Downing ONE VCT plc

Reports and Accounts for the year ended

31 March 2022

Shareholder Information

Share prices

The Company’s share price can be found on various financial websites with the TIDM/EPIC code DDV1. The

share price is also available on Downing’s website (www.downing.co.uk).

Latest share price at 6 July 2022: 58.5p per share

Financial calendar

15 August 2022 Annual General Meeting (“AGM”)

26 August 2022 Payment of final dividend

November 2022 Announcement of half-year results

Dividends

Dividends are paid by the registrar on behalf of the Company. Shareholders who wish to have dividends paid

directly into their bank account, rather than by cheque to their registered address, can make arrangement to do

this by contacting the Company’s registrar, whose details can be found on page 77.

Queries relating to dividends, shareholdings and requests for mandate forms should be directed to the

Company’s registrar.

Selling shares

The Company’s shares can be traded in the same way as any other company listed on the London Stock

Exchange, using a stockbroker. If you wish to sell your shares either you or your adviser should contact Downing

on 020 7416 7780.

Shareholders are advised to seek advice from their tax adviser before selling shares, particularly if they deferred

the payment of capital gains tax in respect of shares acquired prior to 6 April 2004 or subscribed for shares

within the last five years.

The Company is, however, unable to buy back shares direct from Shareholders, so you will need to use a

stockbroker to sell your shares. If you are considering selling your shares or wish to buy shares in the secondary

market, please contact the Company’s Corporate Broker, Panmure Gordon (UK) Limited (“Panmure”). Panmure

can be contacted as follows:

Chris Lloyd 0207 886 2716 Paul Nolan 0207 886 2717

[email protected] [email protected]

Shareholder Information (continued)

Share scam warning

We are aware that a significant number of shareholders of VCTs managed by both Downing and other VCT

managers/advisers have recently received unsolicited telephone calls from a company purporting to be acting on

behalf of a client who is looking to acquire their VCT shares at an attractive price. We believe these calls to be

part of a “Boiler Room Scam”. Shareholders are warned to be very suspicious if they receive any similar type of

telephone call.

Further information can be found on the administrator’s website. If you have any concerns, please contact

Downing by email to [email protected] or by telephone on 020 7416 7780.

Notification of change of address

Communications with Shareholders are mailed to the registered address held on the share register. In the event

of a change of address, or other amendment, this should be notified to the Company’s registrar under the

signature of the registered holder. The registrar’s details can be found on page 77.

Other information for Shareholders

Up-to-date Company information (including financial statements, share price, and dividend history) may be

obtained from Downing’s website at:

www.downing.co.uk/d1

If you have any queries regarding your shareholding in Downing ONE VCT plc, please contact the registrar.

Contents

Page

Financial highlights 1

Financial summary 1

Investment objectives and Directors 2

Chairman’s Statement 3

Investment Adviser’s Reports 6

Review of investments 16

Strategic Report 28

Report of the Directors 34

Directors’ Remuneration Report 39

Corporate Governance Statement 42

Independent Auditor’s Report 47

Income Statement 54

Statement of Changes in Equity 55

Balance Sheet 56

Cash Flow Statement 57

Notes to the accounts 58

Performance summary 76

Company information 77

Notice of Annual General Meeting 78

Financial Highlights

 NAV increase

The net asset value per share (“NAV”) increased by 5.9 pence per share (10.1%) from 58.2

pence per share on 31 March 2021 to 61.6 pence per share at this year end (after adding

back dividends of 2.5p which were paid during the year).

 Dividend

The proposed final dividend of 1.75 pence per share will result in total dividends for the

financial year of 3.0 pence per share (2021: 2.5 pence per share), equivalent to 5.2%

based on the opening net asset value.

 Significant portfolio activity

The year has seen a significant level of portfolio activity with disposal proceeds totalling

£16.4 million (2021: £3.2 million) from 18 different investee companies, producing

realised gains of £3.7 million in the year.

Financial Summary

Audited Audited

31 Mar 31 Mar

2022 2021

Pence Pence

Net asset value per share (“NAV”)

61.60 58.20

Cumulative dividends paid since 12 November 2013 41.25 38.75

Total Return

(net asset value plus cumulative dividends paid per share)

102.85 96.95

Alternative Performance Measure (see page 28)

Key Performance Indicator

Dividends in respect of financial year

Interim dividend per share 1.25 1.25

Proposed final dividend per share

1.75

1.25

3.00

2.50

Dividend Policy

The Directors are targeting an annual dividend of at least 4% of net assets per annum, subject to sufficient

distributable reserves and capital resources.

A full dividend history for the Company can be found at www.downing.co.uk/d1

Investment Objectives

The Company’s principal investment objectives are:

 To provide private investors with attractive returns from a portfolio of VCT qualifying investments; and

 To maintain VCT status so that the Company and its shareholders may benefit from the tax reliefs and

exemptions available under the VCT legislation.

The detailed investment policy adopted to achieve the investment objectives is set out in the Strategic Report on

pages 30 to 31.

Directors

Chris Kay (Chairman) (appointed 12 November 2013) has over 30 years’ experience in the venture capital

industry. He spent nine years with 3i Group plc, where he was an investment director, and a further eight years

at Elderstreet Investments Limited, where he headed the VCT team. He is chief executive of Chrysalis VCT

Management Limited. He is a Cambridge University graduate and gained an MBA at Manchester Business

School. He was formerly chairman of Downing Absolute Income VCT 1 plc and a non-executive director of

Downing Income VCT plc and Downing Income VCT 4 plc.

Chris Allner (appointed 8 February 2021) has over 35 years of venture capital and private equity experience and

is currently a partner of the Investment Adviser, Downing LLP and chairs their investment committee. Prior to

joining Downing, he was the head of private equity at Octopus Investments as well as a director at Beringea and

Bridgepoint with previous experience at 3i and Charterhouse. He has previously sat on the boards of a number

of unquoted and quoted companies across a variety of commercial sectors.

Barry Dean (appointed 12 November 2013) is a chartered accountant and has over 30 years’ experience in the

private equity industry, including 14 years as managing director of Dresdner Kleinwort Benson Private Equity

Limited. He is currently a non-executive director of ProVen VCT plc and was formerly a non-executive director

of Downing Absolute Income VCT 2 plc.

Stuart Goldsmith (appointed 13 February 1996) has worked within financial services throughout his career,

originally within investment management where he was Managing Director of the Britannia Group of Investment

Companies, which managed £4 billion of funds in the UK and the USA for institutions and private clients. More

recently he was the owner and Chairman of Ketton Securities Limited, a firm advising a range of companies on

corporate strategy, mergers and acquisitions. In addition, he has been a non-executive director for a number of

companies in the UK and overseas.

All the Directors are non-executive and, with the exception of Chris Allner, are independent of the Investment

Adviser.

Chairman’s Statement

With the pandemic restrictions gradually being lifted

through the year ended 31 March 2022, the

reopening of the economy has supported a greater

level of investment activity, particularly in respect of

disposals where we have seen some significant

exits. It is pleasing to report that this has also helped

deliver an improved set of results for the year.

Investment Advisory Arrangements

In June 2022, it was announced that Downing LLP

(“Downing”), the Investment Adviser, had agreed to

sell its non-healthcare ventures division to Foresight

Group LLP (“Foresight”). As part of this transaction,

the Board has consented to a novation of the

investment advisory agreement from Downing to

Foresight. The whole of the Downing non-

healthcare ventures team, including support staff,

moved to Foresight when the deal completed on 4

July 2022.

Downing will continue to provide investment

advisory services for the non-venture portfolio of

investments, being the quoted growth and yield

focused investments, as well as administration

services, for a transitional period.

As part of the arrangement, the Board and Downing

have agreed to waive the investment advisory fee

for the quarter ended June 2022, equivalent to

approximately £548,000.

Foresight is a substantial and well-respected fund

manager, and the Board believes that the

transaction is in the best interests of Shareholders

who will benefit from the substantial resources of

Foresight, as well as the continuity of the key

investment executives from Downing.

Your new point of contact for all enquiries is

Foresight’s customer service team, who you can

email at investorrelations@foresightgroup.eu or call

on 020 3667 8181.

We expect to announce a change of name for the

Company in due course.

Net asset value and results

As at 31 March 2022, the net asset value per share

(“NAV”) stood at 61.6p, an increase of 5.9p (10.1%)

over the year after adding back dividends of 2.5p

per share which were paid during the year.

The Income Statement shows gains attributable to

equity shareholders for the year of £10.4 million,

comprising a revenue gain of £2.5 million and a

capital gain of £7.9 million.

Investment portfolio

Over the year, the Investment Adviser actively

exited from a number of portfolio companies,

including several more mature yield focused

investments.

In total 18 full and partial exits completed,

generating proceeds of £16.4 million, with over 50%

of the total proceeds generated from two of the

more mature investments held within the portfolio.

Downing Care Homes Holdings Limited, a special

care homes business had been held by the Company

for over 20 years. Proceeds of £5.0 million were

received, which resulted in a gain over original cost

of £1.1 million. Additionally, the investment

provided a regular yield across its lifetime and we

received a further £1.8 million of rolled up loan

interest upon completion.

Universe Group plc, the quoted growth investment,

was bought by a private equity firm towards the end

of the accounting period, generating proceeds of

£3.4 million. This represented a successful exit for

the Company, resulting in a gain over cost of £1.9

million.

Further detail on these as well as the other exits

during the period can be found within the

Investment Advisers Report and the Review of

Investments on pages 6 to 25.

A portion of these funds were reinvested in line

with current VCT regulations into 19 growth

investments. These tend to be younger businesses

with a higher risk/reward ratio. At the year end, the

Company held a portfolio of 91 active investments.

Of these, 35 are either quoted on AIM or other UK

exchanges and have a value of £26.7 million (31.0%

of the portfolio, excluding cash). The 36 unquoted

growth investments have a value of £40.7 million

and represent 47.3% of the portfolio and the 20

unquoted yield focused investments have a value of

£18.6 million and represent 21.7% of the portfolio.

The year under review saw total unrealised gains of

£4.9 million (approximately 65% from unquoted

growth, 25% from quoted growth and 10% from the

yield focused investments).

The unquoted growth portfolio, which is now the

primary focus of the majority of new investment

activity, produced net unrealised gains of £3.2

million with setbacks from a number of investments

being well outweighed by the stronger performers.

Chairman’s Statement (continued)

Investment portfolio (continued)

The quoted investments are managed with a private

equity-type strategy of taking influential stakes in

the companies and working closely with them as

they develop. This portfolio delivered net unrealised

gains of £1.3 million, with a significant contribution

from Tracsis plc. The yield focused portfolio

produced unrealised gains of £473,000 over the

year, plus income of £4.0 million. Further details on

the investment activity and performance are

included in the Investment Adviser’s Reports on

pages 6 to 15.

Dividends

Downing ONE’s policy is to seek to pay annual

dividends of at least 4% of net assets per annum.

The Board is proposing to pay a final dividend of

1.75p per share on 26 August 2022, subject to

Shareholder approval at the forthcoming AGM, to

Shareholders on the register at 29 July 2022. This

will bring total dividends in respect of the year

ended 31 March 2022 to 3.0p per share (2021:

2.5p), equivalent to 5.2% of the opening net assets.

Shareholders are reminded that the Company

operates a Dividend Reinvestment Scheme for

those investors that wish to reinvest their dividends

and obtain further income tax relief on the

reinvested dividend. A Dividend Reinvestment Form

is available on Downing’s website or shareholders

can change their election via The Downing Investor

Hub provided by City Registrars at:

downing-vct.cityhub.uk.com

Fundraising

The Company launched a small top up offer for

subscription during November 2021. The offer was

closed on 29 April 2022 having raised £1.9 million.

As part of the Foresight transaction, Foresight has

agreed to waive its portion of the promoter’s fee for

existing Shareholders who wish to participate in the

Company’s next fundraising offer, planned for later

this year.

Responsible investing

The Board notes the Investment Adviser, 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 and in order to enhance returns for their

VCT investors.

Further detail on the Investment Adviser’s approach

to responsible investment, including the key

principles and their screening approach, can be

found on pages 26 and 27.

Share buybacks

The Company continues to operate a policy of

buying in its own shares that become available in

the market at a 5% discount to NAV (subject to

liquidity and regulatory restrictions).

During the year, the Company purchased and

subsequently cancelled 4,845,526 shares at an

average price of 57.8p per share, representing 3.0%

of shares in issue at the date of the last Annual

Report.

The Company retains Panmure Gordon as its

corporate broker to assist in operating the share

buyback process and ensuring that the quoted

spread on the Company’s shares remains at a

reasonable level. Contact details for Panmure

Gordon are on page 77.

VCT Qualification

At 31 March 2022, qualifying investments

represented 88.0% of total investments (including

cash).

The Board expects that the minimum VCT

qualification level of 80% will continue to be

maintained for the foreseeable future.

Annual General Meeting (“AGM”)

This year’s AGM will be held at Foresight Group

LLP, The Shard, 32 London Bridge Street, London,

SE1 9SG at 10.30 a.m. on 15 August 2022.

If you intend to attend the AGM, please also notify

us by email to [email protected] in case there

are any changes to arrangements that need to be

communicated at short notice.

Three items of special business are proposed at the

AGM:

 one in respect of the authority to buy back

shares as noted above͖; and

 two in respect of the authority to allot shares.

The authority to allot shares provides the Board

with the opportunity to consider raising further

funds without having to necessarily incur the

expense of seeking separate approval via a

shareholder circular. Any further fundraising

decisions will take account of the level of

uninvested funds and the rate of investment.

Chairman’s Statement

(continued)

Outlook

The Board looks forward to working with Foresight

and continuing to work alongside the existing

Downing executives at their new home. The

changes to the advisory arrangements are expected

to give the Company greater resources to continue

to build the investment portfolio and deliver

positive returns to the Shareholders.

Downing ONE was more exposed than most VCTs

to sectors heavily impacted by the pandemic.

During the course of the last year, we have seen the

start of the recovery process for some of the most

affected investments as they work to rebuild on

updated business plans and have delivered some

pleasing exits.

The younger growth companies that have survived

the challenges of the last two years have generally

been strengthened by their experiences, although

they, along with all portfolio companies, will now

face new challenges from rapidly increasing inflation

and the far-reaching effects of the conflict in

Ukraine.

There is, once again, significant uncertainty as to the

outlook for businesses generally in the short and

medium term, however, we can be reasonably sure

that there will still be good opportunities for

investment out there. It will be more important than

ever that the Investment Adviser is able to identity

and secure deals with strong potential for the funds

that the Company has available for investment,

while continuing to nurture the portfolio of existing

investments.

Chris Kay

Chairman

7 July 2022

Investment Adviser’s Report - Overview

Introduction

We present a review of the investment portfolio

and activity over the last financial year. As with

prior years, our review is split into three parts

comprising:

 this overview;

 a detailed report on the unquoted investments

on pages 10 to 12, and

 a report on the quoted investments on pages 13

to 15.

Portfolio Overview

At 31 March 2022, the Company held a portfolio

with a value of £86.0 million comprising 91 quoted

and unquoted companies, across a diverse range of

sectors in both the growth and yield-focused

categories. Investment valuations across all three

sectors continue to recover, resulting in an overall

unrealised gain in the portfolio. Further detail is

included on the following pages.

The Company has seen a high level of both

realisation and investment activity across the year,

with £16.4 million of proceeds received for full and

partial disposals from 18 different investments.

Over 50% of the proceeds generated were from the

unquoted yield focused investments which form a

reducing part of the portfolio. Some of the proceeds

have been reinvested, with £4.6 million deployed

into eight new and 11 existing investments. All of

the investments made were growth investments,

with eight being quoted growth investments and

the remaining 11 investments made within the

unquoted growth portfolio.

With the steady level of new investment activity

recently, over a third of the investment portfolio

now comprises investments that have been made

within the past three years as illustrated in the chart

below.

In line with this and the fact that new investment is

all within the growth category, the overall

risk/reward ratio of the portfolio has increased. This

is consistent with the refocusing of the VCT scheme

that the UK Government undertook a few years

ago. This trend is expected to continue as exits from

older yield focused investments occur.

As illustrated in the graph below, the growth

investments, both unquoted and quoted, have been

growing steadily over the past 5 years, with there

now being 30 active unquoted growth investments

compared to 5 active unquoted growth investments

5 years ago. The unquoted growth investments now

form 47% (2021: 42%) of the investment portfolio

(excluding cash), quoted growth investments equal

31% (2021: 28%) of the investment portfolio

(excluding cash) and the yield focused investments

have decreased to equal 22% (2021: 30%) of the

investment portfolio (excluding cash).

The shift towards more growth focused investments

has become more prevalent over recent years, and

we expect this to continue as progress with

realisations of the maturing yield focused portfolio.

Portfolio Performance

The performance of the portfolio over the year has

produced an unrealised gain of £4.9 million (2021:

£7.6 million), with the unquoted portfolio

generating an unrealised gain of £3.6 million and the

quoted portfolio generating an unrealised gain of

£1.3 million.

Throughout the coronavirus pandemic, we have

sought to provide as much support as possible to all

investee companies. We are now seeing some

recovery of value from some of the heavily

impacted businesses.

<1 year

1-3 years

31%

3-5 years

24%

>5 years

42%

Age of investment

20%

40%

60%

80%

100%

2015 2016 2017 2018 2019 2020 Mar 2021 Mar 2022

Investment by type

Quoted Growth Unquoted Yield focused Unquoted Growth

Investment Adviser’s Report – Overview (continued)

Portfolio Performance (continued)

The unquoted growth portfolio has seen the most

significant unrealised gains in the portfolio over the

year, which totalled £3.2 million. £1.2 million of

unrealised gains have also been recorded in the

quoted growth portfolio and £472,000 unrealised

gains have been recognised in the unquoted yield

focused.

Despite these positives, there are a number of

emerging risks facing the portfolio including the

consequential impacts of the conflict in Ukraine and

increasing inflation and its impact on investee

companies’ wages and other costs. Through our

close relationship with investee companies we seek

to ensure that the businesses are well placed to

properly assess the fluid situation, particularly in

respect of potential impact of increased wages and

other costs, and the extent to which these may or

may not be able to be passed on to the end

customer.

Further details on individual movements within the

portfolio can be found within the unquoted and

quoted adviser reports on the following pages.

At the year end, of the 77 active investments,

approximately half are valued at, or above, cost, as

illustrated in the chart below. As noted previously,

with a large number of recent investments into the

unquoted growth portfolio of investments, it is not

unexpected to suffer some losses at a relatively

early stage as the vulnerable businesses tend to

become more apparent before the stronger

businesses prove themselves.

The largest unrealised gains in the quoted portfolio

related to Tracsis plc (£2.6 million) and GENinCode

plc (£282,000). An analysis of the unrealised gains

and losses is detailed further within the report on

quoted investments on pages 13 to 15.

Within the unquoted portfolio, the largest

unrealised gain was in respect of one of the newer

growth investments, Ayar Labs, Inc (£1.4 million), as

well as E-Fundamentals (Group) Limited (£1.3

million). These gains were partially offset by

unrealised losses, most notably to StreetHub

Limited (trading as Trouva) (£1.4 million) which sits

in the unquoted growth portfolio and Pilgrim

Trading Limited (£1.3 million), which sits in the

unquoted yield focused portfolio, although it should

be noted that the loss on Pilgrim was offset by £1.2

million of loan stock interest recognised during the

period.

Realised gains, over carrying value, in the period

totalled £3.7 million, representing a realised loss

over cost of £1.9 million. The most notable gains

over carrying value were quoted growth company

Universe Group plc (gain of £2.1 million) and

unquoted growth company Xupes Limited (gain of

£1.2 million). The most notable losses over carrying

value in the period related to one of the older

investments in the portfolio, Downing Care Homes

Holdings Limited which generated a loss over

opening value of £520,000 following the full exit

towards the period end. However, it should be

noted that this represented a gain over original cost

of £1.1 million, in addition to the receipt of interest

income of over £1.8 million.

Further details on these and other movements can

be found within the quoted and unquoted

Investment Adviser Reports.

Income split

As at 31 March 2022, the Company received

income of £4.6 million (2021: £1.3 million). £4.2

million (2021: £939,000) of this balance related to

loan stock interest, which significantly increased

year on year following the receipt of £1.8 million

from Downing Care Homes Holdings Limited upon

exit and £381,000 from the partial loan note and

interest redemption on Doneloans Limited. In

addition, a number of the provisions made in the

prior 24 months have been released, as they are

now deemed recoverable. As the Company exits

more of the older yield focused investments, loan

interest paid up to the VCT is expected to gradually

decrease.

At cost

< cost

47%

> cost

45%

Valuation compared to cost

Investment Adviser’s Report – Overview

(continued)

Income split (continued)

Additionally, the Company received dividend

income from its quoted growth portfolio of

investments of £399,000, remaining relatively

consistent with the prior period receipts of

£357,000.

Portfolio Composition

With a significant level investment activity over

the year to 31 March 2022, the diversification of

the portfolio continues as illustrated in the chart

below.

As at the year end, the main sector in which the

Company is invested into is the Software and

Computer Services sector, with the sector now

representing approximately 23% of the

investment portfolio following further investment

into this sector during the period of £2.6 million.

The most notable new investment into this sector

was DSTBTD Limited (£775,000), with further

details on this, as well as all new investments,

noted in the unquoted investment adviser’s

report below.

