Annual Report • Dec 31, 2013
Annual Report
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Baronsmead VCT 3 plc
Annual report & accounts for the year ended 31 December 2013 2013
| Financial Headlines | 1 | FINAN CIAL STATEMEN TS |
|
|---|---|---|---|
| Strategic Report |
Income Statement | 41 | |
| Performance Summary | 3 | Reconciliation of Movements in | |
| Chairman's Statement | 5 | Shareholders' Funds | 41 |
| Manager's Review | 8 | Balance Sheet | 42 |
| Other Matters | 12 | Cash Flow Statement | 43 |
| Notes to the Accounts | 44 | ||
| Investments | |||
| Summary Investment Portfolio | 16 | Notice of Annual General Meeting | 56 |
| Table of Investments and Realisations | 17 | APPEN DIX |
|
| Ten Largest Investments | 19 | Dividend History Since Launch | 60 |
| DIRECTORS' REPOR T |
Performance Record Since Launch | 60 | |
| Report of the Directors | 24 | Dividends Paid Since Launch | 61 |
| Board of Directors | 24 | Breakdown of Shareholdings | 61 |
| Corporate Governance | 31 | Full Investment Portfolio | 62 |
| Directors' Remuneration Report | 35 | INFORMA TION |
|
| Statement of Directors' Responsibilities | 37 | Shareholder Information and | |
| Contact Details | 64 | ||
| KPMG Independent Auditor's Report | 38 | Corporate Information | 66 |
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based "brokers" who target UK shareholders offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers for free company reports.
Please note that it is very unlikely that either the Company or the Company's Registrar, Computershare, would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of investment "advice".
If you are in any doubt about the veracity of an unsolicited phone call, please call either the Company or the Registrar at the numbers provided on page 64.
If you have sold or otherwise transferred all of your shares in Baronsmead VCT 3 plc, please forward this document and the accompanying form of proxy as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was, or is being, effected, for delivery to the purchaser or transferee.
Net asset value ("NAV") per share increased 12.9 per cent. to 120.9p in the year ended 31 December 2013, before deduction of dividends.
+12.9%
Dividend payments of 7.5p for the year to 31 December 2013.
7.5p
Net annual dividend yield was 7.1 per cent. and gross annual yield was 9.4 per cent.
7.1%
NAV total return to shareholders for every 100.0p invested at launch.
245.4p
The Strategic Report, on pages 2 to 15, has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to inform the members of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006.
The Company is registered in England as a Public Limited Company (Registration number 04115341). The Directors have managed, and intend to continue to manage, the Company's affairs in such a manner as to comply with Section 274 of the Income Tax Act 2007 which grants approval as a VCT.
Baronsmead VCT 3 is a tax efficient listed company which aims to achieve long-term investment returns for private investors.
Full details of the Company's published investment policy and risk management are contained in the 'Other Matters' section of the Strategic Report on pages 12 to 15.
The table and chart below shows the cash returned to shareholders dependent on their subscription cost, including their income tax reclaimed on subscription.
| Year subscribed | Subscription price p |
Income tax reclaim p |
Net cash invested p |
Cumulative dividends paid p |
Net annual yield* % |
Gross equivalent yield† % |
|---|---|---|---|---|---|---|
| 2001 (January) | 100.00 | 20.00 | 80.00 | 78.30 | 7.6% | 10.1% |
| 2005 (March) – C share | 100.00 | 40.00 | 60.00 | 45.54 | 8.6% | 11.4% |
| 2010 (March) | 103.09 | 30.93 | 72.16 | 30.00 | 11.0% | 14.7% |
| 2012 (December) | 117.40 | 35.22 | 82.18 | 12.00 | 14.2% | 18.9% |
The total return could be higher for those shareholders who were able to defer a capital gain on subscription and the net sum invested may be less.
* Net annual yield represents the cumulative dividends paid expressed as a percentage of the net cash invested.
† The gross equivalent yield if the dividends had been subject to the higher rate of tax on dividends (currently 32.5 per cent.). For those shareholders who earn over £150,000 per tax year and who would otherwise pay this additional rate of tax on dividends, the gross equivalent yield will be higher than the figures stated above.
Dividends paid to C shareholders post conversion have been adjusted by the conversion ratio (0.85642528).
I am pleased to report that the Company had a good year and the Net Asset Value ("NAV") before payment of dividends increased by 13.78p a share (12.86 per cent.).
The total dividend for the year was 7.5p, in the form of two interim dividends paid in September and December 2013. On 12 February 2014, the Company declared an interim dividend of 8.0p per share payable on 7 March 2014 to shareholders on the register as of Anthony Townsend Chairman 21 February 2014.
