolio activity
Both solar panel companies, Fresh Green Power Limited and Green Energy production Limited were exited during the year, generating total proceeds of £341,000 at a total of £8,000 below the value shown at 31 March 2021.

A dividend of 7.5p was paid to shareholders to return these realised funds to investors.

Pearce and Saunders Limited, the owner of a freehold pub in south east London, repaid loan note principal of £20,000 during the period, along with a redemption premium of £60,000.

Portfolio valuation
During the year, the carrying value of the portfolio of Venture Capital investments held by the DSO D Share pool was reduced by £33,000.

Pearce and Saunders Limited and Pearce and Saunders DevCo Limited are the only remaining investments in the portfolio. The final pub has now been sold. Unfortunately, distributions to investors have been delayed as we await a final sign off from HMRC. The valuation has been reduced by £33,000 as at 31 March 2022 to reflect likely final proceeds.

There were no other valuation movements in the DSO D Share pool portfolio.

Outlook
The focus for the DSO D Share pool continues to be on exiting from the remaining investments, however the pandemic has significantly delayed these processes, even more than originally foreseen. We now anticipate that these processes will be completed by the end of 2022. We will continue to monitor the companies and seek to maximise the proceeds for DSO D Shareholders. The final distribution will be once the final realisations have taken place.

Downing LLP

Review of investments - DSO D Share Pool
The following investments were held at 31 March 2022:

	Cost	Valuation	Valuation movement in year	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Pearce and Saunders Limited	255	27	(30)	16.2%
Pearce and Saunders DevCo Limited*	19	16	(3)	9.6%
	274	43	(33)
Cash at bank and in hand		124
Total investments		167

* non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

Investment movements for the year ended 31 March 2022

	Cost	Valuation At 01/04/21	Proceeds	Gain/(loss) vs. cost	Realised Gain/(loss)
Disposals	£’000	£’000	£’000	£’000	£’000
Venture Capital investments
Fresh Green Power Limited	189	282	278	89	(4)
Green Energy Production UK Limited	100	67	63	(37)	(4)
Pearce and Saunders Limited*	20	20	80	60	60
	309	369	421	112	52

* non-qualifying investment

DP67 Share Pool
Share Pool Summary

	31 March 2022	31 March 2021
Financial highlights	pence	pence
Net Asset Value per DP67 Share	26.8	18.4
Cumulative distributions	67.8	67.8
Total Return per DP67 Share	94.6	86.2

Investment Manager’s Report - DP67 Share Pool

Introduction
The process of realising the investments and returning funds to DP67 Shareholders remains the focus for this Share pool, although as Shareholders will be aware, this continues to be subject to substantial delays as a result of the coronavirus pandemic.

Net Asset Value and results
The Net Asset Value (“NAV”) per DP67 Share at 31 March 2022 stood at 26.8p, an increase of 8.4p or 45.6% during the year. Total Return stands at 94.6p per DP67 Share, compared to initial cost to Shareholders, net of income tax relief, of 70.0p per share. Compared to the initial NAV of 100p, we consider the Total Return to be underperformance against the original expectations for the DP67 Share pool.

The gain on ordinary activities after taxation for the year was £934,000 (2021: £31,000), comprising a revenue gain of £1.2 million (2021: £76,000) and a capital loss of £247,000 (2021: gain £45,000).

As DP67 Shareholders will be aware, the remaining DP67 portfolio has a high level of exposure to the leisure and hospitality sector, which was significantly impacted by the restrictions and closures during the pandemic. However, over the past year there has generally been good recovery and we are now making progress with the exit process across the final investments.

Venture Capital investments
As at 31 March 2022, the DP67 Share pool held a portfolio of five Venture Capital investments, with a total value of £1.9 million.

Portfolio activity
It is disappointing to report that there were no realisations during the year ended 31 March 2022.

Portfolio valuation
The DP67 portfolio decreased in value by a total of £233,000 during the year ended 31 March 2022. This movement is attributable to adjustments to the related discounted cash flow assessments conducted in respect of Fenkle Street LLP and its subsidiary Gatewales Limited.

Significant loan note interest has been recognised in the year, resulting in the revenue gain of £1.2 million for the period. We shortly expect to receive first round offers on the BPRA funded hotel, and now consider the accrued interest on these loans to be fully recoverable.