Following the exit of Downing Care Homes

Holdings Limited, exposure to the Healthcare

Services sector has almost halved from 7% to 4%

of the overall portfolio.

As a result of a significant level of exit proceeds

generated during the year of £16.4 million, at the

period end, the Company held £20.9 million in

cash, which is expected to be deployed into

supporting the existing portfolio as well any new

investment opportunities as they arise.

Investment Adviser’s Report – Overview (continued)

Performance record

The charts below summarise the performance of

the company over the past eight years since the

merger that created Downing ONE, and the Total

Return (including equivalent dividends received)

to investors since the incorporation of the VCT.

Outlook

The portfolio has encountered various challenges

over the last 24 months and it is encouraging to

see the Total Return up 5.9p on the year.

Of the older investments, we believe that, on the

whole, they are leaner and positioned better than

they were pre-COVID, and we shall continue to

progress with realisation plans for the remaining

yield focused investments.

As the portfolio continues to shift to one that is

more focused on growth investments, we believe

that there will continue to be new investment

opportunities, as well as potential in the current

portfolio, that can drive improved performance.

As you will have seen in the Chairman’s

Statement, following the year end, Downing LLP

agreed to sell its non-healthcare ventures

business to Foresight Group LLP. As part of the

transaction, the investment advisory services

agreement was novated from Downing to

Foresight on 4 July 2022 and the whole of

Downing’s non-healthcare ventures team and key

support staff were transferred to Foresight.

However, it should be noted that the investment

advisory services in respect of the non-ventures

portfolio, being the quoted growth and yield

focused investment will continue to be provided

by Downing for a transitional period.

We look forward to managing the assets under

the umbrella of the Foresight Group, our new

home, and the next chapter for the Company.

Downing LLP

7 July 2022

100

120

140

100

110

120

2014 2015 2016 2017 2018 2019 2020 Mar 2021 Mar 2022

£million

Pence

Performance Record

Net Asset Value per Share Total Return per Share Share price Total Net Assets (£m)

100

120

140

160

1996

2005

2006

2010

2012

Feb-14

Mar-Jul -14

Sep-14

Jan-15

Mar- May 15

Jun-15

Nov-15

Feb-16

Mar- Apr 16

Jul-16

Sep-16

Oct-16

Nov-17

Mar-18

Apr-19

Sep-19

Sep-20

Nov-21

Pence

Total return due to Shareholders by date of investment

Cumulative dividends NAV Income tax reclaim Initial investment

Investment Adviser’s Report – Unquoted Portfolio

We present a review of the unquoted investment

portfolio for the year ended 31 March 2022.

At 31 March 2022, the unquoted portfolio of 56

investments were valued at £59.3 million. 36 of

these with a value of £40.7 million are unquoted

growth companies and 20 are unquoted yield

focused companies with a value of £18.6 million.

Unquoted Growth

Investment activity

During the period, there was a high level of

realisation and investment activity with £4.3

million of proceeds generated from exits and a

total of £3.1 million invested into unquoted

growth companies.

Three new investments were added to the

unquoted growth portfolio:

DSTBTD Limited (£775,000) (trading as

Distributed) is a software development company

that helps to build a flexible and effective

workforce. The company enables enterprises to

build software and technology solutions by

sourcing software developers, onboarding them,

and tracking their performance whilst also being

responsible for the outcomes of the technology

solutions, providing benefits to both the

developers and the enterprise customers.

Bulbshare Limited (£749,000) is a company that

enables brands to build communities from their

existing customers, gathering consumer insights

whilst offering a superior user experience for

those customers. This feedback results in more

engaged customers and builds value for the brand

from user generated content, reviews, and

endorsements.

DiA Imaging Analysis Limited (£208,000) is a

leading provider of Artificial Intelligence based

solutions for ultrasound analysis. The investment

will enable DiA to expand on its portfolio of FDA-

cleared and CE-marked AI-based ultrasound

solutions which enable clinicians to identify

medical abnormalities with speed and accuracy.

Follow on investments totalling £1.4 million were

made into eight companies, most notably

Cambridge Touch Technologies Limited

(£500,000), Cambridge Respiratory Limited

(£250,000) and E-Fundamentals (Group) Limited

(£166,000).

Details of the investment realisations during the

year are set out on page 20. Total proceeds of

£4.3 million were generated from 7 investments,

producing a gain over holding value of £1.9

million, although representing a loss over cost of

£3.2 million.

The largest gain in the period related to Xupes

Limited, a pre-owned luxury goods retailer

specialising in designer watches, handbags, and

jewellery. The investment was sold in October

2021, returning £1.6 million, resulting in a gain

over the opening value of £1.2 million, however,

a loss over cost of £637,000.

Curo Compensation Limited, the provider of a

human resources software service, was sold in

the period, generating proceeds of £1.6 million,

resulting in a loss over cost of £59,000, although

this was a gain over the previous holding value of

£509,000.

Avid Technology Group Limited, a manufacturer

of electrified ancillary equipment for internal

combustion engines, was sold during the period,

generating proceeds of £429,000. The

investment had previously been fully provided

against, so this represented a gain of £429,000 in

the period, although it should be noted that this

was a disappointing overall loss against the

original cost of £1.4 million.

Further deferred consideration was received from

BridgeU Limited in relation to the exit in 2021,

producing further proceeds of £143,000 in the

year.

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, producing a gain

over carrying value and original cost of £23,000.

It is disappointing to report that Exonar Limited

and Glownet Limited both exited in full for nil

proceeds during the year, resulting in a combined

loss over original cost of £1.3 million and a

realised loss over carrying value of £379,000.

Portfolio valuation

The unquoted portfolio, on the whole, performed

well over the period, resulting in a total unrealised

gain of £3.6 million in the period, including

unrealised foreign exchange gains of £511,000.

£472,000 of the £3.6 million gain was recognised

within the unquoted yield focus portfolio, further

detail can be found on the following pages. The

remaining £3.1 million was recognised within the

unquoted growth portfolio. The most significant

movements are noted below:

The largest gain in value was in Ayar Labs, Inc, the

developer of components for high performance

computing and data centre applications. At the

period end, the company was uplifted by £1.4

million, including the impact of foreign exchange.

This revaluation is the result of a calibration to

the price set by a recent funding round.

Investment Adviser’s Report – Unquoted Portfolio (continued)

Portfolio valuation (continued)

E-Fundamentals (Group) Limited, a Software as a

Service (SaaS) analytics company has continued

to grow its customer base, both in the UK and in

the US, resulting in a valuation uplift of £1.3

million as at the year end.

Upp Technologies Limited, 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.

Hackajob Limited, the owner of an online

marketplace for hiring technical talent, was

uplifted by £739,000 as a result of recurring

revenues continuing to grow.

GENinCode develops products and technology

that helps patients and healthcare practitioners

assess and predict the onset of cardiovascular

disease, thrombosis, and to diagnose Familial

Hypercholesterolemia. During the period, in July

2021, the company successfully completed an

IPO which saw its shares quoted on AIM. This

resulted in an unrealised gain of £282,000 over

the period.

There were some setbacks to a small number of

the more vulnerable businesses within the

portfolio, which has offset some of the unrealised

gains recognised at the period end. The largest

unrealised loss in the period was from Streethub

Limited (trading as Trouva), an online marketplace

for a curated range of homeware and lifestyle

products. The company was reduced in value by

£1.4 million, as a result of the business trading

significantly behind budget.

Empiribox Holdings Limited, a provider of

equipment and training to primary schools across

the UK, was revalued downwards by £606,000 as

the business is yet to recover from the impacts of

the coronavirus pandemic.

Hummingbird Technologies Limited, the owner of

an advanced crop analytics platform that is

was reduced in value by £502,000 as a result of a

reduction in revenue forecasts.

Unquoted Yield Focused

Investment activity

During the period, the Company made no new

investments into this portfolio, however, it

generated total proceeds of £8.7 from disposals,

producing a loss of £285,000 over opening value

and a £535,000 loss over original cost. Details of

the realisations are set out on page 20.

The largest realisation in the period related to

Downing Care Homes Holdings Limited, which

owned four specialist care homes. The company

was one of the long-standing investments for the

VCT, with the first care home acquired in 1999.

Following a successful exit, the sale generated

proceeds of £5.0 million, resulting in a loss over

holding value of £520,000, although it should be

noted that this represented a gain over original

cost of £1.1 million, in addition to loan interest

proceeds received during the period of £1.8

million.

Pearce and Saunders Limited, the owner of a

freehold pub in South East London, repaid loan

note principal of £88,000 during the period, along

with a redemption premium of £264,000.

Doneloans Limited, which holds a portfolio of

secured loans, repaid part of its loan notes during

the period, resulting in Downing ONE receiving

capital proceeds of £1.4 million, and associated

interest of £381,000.

Nomansland Biogas Limited, an anaerobic

digestion plant in Devon, was fully exited during

the period, resulting in a minor loss of £21,000

against opening value and original cost.

During the period, the Company also exited from

two of the four Indian solar investments, Indigo

Generation Limited and Ironhide Generation

Limited which were both developing solar farms

on adjacent land in India. After a series of

setbacks, mainly due to the reduction in

prevailing energy prices in the Maharashtra

region of India, the investments were fully exited

for minimal proceeds, resulting in a combined loss

over cost of £1.8 million, although representing a

minor realised gain over carrying value of £8,000.

Portfolio valuation

The unquoted yield focused portfolio

experienced a mixed year with the overall

unrealised movement producing a gain of

£472,000. The most significant movements are as

follows:

Baron House Developments LLP, a company

created to fund the purchase of a property

opposite Newcastle’s Central Station recognised

the largest gain in the period. After being

significantly impacted by the coronavirus

pandemic, we are pleased to report that the hotel

is being marketed for sale and first round offers

are expected to be received shortly with the

estimated sales price suggesting a healthy uplift

of over £900,000.

Investment Adviser’s Report – Unquoted Portfolio (continued)

Portfolio valuation (continued)

Harrogate Street LLP, a property developer was

uplifted by over £700,000 in line with anticipated

exit proceeds, with the sale expected to complete

over the coming months.

Despite these positives in the portfolio, some of the

investee companies suffered setbacks and as a

result an unrealised loss has been recognised.

Pilgrim Trading Limited, the operator of two

children’s nurseries in greater London, saw a

reduction in the carrying value of £1.3 million, but

this was offset by the recognition of £1.2 million of

loan stock interest, most of which was previously

provided against. The business is making progress

and the ultimate payment of the accrued loan stock

interest is now more likely.

Doneloans Limited, which holds a portfolio of

secured loan notes, redeemed a small number of its

loan notes during the period below carrying value,

resulting in a reduction of £135,000 in line with the

company’s net assets as at 31 March 2022.

Conclusion and outlook

The unquoted portfolio continues to see reasonable

recovery from the significant challenges faced in the

over the past 2 years.

We remain focused on exiting the more mature

yield focused investments as we look to redeploy

cash into more growth focused investments in line

with the VCT guidelines.

Downing LLP

7 July 2022

Investment Adviser’s Report - Quoted Growth Portfolio

Investment activity

At 31 March 2022 the quoted portfolio was

valued at £26.7 million, comprising 34 active

investments. Over the year, the quoted portfolio

produced unrealised gains of £1.3 million,

reflecting a 13.4% increase over the period

against the FTSE AIM All Share that fell 13.0%.

Equity markets began a tentative recovery from

the pandemic in the earlier part of the reporting

period as pandemic restrictions were gradually

eased. However, markets remained nervous over

the rapid spread of Covid variants. As the year

progressed, many companies experienced more

normalised trading conditions but fears around

higher inflation and interest rates were evident.

Volatility remained a persistent feature towards

the end of the year and sentiment was dampened

by the discovery of a more virulent strain of

Covid.

The beginning of 2022 was characterised by an

aggressive market rotation from growth to value,

and from small and mid-cap names into the

perceived safety of larger capitalisation

businesses. Sentiment shifted considerably too,

with the tech sector falling as investors switched

into previously unloved sectors as mounting

concern over rising inflation and interest rates

gripped markets.

At the end of the reporting period, news flow was

dominated by the crisis in Ukraine. Equity market

volatility is likely to continue for some time as the

consequences of the conflict in the region

become clearer. Markets face undoubted

headwinds, not only the impact of the Russian

invasion, but widespread Covid lockdowns in

China, persistent supply chain disruptions, and

rising interest rates. The threat of recession and

possibility that we could be entering a prolonged

bear market is also weighing on investor

sentiment.

The quoted portfolio saw increased trading

activity during the period, with eight purchases,

all VCT qualifying. There were five new

investments made into Trellus Health plc,

Eneraqua Technologies plc, Libertine Holdings

plc, Strip Tinning Holdings plc and Verici DX plc,

and three follow on investments into GENinCode

plc, Feedback plc and DeepMatter Group plc.

GENinCode was originally an unlisted position in

the portfolio, however, confidence in the

management team led the Adviser to also

participate further in the IPO of this investment.

There were two corporate actions in the period:

the successful exit of Universe Group plc, which

was acquired by private equity. Universe was

acquired by PDI software, a global provider of

enterprise management software, in January

2022, at a valuation of 12p per share, a 7p per

share premium to the share price before the

announcement. This reflected a successful exit

for the quoted growth portfolio, realising a gain

of £1.9 million over cost, being a realised gain

over opening value of £2.1 million and a money

multiple return of 2.3x. Downing client funds

held a 16.67% equity position in Universe and

were actively engaged with the strategy of the

company. This acquisition is evidence of the

Adviser’s successful private-equity approach to

investing in public markets.

In addition, net proceeds of £5,000 were realised

from the wind-up of the Downing UK Micro-Cap

Growth Fund.

The most notable unrealised movements in the

portfolio over the period are discussed below.

Portfolio Movements

The main positive contributor to performance

was Tracsis plc, which increased the value of the

portfolio by £2.6 million.

Tracsis is a leading provider of software,

hardware, data analytics/GIS and services for the

rail, traffic data and wider transport industries.

The group’s latest results, for the six months

ended 31 January 2022, were in line with

management’s expectations. Highlights included

revenue increased by 31% to £29.2 million, with

significant growth in the Data, Analytics,

Consultancy and Events Division, including post-

Covid recovery. The Rail Technology and Services

Division revenue was at a similar level to prior

year and a recent multi-year Rail Technology

software contract wins will drive future revenue.

The UK rail industry's transition to a new Great

British Railways structure is ongoing and the

overall objective is to create a data-driven,

customer-focused, safety-critical future for the

industry. Tracsis’ range of rail technology

products and services is well placed to help the

rail industry deliver its strategic goals and as a

result the business has been asked to actively

participate in helping to shape future decision

making. The recent acquisition of RailComm is an

important strategic development for Tracsis,

providing a platform onto which the group can

start to internationally expand its rail product

portfolio via direct access to the significant and

growing North American rail technology market.

Investment Adviser’s Report - Quoted Growth Portfolio

(continued)

Portfolio Movements (continued)

GENinCode plc, the predictive genetics company

focused on the prevention of cardiovascular disease,

also made a positive contribution to the portfolio,

delivering an unrealised gain of £282,000.

In March, the group announced a collaboration with

the Academic Health Science Network for the

Northeast and North Cumbria to pilot the use of its

Lipid inCode® test for the diagnosis of

hypercholesterolemia (high levels of cholesterol) and

familial hypercholesterolemia. The group has a

vision to assist clinicians and inform patients in

interpreting cardiovascular risk, and to improve

public health using the predictive capability of

genomics. High genetic risk patients are assisted in

making lifestyle choices and can receive targeted

treatment to improve outcomes. Over the past 15

years GENinCode has made a substantial

investment in its research, bioinformatic data,

technology, and product development to assess

disease risk, in order to help clinicians and patients

prevent the onset of CVD.

GENinCode also announced its collaboration with

the Indiana University School of Medicine (IU). IU is

the largest medical school in the US and will

undertake a 'Proof of Concept' study using Cardio

inCode-SCORE for the risk assessment of patients

for onset of atherosclerotic cardiovascular disease

("ASCVD"). ASCVD accounts for over 85% of all

cardiovascular disease deaths and is the leading

cause of morbidity and mortality in the US and

globally.

Downing Strategic Micro Cap Investment Trust plc

(DSM), was a negative contributor, reducing the

value of the quoted portfolio by £318,000. This

negative share price movement was despite the

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.

Strategically, the managers continue to be active,

ensuring that portfolio businesses are well

positioned to grow over the long term with the right

operating structure and management in place. If

conditions and prices are right, they may exit

positions. Cash remains around 10% and the

uncertain environment is generating ample

opportunities for new investments. The DSM

portfolio consists of value stocks, dynamically

managed with strong balance sheets, appropriate to

the foreseeable economy and held at modest

valuations. Their quoted prices are significantly

below the value at which the managers, using

conservative estimates and noting evident catalysts,

place their achievable market value.

Inland Homes plc was also a negative contributor,

reducing the value of the portfolio by £315,000.

Inland Homes is a brownfield developer,

housebuilder and regeneration specialist focused on

the South and Southeast of England. The group’s

most recently published results for the year ended

30 September 2021, reported record revenue and a

significant reduction in net debt and growth in its

asset management, partnership housing and private

housebuilding divisions. Management stated that

the results are underpinned by the group's attractive

portfolio of brownfield and longer-term strategic

land opportunities. Located across the South and

Southeast of England, it is this valuable portfolio,

together with its planning and housebuilding

expertise, which drives demand from third-party

investors, build to rent operators, registered

providers, and other housebuilders. The underlying

strength of the housing market and the shortfall in

new housing delivery will continue to support

demand for the land Inland owns and the homes

they build.

Outlook

The ramifications of the pandemic continued to

disrupt throughout the reporting period, and

markets have been faced with extreme demand side

shocks, extreme 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 and

higher interest rates cause concern.

Investment Adviser’s Report - Quoted Growth Portfolio

(continued)

Outlook (continued)

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 quoted portfolio

contains good companies, with strong balance sheets

and significant prospects for growth over the long-

term.

Downing LLP

7 July 2022

Review of Investments

Portfolio of investments

The following investments, all of which are incorporated in England and Wales, were held at 31 March 2022:

Cost

Valuation

movement

in year

% of

portfolio

by value

Loan stock

interest

recognised

in the period

Total value

of other

funds also

managed by

Downing

LLP

£’000 £’000 £’000 £’000 £’000

Quoted growth investments

Tracsis plc* 1,443 7,552 2,620 7.1% - 5,844

Downing Strategic Micro-Cap Investment

Trust plc*** 5,197 3,498 (318) 3.3%

3,366

Anpario plc* 1,448 3,340 (62) 3.1% - -

Impact Healthcare REIT plc*** 1,518 1,773 142 1.7% - 1,138

Craneware plc* 353 1,261 (312) 1.2% - 1,886

Inland Homes plc* 1,311 1,153 (315) 1.1% - -

GENinCode plc* 800 1,082 282 1.0% - 1,624

Cohort plc* 394 840 (308) 0.8% - -

Angle plc* 570 768 141 0.7% - -

Pittards plc* 1,350 697 203 0.7% - 421

Vianet Group plc* 756 669 (24) 0.6% - -

Immotion Group plc* 500 546 (61) 0.5% - -

Brooks Macdonald Group plc* 257 445 82 0.4% - -

Libertine Holdings plc* 350 444 95 0.4% - -

Feedback plc* 400 302 (148) 0.3% - -

DeepMatter plc* 463 274 (307) 0.3% - -

Verici DX plc* 240 219 (21) 0.2% - -

Oncimmune Holdings plc* 278 201 (97) 0.2% - -

Norman Broadbent plc* 906 196 45 0.2% - 514

Frontier IP Group plc* 30 191 29 0.2% - -

EnerAqua Technology plc* 195 186 (9) 0.2% - -

Pennant International Group plc* 335 161 (28) 0.2% - -

One Media Group IP plc* 175 156 (19) 0.1% - -

SysGroup plc* 377 144 (94) 0.1% - -

Pelatro plc* 289 136 (95) 0.1% - -

Bonhill Group plc* 1,000 94 (56) 0.1% - 758

Strip Tinning Holdings plc* 105 85 (20) 0.1% - -

Trellus Health plc* 175 83 (92) 0.1% - -

Dillistone Group plc* 411 71 (3) 0.1% - -

Pressure Technologies plc* 249 62 3 0.0% - -

Fireangel Safety Technology Group plc* 545 49 (1) 0.0% - 3,787

Wheelsure Holdings plc** 48 4 (1) 0.0% - -

MI Downing UK Micro-Cap Growth Fund*** 2 2 1 0.0% - 152

AIQ Limited - 1 (1) 0.0% - -

Flowgroup plc 207 - - 0.0% - -

ACHP plc* 61 - - 0.0% - -

Golden Rock Global plc*** - - (1) 0.0% - -

Unquoted growth investments

E-Fundamentals (Group) Limited 1,508 3,847 1,272 3.6% 2 1,533

Carbice Corporation 3,020 2,967 137 2.8% - 1,639

StorageOS Inc 2,970 2,921 134 2.7% - -

Ayar Labs, Inc 1,280 2,594 1,359 2.4% - 3,510

Trinny London Limited 443 2,508 573 2.3% - 14,401

Cornelis Networks Inc 2,102 2,056 95 1.9% - 3,936

Virtual Class Limited 1,164 1,912 (62) 1.8% - 1,816

Rated People Ltd 1,382 1,895 211 1.8% - 4,228

Imagen Limited 1,000 1,763 (65) 1.7% - 3,612

Hummingbird Technologies Limited 2,250 1,750 (502) 1.6% - 250

Hackajob Limited 784 1,523 739 1.4% - 5,731

Continued over the page

Review of Investments (continued)