Analysis of change in NAV over the year
| Pence per ordinary share |
|
|---|---|
| NAV as at 1 January 2013 (after deducting the final dividend of 4.5p for the year to 31 December 2012) |
107.12 |
| Valuation uplift (12.86 per cent.) | 13.78 |
| NAV as at 31 December 2013 before dividends | 120.90 |
| Interim dividend paid on 20 September 2013 | (3.00) |
| Second interim dividend paid on 20 December 2013 | (4.50) |
| NAV as at 31 December 2013 after paying dividends | 113.40 |
Our portfolio is diverse and this has helped to smooth investor returns from year to year. The unquoted portfolio has seen several years of strong growth but last year the return was more modest, principally because many of the current investments are relatively new and therefore will take some time before they start delivering value growth. We remain focused primarily on unquoted investments and the Manager is now working to help these newer investments achieve their potential for growth in future years.
This year's investment performance has been achieved mainly due to the 32.6 per cent. growth in the quoted portfolio. This performance was partly due to the rise in quoted values, resulting from a welcome return of investor appetite for smaller quoted companies, but is also a vindication of the distinctive approach to quoted investment strategy the Manager had developed over the past five years. Since 2008 it has taken larger stakes in selected AIM companies in order to become a more influential partner. This has enabled it to introduce some private equity experience and disciplines to these investments with a view to growing value and achieving satisfactory exits. In addition, during the downturn in the markets following the financial crisis, the Manager took a long term view and continued to invest in companies with strong fundamentals rather than overreact to market sentiment.
As a result of an active year of new investment and realisations, the portfolio has increased to 71 investments. New and follow-on investments totalled £8.9 million across ten unquoted, one ISDX* and fifteen AIM companies. Sales of investments realised capital proceeds of £16.5 million and delivered net gains of £8.1 million. The portfolio as a whole, remains in good health with 80 per cent. of investees reporting steady or improving performance against their business plans.
* ICAP Securities & Derivatives Exchange (ISDX) formerly PLUS Markets Group plc.
The Company's investment objective remains focussed on companies with strong growth potential so as to produce consistently high returns for shareholders over the long-term.
This year's strong performance has increased the NAV total return for each 100p invested in Baronsmead VCT 3 to 217.8p over ten years (245.4p since launch in 2001). Cumulative tax free dividends during that period have amounted to 69.0p per share (78.3p per share for founder shareholders at launch in 2001).
The Company paid dividends totalling 7.5p per share for the financial year to 31 December 2013. Following several profitable realisations, in February 2014, the Directors declared an interim dividend of 8.0p per share payable on 7 March 2014. It is the Board's current expectation that this interim dividend will be in lieu of the dividend that would normally be declared following the half-yearly results for the six-months to 30 June 2014. This pays the dividend to the Company's existing shareholders who benefit from the returns realised in 2013 prior to new shares being allotted with respect to subscriptions to the Company's fundraising.
An offer for subscription to raise gross proceeds of up to £10 million was launched on 22 January 2014. Based on subscriptions to date, it is expected that the Company's offer will be fully subscribed shortly.
In November 2012 the Company announced that it would seek to narrow the mid share price discount to NAV from 10 per cent. to 5 per cent. I am pleased to report that during the twelve months to 31 December 2013 the targeted reduction has been largely achieved with the mid share price discount to NAV averaging 4.7 per cent. for the year.
It is the Board's intention to try to maintain this discount to NAV, however, this policy will be kept under continuous review and may be subject to revision if necessary. Shares will be bought back depending on market conditions at the time and only where the Directors believe such a transaction to be in the best interests of all shareholders.
In its Autumn Statement, issued on 5 December 2013, HM Treasury ("HMT") announced its intention to introduce legislation with effect from 6 April 2014 to prevent the use of "Enhanced Share Buy Backs" by VCTs. Since the Board has never used these arrangements, having preferred to create an orderly market for all shareholders through maintaining a narrow share price discount, this legislation will have no impact on the Company.
HMT also indicated in the Autumn Statement that it wished to consult further on potential changes to VCT rules to address the potential misuse of reserves created from converted share premium accounts. They are concerned that in some circumstances this reserve may be used to return capital to shareholders prior to any profits being generated from investments. The Manager has participated in this consultation alongside other VCT Managers and the Association of Investment Companies ("AIC") with the aim of ensuring that any draft legislation process would not result in any unintended adverse consequences for the industry.
The European Commission is currently undertaking a review of the state aid regulations including the risk capital guidelines under which VCTs are approved at the European level. The aim of the review is to set out a clear framework to allow member states to grant aid without the need for the European Commission to be involved. Our trade association, the AIC is engaged in the discussion and the Manager has provided data and case studies to assist the construction of a suitable response.
The Board has considered the impact on your Company of the Alternative Investment Fund Managers Directive ("AIFMD"), an EU Directive that came into force in July 2013 to regulate the Managers of Alternative Investment Funds. The legislation provides for Investment Trusts and VCTs to opt to become self managed for the purposes of the Directive, which would result in the Company becoming the Alternative Investment Fund Manager ("AIFM"). The legislation also provides that AIFMs that manage assets under €500m can take advantage of a light touch regime and register as Small Registered Managers which only imposes some minimal additional reporting on the AIFM. To minimise the cost of compliance with this Directive the Board has decided that the Company will register as the AIFM. This development will not impact on the day to day investment activities other than the need to novate the Investment Management Agreement to a sister partnership of our current Manager, ISIS EP LLP, controlled and managed by the same individuals.