Cadbury House Holdings has seen good performance since reopening in April 2021 and discussions with management are ongoing in order to seek an exit as soon as possible. The valuation will not be adjusted until we have a clearer picture of how that exit will be achieved.

The valuations of the remaining Venture Capital investments are unchanged from 31 March 2021.

Outlook
The focus for the DP67 Share pool continues to be on exiting from the remaining investments. It is frustrating to report that this process has taken so long but hope that it can be complete with an exit from Cadbury House in 2023. During this next period, we will continue to work with the portfolio companies to seek to maximise proceeds for the DP67 Share pool. Further dividends will be paid once the final realisations have taken place.

Downing LLP

Review of Investments – DP67 Share Pool
The following investments were held at 31 March 2022:

	Cost	Valuation	Valuation movement in year	% of portfolio
Portfolio of investments	£’000	£’000	£’000
Venture Capital investments
Cadbury House Holdings Limited	1,409	791	-	41.5%
Fenkle Street LLP**	405	759	32	39.9%
Gatewales Limited*	343	344	(265)	18.1%
Yamuna Renewables Limited	400	-	-	0.0%
London City Shopping Centre Limited**	99	-	-	0.0%
	2,656	1,894	(233)	99.5%
Cash at bank and in hand		10		0.5%
Total investments		1,904		100.0%

* partially qualifying investment
** non-qualifying investment

All Venture Capital investments are incorporated in England and Wales.

There were no investment disposals during the period.

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. The Directors 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;
prepare a directors’ report, a strategic report and directors’ remuneration report which comply with the requirements of the Companies Act 2006; 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.

Audited Income Statement for the year ended 31 March 2022

	Year ended 31 March 2022			Year ended 31 March 2021
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Income	1,296	-	1,296	266	2	268
Gain on investments	-	6,599	6,599	-	4,816	4,816
	1,296	6,599	7,895	266	4,818	5,084
Investment management fees	(531)	(531)	(1,062)	(411)	(411)	(822)
Other expenses	(409)	-	(409)	(97)	-	(97)
Return/(loss) on ordinary activities before tax	356	6,068	6,424	(242)	4,407	4,165
Tax on total comprehensive income and ordinary activities	-	-	-	(69)	-	(69)
Return/(loss) attributable to equity Shareholders, being total comprehensive income for the year	356	6,068	6,424	(311)	4,407	4,096

Basic and diluted return per share:
DSO D Share	(0.2)	0.2	0.0	(0.4p)	(1.4p)	(1.8p)
DP67 Share	10.5	(2.2)	8.3	(0.8p)	0.4p	(0.4p)
Ventures Share	(1.0)	4.8	3.8	(0.2p)	8.2p	8.0p
Healthcare Share	(1.6)	19.9	18.3	(0.6p)	3.5p	2.9p
AIM Share	(1.5)	(0.9)	(2.3)	n/a	n/a	n/a

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 Recommended Practice issued in April 2021 by the Association of Investment Companies (“AIC SORP”).

Income Statement for the year ended 31 March 2022
Analysed by Share pool – unaudited and non-statutory
Split as:

	Year ended 31 March 2022				Year ended 31 March 2021
	Revenue	Capital	Total		Revenue	Capital	Total
DSO D Share pool	£’000	£’000	£’000		£’000	£’000	£’000
Income	-	-	-	-		-	-
Net gain/(loss) on investments	-	19	19	-		(106)	(106)
	-	19	19	-		(106)	(106)
Investment management fees	(6)	(6)	(12)	(6)		(6)	(12)
Other expenses	(10)	-	(10)	(25)		-	(25)
(Loss)/return on ordinary activities before tax	(16)	13	(3)	(31)		(112)	(143)
Tax on total comprehensive income and ordinary activities	-	-	-	-		-	-
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(16)	13	(3)	(31)		(112)	(143)

	Year ended 31 March 2022			Year ended 31 March 2021
	Revenue	Capital	Total	Revenue	Capital	Total
DP67 Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	1,217	-	1,217	-	-	-
Net (loss)/gain on investments	-	(233)	(233)	-	59	59
	1,217	(233)	984	-	59	59
Investment management fees	(14)	(14)	(28)	(14)	(14)	(28)
Other expenses	(22)	-	(22)	(32)	-	(32)
Return/(loss) on ordinary activities before tax	1,181	(247)	934	(46)	45	(1)
Tax on total comprehensive income and ordinary activities	-	-	-	(30)	-	(30)
Return/(loss) attributable to equity Shareholders, being total comprehensive income for the year	1,181	(247)	934	(76)	45	(31)