Cost

Valuation

movement

in year

% of

portfolio

by value

Loan stock

interest

recognised

in the period

Total value

of other

funds also

managed by

Downing

LLP

£’000 £’000 £’000 £’000 £’000

Unquoted growth investments (continued)

Parsable Inc 1,532 1,422 65 1.3% - 2,004

Cambridge Touch Technologies Limited 959 1,369 507 1.3% - 4,704

Glisser Limited 1,300 1,300 - 1.2% - 5,878

Ecstase Limited 1,000 1,257 257 1.2% - 2,515

Maestro Media Limited 1,000 1,160 160 1.1% - 4,134

Upp Technologies Group Limited 1,077 1,077 835 1.0% - 1,077

Firefly Learning Limited 1,047 1,047 - 1.0% - 2,271

Limitless Technology Limited 757 920 - 0.9% - 2,897

FundingXchange Limited 1,050 786 (264) 0.7% - 1,835

DSTBTD Limited 775 775 - 0.7% - -

Bulbshare Limited 749 749 - 0.7% - 749

Vivacity Labs Limited 500 669 169 0.6% - 3,642

Masters of Pie Limited 667 667 - 0.6% - 2,304

Cambridge Respiratory Innovations Limited 500 500 - 0.5% - 2,000

FVRVS Limited 375 484 109 0.5% 8 -

Channel Mum Limited 737 291 (50) 0.3% 2 291

DiA Imaging Analysis Limited 208 214 6 0.2% - 928

MIP Discovery Limited 225 150 (75) 0.1% - 1,256

StreetHub Limited 1,446 79 (1,431) 0.1% 2 71

Empiribox Holdings Limited 1,813 - (606) 0.0% - -

Lignia Wood Company Limited 1,778 - - 0.0% - -

Live Better With Limited 990 - - 0.0% - -

Lineten Limited 750 - (392) 0.0% - -

Ludorum plc 177 - (7) 0.0% - -

Resource Reserve Recovery Limited 6 - - 0.0% - -

Unquoted yield focused investments

Doneloans Limited 3,631 4,213 (135) 3.9% 378 -

Baron House Developments LLP 2,695 4,177 943 3.9% 443 7,113

Harrogate Street LLP 1,400 2,778 721 2.6% 72 2,876

Data Centre Response Limited 558 1,787 471 1.7% - -

Cadbury House Holdings Limited 3,081 1,688 (113) 1.6% 102 791

Kimbolton Lodge Limited 664 996 30 0.9% - -

Fenkle Street LLP 346 911 39 0.9% 52 13,422

Pilgrim Trading Limited 2,593 778 (1,275) 0.7% 1,228 519

Downing Pub EIS ONE Limited 490 668 100 0.6% - 7,120

SF Renewables (Solar) Limited 422 278 (41) 0.3% - 4,252

Rockhopper Renewables Limited 738 156 (122) 0.1% - 1,599

Pearce & Saunders Limited 1,122 117 (133) 0.1% - 150

Pearce & Saunders DevCo Limited 84 70 (12) 0.1% - 89

Yamuna Renewables Limited 2,500 - - 0.0% - -

Jito Trading Limited 2,500 - - 0.0% - -

Quadrate Catering Limited 1,500 - - 0.0% - -

Top Ten Holdings plc 399 - - 0.0% - -

Quadrate Spa Limited 372 - - 0.0% - -

London City Shopping Centre Limited 110 - - 0.0% - -

Total investments 87,264 85,954 4,897 80.5% 2,289 136,633

Cash at bank and in hand 20,856 19.5%

106,810 100.0%

Review of Investments (continued)

The Company also holds investments in Golden Rock Global plc and Mining, Minerals & Metals plc (which does

not show in the previous table). These investments were acquired in prior periods at negligible value as a result

of reorganisations of other investments and continue to be valued at the same level.

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM

** Quoted on the Aquis Stock Exchange Growth Market

*** Quoted on the Main Market of the London Stock Exchange

Other self-managed and discretionary managed funds also managed by Downing LLP as Investment

Manager or Adviser (excluding Downing ONE VCT plc) as at 31 March 2022:

 Downing TWO VCT plc

 Downing THREE VCT plc

 Downing FOUR VCT plc

 MI Downing UK Micro-Cap Growth Fund

 MI Downing Monthly Income Fund

 Downing Strategic Micro-Cap Investment Trust plc

 Downing AIM Estate Planning Service and Downing AIM NISA

 VT Downing Unique Opportunities Fund

 VT Downing Listed Infrastructure Income Fund

 Downing Healthcare EIS Knowledge Intensive Fund

 Downing Renewables EIS

 Downing Indian Solar EIS

 Downing Ventures EIS

 Downing Pub EIS

Review of Investments (continued)

Investment movements for the year ended 31 March 2022

Additions

£’000

Quoted

rowth investments

Libertine Holdings plc 350

Verici DX plc 240

GENinCode plc 200

EnerAqua Technology plc 195

Trellus Health plc 175

Feedback plc 150

DeepMatter Group plc 113

Strip Tinning Holdings plc 105

1,528

Unquoted

rowth investments

DSTBTD Limited 775

Bulbshare Limited 749

Cambridge Touch Technologies Limited 500

Cambridge Respiratory Innovations Limited 250

DiA Imaging Analysis Limited 208

E-Fundamentals (Group) Limited 166

FVRVS Limited 125

Rated People Limited 100

StreetHub Limited 80

MIP Discovery Limited 75

Channel Mum Limited 63

3,091

4,619

Review of Investments (continued)

Disposals

Loan stoc

interest

Profit/ Realised recognised

Value a

(loss) vs gain/ in the

Cos

01/04/21* Proceeds cos

(loss) period

£’000 £’000 £’000 £’000 £’000 £’000

Quoted growth investments

Universe Group plc 1,506 1,276 3,403 1,897 2,127 -

MI Downing UK Micro-Cap Growth Fund 6 4 5 (1) 1 -

1,512 1,280 3,408 1,896 2,128 -

Unquoted growth investments (including loan note redemptions)

Xupes Limited 2,250 459 1,613 (637) 1,154 -

Curo Compensation Limited 1,663 1,095 1,604 (59) 509 50

Avid Technology Group Limited 1,833 - 429 (1,404) 429 77

BridgeU Corporation - - 143 143 143 -

JRNI Limited 525 525 548 23 23 -

Glownet Limited 741 - - (741) - -

Exonar Limited 550 379 - (550) (379) -

7,562 2,458 4,337 (3,225) 1,879 127

Unquoted yield focused investments (including loan note redemptions)

Pearce and Saunders Limited 88 88 352 264 264 -

Ironhide Generation Limited 920 - 4 (916) 4 -

Indigo Generation Limited 920 - 4 (916) 4 -

Doneloans Limited 1,370 1,370 1,370 - - -

The Thames Club Limited 175 - - (175) - -

Fresh Green Power Limited 378 564 556 178 (8) -

Green Energy Production UK Limited 200 133 125 (75) (8) -

Nomansland Biogas Limited 1,300 1,300 1,279 (21) (21) -

Downing Care Homes Holdings Limited 3,880 5,526 5,006 1,126 (520) 1,769

9,231 8,981 8,696 (535) (285) 1,769

18,305 12,719 16,441 (1,864) 3,722 1,896

* Adjusted for purchases in the year where applicable

Review of Investments

(continued)

Further details of the top ten investments held (by value) are as follows:

Tracsis plc

www.tracsis.com

Cost at 31/03/22: £1,443,000 Valuation at 31/03/22: £7,552,000

Cost at 31/03/21: £1,443,000 Valuation at 31/03/21: £4,932,000

Date of first investment: November 2013

Investment comprises:

Equity shares: £1,443,000 Valuation method: Bid price

% of total shares in

issue/total voting rights:

2.6%

Audited accounts: 31/07/21 31/07/20 Dividend income: £nil

Turnover: £50.2m £48.0m

Profit before tax: £4.6m £4.1m

Net assets: £56.7m £53.0m

The Group specialises in solving a variety of data capture, reporting and resource

optimisation problems along with the provision of a range of associated

professional services. Tracsis' products and services are used to increase

efficiency, reduce cost, and improve the operational performance and decision-

making capabilities for clients and customers.

Doneloans Limited

Cost at 31/03/22: £3,631,000 Valuation at 31/03/22: £4,213,000

Cost at 31/03/21: £5,000,000 Valuation at 31/03/21: £5,717,000

Date of first investment: April 2016

Investment comprises:

Loan note: £3,631,000 Valuation method: Net assets

Equity shares: £1 % of total shares in

issue/total voting rights:

50.0%

Unaudited accounts*: 31/03/21 31/03/20 Dividend income: £nil

Turnover: n/a n/a Loan note income £378,000

Profit before tax: n/a n/a

Net assets: £0.6m £0.3m

Doneloans Limited is a non-VCT-qualifying investment company which holds a

portfolio of secured loans from which it generates a steady income with limited

capital risk.

* Turnover and operating profit figures not publicly available as unaudited

abridged accounts filed.

Baron House

Developments LLP

Cost at 31/03/22: £2,695,000 Valuation at 31/03/22: £4,177,000

Cost at 31/03/21: £2,695,000 Valuation at 31/03/21: £3,234,000

Date of first investment: November 2013

Investment comprises:

Loan note: £2,695,000 Valuation

method:

Discounted cashflow –

from the investment

% of total shares in

issue/total voting rights:

Unaudited accounts: 31/03/21 31/03/20 Loan note income: £443,000

Turnover: £nil £nil

Loss before tax: £nil £nil

Net assets: £4.1m £4.0m

Baron House Developments was created to fund the purchase of a property

opposite Newcastle station, which qualifies under the Business Premises

Renovation Allowance (BPRA) scheme.

Review of Investments

(continued)

E-Fundamentals (Group)

Limited

www.efundamentals.com

Cost at 31/03/22: £1,508,000 Valuation at 31/03/22: £3,847,000

Cost at 31/03/21: £1,342,000 Valuation at 31/03/21: £2,408,000

Date of first investment: December 2017

Investment comprises:

Equity shares: £1,342,000 Valuation

method:

Discounted cashflow –

from the investment

Loan note: £166,000 % of total shares in

issue/total voting rights:

10.6%

Unaudited accounts*: 31/12/20 31/12/19 Dividend income: £nil

Turnover: n/a n/a Loan note income: £2,000

Profit before tax: n/a n/a

Net assets: £11.4m £10.0m

E-Fundamentals (Group) Limited 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.

* Turnover and operating profit figures not publicly available as total exemption full

accounts filed.

Downing Strategic Micro-

Cap Investment Trust plc

www.downingstrategic.co.uk

Cost at 31/03/22: £5,197,000 Valuation at 31/03/22: £3,498,000

Cost at 31/03/21: £5,197,000 Valuation at 31/03/21: £3,816,000

Date of first

investment:

May 2017

Investment comprises:

Equity shares: £5,197,000 Valuation method: Bid price

% of total shares in

issue/total voting rights:

10.6%

Audited accounts: 28/02/22 28/02/21 Dividend income: £42,000

Turnover: £0.8m £1.0m

Gain before tax: £2.4m £5.7m

Net assets: £43.1m £42.5m

Downing Strategic Micro-Cap Investment Trust plc is a non-qualifying investment

which seeks to provide investors with long term growth through a concentrated

portfolio of UK listed companies that typically have a market capitalisation of

below £150 million.

Anpario plc

www.anpario.com

Cost at 31/03/22: £1,448,000 Valuation at 31/03/22: £3,340,000

Cost at 31/03/21: £1,448,000 Valuation at 31/03/21: £3,402,000

Date of first investment: November 2013

Investment comprises:

Equity shares: £1,448,000 Valuation method: Bid price

% of total shares in

issue/total voting rights:

2.6%

Audited accounts: 31/12/21 31/12/20

Turnover: £33.4m £30.5m Dividend income: £57,000

Profit before tax: £5.7m £5.4m

Net assets: £40.3m £37.5m

Anpario plc is an international producer and distributor of natural animal feed

additives for animal health, nutrition, and biosecurity.

Review of Investments (continued)

Carbice Corporation

carbice.com

Cost at 31/03/22: £3,020,000 Valuation at 31/03/22: £2,967,000

Cost at 31/03/21: £3,020,000 Valuation at 31/03/21: £2,830,000

Date of first investment: September 2020

Investment comprises:

Equity shares: £3,020,000 Valuation

method:

Calibration to price of

recent investment

% of total shares in

issue/total voting rights:

19.5%

Audited accounts: None filed Dividend income: £nil

Carbice Corporation has developed a suite of products based on its carbon

material called Carbice Carbon which is primarily used as thermal management

solutions to enable greater thermal conductivity.

StorageOS Inc

ondat.io

Cost at 31/03/22: £2,970,000 Valuation at 31/03/22: £2,921,000

Cost at 31/03/21: £2,970,000 Valuation at 31/03/21: £2,787,000

Date of first investment: November 2020

Investment comprises:

Equity shares: £2,970,000 Valuation

method:

Calibration to price

of recent investment

% of total shares in

issue/total voting rights:

10.9%

Unaudited accounts: 31/01/21 31/01/20 Dividend income: £nil

Turnover: £0.0m £0.1m

Loss before tax: (£0.4m) (£0.9m)

Net assets: £8.5m £3.7m

StorageOS Inc (now trading as Ondat) is a cloud-based storage management

software solution developed to manage storage issues. Downing led a $10 million

round in late 2020.

Harrogate Street LLP

Cost at 31/03/22: £1,400,000 Valuation at 31/03/22: £2,778,000

Cost at 31/03/21: £1,400,000 Valuation at 31/03/21: £2,057,000

Date of first investment: October 2015

Investment comprises:

Loan note: £1,400,000 Valuation

method:

Discounted cashflow –

from the investment

% of total shares in

issue/total voting rights:

Unaudited accounts*

31/03/21 31/03/20 Loan note income: £72,000

Turnover: n/a n/a

Profit before tax: n/a n/a

Net assets: £1.4m £1.5m

Harrogate Street LLP was created to fund the purchase of a hotel site that is let to

Premier Inn on a long-term basis, which qualifies under the Business Premises

Renovation Allowance (BPRA) scheme.

* Turnover and operating profit figures not publicly available as total exemption

full accounts filed.

Review of Investments (continued)

Note:

The proportion of equity held by each investment also represents the level of voting rights held by the Company

in respect of the investment.

Analysis of investments by commercial sector

The split of the venture capital investment portfolio by commercial sector (by cost and by value at 31 March

2022) is as follows:

Ayar Labs, Inc

Ayarlabs.com

Cost at 31/03/22: £1,280,000 Valuation at 31/03/22: £2,594,000

Cost at 31/03/21: £1,280,000 Valuation at 31/03/21: £1,235,000

Date of first investment: August 2020

Investment comprises:

Equity shares: £1,280,000 Valuation

method:

Calibration to price of

recent investment

% of total shares in

issue/total voting rights:

0.9%

Audited accounts: None filed Dividend income: £nil

Ayar Labs, Inc has developed components for high performance computing and data

centre applications to deliver better bandwidth, better power and better latency for

a given application.

£0

£5

£10

£15

£20

£25

Millions

Sector Valuation Sector Cost

Review of Investments (continued)

Portfolio balance

At 31 March 2022, the Company assets employed were broadly in line with the targets within the investment

policy. These are summarised as follows:

Type of Investment

(by HMRC valuation rules)

Actual

Target

VCT qualifying investments 88.0% >80%

Non-qualifying investments (including cash at bank) 12.0% <30%

Total 100.0%

Investment category

(by HMRC value)

Actual

Target

Growth 23.6% 40%-100%

Yield focused 64.4% 0%-60%

Non-qualifying

12.0% max 20%

Total 100.0%

Investment Adviser’s Approach to Responsible Investment

Introduction

Downing LLP (“Downing”) has acted as

Investment Adviser to Downing ONE VCT,

as well as adviser and manager to a number

of other VCTs, investment trusts, funds,

and schemes. Central to Downing’s ethos is

a commitment to be a "Responsible

Investor". We aim to protect and enhance

returns for our funds’ investors by placing

Environmental, Social and Governance

(ESG) criteria at the heart of our business

and investment activities.

We understand that ESG issues represent

risks and opportunities; and that these

issues are becoming an increasingly

material factor with investments. By taking

a long-term, sustainable approach with our

analysis, decision-making and active asset

management, we strive to take these into

account, mitigate risks and maximise

opportunities, while endeavouring to

facilitate wider societal and environmental

benefits, wherever possible.

Our principles

As Investment Adviser to Downing ONE

VCT plc, we aim to support and actively

seek out investments that promote the

principles of ESG, as well as create long-

term, sustainable value and have a positive

impact on society and the economy.

Downing’s approach to investing is

underpinned by a series of ESG principles

that reflect our commitment to embed

Responsible Investment considerations as

part of our normal business operations.

These are:

Integration

To meet our objectives, we will integrate

our Responsible Investment System both

within our business and throughout the

lifecycle of the investments we make.

Influence

Through active ownership, we will endeavour to

engage with and assist individual businesses in

managing ESG risks and opportunities better

than their competitors to create value and a

competitive advantage, while promoting

positive benefits to society and the

environment.

Disclosure

We will seek appropriate monitoring and

disclosure of ESG matters by investees so that

we have a better understanding of what we are

investing into, and the ability to assess their

performance against any ESG initiatives we

decide to implement.

Continual Improvement

We are encouraged by the growing momentum

and developments in the Responsible

Investment and ESG areas and look forward to

working with the investment community to

develop sustainable ways of conducting

business and leading by example.

Screening and exclusions – our evolving

approach

Historically, Downing has tended to avoid a

number of sectors, companies, and investments

because we believe they cause harm to the

environment and society that we cannot

mitigate as responsible investors. Examples of

this being weapons, fossil fuels and tobacco.

This approach has evolved as we have

developed individual investment strategies for

different asset classes. Where a strict negative

screening approach may not be suitable, any

new investment in higher ESG risk sectors we

will have to carefully consider (a) how inherent

risks are reflected in company/investment

valuation and (b) our level of influence on

management teams to foster change and value

creation through an active ownership approach.

Investment Adviser’s Approach to Responsible Investment

(continued)

Screening and exclusions (continued)

In other sectors, with known ESG issues we may

also decide to screen for best-in class

investments, identifying and supporting

management teams that we think are better

placed than their competitors today to become

successful and sustainable businesses in the

future.

Whilst our approach to negative screening may

vary by sector, we maintain some minimum

standards we would expect of any company for

it to attract investment by Downing ONE: at the

very least that the business meets local laws and

regulations, that they are safe places to work

and that the management has a code of ethics

and/or an anticorruption policy in place.

Climate-related matters

Whilst neither the Company nor the Investment

Adviser are currently required to disclose climate

related financial information in line with the Task

Force on Climate related Financial Disclosures

(“TCFD”), they recognise the aim and importance

of the TCFD recommendations to provide a

foundation to improve investors’ ability to

appropriately assess climate-related risk and

opportunities. Disclosing information related to

the TCFD recommendations remains an

objective of the Investment Adviser as part of its

ESG initiatives and progress will be monitored by

the Directors.

Downing’s commitment

Downing has made a long-term commitment to

meet its ESG pledges. To this end, we expect our

polices and processes to evolve over time and

continue to be a core component of the services

that we provide to Downing ONE VCT plc.

Downing LLP

7 July 2022

Strategic Report

The Directors present the Strategic Report for the

year ended 31 March 2022. The Board have

prepared this report in accordance with the

Companies Act 2006 (Strategic Report and

Directors’ Reports) Regulations 2013.

Principal objectives and strategy

The Company is a Venture Capital Trust (“VCT”)

whose principal investment objectives are to:

 provide private investors with attractive

returns from a portfolio of investments focused

on unquoted and AIM quoted companies; and

 maintain VCT status so that the Company and

its shareholders may benefit from the tax

reliefs and exemptions available under the VCT

legislation.

As a Venture Capital Trust, Investors are required to

hold their shares for a minimum period of five years in

order to retain their income tax relief.

Business review and developments

During the year to 31 March 2022, the investments

held increased in value by £4.9 million and gains

arising on investment realisations totalled £3.7

million.

Income over expenditure for the year resulted in a

net gain, after accounting for capital expenses, of

£1.8 million (2021: loss of £1.2 million).

The total gain for the year was £10.4 million (2021:

£6.2 million). Net assets at the year-end were £109.5

million (2021: £101.4 million). Dividends paid during

the year totalled £4.5 million (2021: £5.1 million).

The Company’s business and developments during

the year are reviewed further in the Chairman’s

Statement, the Investment Adviser’s Reports and

the Review of Investments on pages 3 to 26.

Key performance indicators

At each Board meeting, the Directors consider a

number of performance measures to assess the

Company’s level of success in meeting its objectives

(as shown on page 2). The Board believes the

Company’s key performance indicators, for

comparison against similar VCTs, are Total Return

(NAV plus cumulative dividends paid to date) and

dividends per share (as disclosed within the financial

summary). Further consideration of the above key

performance indicators is included in the

Investment Adviser’s reports under Net Asset Value

and results. The performance of the Company

measured by historic Share Price Total Return is

shown in the graph on page 41.