I look forward to meeting as many shareholders as possible at our thirteenth Annual General Meeting to be held on Monday, 14 April 2014 at Plaisterers' Hall, One London Wall, London, EC2Y 5JU at 10.30 a.m. This will be followed by presentations from the Manager, a light lunch and a joint shareholder workshop with Baronsmead VCT 5's shareholders.
There is growing evidence that the long awaited recovery of the UK economy is now underway and there is a greater degree of optimism than there has been for many years. The investment environment has been challenging over the past five years but the Investment Manager has built a strong capability in its chosen sectors and a market leading origination team and this enabled it to continue to find good investments despite the downturn. The addition of six new unquoted companies during 2013 hopefully signals a sustainable increase in the number of good investment opportunities and we believe that the Manager is well placed to take advantage of this.
The successful realisation of many unquoted companies has generated excellent returns but the remaining portfolio is now relatively immature. It remains widely diversified, well resourced and adequately funded and the Investment Manager has the skill and experience to support and help these investments in their development. We believe that the Company is well placed to take advantage of the recovery as it gathers momentum. We will continue to focus on delivering a consistent yield for shareholders while protecting the asset base.
7
Andrew Garside Head of Unquoted Investments
Ken Wotton Head of Quoted Investments
Sheenagh Egan Chief Operating Officer
Michael Probin Investor Relations
The year has seen very different performance contributions from the quoted and unquoted portfolios. Firstly strong upward performance has been delivered by the quoted portfolio which is a welcome reward for patience through an uncertain market over recent years. This has also enabled a level of net divestment from the quoted portfolio as profits have been crystallised into cash, although the significant value growth has still resulted in an increase in the quoted NAV during the period.
The unquoted portfolio has seen a significant refreshment in assets. There was a high level of new unquoted investment with six new unquoted investee companies added to the portfolio and a further one added since the end of the financial year. This is the busiest period of investing for some years. In addition, there has been a high rate of divestment from the unquoted portfolio with some long held investments being realised. The unquoted portfolio has therefore not contributed much to NAV growth this period as a higher proportion of the portfolio is relatively new.
The net assets of £74.9 million were invested as follows:
| Asset class | NAV (£m) |
% of NAV |
Number of investees |
Annual return % |
|---|---|---|---|---|
| Unquoted | 28.3 | 38 | 26 | 0.6 |
| Quoted | 28.9 | 38 | 45 | 32.6 |
| Wood Street Microcap | 7.0 | 9 | 37 | 55.0 |
| Cash and near cash | 10.7 | 15 | – | – |
During the year there were;
Each quarter the direction of general trading and profitability of all investee companies is recorded so that the Board can monitor the overall health and trajectory of the portfolio. At 31 December 2013, 80 per cent. of the 71 companies in the portfolio (excluding Wood Street Microcap) were progressing steadily or better.
The level of quoted assets in the NAV is at a higher proportion than seen in recent periods. This is due to the combination of high growth in quoted values together with the high rate of unquoted divestments. The Manager continues to invest significantly more during each year in unquoted investments over new quoted investments.
After a strong year of growth last year of 8 per cent., the unquoted portfolio has stayed flat during 2013. The unquoted portion of the portfolio is valued using a consistent process every three months which the Board oversees and approves. Almost all of the value creation in unquoted investments comes from operational improvements (revenue and margin growth), rather than financial leverage. The reason the unquoted portfolio is flat this year is that a high proportion of investments are relatively young and have not yet started contributing to value growth.
The year delivered a series of strong realisations, including the pleasing contribution of three of these being longstanding holdings made in 2005 and 2006.
Overall this represents a strong and consistent realisation performance. This level of realisations represents a much higher proportion of the unquoted portfolio than would be seen in an average year. The level of realisations in the short term will be lower and the unquoted element of NAV should therefore grow in the next few years.
There has been a significant uplift in the quoted portfolio of 33 per cent. reflecting a positive re-rating of the small cap sector in the year. This recovery has been welcome following recent years of headwinds from a challenging AIM market environment and weak share prices.
The performance of the quoted portfolio also reflects the changes introduced by the ISIS Quoted Investment team since 2009. The Quoted team is now more likely to build progressive stakes. An investment in a new smaller company might start at an initial low level. As the team becomes more comfortable with performance and where it is possible within the constraints of VCT qualifying investing, the holding will be increased. Several more significant holdings of over 20 per cent. have now been built where the team has a closer, more influential relationship and can utilise some of the good practice from our Private Equity experience. In addition, during the weaker AIM market, the team endeavoured to focus on the fundamentals of the investees and demonstrated patient support when market sentiment depressed share prices of sound companies. The ISIS team believes the benefits of this work are now contributing to improved Quoted performance in addition to the recovery of the Quoted markets.
Realisations during the year from the quoted portfolio totalled £3.4 million at an average multiple of 2.0x cost which is an excellent result. Notably within this is the full realisation due to a takeover of FFastFill plc (2.8x cost) and the partial sales in the market of IDOX plc (at 5.7x cost). A notable disappointment in the quoted portfolio was the failure of Zattikka plc resulting in the full loss of the £315k investment made in April 2012.