Income Statement for the year ended 31 March 2022
Analysed by Share pool – unaudited and non-statutory

	Year ended 31 March 2022			Year ended 31 March 2021
	Revenue	Capital	Total	Revenue	Capital	Total
Ventures Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	58	-	58	230	2	232
Net gain on investments	-	2,641	2,641	-	4,067	4,067
	58	2,641	2,699	230	4,069	4,299
Investment management fees	(314)	(314)	(628)	(257)	(257)	(514)
Other expenses	(235)	-	(235)	(25)	-	(25)
(Loss)/return on ordinary activities before tax	(491)	2,327	1,836	(52)	3,812	3,760
Tax on total comprehensive income and ordinary activities	-	-	-	(39)	-	(39)
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(449)	2,327	1,836	(91)	3,812	3,721

	Year ended 31 March 2022			Year ended 31 March 2021
	Revenue	Capital	Total	Revenue	Capital	Total
Healthcare Share pool	£’000	£’000	£’000	£’000	£’000	£’000
Income	21	-	21	36	-	36
Net gain/(loss) on investments	-	4,172	4,172	-	796	796
	21	4,172	4,193	36	796	832
Investment management fees	(195)	(195)	(390)	(134)	(134)	(268)
Other expenses	(140)	-	(140)	(15)	-	(15)
(Loss)/return on ordinary activities before tax	(314)	3,977	3,663	(113)	662	549
Tax on total comprehensive income and ordinary activities	-	-	-	-	-	-
(Loss)/return attributable to equity Shareholders, being total comprehensive income for the year	(314)	3,977	3,663	(113)	662	549

Income Statement for the year ended 31 March 2022
Analysed by Share pool – unaudited and non-statutory

	Year ended 31 March 2022
	Revenue	Capital	Total
AIM Share pool	£’000	£’000	£’000
Income	-	-	-
Net gain on investments	-	-	-
	-	-	-
Investment management fees	(2)	(2)	(4)
Other expenses	(2)	-	(2)
Loss on ordinary activities before tax	(4)	-	(6)
Tax on total comprehensive income and ordinary activities	-	-	-
Loss attributable to equity Shareholders, being total comprehensive income for the year	(4)	(2)	(6)

Audited Balance Sheet as at 31 March 2022

	2022	2021
	£’000	£’000
Fixed assets
Investments	49,141	40,743
Current assets
Debtors	4,317	701
Cash at bank and in hand	8,384	6,986
	12,701	7,687
Creditors: amounts falling due within one year	(965)	(381)
Net current assets	11,736	7,306
Net assets	60,877	48,049

8BCapital and reserves
Called up Share capital	113	102
Capital redemption reserve	58	58
Special reserve	24,063	29,417
Share premium account	29,284	20,010
Funds held in respect of shares not yet allotted	7	241
Revaluation reserve	6,995	(1,143)
Capital reserve – realised	3,769	3,132
Revenue reserve	(3,412)	(3,768)
Total equity Shareholders’ funds	60,877	48,049

Basic and diluted Net Asset Value per share:
DSO D Share	2.6p	10.2p
DP67 Share	26.8p	18.4p
Ventures Share	68.2p	67.2p
Healthcare Share	84.4p	68.5p
AIM Share	99.9p	n/a

Balance Sheet as at 31 March 2022
Analysed by Share pool – unaudited and non-statutory
Split as:

	2022	2021
DSO D Share pool	£’000	£’000
Fixed assets
Investments	43	445
Current assets
Debtors	61	29
Cash at bank and in hand	124	344
	185	373
Creditors: amounts falling due within one year	(20)	(17)
Net current assets	165	356
Net assets	208	801
Capital and reserves
Called up share capital	8	8
Special reserve	423	966
Revaluation reserve	(231)	(138)
Capital reserve – realised	22	(37)
Revenue reserve	(14)	2
Total equity Shareholders’ funds	208	801