The net asset value per share is defined as an

Alternative Performance Measure and the Board

considers it to be the primary measure of

shareholder value.

The Chairman’s Statement and Investment Adviser’s

Reports include further commentary on the

Company’s activities and future prospects.

Principal risks and uncertainties

The Directors have carried out a robust assessment

of the emerging and principal risks facing the

Company, including those that would threaten its

business model, future performance, solvency, or

liquidity. The Board has ensured that there are

policies in place for managing each of these risks.

The principal financial risks faced by the Company,

which include interest rate, investment, credit and

liquidity risks, are summarised within note 16 to the

financial statements. Note 16 also includes an

analysis of the sensitivity of the NAV to changes in

investment valuations.

Other principal risks faced by the Company have

been assessed by the Board and grouped into the

key categories outlined below:

 Investment performance;

 Regulatory;

 Operational; and

 Economic, political and other external factors.

Investment performance

The Company holds investments in unquoted and

quoted companies. Poor investment decisions or a

lack of effective monitoring and management of

investments could result in a reduction in the

carrying values of the Company’s investments.

The Investment Adviser has significant experience

in investing in unquoted UK companies and engages

reputable and experienced advisers at each stage of

the investment process. Furthermore, the Board

regularly reviews the performance of the portfolio.

Regulatory

The Company, as a fully listed Company on the

London Stock Exchange with a premium listing and

as a Venture Capital Trust, operates in a complex

regulatory environment and therefore faces several

related risks. A breach of the VCT Regulations could

result in the loss of VCT status and consequent loss

of tax reliefs currently available to Shareholders and

the Company being subject to capital gains tax.

Serious breaches of other regulations, such as the

Listing Rules of the Financial Conduct Authority and

the Companies Act, could lead to suspension from

the Stock Exchange and damage to the Company’s

reputation.

Strategic Report (continued)

Principal risks and uncertainties

(continued)

The Board reviews and agrees policies for managing

each of these risks. It receives quarterly reports

from the Adviser, which monitor the compliance of

these risks, and places reliance on the Adviser to

give updates in the intervening periods. These

policies have remained unchanged since the

beginning of the financial year.

Philip Hare & Associates provides regular

independent reviews of the Company’s VCT status,

as well as advice on VCT compliance issues as and

when they arise.

In order to further mitigate this risk, the Board

monitors regulatory and legislative developments.

The Company also has a strong compliance culture

and systems in place to ensure that the Company

complies with all of its regulatory requirements.

Further detail on VCT Status is provided on pages

35 to 36.

Operational

The Company relies on the Investment Adviser,

Administration Manager and other third parties to

fulfil many of its operational requirements and

duties. A provision of inferior services by one or

more of these parties could lead to inadequate

systems and controls or inefficient management of

the Company, its assets and its reporting

requirements.

The Company, the Investment Adviser and the

Administration Manager engage experienced and

reputable service providers, the performance of

which is reviewed on an annual basis by the Board.

In addition, the Audit Committee reviews the

Internal Control and Corporate Governance Manual

on an annual basis.

Economic, political and other external factors

Fluctuations in the stock market due to the

Ukrainian conflict, economic recession, increasing

inflation or monetary policy could affect the

valuations of quoted investments, even if such

companies are performing to plan.

Wider political and economic events also have the

potential to impact the performance, and therefore

valuations of, the unquoted companies in the

portfolio as a result of a deterioration in business

and consumer confidence. This is mitigated by

holding a diversified portfolio of investments across

a wide range of sectors and subsectors.

The emerging risks faced by the Company are

outlined below:

Inflation

The company’s investments could be impacted

negatively as a result of increasing inflation,

particularly wages and other costs.

The Investment Adviser’s close relationship with the

investee companies allows it to ensure that the

businesses properly assess the potential impact of

increasing costs, particularly wages, and the extent

to which these may or may not be able to be passed

on to the end customer. The Board and the

Investment Adviser considers the net impact to be

at a manageable level and shall continue to monitor

developments closely across all investee companies.

Geopolitical risks

The Ukraine conflict and the impact of new

sanctions placed on Russian businesses and

individuals may have some impact on the returns of

the Company.

The Investment Adviser’s hands on approach with

the investee companies ensures that they are well

placed to assess the exposure of the business to the

Ukraine conflict and associated developments. The

Board considers exposure to be low and any direct

impact on the company’s performance is not

expected to be significant. The Board along with the

Investment Adviser shall continue to review the

evolving situation as part of its ongoing activities.

Climate change

The effects of climate change or those of changing

legislation as the world looks to transition towards

net zero emissions may impact the returns

generated by the portfolio companies.

Whilst the Company itself, as a Venture Capital

Trust, has negligible exposures to climate change

risk, the Investment Adviser works with the investee

companies to ensure that climate change risk and

transition risk is appropriately addressed. The Board

together with the Investment Adviser believe that

the risks within the current portfolio to be

manageable and gives consideration to this in

reviewing new investment decisions and will

continue to assess developments in legislation and

their potential impact on portfolio companies.

Developments in accounting and disclosure

regulations impacting the Company are monitored

by the Investment Adviser and Administration

Manager to ensure full compliance.

Strategic Report (continued)

Principal risks and uncertainties

(continued)

Coronavirus Pandemic

The impact of the coronavirus pandemic on global

markets was first observed in March 2020. Since

then, there have been a number of challenges for

businesses in the UK and around the world, as

governments sought to contain rising infection

numbers.

The Board recognises that the resulting restrictions

and subsequent major developments have had an

impact on valuations and has negatively impacted

the prospects of many businesses within the

portfolio, particularly those in the hospitality,

manufacturing and children’s nursery sectors.

As a result of the Investment Advisers close

involvement with all investee companies, the

Adviser has been able to provide support, where

possible, throughout the pandemic. The Board and

Adviser will continue to monitor developments as

the world starts to return to more normal

conditions.

Viability statement

In accordance with Corporate Governance best

practice, the Directors have carried out a robust

assessment of the emerging and principal risks

facing the Company over a longer period than the

12 months required by the ‘Going Concern’

provision. The Board has conducted this review for

a period of five years from the accounts approval

date as developments are considered to be

reasonably foreseeable over this period and is

considered reasonable for a business of its nature

and size as well, as the period being the minimum

expected holding period. The five-year review

considers the principal risks facing the Company,

which are summarised within note 16, as well as the

Company’s cash flows, dividend cover and VCT

monitoring compliance over the period. This

includes the potential impact of the coronavirus

pandemic and any other risks which may adversely

impact its business model, future performance,

solvency or liquidity. The five-year review makes

assumptions about the normal level of capital

recycling likely to occur, expenses, dividends and

share buybacks.

The Board has considered the Company’s cashflow

projections and found these to be realistic and

reasonable.

The Directors believe that the Company is well

placed to manage its business risks successfully.

Based on the results, the Board believes that, taking

into account the Company’s current position, and

subject to the emerging and principal risks faced by

the business, the Company will be able to continue

in operation and meet its liabilities as they fall due

for a period of at least five years from the accounts

approval date.

Business model

The Company operates as a Venture Capital Trust

to ensure that its Shareholders can benefit from the

tax reliefs available.

The Business of the Company is to act as an

investment company, investing in a portfolio which

meets the conditions set out within its Investment

Policy, as shown below.

Investment policy

Quantitative analysis of how the Company has

operated in accordance with its investment policy

are shown in the Review of Investments on pages

16 to 25 and in the VCT compliance section of this

report on page 35.

The Company’s investment policy is as follows:

Asset allocation

The Company will seek to maintain a minimum of

80% of its funds invested in VCT qualifying

investments, with the balance held in non-qualifying

investments. New funds raised will initially be held

in non-qualifying investments and cash and will

gradually be invested in VCT qualifying investments

over a two to three-year period.

VCT qualifying investments

The Company seeks to hold a portfolio of VCT

qualifying investments as follows:

Investment

type

Target

Maximum

Target

IRR

Growth 0%-100% 100%

15% and

above

Yield focused 0%-60% 100% 10%

Growth investments will be in companies with

prospects for high capital growth, reflecting higher risk,

predominantly focusing on:

 investments in unquoted companies where there

are reasonable prospects of a trade sale or clear

exit strategy over a five to seven-year time horizon

and the prospects of a reasonable level of capital

growth. Start-ups will not generally be considered,

although the fund may consider investments in

early-stage companies offering higher risk and

higher potential returns; and

Strategic Report (continued)

Investment policy (continued)

 companies already quoted on AIM, the Aquis Stock

Exchange Growth market or the Main Market of

the London Stock Exchange, or being admitted to

AIM, the Aquis Stock Exchange Growth market or

the Main Market of the London Stock Exchange.

Yield focused investments will generally be in

unquoted businesses (although this may include

some quoted businesses), with a preference for

companies which, subject to prevailing VCT rules,

own substantial assets.

These investments may be structured such that

they comprise of loan stock and/or preference

shares.

Some investments may exhibit features of both of the

above categories.

Non-Qualifying Investments

Non qualifying investments invested after 5 April

2016 will only be made in the following categories:

 Shares or units in an AIF (Alternative Investment

Fund) e.g. an investment trust or in a UCITS

(undertakings for the collective investment in

transferable securities) e.g. an OEIC (open

ended investment company) which may be

repurchased or redeemed by the investor on no

more than 7 days’ notice; and

 Ordinary shares or securities in a company

which are acquired on a European regulated

market e.g. in companies with shares listed on

the main market of the London Stock Exchange.

The existing non-qualifying portfolio includes

investments made before 5 April 2016 within the

following categories:

 Non-qualifying listed investments which are in

quoted companies where the holdings can be

traded and in companies in which the

Investment Adviser has detailed knowledge as

a result of VCT qualifying investments made

previously;

 Secured loans which are secured on assets

held by the borrower; and

 Non-qualifying unquoted investments which

will generally not exceed 5% of the overall

fund.

In addition to the above, the Company may hold

non-qualifying funds in cash or bank deposits,

which fall within the VCT rules.

The allocation between asset types in the non-

qualifying portfolio will vary depending upon

opportunities that arise, with any one asset class

having a maximum exposure of 100% of the non-

qualifying portfolio.

Risk diversification

The Directors will control the overall risk of the

Company. The Investment Adviser will ensure the

Company has exposure to a diversified range of

VCT qualifying investments from different sectors

and no more than 15% of the Company’s funds in

any one company or any one issue of fixed income

securities.

Venture Capital Trust Regulations

In continuing to maintain its VCT status, the

Company complies with a number of regulations as

set out in Part 6 of the Income Tax Act 2007 VCT

Rules.

Borrowing Policy

It is not the Company’s intention to have any

borrowings. The Company does, however, have the

ability to borrow a sum equal to no more than 10%

of the aggregate amount paid up on the issued

share capital of the Company plus the amounts

standing to the credit of the consolidated reserves

of the Company.

At 31 March 2022, the maximum amount of

borrowings allowed, without the previous sanction

at a General Meeting, stood at £10.9 million. There

are no plans to utilise this ability at the current time.

Performance incentive fees

Downing LLP is entitled to receive a performance

incentive fee equal to 20% of the realised gains on

any exit from new investments made since 1 April

2019 (“New Investments”) where, and to the extent

that, the following conditions are met:

(a) The Internal Rate of Return (“IRR”) of all New

Investments at the year-end exceeds the hurdle

of 5% per annum (based on audited valuations

and including realised and unrealised gains and

losses and all investment income, measured from

1 April 2019 (“IRR Hurdle”); and

(b) The Total Return per share at the year end

exceeds the Base Value per share (“Base Value

Hurdle”). The Base Value per Share is set at the

Total Return per share (NAV plus dividends paid

since the date of the merger) as at 31 March

2019, being 109.8p per Share.

Strategic Report (continued)

Performance incentive fees (continued)

If any amount is not paid in a year when an

investment is realised because the IRR Hurdle

and/or Base Value Hurdle are not met, such

amounts are deferred and can be paid in a future

year if and when the IRR Hurdle and Base Value

Hurdle are both met again. Additionally, the

amounts payable under this proposed scheme are

only paid to the extent that the IRR Hurdle and Base

Level are exceeded, and no payment will be made

which would cause either hurdle to cease to be met.

As the hurdles have not been met, no fee is due to

be paid in respect of the year ended 31 March

2022.

Statement on s172

Under section 172 of the Companies Act 2006, the

Board have a duty to promote the success of the

Company, and when making decisions for the long

term, have regard to a range of matters including:

 the likely consequences of any decision in the

long term;

 the interest of the Company’s employees;

 the need to foster the Company’s business

relationships with suppliers, customers and

others;

 the impact of the Company’s operations on the

environment and community;

 the desirability of the Company maintaining a

reputation for high standards of business

conduct; and

 the need to act fairly between Shareholders of

the Company.

However, the Company has no employees (other

than its directors) and no customers in the

traditional sense. It is normal practice for Venture

Capital Trusts to delegate authority for day-to-day

management and administration of the Company to

third parties. The Board will then engage with the

third parties in setting, approving and overseeing

the execution of the business strategy and related

policies. In accordance with the Company’s nature

as a Venture Capital Trust, the Board’s principal

concern has been, and continues to be, the interest

of the Company’s Shareholders taken as a whole, as

well as continuing to monitor portfolio management

in light of the Company’s objectives.

In addition to this, the Board has a responsible

governance culture and has due regard for broader

matters so far as they apply including the

expectations of its regulators. Specifically, the Board

engages with the Investment Adviser at every Board

meeting where it will review the financial and

operational performance, as well as legal and

regulatory compliance.

The Board also reviews its relationships with other

service providers at least annually as well as other

areas over the course of the financial year including

the Company’s key risks; stakeholder-related

matters; diversity and inclusivity; environmental

matters; and corporate responsibility and

governance.

The Investment Adviser regularly engages with

major shareholders, by producing half yearly reports

and reporting back to the Board. The Board also

encourage all Shareholders to attend the AGM and

welcomes any other communications from

Shareholders. Its main stakeholders therefore

comprise of the shareholders, the Investment

Adviser, other service providers and investee

companies.

The principal decisions made or approved by the

Directors during the year are as follows. Principal

decisions have been defined as those that have a

material impact to the Company and its key

stakeholders:

Dividend declarations

The Directors target an annual dividend of at least

4% of net assets per annum, subject to sufficient

distributable reserves and capital resources. The

Board closely monitor the level of dividends and

propose to pay a final dividend of 1.75 pence per

share which will result in total dividends for the

financial year of 3.0 pence per share, equivalent to

5.2% based on the opening net asset value.

Launch of top up offer for subscription

At the end of November 2021, the Company

launched a new non-prospectus top-up offer in

order to provide additional funds for further

investment activity. As noted in the Chairman’s

Statement, the offer closed following the period end

having raised £1.9 million.

Communication with Shareholders

As a result of the COVID-19 restrictions in place at

the time, the AGM in 2020 could not be held in

person and the decision was made to hold the AGM

virtually. The Board encourages all shareholders to

attend the AGM and welcomes communication

from Shareholders and was pleased to hold the

2021 AGM in person at the Company’s registered

office to facilitate this interaction. In person AGMs

will continue, where possible, to allow Shareholders

to ask questions and hear updates from the Board

and Investment Adviser.

Strategic Report (continued)

Global greenhouse gas emissions

The Company has no greenhouse emissions to

report from its operations, nor does it have

responsibility for any other emission producing

sources under the Companies Act 2006 (Strategic

Report and Director’s Reports) Regulations 2013.

Climate-related matters

The FCA reporting requirements consistent with the

Task Force on Climate-related Financial Disclosures

(“TCFD”) do not currently apply to the Company.

The Board and Investment Adviser acknowledges

the recommendations which will be reviewed over

future periods.

Environmental, social, and human rights

policy

The Company seeks to conduct its affairs

responsibly. Where appropriate, the Board and the

Advisers take environmental, social and human

rights factors into consideration when making

investment decisions. Further details on the

Investment Advisers approach to responsible

investment can be found on pages 26 to 27.

Share capital

The Board has authority to make market purchases

of the Company’s own shares. This authority for up

to 14.9% of the Company’s issued share capital was

granted at the last AGM.

A resolution will be put to Shareholders to renew

this authority at the forthcoming AGM.

The capital structure of the Company is disclosed on

page 34.

Directors and senior management

The Company does not have any employees,

including senior management, other than the Board

of the three non-executive directors, all of whom

are male.

Whilst the Board have delegated the day-to-day

operation of the Company to its advisers, details of

which are contained within the Report of the

Directors, they retain the responsibility of planning,

directing, and controlling the activities of the

Company.

Future prospects

The Company’s future prospects are set out in the

Chairman’s Statement and Investment Adviser’s

Report.

By order of the Board

Grant Whitehouse

Company Secretary

St. Magnus House

3 Lower Thames Street

London EC3R 6HD

7 July 2022

Report of the Directors

The Directors present the Annual Report and

Accounts of the Company for the year ended 31

March 2022.

Share capital

At the beginning of the year, the Company had

161,094,068 Ordinary Shares of 1p each in issue.

The Company allotted 20,170,101 Ordinary shares

at an average price of approximately 60.6p per

Ordinary Share under the terms of the Offers for

Subscription.

A further 1,148,756 Ordinary Shares at an average

price of 60.7p per Ordinary Share were allotted

under the terms of the Dividend Reinvestment

Scheme (“DRIS”).

At the AGM held on 10 August 2021, Shareholders

unconditionally authorised the Company to make

market purchases of its own Ordinary shares of 1p

each, up to a maximum of 26,170,121 Ordinary

Shares, representing 14.9% of the share capital in

issue at the date of the last Annual Report. At the

date of this report, authority remains in place for

21,324,595 Ordinary Shares. A resolution to renew

the authority to buy back up to approximately

14.9% of the share capital at the date of this report

will be put to Shareholders at the AGM taking place

on 15 August 2022.

During the year, the Company repurchased

4,845,526 Ordinary Shares of 1p each for average

consideration of 57.8p per share, representing 3.0%

of shares in issue at the date of the last Annual

Report. These shares were subsequently cancelled.

At the year end, the Company had 177,567,399

Ordinary Shares in issue. There were no other share

classes in issue at the year end.

Results and dividends

£’000

Per

Gain on ordinary activities after

tax for the year ended 31 March

2022 10,396 4.2p

Distributions paid/proposed for the year

25 February 2022 – 2022 Interim 2,227 1.25p

26 August 2022 – 2022 Final 3,107 1.75p

5,334 3.00p

The Company has a stated target for annual dividends

of at least 4% of net assets per annum. In respect of

the year under review this is equivalent to 2.5p. The

Board is proposing a final dividend of 1.75p per

share to be paid, subject to Shareholder approval at

the AGM, on 26 August 2022 to Shareholders on

the register at 29 July 2022, which will result in

total dividends for the financial year of 3.0 pence

per share (2021: 2.5 pence per share).

Investment adviser and administration

manager

Downing LLP was appointed on 1 April 2010, as

Investment Adviser, for a fee payable quarterly in

advance in respect of each quarter, such quarterly

fee being equal to one quarter of 2.0% of the Net

Asset Value of the Company as at the opening of

business on the first business day of that quarter.

The agreement is not for a fixed term and may be

terminated by either side giving not less than 12

months’ notice in writing. During the year the

investment management fees amounted to £2.1

million (2021: £1.6 million). The fees payable by the

Company to the Investment Adviser are allocated

50% to revenue and 50% to capital. This allocation

may be reviewed in the future as the focus of the

portfolio changes.

Downing LLP also receives arrangement and

monitoring (non-executive directorship) fees from

the investee companies. During the year, Downing

LLP was due arrangement fees of £58,000 (2021:

£288,000) and monitoring fees of £697,000 (2021:

£729,000). These fees also relate to investments

made by other funds managed by Downing LLP.

In addition, Downing LLP also provides

administration services to the Company for an

annual fee which from 12 November 2013 is

calculated as follows:

 £40,000 (which is subject to an RPI annual

increase, if positive); plus

 0.125% of the Net Asset Value of the Company

in excess of £10 million; plus

 £10,000 per additional share class of the

Company (excluding the Ordinary Share class).

During the year, fees for administration services

amounted to £166,000 (2021: £147,000).

If the Company undertakes any significant

corporate actions (including the raising of

additional capital), Downing LLP shall be entitled to

negotiate an additional fee or increased fee to take

account of any significant additional work

occasioned for the Company Secretary and

bookkeeper by that corporate action.

Report of the Directors (continued)

Investment adviser and administration

manager (continued)

Following the period end, the Company announced

that Downing LLP agreed to sell its non-Healthcare

Ventures business to Foresight Group LLP

(“Foresight”) and as a result the investment

advisory agreement was novated from Downing to

Foresight on completion of the sale on 4 July 2022.

Downing shall continue to provide investment

advisory services in respect of the non-venture’s

portfolio of investments, as well as administration

services to the Company for a transitional period.

Ongoing trail fee

The Company has an agreement to pay an ongoing

trail fee annually to Downing LLP, in connection

with funds raised under original offers for

subscription out of which Downing LLP has an

obligation to pay trail commission to intermediaries.

The ongoing trail fee is calculated between 0.25%

and 0.50% of the net assets attributable at the year

end to the shareholdings which have arisen from

each fundraising offer.

Annual running costs cap

The Ongoing Charges figure (calculated in

accordance with the AIC’s methodology) is an

Alternative Performance Measure used by the

Board to monitor expenses. The annualised Ongoing

Charges figure was 2.5% for the year ended 31

March 2022.