Whilst it is expected that work in the Quoted arena will deliver future positive returns, the high annual growth achieved in this period should be considered as exceptional.
Wood Street Microcap Investment Fund ("Wood Street") was established by ISIS in May 2009 to provide flexibility for the Baronsmead VCTs to invest in larger and more liquid non VCT qualifying AIM and Small Cap opportunities. It represents another innovation introduced by the ISIS Quoted team to seek performance improvement. At 31 December 2013, Baronsmead VCT 3 had invested £3.5 million through Wood Street into a portfolio of 37 companies, now valued at £7.0 million. Wood Street generated a positive return of 55 per cent. over the year.
Baronsmead VCT 3 had cash and near cash resources of approximately £10.7 million at the year-end. This asset class is conservatively managed to take minimal or no capital risk, a strategy outlined in prospectuses that have been issued in the past.
In addition, investments within the Wood Street fund are expected to be relatively more liquid than other investments as explained in the section above. This gives the Manager the possibility of realising cash from Wood Street should this ever be required to supplement liquid assets.
During the year, £7.3 million was invested in 11 unquoted companies including 7 new additions to the unquoted portfolio, one of which utilised an existing acquisition vehicle. The new unquoted investments were;
• Create Health is an internationally renowned fertility clinic which is the UK's leading specialist in natural and mild IVF techniques. Natural and mild IVF uses lower levels of drugs and is viewed as more ethical and healthier – it is used widely in advanced overseas fertility markets and is growing in popularity in the UK. The investment will fund the opening of a new flagship site in London.
The average investment value of the top ten companies held by Baronsmead VCT 3 is £2.3 million per company. Because these investments are normally held by the other Baronsmead VCTs, the total managed by ISIS in each investee is significantly larger than this, which enables ISIS to dedicate significant resource to manage each investment and their progress. The top ten investees employ some 2,800 people, which is an increase of 16 per cent. over the last year. Their turnover has also grown by some 15 per cent. Each of the top ten companies is described in more detail on pages 19 to 23 of the Annual Report and Accounts.
ISIS continues to invest in its skills and capacity with over 35 of its total team of 60 devoted to investment management activities across all its investing activities. Its focus is on generating strong investment returns from its portfolio through a mixture of intelligent investment selection and hands on portfolio management. Its ability to select good investments owes much to its sector research and to its strong origination team that help the team to generate proprietary deal flow.
Its investments are supported from the outset by an experienced internal value enhancement team together with a panel of proven Operating Partners who work exclusively with ISIS to assist management teams to deliver both strategic development and operational efficiencies. Both have enabled ISIS to build a strong track record of producing consistent returns from its unquoted investments.
ISIS has pursued a strategy of sector specialisation over many years and in that time its executives have developed in-depth knowledge of these sectors and valuable networks of contacts which have enabled it to capitalise on opportunities that have presented themselves in an ever changing environment. Its key sectors are:
Our portfolio companies and their management teams are now more experienced at handling economic uncertainties, including managing their growth and operations in a tougher environment than in previous decades. Low bank borrowings within the portfolio give them robust financial structures.
ISIS is an active investment manager which partners with our investees to help them to grow revenue and earnings and build resilient, well invested businesses, able to maintain standards, whilst growing. Our intention is to seek out the best opportunities where growth is driven by innovation and gaining market share through differentiation rather than relying on favourable economic growth.
ISIS EP LLP Investment Manager 17 February 2014
The Board of Baronsmead VCT 3 has the objective to maintain a minimum annual dividend level of around 4.5p per ordinary share if possible, but this depends primarily on the level of realisations achieved and cannot be guaranteed.
Since 2007, the average annual tax free dividend paid to shareholders has been 7.5p per share (equivalent to a pre-tax return of 10.0p per share for a higher rate taxpayer). For shareholders who received up front tax reliefs, their returns would have been higher.
The Company buys back its shares if, in the opinion of the Board, a repurchase would be in the best interests of the Company's shareholders as a whole. Shares are bought back through the market rather than directly from shareholders. This minimises the number of shares bought back by the Company while maximising the opportunity for investors to invest in the Company's existing shares.
The Board's current policy is to seek to maintain a mid share price discount of approximately 5 per cent. to net asset value, depending on market conditions at the time.
Baronsmead VCT 3 is a tax efficient listed company which aims to achieve long-term investment returns for private investors, including tax free dividends.
The Company's investment policy is to invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on AIM.
Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.
The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities and fixed interest bearing securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM-traded investments are primarily held in ordinary shares. Pending investment
in VCT qualifying and non-VCT qualifying unquoted, AIM-traded and other quoted securities (which may be held directly or indirectly through collective investment vehicles), cash is primarily held in interest bearing accounts, money market open ended investment companies ("OEICs"), UK gilts and treasury bills.
Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas.