	2022	2021
DP67 Share pool	£’000	£’000
Fixed assets
Investments	1,894	2,127
Current assets
Debtors	1,218	1
Cash at bank and in hand	10	10
	1,228	11
Creditors: amounts falling due within one year	(124)	(74)
Net current assets	1,104	(63)
Net assets	2,998	2,064
Capital and reserves
Called up share capital	11	11
Special reserve	(400)	(400)
Revaluation reserve	(263)	(30)
Capital reserve – realised	2,392	2,406
Revenue reserve	1,258	77
Total equity Shareholders’ funds	2,998	2,064

	2022	2021
Ventures Share pool	£’000	£’000
Fixed assets
Investments	31,259	28,633
Current assets
Debtors	1,801	464
Cash at bank and in hand	4,321	3,141
	6,122	3,605
Creditors: amounts falling due within one year	(490)	(238)
Net current assets	5,632	3,367
Net assets	36,891	32,000
Capital and reserves
Called up share capital	65	59
Capital redemption reserve	58	58
Special reserve	16,290	20,195
Share premium account	18,657	14,009
Funds held in respect of shares not yet allotted	2	222
Revaluation reserve	3,548	(814)
Capital reserve – realised	1,428	847
Revenue reserve	(3,067)	(2,576)
Total equity Shareholders’ funds	36,891	32,000

	2022	2021
Healthcare Share pool	£’000	£’000
Fixed assets
Investments	15,945	9,538
Current assets
Debtors	633	254
Cash at bank and in hand	2,483	3,491
	3,116	3,745
Creditors: amounts falling due within one year	(310)	(99)
Net current assets	2,806	3,646
Net assets	18,751	13,184
Capital and reserves
Called up share capital	27	24
Special reserve	7,752	8,656
Share premium account	8,594	6,001
Funds held in respect of shares not yet allotted	5	19
Revaluation reserve	4,031	(161)
Capital reserve – realised	(73)	(84)
Revenue reserve	(1,585)	(1,271)
Total equity Shareholders’ funds	18,751	13,184

	2022
AIM Share pool	£’000
Fixed assets
Investments	-
Current assets
Debtors	604
Cash at bank and in hand	1,446
	2,050
Creditors: amounts falling due within one year	(21)
Net current assets	2,029
Net assets	2,029
Capital and reserves
Called up share capital	2
Special reserve	(2)
Share premium account	2,033
Funds held in respect of shares not yet allotted	-
Revaluation reserve	-
Capital reserve – realised	-
Revenue reserve	(4)
Total equity Shareholders’ funds	2,029

Statement of Changes in Equity for the year ended 31 March 2022

	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 2020	98	58		39,433		17,971		535		(13,302)		2,483		(3,451)		43,825
Total comprehensive income	-		-		-		-		-		4,158		249		(311)		4,096
Transfer between reserves*	-	-		(10,016)		-		-		8,001		2,021		(6)		-
Unallotted shares	-	-		-		-		(294)		-		-		-		(294)
*Transactions with owners*
Dividend paid	-	-		-		-		-		-		(1,621)		-		(1,621)
Purchase of own shares	-	-		-		-		-		-		-		-		-
Issue of shares	4	-		-		2,097		-		-		-		-		2,101
Share issue costs	-	-		-		(58)		-		-		-		-		(58)
At 31 March 2021	102	58		29,417		20,010		241		(1,143)		3,132		(3,768)		48,049
Total comprehensive income	-		-		-		-		-		6,335		(267)		356		6,424
Transfer between reserves*	-	-		(5,159)		-		-		1,803		3,356		-		-
Unallotted shares	-	-		-		-		(234)		-		-		-		(234)
*Transactions with owners*
Dividend paid	-	-		-		-		-		-		(2,452)		-		(2,452)
Purchase of own shares	-	-		(195)		-		-		-		-		-		(195)
Issue of shares	11	-		-		9,501		-		-		-		-		9,512
Share issue costs	-	-		-		(227)		-		-		-		-		(227)
At 31 March 2022	113	58		24,063		29,284		7		6,995		3,769		(3,412)		60,877

* A transfer of £1,803,000 (2021: £8,001,000) representing previously recognised realised gains and losses on disposal of investments during the period has been made between the Revaluation Reserve and the Capital reserve - realised. A transfer of £5,159,000 (2021: £10,022,000) representing the total of: realised losses on the disposal of investments, cumulative realised losses on permanent fair value change, capital expenses and capital dividends in the period, has been made between the Capital Reserve - realised and the Special reserve. In 2021 a transfer of £6,000, representing the balance on the Revenue reserve relating to previously cancelled share classes, was made from the revenue reserve to the Special reserve.