Downing LLP provides a cap on the annual running

costs of the Company. Any annual running costs

above this level are met by Downing LLP. The cap is

set at 2.6% of nets assets per annum. The annual

running costs cap for this purpose is calculated

based on the net asset value at the end of each

quarter and certain costs are excluded such as fees

in connection with the listing of the Company’s

shares and AIC membership fees.

Directors

The Directors of the Company during the year were

as follows:

Chris Kay

Barry Dean

Stuart Goldsmith

Chris Allner (appointed 8 Feb 2021)

Directors generally retire at every third AGM or are

subject to re-election at the AGM immediately

following their appointment, in accordance with the

requirement of the Articles of Association. At the

forthcoming AGM Stuart Goldsmith will retire and

offers himself for re-election. In accordance with

corporate governance best practice, by virtue of

serving on the Board for more than nine years,

Stuart Goldsmith will retire at each Annual General

Meeting, and being eligible, offers himself for re-

election. Each of the Directors has considerable

experience in the VCT sector and has continued to

perform well.

Each of the Directors have entered into an

agreement for services whereby they are required

to devote such time to the affairs of the Company

as the Board reasonably requires, consistent with

their role as a non-executive Director, and is subject

to a three-month termination notice on either side.

Appointments of new Directors to the Board are

considered by the Nomination Committee as and

when required.

The Company provides Directors’ and Officers’

liability insurance, giving appropriate cover for legal

action brought against its directors, and has also

agreed to indemnify the directors in circumstances

where they are not considered to be culpable. The

indemnity, which is a qualifying third-party

indemnity provision for the purpose of the

Companies Act, is for the benefit of all of the

Company’s current directors.

VCT compliance

The Company has retained Philip Hare & Associates

LLP (“Philip Hare”) to advise it on compliance with

VCT requirements, reporting directly to the Board.

Philip Hare works closely with the Investment

Adviser; undertaking reviews of the VCT

compliance status of new investment opportunities;

providing regular compliance updates on the

Company’s existing portfolio of investments and

providing advice on VCT compliance issues as and

when they arise.

Report of the Directors (continued)

VCT compliance (continued)

A summary of the VCT Regulations is included in

the Company’s Investment Policy as shown on page

30. Compliance with the main VCT regulations at 31

March 2022, and for the year then ended, is

summarised as follows:

1. 80.0% of its investments in

qualifying companies (Company

as a whole);

88.0%

2. At least 70.0% of the Company’s

qualifying investments in

“eligible shares” (investments

made prior to 6 April 2018 from

funds raised before 6 April 2011

are excluded);

94.5%

3. At least 10.0% of each

investment in a qualifying

company held in “eligible

shares”;

Complied

4. No investment constitutes more

than 15.0% of the Company’s

portfolio;

Complied

5. Income for the year ended 31

March 2021 is derived wholly or

mainly from shares and

securities; and

100.0%

6. The Company distributes

sufficient revenue dividends to

ensure that not more than 15%

of the income from shares and

securities, in any one year, is

retained.

Complied

Substantial interests

As at 31 March 2022, and at the date of this report,

the Company was not aware of any beneficial

interests exceeding three per cent of the issued

share capital.

Auditor

A resolution to re-appoint BDO LLP as the

Company’s auditor will be proposed at the

forthcoming AGM.

Annual General Meeting

The AGM will be held at Foresight Group LLP, The

Shard, 32 London Bridge Street, London, SE1 9SG at

10.30 a.m. on 15 August 2022. Full details are

included in the Notice of the AGM at the end of this

document.

Directors’ responsibilities statement

The Directors are responsible for preparing the

Strategic Report, the Report of the Directors, the

Directors’ Remuneration Report, the separate

Corporate Governance Statement and the financial

statements in accordance with applicable law and

regulations. They are also responsible for ensuring

that the annual report includes information required

by the Listing Rules of the Financial Conduct

Authority.

Company law requires the directors to prepare

financial statements for each financial year. Under

that law, the directors have elected to prepare the

financial statements in accordance with United

Kingdom Generally Accepted Accounting Practice

(United Kingdom Accounting Standards and

applicable law), including Financial Reporting

Standard 102, the financial reporting standard

applicable in the UK and Republic of Ireland (FRS

102). Under company law, the directors must not

approve the financial statements unless they are

satisfied that they give a true and fair view of the

state of affairs of the Company and of the profit or

loss of the Company for that period.

In preparing these financial statements, the

Directors are required to:

 select suitable accounting policies and then

apply them consistently;

 make judgments and accounting estimates that

are reasonable and prudent;

 state whether the financial statements have

been prepared in accordance with applicable

UK Accounting Standards, subject to any

material departures disclosed and explained in

the financial statements;

 prepare the financial statements on the going

concern basis unless it is inappropriate to

presume that the Company will continue in

business; and

 prepare a Directors’ Report, Strategic Report

and Directors’ Remuneration Report which

comply with the requirements of the

Companies Act 2006.

The directors are responsible for keeping adequate

accounting records that are sufficient to show and

explain the Company’s transactions, and 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.

Report of the Directors (continued)

Directors’ responsibilities statement

(continued)

In addition, each of the directors is responsible for

ensuring that the Annual Report, taken as a whole,

is fair, balanced and understandable and provides

the information necessary to assess the Company’s

position, performance, business model and strategy.

Website publication

The directors are responsible for ensuring the

annual report and the financial statements are made

available on a website. Financial statements are

published on the Company’s website in accordance

with legislation in the United Kingdom governing

the preparation and dissemination of financial

statements, which may vary from legislation in other

jurisdictions. The maintenance and integrity of the

Company’s website is the responsibility of the

directors. The directors’ responsibility also extends

to the ongoing integrity of the financial statements

contained therein.

Directors’ statement pursuant to the

Disclosure and Transparency Rules

Each of the directors, whose names and functions

are listed on page 2, confirms that, to the best of

each person’s knowledge:

 the financial statements, prepared in

accordance with United Kingdom Generally

Accepted Accounting Practice, give a true and

fair view of the assets, liabilities, financial

position and profit of the Company; and

 the Annual Report, comprising the Chairman’s

Statement, the Strategic Report, the

Investment Adviser’s Report, the Review of

Investments and the Report of the Directors,

includes a fair review of the development and

performance of the business and the position

of the Company, together with a description of

the principal risks and uncertainties that it

faces.

Electronic publication

The financial statements are published on

www.downing.co.uk, a website maintained by the

Investment Adviser. Legislation in the United

Kingdom governing the preparation and

dissemination of the financial statements may differ

from legislation in other jurisdictions.

Corporate governance

The Company’s compliance with, and departures

from, the Association of Investment Companies

Code of Corporate Governance (AIC Code,

www.theaic.co.uk), is shown on page 45.

The Statement on Corporate Governance set out on

pages 42 to 46 is included in the Report of the

Directors by reference.

Streamlined Energy and Carbon Reporting

(‘SECR’)

As the company has no employees and primarily

conducts its business at the London office of the

Investment Adviser and administrator, Downing

LLP, the company is not directly responsible for the

consumption of electricity and gas in the UK, nor is

the company responsible for greenhouse gas

emissions related to transport in the UK.

As the company did not consume more than 40,000

kWh of energy during the year ended 31 March

2022, it has nothing to report under the Companies

(Directors’ Report) and Limited Liability Partnerships

(Energy and Carbon Report) Regulation 2018.

Other matters

Information in respect of financial instruments and

future developments which were previously

disclosed within the Directors Report has been

disclosed within the Strategic Report on pages 28 to

33.

Information in respect of greenhouse gas emissions,

which is normally disclosed within the Report of the

Directors has been disclosed within the Strategic

Report on page 33.

Information on financial risk management including

investment risks, credit risks and liquidity risks has

been disclosed within the notes to the accounts in

note 16.

Insurance cover

Directors’ and Officers’ liability insurance cover is

held by the Company in respect of the directors.

Events after the end of the reporting

period

Following the period end, the Company allotted

2,813,152 Ordinary Shares of 1p each under the

terms of the offers for subscription. The aggregate

consideration of the shares was £1.8 million.

Report of the Directors (continued)

Events after the end of the reporting

period (continued)

On 13 June 2022, the Company announced that its

Investment Adviser, Downing LLP, agreed to sell its

non-Healthcare Ventures business to Foresight

Group LLP (“Foresight”). As part of this transaction,

the Investment advisory agreement was novated to

Foresight on completion of the sale. Downing will

continue to provide administration services, and

investment advisory services in respect of the non-

venture portfolio of investments, being the quoted

growth and yield focused investments for a

transitional period. Further detail can be found

within the Chairman’s Statement.

Statement as to disclosure of information

to the Auditor

The directors in office at the date of the report have

confirmed that, as far as they are aware, there is no

relevant audit information of which the Auditor is

unaware. Each of the directors has confirmed that

they have taken all the steps that they ought to

have taken as directors in order to make themselves

aware of any relevant audit information and to

establish that it has been communicated to the

Auditor.

By order of the Board

Grant Whitehouse

Company Secretary

St. Magnus House

3 Lower Thames Street

London EC3R 6HD

7 July 2022

Directors’ Remuneration Report

The Board has prepared this report in accordance

with the requirements of Section 420 and 422 of

the Companies Act 2006. A resolution to approve

this report will be put to Shareholders at the Annual

General Meeting.

Under the requirements of Section 497, the

Company’s Auditors are required to audit certain

disclosures contained within the Report. These

disclosures have been highlighted and the audit

opinion thereon is contained within the Auditor’s

Report.

Annual statement from the Remuneration

Committee

The Committee comprises Chris Kay, Barry Dean,

Stuart Goldsmith and Chris Allner. The current

remuneration levels for the year ended 31 March

2022 were last reviewed by the remuneration

committee during its meeting on 24 February 2017.

Remuneration policy

Below is the Company’s current remuneration policy

which was last put to a Shareholder vote at the

AGM in 2020.

In accordance with regulations, Shareholders must

vote on the remuneration policy, for the financial

year commencing after the AGM, every three years

or sooner if the Company wants to make changes to

the policy. Therefore, the policy will be put to

Shareholders again at the AGM in 2023.

The Company’s policy on directors’ remuneration is

to seek to remunerate board members at a level

appropriate for the time commitment required and

degree of responsibility involved for a self-managed

Venture Capital Trust, where all investment

decisions are made by the Board and where the

non-executive directors are more closely involved

with the investee companies than other similar

VCTs.

Non-executive directors are not entitled to any

performance related pay or incentive.

Directors’ remuneration is guided by the Company’s

Articles of Association as follows:

(i) The ordinary remuneration of the directors

shall not in aggregate exceed £150,000 per

annum (or such higher sum as may from time to

time be determined by an Ordinary Resolution)

and shall be divided between the directors as

they may agree or, failing agreement, equally,

except that any director who shall hold office

for part only of the period in respect of which

such remuneration is payable shall be entitled

only to rank in such division for a proportion of

remuneration related to the period during

which they held office. The directors shall also

be entitled to be paid all travelling, hotel and

other expenses properly incurred by them in

connection with the business of the Company,

or in attending and returning from meetings of

the directors or of committees of the directors

or General Meetings or separate meetings of

the holders of any class of shares or

debentures of the Company or otherwise in

connection with the discharge of their duties.

(ii) Any director who serves on any committee or

who devotes special attention to the business

of the Company, or who otherwise performs

services which in the opinion of the directors

are outside the scope of the ordinary duties of

a director, may be paid such extra

remuneration by way of salary, lump sum,

percentage of profits or otherwise as the

directors may determine.

The Company’s policy is that fees payable to

directors should reflect their expertise,

responsibilities and time spent on Company matters.

In determining the level of remuneration, market

equivalents are considered in comparison to the

overall activities and size of the Company. There is

no performance related pay criteria applicable to

directors.

Letters of appointment

Each of the directors on the current Board has a

letter of appointment whereby they are required to

devote such time to the affairs of the Company, as

the Board reasonably requires, consistent with their

role as a non-executive director. A three-month

rolling notice period applies.

Annual report on remuneration (audited)

The following disclosure is required to be audited

under the requirements of section 497. The audit

opinion thereon is contained within the Auditor’s

Report on pages 47 to 53.

Directors’ Remuneration Report

(continued)

Annual report on remuneration (audited)

(continued)

Directors’ remuneration for the year under review

was as follows:

2022

fee

£’000

change

gross

fee

2021

fee

£’000

change

gross

fee

2020

fee

£’000

Chris

Kay

Barry

Dean

Stuart

Goldsmith

Chris

Allner

nil

n/a

105 105 105

between the years ending 31 March 2022 and 31 March

2021

between the years ending 31 March 2021 and 31 March

2020

No other emoluments, pension contributions or life

assurance contributions were paid by the Company

to, or on behalf of, any Director. The Company does

not have any share options in place.

Statement of implementation of

remuneration policy in the current

financial year

The remuneration levels for the forthcoming year

have been agreed at the following levels:

Annual

fee

Chris Kay 45,000

Barry Dean 30,000

Stuart Goldsmith 30,000

Chris Allner

20,000

125,000

As part of the transfer of the investment advisory

agreement to Foresight, from 1 July 2022 Chris Allner is

being paid an annual fee of £20,000 which is rechargeable

to Downing LLP until 30 June 2024.

Directors share interests (audited)

The Directors of the Company during the year and

their beneficial interest in the issued Ordinary

Shares, at each year end, were as follows:

31 March

2022

31 March

2021

Chris Kay 83,300 83,300

Barry Dean 7,129 7,129

Stuart Goldsmith 7,881 7,881

Chris Allner 16,736 nil

There have been no changes in Directors’

shareholdings since the year end.

Statement of voting at AGM

At the AGM on 10 August 2021, the votes in

respect of the resolution to approve the Director’s

Remuneration Report were as follows:

In favour 94.9%

Against 5.1%

At the 2020 AGM, where the remuneration policy

was last put to a Shareholder vote, 92.4% voted for

the resolution and 7.6% voted against, showing

significant Shareholder support.

Relative importance of spend on pay

The difference in actual spend between 31 March

2022 and 31 March 2021 on remuneration for all

employees, in comparison to distributions (dividends

and share buybacks) and other significant spending,

are set out in the tabular graph below.

Performance graph

The graph on the next page charts the total

cumulative Shareholder return of the Company

(assuming all dividends are re-invested) (“NAV Total

Return”) and Total Return of the Company’s Share

Price (“Share Price Total Return”) over the past 10

years, compared to the FTSE AIM All Share Index,

each of which has been rebased to 100 pence.

Directors’ Remuneration Report (continued)

Performance graph (continued)

Shareholders should note that the Company has

undergone some substantial changes over that

period.

The Board believes that NAV Total Return provides

Shareholders with a fairer reflection of the

Company’s long-term value than the Company’s

share price, due to the long-term nature of an

investment in Venture Capital Trust shares. The

FTSE AIM All Share Index (“FTSE Index”) is not a

benchmark for the Company and its components

include a much broader range of quoted

investments than the Company is able to invest in.

The FTSE Index also does not include exposure to

unquoted asset-backed investments of which the

Company also holds a significant proportion. As a

result, the Company’s performance is not expected

to be closely correlated to the FTSE Index.

However, of the publicly available indexes that can

be used by the Company without incurring

disproportionate costs, the FTSE Index is considered

to be the most appropriate broad equity market

index to use for this chart.

By order of the Board

Grant Whitehouse

Company Secretary

St. Magnus House

3 Lower Thames Street

London EC3R 6HD

7 July 2022

100

125

150

175

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

Downing One VCT plc

Performance Graph

Downing One VCT plc NAV Total Return Downing One VCT plc Share Price Total Return FTSE AIM All Share Index

Corporate Governance Statement

The Directors support the relevant principles of the

Association of Investment Companies Code of

Corporate Governance (AIC Code), being the

principles of good governance and the code of best

practice, as set out in the annex to the Listing Rules

of the UK Listing Authority. The AIC Code

addresses the Principles and Provisions set out in

the UK Corporate Governance Code (UK Code) as

well as setting out additional Provisions. The Board

considers that reporting against principles and

recommendations of the AIC Code will provide

better information to Shareholders.

The Board

At the date of this report, the Company has a Board

comprising of four non-executive Directors. The

Chairman is Chris Kay. The Company does not have

a Senior Independent Director. Biographical details

of all current Board members (including the

significant commitments of the Chairman) are

shown on page 2.

The Board has assessed the independence of each

of the Directors, all of which are considered to be

independent, with the exception of Chris Allner, in

accordance with the provision and

recommendations set out in the AIC code.

In accordance with Company policy and corporate

best practice, Stuart Goldsmith offers himself for re-

election at the forthcoming AGM.

Full Board meetings take place quarterly and the

Board meets or communicates more regularly to

address specific issues. The Board has a formal

schedule of matters specifically reserved for its

decision which includes but is not limited to

considering recommendations from the Investment

Adviser; and reviewing, annually, the terms of

engagement of all third-party advisers (including the

Investment Adviser). The Board has also

established procedures whereby Directors wishing

to do so in the furtherance of their duties, may take

independent professional advice at the Company’s

expense.

All Directors have access to the advice and services

of the Company Secretary. The Company Secretary

provides the Board with full information on the

Company’s assets and liabilities and other relevant

information requested by the Chairman in advance

of each Board meeting.

Committees to the Board

As the Company has a small Board comprising

wholly of non-executive Directors, all Directors sit

on the Nomination, Remuneration and Audit

Committees.

The Chairman of the Nomination and Remuneration

Committees is Barry Dean. The Chairman of the

Audit Committee is Stuart Goldsmith.

Committee meetings are held in conjunction with

the Board meetings. All committees have defined

terms of reference and duties, which are available

from www.downing.co.uk.

Board and Committee meetings

The following table sets out the Directors’

attendance at the Board and Committee meetings

held during the year.

Board

meetings

attended

Audit Com.

meetings

attended

Chris Kay

6/6 2/2

Barry Dean

6/6 2/2

Stuart Goldsmith

6/6 2/2

Chris Allner

6/6 2/2

The Board also meets as and when required during

the year to discuss other matters arising.

Audit Committee

The Audit Committee is responsible for:

 monitoring the Company’s financial reporting

and any formal announcements relating to the

company’s financial performance;

 providing advice on whether the annual report

and accounts, taken as a whole, are fair balance

and understandable;

 reviewing internal controls and risk management

systems; and

 matters regarding audit and external auditors.

Financial Reporting

The Committee is responsible for reviewing and

agreeing the half-yearly and annual accounts

(including those figures presented within) before

they are presented to the Board for final approval.

In particular, the Committee reviews, challenges

(where appropriate) and agrees the basis for the

carrying value of the unquoted investments, as

prepared by the Investment Adviser, for

presentation within the half-yearly and annual

accounts.

Corporate Governance Statement (continued)

Financial Reporting (continued)

The Committee also takes into careful consideration

comments on matters regarding valuation, revenue

recognition and disclosures arising from the

Auditors Report to the Audit Committee as part of

the finalisation process for the Annual Accounts.

The Committee has considered the whole Annual

Report for the year ended 31 March 2022 and has

reported to the Board that it considers it to be fair,

balanced and understandable, providing the

information necessary for shareholders to assess

the Company’s performance, business model and

strategy.

Internal audit and control

The Committee has considered the need for an

internal audit function and has concluded that at the

present time this would not be appropriate for a

company of this size and structure. The Committee

seeks to satisfy themselves that there is a proper

system and allocation of the responsibilities for the

day-to-day monitoring of financial controls by

receiving representations and information (either

upon request or voluntarily) from the Investment

Adviser. This is covered more fully under Risk

Management and Internal Control on page 44.

Whistleblowing procedures

As the Company has no staff, other than directors,

there are no procedures in place relating to

whistleblowing. The Audit Committee understands

that the Investment Adviser has whistleblowing

procedures in place.

External auditor

The Committee reviews and agrees the audit

strategy paper, presented by the Auditor in advance

of the audit, which sets out the key risk areas to be

covered during the audit, confirms their status of

independence and includes the proposed audit fee.

The Committee confirms that the main area of risk

for the year under review is valuation of unquoted

investments. The Committee also carefully

examines the treatment of quoted investments and

loan stock interest revenue recognition.

The Committee, after taking into consideration

comments from the Investment Adviser, Downing

LLP, regarding the effectiveness of the audit

process; immediately before the conclusion of the

annual audit, will recommend to the Board either

the re-appointment or removal of the auditors.

Under the Competition and Markets Authority

regulations, there is a requirement that an audit

tender process be carried out every ten years and

mandatory rotation at least every twenty years. The

last audit tender took place for the year ended 31

March 2015 and therefore mandatory tender will be

required not later than after the year ending 31

March 2024.

Following assurances received from the Investment

Adviser at the completion of the audit for the year

to 31 March 2022, and taking discussions held with

the engagement Partner at BDO LLP into

consideration, the Committee has recommended

they be re-appointed at the forthcoming AGM.

Non audit services

The Committee will approve the provision of ad-hoc

work and maximum expected fee before being

undertaken, to ensure the Auditors objectivity and

independence are safeguarded.

Nomination Committee

The Nomination Committee’s primary function is to

make recommendations to the Board on all new

appointments and also to advise generally on issues

relating to the Board composition and balance.

Before any appointment is made by the Board, the

Committee shall evaluate the balance of skills,

knowledge and experience, and consider candidates

based on merit, against objective criteria, and with

due regard for the benefits of diversity on the

Board. The Committee did not meet during the

year.