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs. Amongst other conditions, the Company may not invest more than 15 per cent. by value of its investments calculated in accordance with section 278 of ITA 2007 (as amended) (VCT Value) in a single company or group of companies and must have at least 70 per cent. of its investments by VCT Value throughout the period in shares and securities comprised in qualifying holdings. At least 70 per cent. by VCT Value of qualifying holdings must be in "eligible shares", which are ordinary shares which have no preferential rights to assets on a winding up and no rights to be redeemed, but may have certain preferential rights to dividends. For funds raised before 6 April 2011, at least 30 per cent. by VCT Value of qualifying holdings must be in "eligible shares" which are ordinary shares which do not carry any rights to be redeemed or preferential rights to dividends or to assets on a winding up. At least 10 per cent. of each qualifying investment must be in "eligible shares".
The companies in which investments are made must have no more than £15 million of gross assets at the time of investment to be classed as a VCT qualifying holding.
The Company aims to be at least 90 per cent. invested, directly or indirectly, in VCT qualifying and nonqualifying growth businesses subject always to the quality of investment opportunities and the timing of realisations. It is intended that at least 75 per cent. of any funds raised by the Company will be invested in VCT qualifying investments. Non-VCT qualifying investments held in unquoted, AIM-traded and other quoted companies may be held directly or indirectly through collective investment vehicles.
Risk is spread by investing in a number of different businesses within different qualifying industry sectors using a mixture of securities. Generally no more than £2.5 million, at cost, is invested in the same company. The maximum the Company will invest in a single company (including a collective investment vehicle) is 15 per cent. of its investments by VCT Value. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.
Investments are selected in the expectation that the application of private equity disciplines including an active management style for unquoted companies will enhance value and enable profits to be realised from planned exits.
The Company aims to invest in larger more mature unquoted and AIM-traded companies and to achieve this it invests alongside the other Baronsmead VCTs.
Certain members and employees of the Manager invest in unquoted investments alongside the Company. This scheme is in line with current practice of private equity houses and its objective is to attract, recruit, retain and incentivise the Manager's team and is made on terms which align the interests of shareholders and the Manager.
The Company's policy is to use borrowing for short term liquidity purposes only up to a maximum of 25 per cent. of the Company's gross assets, as permitted by the Company's articles. The Company currently has no borrowings.
The Board has delegated the management of the investment portfolio to the Manager. The Manager also provides or procures the provision of company secretarial, accounting, administrative and custodian services to the Company.
The Manager has adopted a 'top-down, sector-driven' approach to identifying and evaluating potential investment opportunities, by assessing a forward view of firstly the business environment, then the sector and finally the specific potential investment opportunity.
Based on its research, the Manager has selected a number of sectors that it believes will offer attractive growth prospects and investment opportunities. Diversification is also achieved by spreading investments across different asset classes and making investments for a variety of different periods.
The Manager's Review on pages 8 to 11 provides a review of the investment portfolio and of market conditions during the year, including the main trends and factors likely to affect the future development, performance and position of the business.
The Board believes that the principal risks faced by the Company are:
Liquidity risk the Company's investments may be difficult to realise. The fact that a share is traded on AIM does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable.
Credit risk Cash management risk may occur by placing cash deposits with high risk institutions or not spreading cash effectively. The cash management strategy is set by the Board and the Investment Committee of the Manager approves all liquid asset investments. Due diligence is undertaken on the sponsor or manager of any nongovernment instruments invested in and this is updated on a regular basis to minimise the risk.
The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the Financial Reporting Council's ("FRC") "Internal Controls: Guidance to Directors".
Details of the Company's internal controls are contained in the Corporate Governance section on page 34.
The Board expects the Manager to deliver a performance which meets the objective of achieving long-term investment returns, including tax free dividends. A review of the Company's performance during the financial year, the position of the Company at the year end and the outlook for the coming year is contained within the Chairman's Statement on pages 5 to 7.
The Board assesses the performance of the Manager in meeting the Company's objective against the primary KPIs highlighted on pages 3 and 4 of this Report and Accounts.
A performance fee is payable to the Manager when the total return on net proceeds of the ordinary shares exceeds 8 per cent. per annum (simple). To the extent that the total return exceeds the threshold, a performance fee (plus VAT) will be paid to the Manager of an amount equal to 10 per cent. of the excess. The performance fee payable in any one year is capped at 5 per cent. of net assets.
No performance fee was paid in 2012 and there is no performance fee payable for the year to 31 December 2013.
The Board recognises the requirement under Section 414 of the Act to detail information about environmental matters (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply.
The Board of Directors of the Company comprises one female and three male Directors. The Manager has an equal opportunity policy and currently employs 35 men and 25 women.
The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in Baronsmead VCT 3 in ways that best suit their personal investment and tax planning and in a way that treats all shareholders equally.