Cash Flow Statement for the year ended 31 March 2022

	Unaudited non-statutory analysis					Audited
	DSO D Share pool	DP67 Share pool	Ventures Share pool	Healthcare Share pool	AIM Share Pool	Company
	£’000	£’000	£’000	£’000	£’000	£’000
Cash flows from operating activities
(Loss)/return on ordinary activities before taxation	(3)	934	1,836	3,663	(6)	6,424
(Gains)/losses on investments	(19)	233	(2,641)	(4,172)	-	(6,599)
Increase in creditors	3	50	253	211	21	538
Increase in debtors	(32)	(1,217)	(1,337)	(379)	(604)	(3,569)
Net cash outflow from operating activities	(51)	-	(1,889)	(677)	(589)	(3,206)
Corporation tax paid	-	-	-	-	-	-
Net cash generated from operating activities	(51)	-	(1,889)	(677)	(589)	(3,206)
Cash flow from investing activities
Purchase of investments	-	-	(2,070)	(4,764)	-	(6,834)
Proceeds from disposal of investments	421	-	2,085	2,529	-	5,035
Net cash inflow/(outflow) from investing activities	421	-	15	(2,235)	-	(1,799)
Net cash inflow/(outflow) before financing	370	-	(1,874)	(2,912)	(589)	(5,005)
Cash flows from financing activities
Repurchase of shares	-	-	(58)	(137)	-	(195)
Issue of share capital	-	-	4,775	2,658	2,079	9,512
Cost of issue of share capital	-	-	(122)	(61)	(44)	(227)
Funds held in respect of shares not yet allotted	-	-	(220)	(14)	-	(234)
Equity dividends paid	(590)	-	(1,321)	(542)	-	(2,453)
Net cash (outflow)/inflow from financing activities	(590)	-	3,054	1,904	2,035	6,403

Net change in cash	(220)	-	1,180	(1,008)	1,446	1,398
Cash and cash equivalents at start of the year	344	10	3,141	3,491	-	6,986
Cash and cash equivalents at end of the year	124	10	4,321	2,483	1,446	8,384

Cash and cash equivalents comprise
Cash at bank and in hand	124	10	4,321	2,483	1,466	8,384
Total cash and cash equivalents	124	10	4,321	2,483	1,446	6,938

Cash Flow Statement for the year ended 31 March 2021

	Unaudited non-statutory analysis				Audited
	DSO D Share pool	DP67 Share pool	Ventures Share pool	Healthcare Share pool	Company
	£’000	£’000	£’000	£’000	£’000
Cash flows from operating activities
(Loss)/return on ordinary activities before taxation	(143)	(1)	3,760	549	4,165
Losses/(gains) on investments	106	(59)	(4,067)	(796)	(4,816)
(Decrease)/increase in creditors	(16)	(8)	(28)	(321)	(373)
Decrease/(increase) in debtors	21	16	(61)	(248)	(272)
Net cash outflow from operating activities	(32)	(52)	(396)	(816)	(1,296)
Corporation tax paid	-	-	-	-	-
Net cash outflow from operating activities	(32)	(52)	(396)	(816)	(1,296)
Cash flow from investing activities
Purchase of investments	-	-	(7,010)	(3,458)	(10,468)
Proceeds from disposal of investments	104	-	7,029	1,875	9,008
Net cash inflow/(outflow) from investing activities	104	-	19	(1,583)	(1,460)
Net cash inflow/(outflow) before financing	72	(52)	(377)	(2,399)	(2,756)
Cash flows from financing activities
Issue of share capital	-	-	1,549	552	2,101
Cost of issue of share capital	-	-	(42)	(16)	(58)
Funds held in respect of shares not yet allotted	-	-	(189)	(105)	(294)
Equity dividends paid	-	-	(1,150)	(471)	(1,621)
Net cash inflow/(outflow) from financing activities	-	-	168	(40)	128

Net change in cash	72	(52)	(209)	(2,439)	(2,628)
Cash and cash equivalents at start of the year	272	62	3,350	5,930	9,614
Cash and cash equivalents at end of the year	344	10	3,141	3,491	6,986

Cash and cash equivalents comprise
Cash at bank and in hand	344	10	3,141	3,491	6,986
Total cash and cash equivalents	344	10	3,141	3,491	6,986

Notes
1. 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, and its registered office is St. Magnus House, 3 Lower Thames Street, London EC3R 6HD.