Director tenure policy

Given the size of the Company and the complexity

of the VCT regulations, the Board does not impose a

limit in respect of the tenure of the Company’s non-

executive Directors. In accordance with Corporate

Governance, the Director tenure policy of the

Company requires that any Director who has served

on the Board in excess of nine years be subject to

annual re-election. Directors who have served on

the Board for less than nine years are subject to re-

election at the AGM immediately following their

appointment, and every three years thereafter.

Corporate Governance Statement (continued)

Diversity policy

When considering a new appointment to the Board,

the committee’s responsibility is to ensure that

Shareholders are safeguarded by appointing the

most appropriate person for the position,

(irrespective of gender) giving due regard to past

and present experience in the sectors in which the

Company invests. The Company therefore does not

have a specific diversity policy in place.

Remuneration Committee

The Remuneration Committee meets as required, to

discuss the existing levels of remuneration for the

non-executive Directors, and whether they reflect

the time commitment and responsibilities of the

positions and are comparable with industry

standards. Where deemed necessary, they will

recommend adjustments to the remuneration levels.

The Committee did not meet during the year.

Board performance evaluation

The Company operates an annual process for the

evaluation of the performance of the Board, each of

its committees and of the non-executive Directors.

The evaluation is undertaken using a questionnaire

which covers a broad range of topics, including how

the Board conducts its business and how it

discharges its responsibilities. Further questions

address the evaluation of the Chairman’s

performance.

The responses to the questionnaire were

summarised by the Company Secretary and passed

to the Chair of the Remuneration Committee. Any

matters arising were then discussed with the non-

executive directors as appropriate.

Anti-bribery policy

The Company operates an anti-bribery policy to

ensure that it meets its responsibilities arising from

the Bribery Act 2010. This policy can be found on

the website maintained by the Investment Adviser

at www.downing.co.uk.

Relations with Shareholders

Shareholders have the opportunity to meet the

Board at the AGM. The Board is also happy to

respond to any written queries made by

Shareholders during the course of the year, or to

meet with Shareholders if so requested. As

disclosed in the Report of the Directors, there were

no Shareholders with a substantial interest in the

Company at the year-end or at the date of this

report.

In addition to the formal business of the AGM,

representatives of the management team and the

Board are available to answer any questions a

Shareholder may have. Separate resolutions are

proposed at the AGM on each substantially separate

issue. The Company’s registrar collates proxy votes,

and the results (together with the proxy forms) are

forwarded to the Company Secretary immediately

prior to the AGM. Proxy votes are announced at the

AGM, following each vote on a show of hands,

except in the event of a poll being called, and are

published immediately following the AGM.

Shareholders have the opportunity to vote on the

resolutions proposed at the AGM using the proxy

form, or electronically online.

The notice of the next AGM can be found at the

end of these financial statements and a proxy form

is included with Shareholders’ copies of this Annual

Report. The conditions of appointment of non-

executive Directors are available to Shareholders

upon request.

Financial reporting

The Directors’ Statement of Responsibilities for

preparing the accounts is set out in the Report of

the Directors on page 36, and a statement by the

Auditor about their reporting responsibilities is set

out in the Independent Auditor’s Report on page 52.

Risk Management and Internal control

The Board has adopted an Internal Control Manual

(“Manual”) for which it is responsible, which has

been compiled in order to comply with the AIC

Code. The Manual is designed to provide

reasonable, but not absolute, assurance against

material misstatement or loss, which it achieves by

detailing the perceived risks and controls to mitigate

them. The Board reviews the perceived risks, in line

with relevant guidance, on an annual basis and

implements additional controls as appropriate.

The Board is responsible for ensuring that the

procedures to be followed by the Company’s

advisers and Directors are in place, and they review

the effectiveness of the Manual, based on the

report from the Audit Committee, on an annual

basis to ensure that the controls remain relevant

and were in operation throughout the year.

Although the Board is ultimately responsible for

safeguarding the assets of the Company, the Board

has delegated, through written agreements, the day-

to-day operation of the Company (including the

financial reporting process) to Downing LLP.

Corporate Governance Statement (continued)

Going Concern

The Company’s business activities, together with

the factors likely to affect its future development,

performance and position, are set out in the

Chairman’s Statement on pages 3 to 5, the

Investment Adviser’s Report on pages 6 to 15 and

the Strategic Report on pages 28 to 33. The

financial position of the Company, its cash flows,

liquidity position and borrowing facilities are shown

in the Cash Flow Statement on page 57 and the

Strategic Report on page 28. In addition, notes 13

and 16 to the financial statements include the

Company’s objectives, policies and processes for

managing its capital; its financial risk management

objectives, details of its financial instruments; and

its exposures to credit risk and liquidity risk.

The Board have undertaken a review of the

prospects of the Company over a 12-month period.

The major cash outflows of the Company (most

notably investments, share buybacks and dividends)

are within the Company’s control. The Company has

considerable financial resources at the year end and

holds a diversified portfolio of investments. As a

consequence, the Directors believe that the

Company is well placed to manage its business risks

successfully, despite the uncertain economic

outlook.

In addition, the Directors have carried out a robust

assessment of the principal risks facing the

Company over a longer period than the 12 months

required by the ‘Going concern’ provision, as set out

in the viability statement on page 28.

The Company has little direct exposure to the

conflict in Ukraine and impact of new sanctions

placed on Russian business and individuals. The

Investment Adviser works closely with all investee

companies to ensure that they are well placed to

assess the exposure of the business to the Ukraine

conflict and associated developments. As a result,

direct impact of the sanctions on the company’s

performance is not expected to be significant.

Increasing inflation, particularly on wages and other

costs has developed into an emerging risk during

the period. The Investment Adviser’s close

relationship with the investee companies allow it to

ensure that the businesses properly assess the

potential impact of increasing costs, particularly

wages, and the extent to which these may or may

not be able to be passed on to the end customer.

The Board believes that, currently, the net impact is

at a manageable level and does not have a

significant impact on the going concern of the

Company.

After reviewing the company’s forecasts and

projections, the Directors have a reasonable

expectation that the major cash outflows of the

Company (notably new investments, share buybacks

and dividends) are within the Company’s control

and therefore the Board is confident that the

current situation will not threaten the going concern

status and are satisfied that the Company has

adequate resources to continue in business for at

least twelve months from the date of approval of

these financial statements.

For this reason, the Board believes that the

Company continues to be a going concern and that

it is appropriate to continue to apply the going

concern basis in preparing the financial statements

Compliance statement

The Listing Rules require the Board to report on

compliance with the UK Corporate Governance

Code throughout the accounting period. The

preamble to the UK Corporate Governance Code

does, however, acknowledge that some provisions

may have less relevance for investment companies,

adding that the AIC Code can assist in meeting the

obligations under the UK Corporate Governance

Code. With the exception of the limited items

outlined below, the Company has complied

throughout the accounting year ended 31 March

2022 with the provisions set out in the AIC Code of

Corporate Governance.

a) The Company has no major Shareholders, so

Shareholders are not given the opportunity to

meet any new non-executive Directors at a

specific meeting other than the Annual General

Meeting. (5.2.3)

b) Due to the size of the Board and nature of the

VCT’s business, the Board considers it

appropriate for the entire Board, including the

chair, to fulfil the role of the nomination, audit

and the remuneration committee. (7.2.22, 9.2.37,

8.2.29)

Corporate Governance Statement (continued)

Compliance statement (continued)

c) A Senior Independent Director has not been

appointed. (6.2.14)

By order of the Board

Grant Whitehouse

Company Secretary

St. Magnus House

3 Lower Thames Street

London EC3R 6HD

7 July 2022

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

Opinion on the financial statements

In our opinion the financial statements:

►

give a true and fair view of the state of the Company’s affairs as at 31 March 2022 and of its profit for

the year then ended;

►

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice;

►

have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Downing ONE VCT plc (the ‘Company’) for the year ended 31

March 2022 which comprise the Income Statement, the Statement of Changes in Equity, the Balance Sheet, the

Cash Flow Statement and notes to the financial statements, including a summary of significant accounting

policies. The financial reporting framework that has been applied in their preparation is applicable law and United

Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard

applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs

(UK)) and applicable law. Our responsibilities under those standards are further described in the

Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is

consistent with the additional report to the audit committee.

Independence

Following the recommendation of the audit committee, we were appointed by the Board of Directors to audit

the financial statements for the year ended 31 March 2010 and subsequent financial periods. The period of total

uninterrupted engagement including retenders and reappointments is 12 years, covering the years ended 31

March 2010 to 31 March 2022. We remain independent of the Company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical

Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in

accordance with these requirements. The non-audit services prohibited by that standard were not provided to

the Company.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of

accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’

assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:

 Obtaining the VCT compliance reports during the year and as at year end and reviewing their

calculations to check that the Company was meeting its requirements to retain VCT status;

 Reviewing the forecasted cash flows that support the Directors’ assessment of going concern and

challenging management’s assumptions and judgements made in the forecasts, assessing them for

reasonableness. In particular we considered the available cash resources relative to the forecast

expenditure and ability to meet VCT qualification criteria; and

 Evaluating the appropriateness of management’s method of assessing the going concern in light of

worst-case assumptions and the present uncertainties due to the Covid-19 pandemic.

Based on the work we have performed, we have not identified any material uncertainties relating to events or

conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a

going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements

about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the

relevant sections of this report.

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

Overview

2022 2021

Key audit matters Valuation of unquoted investments Yes Yes

Materiality Company financial statements as a whole

£1,915,000 (2021: £1,560,000) based on 1.75% of net assets (2021: 1.75% of fixed

asset investments)

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the Company and its environment, including the

Company’s system of internal control, and assessing the risks of material misstatement in the financial

statements. We also addressed the risk of management override of internal controls, including assessing

whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of

the financial statements of the current period and include the most significant assessed risks of material

misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on:

the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement

team. These matters were addressed in the context of our audit of the financial statements as a whole, and in

forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How the scope of our audit addressed the key audit

matter

Valuation of

unquoted

investments

Refer to note

2 and 10 of

the financial

statements

The unquoted

investments consist of

both equity and loan

note investments. We

consider the valuation

of unquoted

investments to be the

most significant audit

area as there is a high

level of estimation

uncertainty involved in

determining the

unquoted investment

valuations.

There is an inherent

risk of management

override arising from

the unquoted

investment valuations

being prepared by the

Investment Manager,

who is remunerated

based on the value of

the net assets of the

fund, as shown in note

Our sample for the testing of unquoted investments was stratified

according to risk considering, inter alia, the value of individual

investments, the nature of the investment, the extent of the fair

value movement and the subjectivity of the valuation technique.

For all Investments in our sample we:

Challenged whether the valuation methodology was the most

appropriate in the circumstances under the International Private

Equity and Venture Capital Valuation (“IPEV”) Guidelines and the

applicable accounting standards. We have checked that the

valuation methodology remains applicable given the impact of the

Russia/Ukraine crisis and Covid-19, and recalculated the value

attributable to the Company, having regard to the application of

enterprise value across the capital structures of the investee

companies.

For investments sampled that were valued using less subjective

valuation techniques (cost and price of recent investment reviewed

for changes in fair value) we:

►

Verified the cost or price of recent investment to supporting

documentation;

►

Considered whether the investment was an arm’s length

transaction through reviewing the parties involved in the

transaction and checking whether or not they were already

investors of the investee Company;

►

Considered whether there were any indications that the

cost or price of recent investment was no longer

representative of fair value considering, inter alia, the

current performance of the investee company and the

milestones and assumptions set out in the investment

proposal; and

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

An overview of the scope of our audit (continued)

Key audit matter How the scope of our audit addressed the key audit

matter

►

Considered whether the price of recent investment is

supported by alternative valuation techniques.

For investments sampled that were valued using more subjective

techniques (earnings multiples, revenue multiples and discounted

cash flow forecasts) we:

►

Challenged and corroborated the inputs to the valuation

with reference to management information of investee

companies, market data and our own understanding and

assessed the impact of the estimation uncertainty

concerning these assumptions and the disclosure of these

uncertainties in the financial statements;

►

Reviewed the historical financial statements and any recent

management information available to support assumptions

about maintainable revenues, earnings or cash flows used in

the valuations;

►

Considered the revenue or earnings multiples applied and

the discounts applied by reference to observable listed

company market data; and

►

Challenged the consistency and appropriateness of

adjustments made to such market data in establishing the

revenue, cash flow or earnings multiple applied in arriving at

the valuations adopted by considering the individual

performance of investee companies against plan and

relative to the peer group, the market and sector in which

the investee company operates and other factors as

appropriate.

For a sample of loan note investments held at fair value included

above, we:

►

Vouched security held to loan agreement

►

Considered the assumption that fair value is not significantly

different to cost by challenging the assumption that there is

no significant movement in the market interest rate since

acquisition and considering the “unit of account” concept

►

Reviewed the treatment of accrued redemption

premium/other fixed returns in line with the Statement of

Recommended Practice: Financial Statements of Investment

Trust Companies and Venture Capital Trusts (“the SORP”).

Where appropriate, we performed a sensitivity analysis by

developing our own point estimate where we considered that

alternative input assumptions could reasonably have been applied

and we considered the overall impact of such sensitivities on the

portfolio of investments in determining whether the valuations as a

whole are reasonable and free from bias.

Key observations:

Based on the procedures performed we consider the investment

valuations to be appropriate considering the level of estimation

uncertainty.

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of

misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could

influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we

use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,

misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the

nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their

effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and

performance materiality as follows:

Company financial statements

2022 2021

Materiality £1,915,000 £1,560,000

Basis for determining materiality 1.75% of net assets 1.75% of fixed asset investments

Rationale for the benchmark

applied

The primary focus of Investment

companies of this nature is long-

and short-term capital appreciation.

Therefore the users of the financial

statements are primarily focused on

the net asset value, hence we

consider this to be the most

appropriate basis for our materiality

calculations.

We have updated our materiality

basis during the year as in our

judgement, the users of the

financial statements are interested

in the net asset position as

compared to gross assets.

In setting materiality, we have

had regard to the nature and

composition of the investment

portfolio. Given that the VCT’s

portfolio is comprised of quoted

and unquoted investments

which would typically have a

wider spread of reasonable

alternative possible valuations,

we have applied a percentage of

1.75% of net assets.

Performance materiality £1,436,000 £1,170,000

Basis for determining performance

materiality

75% of materiality 75% of materiality

The level of performance

materiality applied was set after

having considered a number of

factors including the expected

total value of known and likely

misstatements.

The level of performance

materiality applied was set after

having considered a number of

factors including the expected

total value of known and likely

misstatements.

Lower testing threshold

We determined that for Revenue return before tax, a misstatement of less than materiality for the financial

statements as a whole, could influence users of the financial statements as it is a measure of the Company’s

performance of income generated from its investments after expenses. As a result, we determined a lower

testing threshold for those items impacting revenue return of £280,000 (2021: £253,000) based on 10% (2021:

10%) of gross expenditure.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of

£95,000 (2021: £31,000). We also agreed to report differences below this threshold that, in our view, warranted

reporting on qualitative grounds.

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

Other information

The directors are responsible for the other information. The other information comprises the information

included in the Report & Accounts other than the financial statements and our auditor’s report thereon. Our

opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is

to read the other information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be

materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are

required to determine whether this gives rise to a material misstatement in the financial statements themselves.

If, based on the work we have performed, we conclude that there is a material misstatement of this other

information, we are required to report that fact.

We have nothing to report in this regard.

Corporate governance statement

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability

and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions

of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our

audit, we have concluded that each of the following elements of the Corporate Governance Statement is

materially consistent with the financial statements, or our knowledge obtained during the audit.

Going concern

and longer-

term viability

 The Directors' statement with regards to the appropriateness of adopting the going

concern basis of accounting and any material uncertainties identified; and

 The Directors’ explanation as to their assessment of the Company’s prospects, the

period this assessment covers and why the period is appropriate.

Other Code

provisions

 Directors' statement on fair, balanced and understandable;

 Board’s confirmation that it has carried out a robust assessment of the emerging and

principal risks;

 The section of the annual report that describes the review of effectiveness of risk

management and internal control systems; and

 The section describing the work of the audit committee.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are

required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described

below.

Strategic

report and

Directors’

report

In our opinion, based on the work undertaken in the course of the audit:

 the information given in the Strategic report and the Directors’ report for the

financial year for which the financial statements are prepared is consistent with the

financial statements; and

 the Strategic report and the Directors’ report have been prepared in accordance

with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its environment

obtained in the course of the audit, we have not identified material misstatements in the

strategic report or the Directors’ report.

Directors’

remuneration

In our opinion, the part of the Directors’ remuneration report to be audited has been

properly prepared in accordance with the Companies Act 2006.

Matters on

which we are

required to

report by

exception

We have nothing to report in respect of the following matters in relation to which the

Companies Act 2006 requires us to report to you if, in our opinion:

 adequate accounting records have not been kept, or returns adequate for our audit

have not been received from branches not visited by us; or

 the financial statements and the part of the Directors’ remuneration report to be

audited are not in agreement with the accounting records and returns; or

 certain disclosures of Directors’ remuneration specified by law are not made; or

 we have not received all the information and explanations we require for our audit.

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

Responsibilities of Directors

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the

preparation of the financial statements and for being satisfied that they give a true and fair view, and for such

internal control as the Directors determine is necessary to enable the preparation of financial statements that are

free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations,

or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our

opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures

in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,

including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is

detailed below:

We gained an understanding of the legal and regulatory framework applicable to the Company and the industry

in which it operates and considered the risk of acts by the Company which were contrary to applicable laws and

regulations, including fraud. These included but were not limited to compliance with Companies Act 2006, the

FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry practice represented

by the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture

Capital Trusts (“the SORP”) and updated in February 2018 with consequential amendments and the applicable

financial reporting framework. We also considered the Company’s qualification as a VCT under UK tax

legislation.

Our procedures included:

 obtaining an understanding of the control environment in monitoring compliance with laws and

regulations;

 agreement of the financial statement disclosures to underlying supporting documentation;

 enquiries of management and those charged with governance relating to their knowledge of any non-

compliance with laws and regulations;

 obtaining the VCT compliance reports prepared by management’s expert during the year and as at year

end and reviewing their calculations to check that the Company was meeting its requirements to retain

VCT status; and

 reviewing minutes of board meetings and legal correspondence and invoices throughout the period for

instances of non-compliance with laws and regulations and fraud.

We assessed the susceptibility of the financial statement to material misstatement including fraud and

considered the fraud risk areas to be the valuation of unquoted investments and management override of

controls.

Independent Auditor’s Report to the Members of

Downing ONE VCT plc

(continued)

Auditor’s responsibilities for the audit of the financial statements (continued)

Our tests included, but were not limited to:

 the procedures set out in the Key audit matters section above;

 obtaining independent evidence to support the ownership of a sample of investments;

 enquiries of management, those charged with governance relating to their knowledge of any fraud,

whether suspected or alleged

 recalculating investment management fees in total;

 obtaining independent confirmation of bank balances; and

 testing journals which met a defined risk criteria by agreeing to supporting documentation and

evaluating whether there was evidence of bias by the Investment Manager and Directors that

represented a risk of material misstatement due to fraud.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team

members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout

the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements,

recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not

detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery,

misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and

the further removed non-compliance with laws and regulations is from the events and transactions reflected in

the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members

those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the

Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Vanessa-Jayne Bradley (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

7 July 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Income Statement

for the year ended 31 March 2022

ear ended 31 March 2022 Year ended 31 March 2021

Revenue Capital Total Revenue Capital Total

0B0B0BNote £’000 £’000 £’000 £’000 £’000 £’000

1BIncome 2B2333 4,584 - 4,584 1,333 - 1,333

Gains on investments 3B310 - 8,619 8,619 - 7,402 7,402

4,584 8,619 13,203 1,333 7,402 8,735

Investment management fees 4B44 (1,051) (1,051) (2,102) (817) (817) (1,634)

Other expenses 5B5 (705) - (705) (900) - (900)

Return/(loss) on ordinary

activities before tax

2,828 7,568 10,396 (384) 6,585 6,201

Tax on total comprehensive

income and ordinary activities

6B7 (300) 300 -

(232) 232 -

Return/(loss) attributable to

equity shareholders

7B79 2,528 7,868 10,396

(616) 6,817 6,201

Basic and diluted return/(loss) per

8B8B9 1.4 4.5 5.9

(0.4) 4.4 4.0

The total column within the Income Statement represents the Statement of Total Comprehensive Income of the

Company prepared in accordance with Financial Reporting Standards (“FRS 102”). There are no other items of

comprehensive income. The supplementary revenue and capital return columns are prepared in accordance with

the Statement of Recommended Practice issued in November 2014 and updated in April 2021 by the

Association of Investment Companies (“AIC SORP”).

The accompanying notes form an integral part of these financial statements.