On behalf of the Board Anthony Townsend Chairman 17 February 2014
| Book cost | ||||
|---|---|---|---|---|
| Company | Location | Sector | Activity | £'000 |
| Unquoted investments New |
||||
| CableCom II Networking Holdings Limited |
Somerset | TMT* | Provider of network solutions | 1,250 |
| Create Health Limited | London | Healthcare & Education | Provider of fertility services | 1,065 |
| Carousel Logistics Limited | Kent | Business Services | Provider of bespoke logistics and supply chain solutions |
955 |
| Key Travel Limited | London | Business Services | Travel management company, focused on the non-profit sector |
954 |
| Eque2 Limited | Manchester | TMT* | Enterprise resource planning (ERP) solutions provider to the construction industry |
877 |
| Armstrong Craven Limited | Manchester | Business Services | Provider of executive search and business intelligence services |
673 |
| Follow on | ||||
| Impetus Holdings Limited | London | Business Services | Automotive consultancy and outsourced service provider |
248 |
| Playforce Holdings Limited | Melksham | Business Services | Design and installation of playground equipment |
163 |
| Crew Clothing Holdings Limited | London | Consumer Markets | Branded clothing retailer | 109 |
| Valldata Group Limited | Melksham | Business Services | Payment processing to charity sector | 54 |
| Total unquoted investments | 6,348† | |||
| AIM-traded & ISDX investments | ||||
| New | ||||
| Everyman Media Group plc | London | Consumer Markets | Boutique independent cinema chain | 391 |
| MartinCo plc | Bournemouth | Consumer Markets | UK letting agency franchise network | 343 |
| Bioventix plc | Farnham, Surrey |
Healthcare & Education | Develops sheep monoclonal antibodies | 227 |
| Daily Internet plc | Stockport | TMT* | SME Domain registration & hosting | 225 |
| Ideagen plc | Matlock | TMT* | Compliance software solutions | 225 |
| Pinnacle Technology Group plc | Stirlingshire | TMT* | B2B telecoms and IT reseller | 169 |
| One Media iP Group plc Follow on |
Buckinghamshire TMT* | Content acquisition and distribution | 56 | |
| Sanderson Group plc | Coventry | TMT* | Retail and manufacturing IT | 225 |
| Plastics Capital plc | London | Business Services | Specialist plastic products buy and build | 189 |
| Tasty plc | London | Consumer Markets | Restaurant chain | 125 |
| TLA Worldwide plc | London | Business Services | Baseball sports management and marketing | 113 |
| EG Solutions plc | Staffordshire | TMT* | Back office optimisation software | 78 |
| Green Compliance plc | Worcester | Business Services | Small business compliance | 50 |
| Paragon Entertainment Limited | London | Consumer Markets | Visitor attractions | 45 |
| Accumuli plc | Salford | TMT* | Managed IT security | 40 |
| Tangent Communications plc | London | Business Services | Digital marketing and online print services | 40 |
| Total AIM-traded & ISDX investments | 2,541 |
Total investments in the year 8,889
* Technology, Media & Telecommunications ("TMT").
† In addition, Consumer Investment Partners, an existing portfolio company established in 2012 to seek investments in the Consumer Markets sector, invested £0.96 million in Luxury For Less, an online bathroom products retailing business.
| 31 December | |||||
|---|---|---|---|---|---|
| First | 2012 | Overall | |||
| investment | valuation | Proceeds‡ | multiple | ||
| Company | date | £'000 | £'000 | return | |
| Unquoted realisations | |||||
| CableCom Networking Holdings Limited | Full trade sale | May 07 | 4,328 | 5,748 | 4.8* |
| Independent Living Services Limited | Full trade sale | Sep 05 | 3,322 | 3,426 | 2.5* |
| CSC (World) Limited | Full trade sale | Jan 08 | 2,410 | 3,115 | 2.4* |
| Kafevend Holdings Limited | Full trade sale | Oct 05 | 2,956 | 2,430 | 2.5* |
| MLS Limited | Full trade sale | Jul 06 | 956 | 984 | 2.8* |
| Valldata Group Limited | Loan repayment | Jan 11 | 450 | 540 | 1.5* |
| Kidsunlimited Group Limited | Loan repayment | Jun 01 | 113 | 176 | 4.9*† |
| Consumer Investment Partners Limited | Loan repayment | Apr 12 | 45 | 45 | 1.0 |
| Total unquoted realisations | 14,580 | 16,464 | |||
| AIM-traded realisations | |||||
| IDOX plc | Market sale | Jan 09 | 1,724 | 1,752 | 5.7 |
| FFastFill plc | Full trade sale | Jun 07 | 612 | 874 | 2.8 |
| PROACTIS Holdings plc | Full market sale | May 06 | 426 | 621 | 1.1* |
| Active Risk Group plc | Full trade sale | May 10 | 54 | 126 | 0.8 |
| Zattikka plc | Write off | Apr 12 | 136 | – | N/A |
| Total AIM-traded realisations | 2,952 | 3,373 | |||
| Total realisations in the year | 17,532 | 19,837 |
‡ Proceeds at time of realisation including redemption premium and interest.
* Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.
† Kidsunlimited Group Limited was realised in April 2008. As part of the consideration, Baronsmead VCT 3 received £113,000 in loan stock, which was redeemed in April 2013. The overall multiple return for the investment in Kidsunlimited was 4.9 times original cost.