2. 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 April 2021 (“SORP”).

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

Going concern
The Directors have made an assessment of the company’s ability to continue as a going concern and are satisfied that the company has the resources to continue in business for the foreseeable future, being a period of 12 months from the date these Financial Statements were approved. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the company’s ability to continue as a going concern, having taken into account the liquidity of the company’s investment portfolio and the company’s financial position in respect of its cash flows and investment commitments. Therefore, the Financial Statements have been prepared on the going concern basis.

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.

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.

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.

In respect of disclosures required by the SORP for the 10 largest investments held by the Company, the most recent publicly available accounts information, either as filed at Companies House, or announced to the London Stock Exchange, is disclosed. In the case of unlisted investments, this may be abbreviated information only.

Judgements in applying accounting policies and key sources of estimation uncertainty
The key estimate in the financial statements is the determination of the fair value of the unquoted investments by the Directors as it impacts the valuation of the unquoted investments at the balance sheet date.

Of the Company’s assets measured at fair value, it is possible to determine their 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”).

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 acquisition of an investment are deducted from the Capital Account;
Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment;
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. Investment management fees are allocated 50% to revenue and 50% to capital, in order to reflect the Directors’ expected long-term view of the nature of the investment returns of the Company.

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, should a Performance Incentive become payable it will 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. There is no Performance Incentive in place for the AIM Share class.

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.

3. Basic and diluted return per share

	Weighted Average number of shares in issue*	Revenue (loss)/ return	Capital (loss)/ gain	Total Comprehensive Income/ (loss)	Basic and Diluted return per share
		£’000	£’000	£’000	pence
Return per share is calculated on the following:
Year ended 31 March 2022
DSO D Shares	7,867,247	(16)	13	(3)	0.0
DP67 Shares	11,192,136	1,181	(247)	934	8.3
Ventures Shares	48,629,971	(491)	2,327	1,836	3.8
Healthcare Shares	20,007,047	(314)	3,977	3,663	18.3
AIM Shares	283,425	(4)	(2)	(6)	(2.3)
Year ended 31 March 2021
DSO D Shares	7,867,247	(31)	(112)	(143)	(1.8p)
DP67 Shares	11,192,136	(76)	45	(31)	(0.4p)
Ventures Shares	45,988,062	(91)	3,812	3,721	8.0p
Healthcare Shares	18,803,854	(113)	662	549	2.9p

*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, Ventures Share, Healthcare Share or AIM Share. The return per share disclosed therefore represents both the basic and diluted return per share for all classes of share.

4. Basic and diluted Net Asset Value per share

	Shares in issue		2022 Net Asset Value		2021 Net Asset Value
	2022	2021	Pence per share	£’000	Pence per share	£’000
DSO D Shares	7,867,247	7,867,247	2.6	208	10.2	801
DP67 Shares	11,192,136	11,192,136	26.8	2,998	18.4	2,064
Ventures Shares	54,112,154	47,308,832	68.2	36,889	67.2	31,778
Ventures Management Shares	11,216,391	11,216,391	-	-	-	-
Healthcare Shares	22,206,436	19,230,091	84.4	18,746	68.5	13,165
Healthcare Management Shares	4,605,472	4,605,472	-	-	-	-
AIM Shares	2,034,990	n/a	99.9	2,029	-	-

Funds held in respect of shares not yet allotted				7		241
Net assets per Balance Sheet				60,876		48,049

The Directors allocate the assets and liabilities of the Company between the DSO D Shares, DP67 Shares, Ventures Shares, Healthcare Shares and AIM 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 Ventures Share, per Healthcare Share or per AIM 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 Ventures Share, per Healthcare Share and per AIM Share.

5. 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 the 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;
Foreign exchange 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.

Foreign exchange risk

The Company has exposure to fluctuations in the prevailing market rates of exchange between the US Dollar ("USD") and the British Pound ("GBP"), as a result of holding investments in companies which use USD as their functional and reporting currency. The valuations of such investments are first performed in USD and subsequently converted to the equivalent GBP values at each reporting date. As at 31 March 2022, cumulative unrealised foreign exchange gains of £171,000 (2021: cumulative loss £266,000) had been recognised in the Income Statement, representing the movements in the USD:GBP exchange rates between the date of each relevant investment and the reporting date. The Board continues to review the exposure to fluctuations in foreign currencies but has not sought to mitigate the exposure at this time. The Company does however have relationships with foreign exchange service providers and will seek to reduce the impact of foreign exchange fluctuations on future cash flows as they arise.