Statement of Changes in Equity

for the year ended 31 March 2022

Called

Capital

redemption

reserve

premium

account

Funds

held in

respect of

not yet

allotted

Special

reserve

Capital

reserve

realised

Revaluation

reserve

Revenue

reserve

Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

For the year ended 31 March 2021

At 1 April 2020 1,440 1,615 54,703 5,775 34,587 - (8,504) (874) 88,742

Total comprehensive

income - - - - - (780) 7,597 (616) 6,201

Realisation of

revaluations from

previous years* - - - - - (1,735) 1,735 - -

Realisation of impaired

valuations - - - - - (5,581) 5,581 - -

Transfer between

reserves* - - - - (12,197) 12,197 - - -

Transactions with owners

Dividends paid - - - - - (4,101) - (1,039) (5,140)

Utilised in share issue - - - (5,775) - - - - (5,775)

Unallotted shares - - - 7,545 - - - - 7,545

Issue of new shares 205 - 11,727 - - - - - 11,932

Share issue costs - - - - (286) - - - (286)

Purchase of own

shares** (34) 34 - - (1,866) - - - (1,866)

At 31 March 2021 1,611 1,649 66,430 7,545 20,238 - 6,409 (2,529) 101,353

For the year ended 31 March 2022

At 1 April 2021 1,611 1,649 66,430 7,545 20,238 - 6,409 (2,529) 101,353

Total comprehensive

income - - - - - 2,971 4,897 2,528 10,396

Realisation of

revaluations from

previous years* - - - - - 794 (794) - -

Realisation of impaired

valuations - - - - - (791) 791 - -

Transfer between

reserves* - - - (738) 738 - - -

Transactions with owners

Dividends paid - - - - - (3,712) - (743) (4,455)

Utilised in share issue - - - (7,545) - - - - (7,545)

Unallotted shares - - - 78 - - - - 78

Issue of new shares 213 - 12,605 - - - - - 12,818

Share issue costs - - - - (360) - - - (360)

Purchase of own

shares** (48) 48 - - (2,812) - - - (2,812)

At 31 March 2022 1,776 1,697 79,035 78 16,328 - 11,303 (744) 109,473

* A transfer of £794,000 representing previously recognised unrealised gains on disposal of investments during

the year ended 31 March 2022 (2021: losses of £1,735,000) has been made from the Revaluation reserve to

the Capital Reserve-realised. A transfer of £738,000 representing realised gains on disposal of investments,

less net investment impairments and the excess of capital expenses over capital income and capital dividends

in the year (2021: £12.2 million) has been made from the Special reserve to the Capital Reserve – realised.

** These shares were subsequently cancelled.

The accompanying notes form an integral part of these financial statements.

Balance Sheet

as at 31 March 2022

2022 2021

Note £’000 £’000

Fixed assets

Investments 10 85,954 89,157

Current assets

Debtors 11 3,300 2,001

Cash at bank and in hand 20,856 10,738

24,156 12,739

Creditors: amounts falling due within one year 12 (637) (543)

Net current assets 23,519 12,196

Net assets 109,473 101,353

9B9

Capital and reserves

Called up share capital 13 1,776 1,611

Capital redemption reserve 14 1,697 1,649

Share premium account 14 79,035 66,430

Funds held in respect of shares not yet allotted 14 78 7,545

Special reserve 14 16,328 20,238

Revaluation reserve 14 11,303 6,409

Revenue reserve (744) (2,529)

Total equity shareholders’ funds 15 109,473 101,353

Basic and diluted net asset value per share 15 61.6p 58.2p

The financial statements on pages 54 to 75 were approved and authorised for issue by the Board of Directors on

7 July 2022 and were signed on its behalf by:

Chris Kay

Chairman

Company number: 3150868

The accompanying notes form an integral part of these financial statements.

Cash Flow Statement

for the year ended 31 March 2022

2022 2021

Note £’000 £’000

Cash flow from operating activities

Gain/(loss) on ordinary activities after taxation 10,396 6,201

(Gain)/loss on investments 10 (8,619) (7,402)

(Increase) in debtors (1,298) (57)

Increase in creditors 72 25

Net cash generated from/ (used in) operating activities 551 (1,233)

Cash flow from investing activities

Purchase of investments 10 (4,619) (21,403)

Proceeds from disposal of investments 10 16,441 3,238

Net cash inflow/(outflow) from investing activities 11,822 (18,165)

Cash flows from financing activities

Proceeds from share issue 12,121 11,933

Funds held in respect of shares not yet allotted (7,467) 1,770

Share issue costs (360) (286)

Purchase of own shares (2,791) (1,612)

Equity dividends paid 8 (3,758) (5,140)

Net cash (outflow)/inflow from financing activities (2,255) 6,665

Increase/(decrease) in cash 10,118 (12,733)

Net movement in cash

Beginning of year 10,738 23,471

Net cash (outflow)/inflow 10,118 (12,733)

End of year 20,856 10,738

The accompanying notes form an integral part of these financial statements.

Notes to the Accounts

for the year ended 31 March 2022

1. General information

Downing ONE VCT plc (“the Company”) is a venture capital trust established under the legislation

introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and

Wales, 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” issued November 2014 and updated in April 2021 (“SORP”).

The financial statements are presented in Sterling (£) and rounded to thousands.

Going concern

After reviewing the Company’s forecasts and projections, the Directors have a reasonable expectation that

the major cash outflows of the Company (most notably investments, share buybacks and dividends) are

within the Company’s control and therefore the Company has sufficient cash to meet its expenses and

liabilities when they fall due. The impact of COVID-19 has been considered. More detail on these

considerations can be found within the Corporate Governance report. As such, the Board confirms that the

Company has adequate resources to continue in operational existence for at least 12 months from the date

of approval of the financial statements. The Company therefore continues to adopt the going concern basis

in preparing its financial statements as noted further within the Corporate Governance Report on page 45.

Presentation of income statement

In order to better reflect the activities of a Venture Capital Trust and in accordance with guidance issued by

the Association of Investment Companies (“AIC”), supplementary information which analyses the income

statement between items of a revenue and capital nature has been presented alongside the income

statement. The net revenue 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.

Investments

Venture capital investments are designated as “fair value through profit or loss” assets due to investments

being managed and their performance evaluated on a fair value basis. 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.

Investments quoted on recognised stock markets are measured using bid prices.

The valuation methodologies for unquoted instruments (comprising equity and loan notes), used by the IPEV

to ascertain the fair value of an investment, are as follows:

 Calibration to the price of recent investment;

 Multiples;

 Net assets;

 Discounted cash flows or earnings (of the 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, as

explained in the investment accounting policy above and addressed further in note 10. Where an investee

company has gone into receivership, liquidation or administration and there is little likelihood of a recovery,

the loss on the investment, although not physically disposed of, is treated as being realised.

Gains and losses arising from changes in fair value are included in the income statement as a capital item.

Notes to the Accounts (continued)

for the year ended 31 March 2022

2. Accounting policies (continued)

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 the SORP and FRS 102 sections 14 and 15 that 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 Board and Adviser

consider 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”).

A price sensitivity analysis of the unquoted investments is provided in note 16, under Investment price risk.

Income

Dividend income from investments is recognised when the shareholders’ right to receive payment has been

established, normally the ex-dividend date.

Loan stock interest is accrued on a time apportioned basis, by reference to the principal outstanding and at

the effective interest rate applicable and only where there is reasonable certainty of collection.

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 profits.

Expenses

All expenses are accounted for on an accruals basis. 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.

Notes to the Accounts (continued)

for the year ended 31 March 2022

2. Accounting policies (continued)

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.

Deferred taxation is not discounted and 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 the obligations or rights crystallise based on tax rates and law enacted or substantively enacted

at the balance sheet date. 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. Deferred

tax assets are only recognised if it is expected that future taxable profits will be available to utilise such

assets and are recognised on a non-discounted basis.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity

of three months or less.

Other debtors and other creditors

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

cost.

Share issue costs

Share issue costs have been deducted from the special reserve account.

Segmental reporting

The Company only has one class of business and one market.

Dividends payable

Dividend’s payable are recognised as distributions in the financial statements when the Company’s liability

to make payment has been established, normally the record date.

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 and Statement of Changes in

Equity.

3. Income

2022 2021

Revenue Capital Total Total

£’000 £’000 £’000 £’000

Income from investments

Loan stock interest 4,185 - 4,185 939

Dividend income 399 - 399 357

4,584 - 4,584 1,296

Other income

Other income - - - 2

Deposit interest - - - 35

4,584 - 4,584 1,333

Notes to the Accounts (continued)

for the year ended 31 March 2022

4. Investment management fees

2022 2021

£’000 £’000

Investment management fees 2,102 1,634

The annual running costs of the Company for the year were subject to a cap of 2.6% of the Company’s net

assets. The expense cap for the year was 2.5% and therefore has not been breached for the year under review.

Downing LLP also provides administration services. Fees in relation to these services are shown within note

5 below.

5. Other expenses

2022 2021

£’000 £’000

Administration services 166 147

Directors’ remuneration 108 112

Social security costs (key management personnel) 4 8

Trail fee 192 172

Auditor’s remuneration for statutory audit 50 42

Legal and professional fees 13 5

Custodian charges 24 62

Registrar’s fees 68 77

Provision for doubtful income - 69

Other expenses 80 206

705 900

6. Directors’ remuneration

The Directors of the Company are considered to be the only key management personnel. Details of

remuneration (excluding employer’s NIC) are given in the Directors’ Remuneration Report on page 40. The

Company had no employees (other than Directors) during the year (2021: none). No other emoluments and

pension contributions were paid by the Company to, or on behalf of, any Directors. There were no amounts

outstanding at the year end.

Notes to the Accounts (continued)

for the year ended 31 March 2022

7. Tax on ordinary activities

2022 2021

£’000 £’000

a) Tax charge for the year

Current year:

UK Corporation tax (charged to the Revenue Account) 300 232

Tax credited to Capital Account (300) (232)

- -

b) Factors affecting tax charge for the year

Gain on ordinary activities before taxation 10,396 6,201

Tax charge calculated on return on ordinary activities before taxation at the

applicable rate of 19.0% (2021: 19.0%)

1,975

1,178

Effects of:

(Gains)/losses on investments (1,638) (1,406)

UK dividend income (76) (68)

LLP income 28 90

Disallowable expenses 2 3

Partnership trading losses utilised (79) -

Excess management fees (utilised)/carried forward on which deferred

tax asset is not recognised (212)

203

- -

c) Excess management fees, which are available to be carried forward and set off against future taxable

income, amounted to £3.4 million (2021: £4.3 million). The associated deferred tax asset has not been

recognised due to the fact that it is unlikely that the excess management fees will be set off against

future taxable profits in the foreseeable future. Due to the Company’s status as a Venture Capital Trust

and the intention to continue meeting the conditions required to obtain approval in the foreseeable

future, the Company has not provided deferred tax on any capital gains and losses arising on the

revaluation or disposal of investments.

A deferred tax asset of £410,000 arising from investments in LLP companies has not been recognised

as it is uncertain whether the losses carried forward will be offset against future taxable profits of the

same trade in the foreseeable future.

8. Dividends

ear ended 31 March 2022 Year ended 31 March 2021

Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Dividends paid in year

2022 Interim: 1.25p - 2,227 2,227 - - -

2021 Final: 1.25p 743 1,485 2,228 - - -

2021 Interim: 1.25p - - - - 2,021 2,021

2020 Final: 2.0p - - - 1,039 2,080 3,119

743 3,712 4,455 1,039 4,101 5,140

Dividends proposed

2022 Final: 1.75p (2021: 1.25p) 1,900 1,207 3,107 732 1,463 2,195

Notes to the Accounts (continued)

for the year ended 31 March 2022

9. Basic and diluted return per share

2022 2021

£’000 £’000

Return per share based on:

Net revenue gain/(loss) for the financial year 2,528 (616)

Net capital gain for the financial year 7,868 6,817

Total gain for the financial year 10,396 6,201

Weighted average number of shares in issue 177,473,899 156,403,594

As the Company has not issued any convertible securities or share options, there is no dilutive effect on return

per share. The return per share disclosed therefore represents both the basic and diluted return per share.

10. Investments

Unquoted

investments

Quoted

on Aquis

Growth

Marke

Quoted

on Main

Marke

Quoted

AIM

Total

£’000 £’000 £’000 £’000 £’000

Opening cost at 1 April 2021 78,828 48 6,714 15,359 100,949

Unrealised gains/(losses) at 1 April 2021 3,678 (44) (1,267) 4,042 6,409

Realised (losses) arising on impairment (17,933) - - (268) (18,201)

Opening fair value at 1 April 2021 64,573 4 5,447 19,133 89,157

Movement in the year:

Purchased at cost 3,091 - - 1,528 4,619

Disposal proceeds (13,033) - - (3,408) (16,441)

Realised gains in the income statement 1,594 - - 2,128 3,722

Unrealised valuation gains in the income statement 3,136 (1) (177) 1,428 4,386

Unrealised foreign exchange gains in the

income statement

511

Transfers between investment categories (600) - - 600 -

Closing fair value at 31 March 2022 59,272 3 5,270 21,409 85,954

Closing cost at 31 March 2022 64,526 48 6,714 15,976 87,264

Unrealised gains/(losses) at 31 March 2022 7,089 (45) (1,444) 5,703 11,303

Realised losses arising on impairment (12,343) - - (270) (12,613)

Closing fair value at 31 March 2022 59,272 3 5,270 21,409 85,954

A schedule disclosing the additions and disposals during the year and other information on investments can

be found within the Review of Investments on pages 19 to 20.

Notes to the Accounts (continued)

for the year ended 31 March 2022

10. Investments (continued)

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level 1 Reflects financial instruments quoted in an active market (quoted companies);

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

Level 3 Reflects financial instruments that use valuation techniques that are not based on observable market

data (unquoted equity investments and loan note investments).

Level 1 Level 2 Level 3 2022 Level 1 Level 2 Level 3 2021

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Quoted on AIM 21,409 - - 21,409 19,133 - - 19,133

Quoted on Aquis 3 - - 3 4 - - 4

Quoted on Main market 5,270 - - 5,270

5,447 - - 5,447

Loan notes - - 16,264 16,264 - - 19,891 19,891

Unquoted - - 43,008 43,008 - - 44,682 44,682

26,682 - 59,272 85,954 24,584 - 64,573 89,157

Reconciliation of fair value for Level 3 financial instruments held at the year end:

Unquoted Loan

shares notes Total

£’000 £’000 £’000

Balance at 31 March 2021 44,682 19,891 64,573

Movements in the income statement:

Unrealised valuation gains in the income statement 1,601 1,535 3,136

Unrealised foreign exchange gains in the income statement 511 - 511

Realised (losses)/gains in the income statement (2,239) 3,833 1,594

44,555 25,259 69,814

Purchases at cost 2,657 434 3,091

Disposal proceeds (3,604) (9,429) (13,033)

Transfer between investment categories (600) - (600)

Balance at 31 March 2022 43,008 16,264 59,272

Changing one or more of the inputs to reasonable possible alternative valuation assumptions could result in a

significant change in the fair value of the Level 3 investments. There is an element of judgement in the choice

of assumptions for unquoted investments and it is possible that, if different assumptions were used, different

valuations could have been attributed to some of the Company’s investments.

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”). A price sensitivity analysis of the unquoted investments is

provided in note 16, under Investment price risk.

The Board and the Investment Adviser believe that the valuations as at 31 March 2022 reflect the most

appropriate assumptions at that date, giving due regard to all information available from each investee

company. Valuations are subject to fluctuations in market conditions and the sensitivity of the Company to

such changes is shown within note 16.

Significant interests

Details of shareholdings in those companies where the Company’s holding, at 31 March 2022, represents

greater than 20% of the nominal value of any class of the allotted shares in the portfolio company are included

within the review of investments on pages 21 to 24. Relevant companies which are not included within the

review of investments are disclosed on the next page. Although the Company, through the Investment Adviser

will, in some cases, be represented on the Board of the portfolio company, it will not take a controlling interest

in the company.

Notes to the Accounts (continued)

for the year ended 31 March 2022

10. Investments (continued)

Significant interests (continued)

The investments listed below are held and managed as part of the investment portfolio and therefore, in

accordance with FRS 102 section 14, are measured at fair value through profit or loss. All of the companies

named are incorporated in Great Britain. The percentage holding does not reflect the percentage voting rights

in the company as a whole.

Compan

Registered

office

Class of shares

Number

held

Proportion

of class

held

Proportion

of total

voting

rights

Bulbshare Limited SE1 3S

Ordinary ‘A1’ Shares 898 22.5% 3.7%

Cadbury House Holdings

Limited EC3R 6HD Ordinary Shares 892,306 36.2% 36.2%

Channel Mum Limited RG1 1PL Ordinary ‘D1’ Shares 57,022 26.3% 9.6%

Cornelis Networks

Inc EC4M 8AL

Preference ‘A3’

Shares 2,700,000 42.2% 4.7%

Data Centre Response

Limited SN6 8T

Ordinary ‘A’ Shares 1,477 100% 49.6%

Data Centre Response

Limited SN6 8T

Ordinary ‘B’ Shares 181,048 100% -

DiA Analysis Imagining

Limited

WC1H

0AF

Preference ‘C1’

Shares 22,570 43.0% 0.7%

Empiribox Holdings Limited OX11 0QX Ordinary ‘C’ Shares 2,515,592 40.9% 8.7%

Empiribox Holdings Limited OX11 0QX Ordinary ‘D’ Shares 1,377,144 41.5% -

Empiribox Holdings Limited OX11 0QX Ordinary ‘E’ Shares 13,548,122 37.4% 30.3%

Glisser Limited EC2A 4NE Ordinary ‘B3’ Shares 279,165 52.7% 5.2%

ito Trading Limited YO8 6EL Ordinary ‘B’ Shares 2,551,020 50.0% 25.0%

Kimbolton Lodge Limited EC3R 6HD Ordinary ‘A’ Shares 603,500 50.0% 50.0%

Pearce and Saunders

Limited EC3R 6HD Ordinary Shares 950,400 44.0% 4.4%

Pearce and Saunders

DevCo Limited EC3R 6HD Ordinary ‘A’ Shares 83,600 44.0% 4.4%

Pilgrim Trading Limited EC3R 6HD Ordinary ‘A’ Shares 300 60.0% 13.9%

Pilgrim Trading Limited EC3R 6HD Ordinary ‘B’ Shares 1,815,348 60.0% -

Quadrate Catering Limited EC3R 6HD Ordinary ‘A’ Shares 257 39.5% 25.7%

Quadrate Catering Limited EC3R 6HD Ordinary ‘B’ Shares 1,049,654 39.5% -

Rated People Limited SE1 8NW Ordinary ‘C’ Shares 30,171 21.4% 2.7%

rinny London Limited SW3 3TD Preference ‘B2’ Share

1,820 29.5% 0.9%

irtual Class Limited E1 8EW Ordinary ‘B’ Shares 3,238 50.0% 1.9%

irtual Class Limited E1 8EW Ordinary ‘C2’ Shares 4,662 30.1% 2.7%

amuna Renewables

Limited YO8 6EL Ordinary ‘B’ Shares 2,551,020 50.0% 25.0%

Notes to the Accounts (continued)

for the year ended 31 March 2022

11. Debtors

2022 2021

£’000 £’000

Other debtors 103

632

Income tax recoverable 3 3

Prepayments and accrued income 3,194 1,366

3,300 2,001

12. Creditors: amounts falling due within one year

2022 2021

£’000 £’000

Taxation and social security 6 14

Other creditors 46 10

Accruals and deferred income 585 519

637 543

13. Called up share capital

2022 2021

£’000 £’000

Issued, allotted, called up and fully paid:

177,567,399 (2021: 161,094,068) Ordinary Shares of 1p each 1,776 1,611

The Company allotted 20,170,101 Ordinary Shares of 1p each at an average price of 60.6p per Ordinary Share

under the terms of the offers for subscription. The aggregate consideration of the shares was £12.1 million,

which excludes costs of £360,000.

Under the terms of the Company’s Dividend Reinvestment scheme, the Company allotted 1,148,756 Ordinary

Shares of 1p each at an average price of 60.7p, to subscribing shareholders in respect of the dividends paid

on 27 August 2021 and 25 February 2022 respectively.

During the year, the Company repurchased 4,845,526

Ordinary Shares of 1p each for an average

consideration of 57.8p per share, representing 3.0% of those shares in issue at the last Annual Report. These

shares were subsequently cancelled.

Management of capital

The Company’s capital is managed in accordance with its investment policy, as shown in the Strategic Report

on pages 30 to 31, in pursuit of its principal investment objectives as stated on page 2. The Company has the

authority to buy back shares as described in the Strategic Report on page 33. The Company’s objectives when

managing capital are to safeguard the Company’s ability to continue as a going concern, so that it can continue

to provide an adequate return to Shareholders by allocating its capital to assets commensurately with the

level of risk. As a Venture Capital Trust, the Company has an amount of capital, at least 80% (as measured

under the tax legislation) of which is and must be, and remain, invested in the relatively high-risk asset class

of small UK companies within three years of that capital being subscribed. The Company accordingly has

limited scope to manage its capital structure in the light of changes in economic conditions and the risk

characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure,

the Company may adjust the amount of dividends paid to Shareholders, return capital to Shareholders, issue

new shares or sell assets if so required to maintain a level of liquidity to remain a going concern.

Notes to the Accounts (continued)

for the year ended 31 March 2022

13. Called up share capital (continued)

Although, as the Investment Policy implies, the Board would consider levels of gearing, there are no current

plans to do so. It regards the net assets of the Company as the Company’s capital, as the levels of liabilities

are small and the management of them is not directly related to managing the return to Shareholders. There

has been no change in this approach from the previous year.

There is a single class of Ordinary Shares. There are no restrictions on the distribution of dividends and the

repayment of capital.