The top ten investments by current value at 31 December 2013 illustrate the diversity and size of investee companies within the portfolio. This financial information is taken from publicly available information published at Companies House, which has been audited by the auditors of the investee companies.
| 1 NEXUS VEHICLE HOLDINGS LIMITED Leeds |
|||||
|---|---|---|---|---|---|
| All ISIS EP LLP managed funds | Year ended 30 September | ||||
| First investment: | February 2008 | 2012 | 2011 | ||
| Total cost: | £9,500,000 | £ million | £ million | ||
| Total equity held: | 56.00% | Sales: | 36.5 | 38.3 | |
| EBITA: | 3.3 | 4.3 | |||
| Baronsmead VCT 3 only | Net Assets: | 1.8 | 1.7 | ||
| Cost: | £2,368,000 | ||||
| Valuation: | £4,621,000 | No. of Employees: | 113 | 90 | |
| Valuation basis: | Earnings Multiple | ||||
| % of equity held: | 12.32% | ||||
| www.nexusrental.co.uk | (Source: Nexus Vehicle Holdings Limited, Report & Financial Statements 30 September 2012) |
Nexus enables corporate users to source all their vehicle rental needs from one source – a highly efficient and cost effective online based process. The service is provided using its proprietary system, IRIS, an advanced web based IT tool that is highly regarded in the industry. It offers fast access to a large range of rental fleets and enables customers to benefit from the buying scale of Nexus.
Netcall is one of the UK's leading providers of customer engagement solutions. They support organisations to deliver outstanding customer service and achieve a realistic return on their investment. Some of the challenges their solutions can help overcome include customer contact across multiple channels, resource utilisation, improving customer satisfaction ratings, process automation, unifying communications effectively and maximising available budget.
Currently over 750 organisations in the Public, Private and Healthcare markets use one or more of the Netcall solutions which include contact management, business process management, workforce optimisation and enterprise content management.
| All ISIS EP LLP managed funds | Year ended 28 October | |||
|---|---|---|---|---|
| First investment: | November 2006 | 2012 | 2011 | |
| Total cost: | £5,833,000 | £million | £million | |
| Total equity held: | 25.51% | Revenue: | 48.5 | 40.7 |
| EBITA: | 3.5 | 3.3 | ||
| Baronsmead VCT 3 only | Net Assets: | 6.0 | 5.7 | |
| Cost: | £1,453,000 | |||
| Valuation: | £2,336,000 | No. of employees: | 363 | 311 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 6.09% |
www.crewclothing.co.uk (Source: Crew Clothing Holdings Limited, Report and Financial Statements 28 October 2012)
Crew Clothing Co. is an English clothing brand with a wide range of active, outdoor and casual wear for men and women. Since it was founded in 1993, the brand has since evolved into the fast growing premium active and casual wear sectors, but retained its unique heritage and positioning. Today it is a well known, respected and aspirational clothing brand in the UK.
The business is a multi-channel retailer with its own significant retail estate, wholesale accounts and direct mail order channels. It is growing by expanding all these routes to market as the brand grows in presence.
3
| All ISIS EP LLP managed funds | Year ended 31 March | |||
|---|---|---|---|---|
| First investment: | April 2001 | 2013 | 2012 | |
| Total cost: | £2,175,000 | £million | £million | |
| Total equity held: | 1.28% | Revenue: | 30.5 | 33.0 |
| EBITA: | (5.3) | (6.4) |
| Cost: | £771,000 | |||
|---|---|---|---|---|
| Valuation: | £2,239,000 | No. of employees: | 216 | 209 |
| Valuation basis: | Last Traded Price | |||
| % of equity held: | 0.47% | |||
Baronsmead VCT 3 only Net Assets: 135.1 139.5
www.vectura.com (Source: Vectura Group Plc, Annual Report and Accounts 2012/2013)
Vectura Group plc is a product development Company that focuses on the development of pharmaceutical therapies for the treatment of bronchopulmonary diseases. This growing market includes asthma and chronic obstructive pulmonary disease. The Company's approach to product development is driven by innovative and enabling formulation and inhalation device technologies
Vectura is based in the UK, with headquarters and development operations in Chippenham, Wiltshire and a device development group in Cambridge.
| 5 IDOX PLC London |
|||||
|---|---|---|---|---|---|
| All ISIS EP LLP managed funds | Year ended 31 October | ||||
| First investment: | May 2002 | 2012 | 2011 | ||
| Total cost: | £1,641,000 | £million | £million | ||
| Total equity held: | 4.98% | Revenue: | 57.9 | 38.6 | |
| EBITA: | 12.8 | 9.5 | |||
| Baronsmead VCT 3 only | Net Assets: | 38.9 | 34.4 | ||
| Cost: | £614,000 | ||||
| Valuation: | £2,081,000 | No. of employees: | 467 | 363 | |
| Valuation basis: | Last Traded Price | ||||
| % of equity held: | 1.83% | ||||
| www.investors.idoxgroup.com | (Source: IDOX Plc, Annual Report and Accounts 31 October 2012) |
IDOX group is a leading software and information management solutions provider. These deliver seamless integration and automation from consumer websites through to document storage. In the private sector, its engineering information management software combines McLaren and CTSpace, who are leaders in their markets.