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

There are three categories in respect of interest, which are attributable to the financial instruments held by the Company as follows:

“Fixed rate” assets represent investments with predetermined yield targets and comprise certain loan note investments and preference shares;
“Floating rate” assets predominantly bear interest at rates linked to Bank of England base rate or LIBOR and comprise cash at bank; and
“No interest rate” assets do not attract interest and comprise equity investments, certain loan note investments, Liquidity investments, loans and receivables (excluding cash at bank) and other financial liabilities.

The Company monitors the level of income received from fixed and floating rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, if this should be required to ensure compliance with the VCT regulations.

The Bank of England base rate has been an average of 0.19% during the year. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and Total Return of the Company.

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

The Manager manages credit risk in respect of loan notes with a similar approach as described under investment price risk. The management of credit risk, associated interest, dividends and other receivables is covered within the investment management procedures.

Cash is mainly held with Royal Bank of Scotland plc, an A-rated financial institution. Consequently, the Directors consider that the credit risk associated with cash deposits is low.

There have been limited changes in fair value during the year that are directly attributable to changes in credit 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.

The Company has a relatively low level of creditors, being £965,000 (2021: £381,000), all of which are payable within one year. The Company has no borrowings, and accordingly the Board believes that the Company’s exposure to liquidity risk is low. Also, the quoted investments held by the Company are considered to be readily realisable. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. For these reasons, the Board believes that the Company’s exposure to liquidity risk is minimal. The Company’s liquidity risk is managed by the Investment Manager in line with guidance agreed with the Board and is reviewed by the Board at regular intervals.

6. Controlling party and related party transactions
In the opinion of the Directors, there is no immediate or ultimate controlling party.

Fees payable during the year to the Directors and their interest in shares of the Company are disclosed within the Directors’ Remuneration Report and in the Report of the Directors in the Financial Statements. There were no amounts outstanding and due to the Directors as at 31 March 2022 (2021: nil).

Further related party transactions include Investment Management and Administration fees payable to Downing LLP,. In addition, Downing LLP was also paid promoter fees in connection with the offers for subscription which were open during the year. The total paid to Downing LLP during the year ended 31 March 2022 was £149,000 (2021: £32,000).

The Company also has an agreement to pay an ongoing trail fee annually to Downing LLP, in connection with applicable proceeds raised under previous offers for subscription, out of which Downing LLP has an obligation to pay trail commission to intermediaries. The total trail fee payable to Downing in respect of the year ended 31 March 2022 was £24,000, all of which was unpaid as at 31 March 2022 (2021; £24,000).

7. Events after the end of the reporting period
In the period between 31 March 2022 and the date of this report, the Company issued the following shares:

4,611,464 Ventures Shares, at an average price of 27.0p per share; and
1,763,300 Healthcare Shares, at an average price of 31.6p per share; and
660,813 AIM Shares, at an average price of 102.5p per share

At the date of this report, there were 69,880,747 Ventures Shares, 28,560,321 Healthcare Shares and 2,695,803 AIM Shares in issue, including Management Shares.

On 13 June 2022, the Company announced that its investment manager, Downing LLP (“Downing”), agreed to sell its technology Ventures business to Foresight Group Holdings Limited (“Foresight”). As part of this transaction, the Investment Management agreement (with the exception of the management of the Healthcare share pool) was novated from Downing to Foresight at the completion of the sale on 5 July 2022. The management of the Healthcare share pool will be retained by Downing and continue to be managed by Downing’s expanding Healthcare team. In order to ensure a smooth handover, Downing will also continue to provide administration services, and investment management services in respect of the AIM share pool and for non-ventures portfolio investments (primarily in the planned exit share pools which are being wound down) for a transitional period.

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 2022, but has been extracted from the statutory financial statements for the year ended 31 March 2022 which were approved by the Board of Directors on 25 July 2022 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 2021 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.

A copy of the full annual report and financial statements for the year ended 31 March 2021 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at 6^th Floor, St. Magnus House, 3 Lower Thames Street, London EC3R 6HD and will be available for download from and www.downing.co.uk/d4.

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