14. Reserves

2022 2021

£’000 £’000

Capital redemption reserve 1,697 1,649

Share premium account 79,035 66,430

Funds held in respect of shares not yet allotted 78 7,545

Special reserve 16,328 20,238

Revaluation reserve 11,303 6,409

Revenue reserve (744) (2,529)

107,697 99,742

Distributable reserves are calculated as follows:

2022 2021

£’000 £’000

Special reserve 16,328 20,238

Revenue reserve (744) (2,529)

Unrealised (losses) (excluding unrealised unquoted gains) (4,200) (3,547)

11,384 14,162

Capital redemption reserve

This reserve accounts for amounts by which the issued share capital is diminished through the repurchase

and cancellation of the Company’s own shares.

Share premium account

This reserve accounts for the difference between the price paid for shares and the nominal value of the shares,

less issue costs and transfers to the other distributable reserves.

Funds held in respect of shares not yet allotted

This reserve accounts for cash received in respect of applications for new shares that have not yet been

allotted and is recorded on the Balance Sheet.

Special reserve

The Special reserve is available to the Company to enable the purchase of its own shares in the market without

affecting its ability to pay capital distributions. Share issue costs are also charged to the special reserve.

Notes to the Accounts (continued)

for the year ended 31 March 2022

14. Reserves (continued)

Capital reserve - realised

The following are disclosed in this reserve:

 gains and losses compared to cost on the realisation of investments;

 expenses, together with the related taxation effect, charged in accordance with the above accounting

policies; and

 dividends paid to equity holders.

Revaluation reserve

Increases and decreases in the valuation of investments held at the year-end against cost are included in this

reserve.

Revenue reserve

This reserve accounts for movements from the revenue column of the Income statement, the payment of

dividends and other non-capital realised movements.

15. Basic and diluted net asset value per share

in issue

Net

assets

NAV

per

£’000 Pence

As at 31 March 2022

Ordinary Shares

177,567,399 109,473 61.6

109,473

As at 31 March 2021

Ordinary Shares

161,094,068 101,353 58.2

101,353

As the Company has not issued any convertible securities or share options, there is no dilutive effect on the

net asset value per share. The net asset value per share disclosed therefore represents both the basic and

diluted net asset value per share.

The Company’s net assets as at 31 March 2022 included funds held in respect of shares not yet allotted of

£78,000.

16. Financial instruments

The Company’s financial instruments comprise investments held at fair value through profit or loss, being

equity and loan stock investments in quoted companies and unquoted companies, loans and receivables, being

cash deposits and short-term debtors, and financial liabilities, being creditors arising from its operations. The

main purpose of these financial instruments is to generate cash flows, revenue and capital appreciation for

the Company’s operations. The Company has no gearing or other financial liabilities, apart from short-term

creditors and does not use any derivatives.

The fair value of investments is determined using the detailed accounting policy as shown in note 2. The

composition of the investments is set out in note 10. The fair value of cash deposits and short-term debtors

and creditors equates to their carrying value in the balance sheet.

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

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:

 Investment 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 on the following pages.

Investment 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 investment

risks is a fundamental part of the investment activities undertaken by the Investment Adviser and overseen

by the Board. The Investment Adviser monitors investments through regular contact with management of

investee companies, regular review of management accounts and other financial information and attendance

at investee company board meetings. This enables the Investment Adviser 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 investment risks to which the Company is exposed are:

 Investment price risk;

 Interest rate risk; and

 Foreign currency exposure 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 investment price movements in respect of quoted investments and also

changes in the fair value of unquoted investments that it holds.

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

Investment price risk (continued)

Quoted investments

The Company’s sensitivity to fluctuations in the share prices of its quoted investments, excluding fixed

interest bonds, is summarised below. In light of the current volatile market conditions arising from the

coronavirus pandemic and the conflict in Ukraine, the Board has considered the reasonably possible market

movements that should be illustrated with sensitivity analysis. A positive 20% movement and negative 50%

movement in the share price in each of the quoted stocks held by the Company is considered to be a

reasonable maximum movement in a year and would have an effect as follows:

ear ended 31 March 2022

Sensitivity +20%

movement

-50%

movement

Risk

exposure

Impact on

net assets/

return

Impact

on NAV

per

Impact on

net assets/

return

Impact on

NAV per

£’000 £’000 Pence £’000 Pence

Quoted shares 26,682 5,336 3.0 (13,341) (7.5)

ear ended 31 March 2021

Sensitivity +20%

movement

-50%

movement

Risk

exposure

Impact on

net assets/

return

Impact

on NAV

per

Impact on

net assets/

return

Impact on

NAV per

£’000 £’000 Pence £’000 Pence

Quoted shares 24,584 4,917 3.1 (12,292) (7.6)

Unquoted investments

At 31 March 2022, the unquoted portfolio was valued at £59,272,000 (31 March 2021: £64,573,000). A

breakdown of the unquoted portfolio by valuation method used is as follows:

2022

£’000

Calibration to price of recent investment 26,742

Discounted cash flows (from the investment) 15,622

Multiples 12,695

Net Assets 4,213

59,272

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

Investment price risk (continued)

As many of the Company’s unquoted investments are valued using revenue or earnings multiples of

comparable companies or sectors, a change in the relevant market sectors could impact on the valuation of

the equity investments held in the unquoted portfolio. As the unquoted investments are across a broad

range of sectors and valued using different valuation techniques, it is not possible to create a meaningful

analysis by changing one input or discount factor. As unquoted investments are typically structured as partly

equity and partly loan notes, investment price risk of the unquoted investments is considered as a whole.

The Board has considered the current volatile market conditions arising from the coronavirus pandemic in

determining the reasonably possible market movements that should be illustrated within sensitivity analysis.

A positive 20% and negative 50% movement in the price of these investments is considered to be a

reasonable maximum level in a year and would have an effect as shown below:

ear ended 31 March 2022

Sensitivity +20%

movement

-50%

movement

Risk

exposure

Impact on

net assets/

return

Impact

on NAV

per

Impact on

net assets/

return

Impact on

NAV per

£’000 £’000 Pence £’000 Pence

Unquoted investments 59,272 11,854 6.7 (29,636) (16.7)

ear ended 31 March 2021

Sensitivity +20%

movement

-50%

movement

Risk

exposure

Impact on

net assets/

return

Impact

on NAV

per

Impact on

net assets/

return

Impact on

NAV per

£’000 £’000 Pence £’000 Pence

Unquoted investments 64,573 12,914 8.0 (32,286) (20.0)

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

Investment price risk (continued)

The sensitivity analysis for unquoted valuations above assumes that each of the sub-categories of financial

instruments (ordinary shares and loan stocks) held by the Company produces an overall positive movement

of 20% and negative movement of 50%. Shareholders should note that equal correlation between these

sub-categories is unlikely to be the case in reality, particularly in the case of loan stock instruments. Where

share prices are falling, the equity instrument could fall in value before the loan stock instrument. It is not

considered practical to assess the sensitivity of the loan stock instruments to investment price risk in

isolation.

Interest rate risk

The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of

changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with

its bankers. Investments in loan stock and fixed interest securities attract interest predominately at fixed

rates. A summary of the interest rate profile of the Company’s investments is shown below.

Interest rate profile of financial assets and financial liabilities

There are three levels of interest which are attributable to the financial instruments as follows:

 “Fixed rate” assets represent investments with predetermined yield targets and comprise fixed interest

and loan note investments.

 “Floating rate” assets predominantly bear interest at rates linked to the Bank of England base rate and

comprise cash at bank.

 “No interest rate” assets do not attract interest and comprise equity investments, non-interest-bearing

convertible loan notes, loans and receivables (excluding cash at bank) and other financial liabilities.

Interest rate risk profile of financial assets and financial liabilities

Weighted Weighted

average average period 2022 2021

interest rate until maturit

£’000 £’000

Fixed rate 23.3% 1,723 days 16,264 19,891

Floating rate 0.0% 20,856 10,738

No interest rate 72,353 70,724

109,473 101,353

The Company monitors the level of income received from fixed, floating and non-interest rate assets and, if

appropriate, may make adjustments to the allocation between the categories, in particular, should this be

required to ensure compliance with the VCT regulations.

During the period the Bank of England base rate has increased from 0.1% per annum to 0.75% per annum at

the period end. Following the period end, in May 2022, the rate increased further, to 1.0% per annum. Any

potential change in the base rate at the current level would not have a material impact on the net assets and

total return of the Company.

Foreign currency exposure risk

The Company has exposure to foreign currency risk through its investments in companies whose valuation

is denominated and who report in US Dollars. This has resulted in an unrealised foreign exchange loss of

£511,000 (2021: £735,000) during the year. Due to the relatively low exposure to companies denominated

in foreign currencies, the Board considers foreign currency risk to be at an acceptable level and does not

seek to mitigate such exposure as this could restrict the net returns from the foreign currency investments.

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

Credit risk

Credit risk is the risk that the counterparty to a financial instrument is unable to discharge a commitment to

the Company made under that instrument. The Company is exposed to credit risk through its holdings of

loan stock in investee companies, investments in fixed interest securities, cash deposits and debtors.

The Company’s financial assets that are exposed to credit risk are summarised as follows:

2022 2021

£’000 £’000

Fair value through profit or loss assets:

Investments in loan stocks 16,264 19,891

Loans and receivables:

Cash and cash equivalents 20,856 10,738

Interest, dividends and other receivables 3,170 1,277

40,290 31,906

The Investment Adviser manages credit risk in respect of loan notes with a similar approach as described

under investment risks above. In addition, with the exception of new investments, credit risk is mitigated by

registering floating charges, covering the full par value of the loan stock in the form of fixed and floating

charges over the assets of the investee companies. The strength of this security in each case is dependent

on the nature of the investee company’s business and its identifiable assets. The level of security is a key

means of managing credit risk. Similarly, the management of credit risk associated with interest, dividends

and other receivables is covered within the investment management procedures.

Cash is mainly held at Royal Bank of Scotland plc, with a balance also maintained at Bank of Scotland plc,

both of which are A-rated financial institutions. Consequently, the Directors consider that the credit risk

associated with cash deposits is low.

There has been limited changes in fair value during the year that can be directly attributable to changes in

credit risk.

As at 31 March 2022, of the loan stock classified as “past due”, on the next page, £911,000 relates to the

principal of loan notes where, although the principal remains within the term, the investee company is not

fully servicing the interest obligations under the loan note and is in arrears. Notwithstanding the arrears of

interest, the Directors do not consider that the loan note itself has been impaired or the maturity of the

principal has altered.

As at 31 March 2022, of the loan stock classified as “past due”, on the next page, £6,760,000 relates to the

principal of loan notes where the principal has passed its maturity date. As at the balance sheet date, the

extent to which the principal is past its maturity date, £874,000 falls within the banding of nil to 2 years past

due and £5.9 million is 2 to 5 years past due. Notwithstanding this information, the Directors do not

consider the loan notes to be impaired at the current time or that maturity dates of the principal have

altered.

Notes to the Accounts (continued)

for the year ended 31 March 2022

16. Financial instruments (continued)

Credit risk (continued)

As at 31 March 2021, of the loan stock classified as “past due”, below, £1,931,000 related to the principal of

loan notes where, although the principal remained within term, the investee company was not fully servicing

the interest obligations under the loan note and was in arrears. Notwithstanding the arrears of interest, the

Directors did not consider that the loan note itself had been impaired or the maturity of the principal had

altered.

As at 31 March 2021, of the loan stock classified as “past due”, below, £7,328,000 related to the principal of

loan notes where the principal had passed its maturity date. As at 31 March 2021, the extent to which the

principal is past its maturity date, £5.0 million falls within the banding of nil to 2 years past due and £2.3

million is 3 to 5 years past due. Notwithstanding this information, the Directors did not consider the loan

notes to be impaired at 31 March 2021 or that maturity dates of the principal had altered.

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 when

required at their fair values or from the inability to generate cash inflows as required. The Company normally

has a relatively low level of creditors (2022: £637,000, 2021: £543,000) and has no borrowings. Most of 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 Adviser in line with guidance agreed with the

Board and is reviewed by the Board at regular intervals.

Although the Company’s investments are not held to meet the Company’s liquidity requirements, the table

below shows an analysis of the assets, highlighting the length of time that it could take the Company to realise

its assets if it were required to do so.

The carrying value of loan stock investments held at fair value through the profit and loss account at 31 March

2022, as analysed by expected maturity date, is as follows:

Not later Between Between Between Over Passed

than 1 1 and 2 2 and 3 3 and 5 5 maturit

year years years years

ears date Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000

s at 31 March 2022

Fully performing loan stock 167 - - 2,017 3,631 2,778 8,593

Past due loan stock 911 - - - - 6,760 7,671

1,078 - - 2,017 3,631 9,538 16,264

s at 31 March 2021

Fully performing loan stock 2,057 - - 1,750 5,000 1,825 10,632

Past due loan stock 834 1,097 - - - 7,328 9,259

2,891 1,097 - 1,750 5,000 9,153 19,891

Notes to the Accounts (continued)

for the year ended 31 March 2022

17. Contingencies, guarantees and financial commitments

As at 31 March 2022, the Company had exited from JRNI Limited. Of the total sales consideration, £84,000

had been withheld from the Company pending warranty claims. Whilst the Directors consider it unlikely that

any such claims will be made, the remaining funds will not be released to the Company until the expiry of the

warranty period. As such, in accordance with FRS 102 (Section 10.11.3). this amount has not been recorded

as a receivable in these financial statements, nor as part of the exit proceeds shown on page 20.

Other than those noted above, there were no contingencies, guarantees or financial commitments of the

Company at the year-end (2021: £453,000).

18. 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 on pages 39 to 41. There were no amounts outstanding and due to the

Directors as at 31 March 2021 (2021: nil).

Further related party transactions include Investment Adviser and Administration fees payable to Downing

LLP, as disclosed in notes 4 and 5. In addition, Downing LLP was also paid promoter fees in connection with

the fundraising offer that was open during the period, which totalled £276,000 for the year ended 31 March

2022 (2021: £206,000).

The Company also has an agreement to pay an ongoing trail fee annually to Downing LLP, in connection with

funds raised under original offers for subscription out of which Downing LLP has an obligation to pay trail

commission to intermediaries. During the year to 31 March 2022, £192,000 (2021: £172,000) was paid to

Downing LLP.

19. Events after the end of the reporting period

Since the year end, the Company allotted 2,813,152 Ordinary Shares of 1p each at an average price of 63.5p

per Ordinary Share, under the terms of the offers for subscription. The aggregate consideration for the shares

was £1.8 million.

On 13 June 2022, the Company announced that its investment adviser, Downing LLP (“Downing”), agreed to

sell its non-Healthcare Ventures business to Foresight Group LLP (“Foresight”). As part of this transaction, the

Investment Advisory agreement was novated from Downing to Foresight at the completion of the sale on 4

July 2022. Downing will continue to provide administration services, and investment advisory services in

respect of the non-venture portfolio of investments, being the quoted growth and yield focused investments

for a transitional period. Further detail has been disclosed within the Chairman’s Statement on page 3.

Unaudited Performance Summary for Investor Groups

The Company undertook a merger with five other VCTs followed by a share reorganisation on 12 November 2013.

Full details, including share conversion ratios, can be found on Downing’s website, www.downing.co.uk.

The figures in the table below show the performance of the various groups of investors who make up the

Company’s current shareholder base and grouped by the VCTs that participated in the merger in November 2013.

Share issue

Year of

launch

Initial

income

tax relief

Equivalent

dividends

received

Equivalent

NAV

(Loss)/gain

(ignoring

income tax

relief)

Gain/(loss)

(after initial

income tax

relief)

(note 1)

Gain/(loss)

(after initial

and SRRP

tax relief)

(note 2)

Downing ONE VCT plc (“DDV1”) (%) (pence) (pence) (%) (%) (%)

AIM Distribution Trust plc 1996 20% 74.0p 15.4p -10.7% 11.6% 21.4%

AIM Distribution Trust plc - top up 2005 40% 24.2p 15.4p -46.3% -10.5% 7.2%

Pennine AIM VCT 5 plc 2005 40% 45.3p 13.4p -41.3% -2.2% 9.1%

Pennine AIM VCT 6 plc 2006 40% 49.0p 17.8p -33.2% 11.4% 26.5%

Downing Distribution VCT 1 plc - top up 2010 30% 46.9p 43.9p -13.3% 23.7% n/a

Downing Distribution VCT 1 plc - top up 2012 30% 36.9p 43.9p 3.8% 48.3% n/a

Downing ONE VCT plc Feb 2014 30% 41.3p 61.6p 2.3% 46.1% n/a

Downing ONE VCT plc Mar-Jul 2014 30% 39.3p 61.6p 2.4% 46.2% n/a

Downing ONE VCT plc Sep 2014 30% 37.3p 61.6p 1.6% 45.2% n/a

Downing ONE VCT plc Jan 2015 30% 37.3p 61.6p 2.4% 46.2% n/a

Downing ONE VCT plc Mar-May 2015 30% 37.3p 61.6p 4.6% 49.3% n/a

Downing ONE VCT plc Jul-2015 30% 37.3p 61.6p 2.0% 45.8% n/a

Downing ONE VCT plc Sep-Nov-2015 30% 35.3p 61.6p 3.1% 47.4% n/a

Downing ONE VCT plc Feb-2016 30% 32.3p 61.6p -4.3% 36.6% n/a

Downing ONE VCT plc Mar-Apr 2016 30% 29.3p 61.6p -4.5% 36.4% n/a

Downing ONE VCT plc Jul 2016 30% 29.3p 61.6p -1.3% 41.1% n/a

Downing ONE VCT plc Sep 2016 30% 26.3p 61.6p -1.3% 41.0% n/a

Downing ONE VCT plc Oct 2016 30% 26.3p 61.6p -5.0% 35.6% n/a

Downing ONE VCT plc Nov 2017 30% 18.8p 61.6p -9.5% 29.2% n/a

Downing ONE VCT plc Mar 2018 30% 15.8p 61.6p -10.4% 28.1% n/a

Downing ONE VCT plc Apr 2019 30% 9.8p 61.6p -11.6% 26.3% n/a

Downing ONE VCT plc Sep 2019 30% 5.8p 61.6p -14.3% 22.5% n/a

Downing ONE VCT plc Sept 2020 30% 2.5p 61.6p 3.6% 48.0% n/a

Downing ONE VCT plc Nov 2021 30% 0.0p 61.6p 1.0% 44.3% n/a

Downing Income VCT 3 plc (“DI3”)

Pennine AIM VCT plc 1996 20% 108.2p 19.9p 28.0% 60.0% 70.4%

Pennine AIM VCT II plc 1997 20% 65.9p 13.2p -20.9% -1.1% 5.7%

Pennine Downing AIM VCT plc 1998 20% 51.3p 17.5p -31.3% -14.1% -5.0%

The Ethical AIM VCT plc 1999 20% 31.4p 11.3p -57.3% -46.6% -40.7%

Pennine Downing AIM VCT 2 plc 2001 20% 45.2p 17.8p -37.0% -21.3% -12.0%

Pennine AIM VCT plc (C share) 2002 20% 46.4p 27.8p -25.8% -7.3% 7.2%

Pennine AIM VCT plc (D share) 2006 30% 54.9p 32.8p -12.3% 25.3% 44.8%

Downing Distribution VCT 2 plc - top up 2010 30% 52.8p 56.4p 0.8% 43.9% n/a

Downing Income VCT 3 plc - top up 2013 30% 40.3p 56.4p 6.7% 52.4% n/a

Downing Income VCT 3 plc (E share) 2011 30% 43.4p 53.6p -3.0% 38.5% n/a

Downing Income VCT plc (“DI”)

Framlington AIM VCT 2 plc 2005 40% 42.6p 21.7p -35.7% 7.2% 22.1%

Downing Income VCT plc 2013 30% 14.6p 21.7p 5.1% 50.2% n/a

Downing Income VCT 4 plc (“DI4”)

Framlington AIM VCT plc 2006 40% 49.5p 23.8p -26.7% 22.2% 37.7%

Downing Income VCT 4 plc 2013 30% 16.0p 23.8p 10.3% 57.5% n/a

Downing Absolute Income VCT 1 plc (“DAI1”)

Downing Healthcare Protected VCT plc 1996 20% 103.1p 51.9p 55.0% 93.7% 123.9%

Downing Protected VCT 1 plc - top up 2010 30% 45.7p 51.9p 7.0% 52.9% n/a

Downing Absolute Income VCT 1 plc - top up 2010 30% 45.7p 51.9p 6.8% 52.5% n/a

Downing Absolute Income VCT 1 plc - top up 2012 30% 39.7p 51.9p -0.9% 41.6% n/a

Downing Absolute Income VCT 1 plc (C share) 2010 30% 41.6p 43.4p -15.0% 21.4% n/a

Downing Absolute Income VCT 2 plc (“DAI2”)

Downing Absolute Income VCT 2 plc 2010 30% 45.9p 42.4p -11.7% 26.1% n/a

Note 1 Initial income tax relief has been netted off against original cost for the purpose of calculating the percentage net gain/(loss).

Note 2 Between April 2012 and 2013, a number of VCTs which subsequently merged to form Downing ONE VCT plc offered a Share

Realisation and Reinvestment Programme (“SRRP”), which allowed Shareholders who had held their shares for more than five years to sell their

shares and reinvest the proceeds, receiving additional income tax relief at the rate of 30% on the new issue. The income tax relief obtained on

the SRRPs has been treated as additional income for the purpose of calculating the percentage net gain/(loss).