The Baronsmead VCTs first invested in IDOX in 2002, approximately two years after the company floated on AIM. Over the last decade IDOX has shown strong growth through a combination of organic growth and acquisition, and is now seeking to diversify from its core local authority markets into the private sector to become a leading player in industries like oil, gas and pharmaceuticals.
6
Inspired Thinking Group Limited Birmingham
Valuation basis: Earnings Multiple % of equity held: 4.95%
Cost: £796,000
www.inspiredthinkinggroup.com (Source: Inspired Thinking Group Holdings Limited, Report and Financial Statements 31 August 2013)
First investment: May 2010 2013 2012 Total cost: £3,200,000 £ million £ million Total equity held: 22.50% Revenue: 43.3 32.7
Baronsmead VCT 3 only Net Assets: 0.8 0.8
Valuation: £2,056,000 No. of employees: 218 158
All ISIS EP LLP managed funds Year ended 31 August
ITG provides services that help marketing departments to operate more efficiently. This includes outsourced print management services to major retailers and consumer facing businesses. ITG also owns and provides a workflow and content system called MediaCentre that enables their clients to gain tighter control over their marketing operations. The combined services are already saving some major retailers considerable sums within their marketing departments, enabling them to make fixed budgets more effective.
The ITG management team are known as experienced and innovative in this field and have been successful in winning large new accounts over time from blue chip clients.
EBITA: 1.6 1.6
7
| All ISIS EP LLP managed funds | Year ended 31 March | |||
|---|---|---|---|---|
| First investment: | January 2011 | 2013 | *2012 | |
| Total cost: | £4,921,000 | £million | £million | |
| Total equity held: | 58.90% | Revenue: | 7.5 | 8.8 |
| EBITA: | 1.6 | 1.2 | ||
| Baronsmead VCT 3 only | Net Assets: | 9.7 | 9.5 | |
| Cost: | £1,220,000 | |||
| Valuation: | £1,701,000 | No. of employees: | 232 | 272 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 13.88% |
www.valldata.co.uk (Source: Valldata Group Limited, Directors Report & Financial Statements 31 March 2013)
Valldata is the UK's leading provider of outsourced donation processing and fulfilment services for the UK not-forprofit sector. Using its advanced technology and IT systems it manages over 8 million interactions with donors every year covering paper-based donation, donations via telephone and online services, and also manages the database updates for its customers. Investment in technology and infrastructure means it can typically process payments faster and at lower cost than a client could do in-house.
Many functions of this nature are undertaken in house by large charities and Valldata is growing as some of this work is outsourced.
*15 month period ended 31 March 2012
| All ISIS EP LLP managed funds | Year ended 31 December | |||
|---|---|---|---|---|
| First investment: | September 2006 | 2012 | 2011 | |
| Total cost: | £3,223,000 | £million | £million | |
| Total equity held: | 14.52% | Revenue: | 19.3 | 14.6 |
| EBITA: | 1.6 | 1.1 | ||
| Baronsmead VCT 3 only | Net Assets: | 12.3 | 11.0 | |
| Cost: | £594,000 | |||
| Valuation: | £1,634,000 | No. of employees: | 453 | 325 |
| Valuation basis: | Bid Price | |||
| % of equity held: | 2.53% |
www.dimt.co.uk (Source: Tasty Plc, Report and Financial Statements 31 December 2012)
Tasty plc is a branded restaurant operator in the UK casual dining market. Tasty's two core trading brands are Dim T and Wildwood restaurants. Wildwood serves pizza, pasta and grills and offers customers a warm, homely and rustic feel. It is the core growth brand with 17 units around the M25 and South East of England. Dim T serves pan Asian food with Dim Sum and offers customers a modern, ethnic and relaxed feel, trading from six units. It is primarily more London focused, positioned in high footfall areas. With both brands now established and the group having achieved critical mass Tasty is now self-funding for its continued roll-out strategy. Tasty's highly regarded management team have prior experience of opening over 20 restaurants a year and have critical knowledge of the UK property market, which underpin this strategy.
| All ISIS EP LLP managed funds | Year ended 31 March | |||
|---|---|---|---|---|
| First investment: | October 2011 | 2013 | 2012 | |
| Total cost: | £6,010,000 | £million | £million | |
| Total equity held: | 55.00% | Revenue: | 8.4 | 7.5 |
| EBITA: | 0.2 | 0.4 | ||
| Baronsmead VCT 3 only | Net Assets: | 0.5 | 0.4 | |
| Cost: | £1,346,000 | |||
| Valuation: | £1,583,000 | No. of employees: | 390 | 348 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 10.89% |
www.iccmcares.co.uk (Source: ICCM Ltd, Directors' Report and Financial Statements)
Based in Kettering, ICCM supports adults and children with a range of conditions, including spinal chord injuries, acquired brain injuries and other degenerative disabilities such as multiple sclerosis, motor neurone disease and cerebral palsy.
By building a nurse-led package to suit individual needs, ICCM gives clients freedom to live independent lives in the community.
The investment will ensure that ICCM can continue its excellent reputation in the East Midlands, whilst also building on existing relationships in other geographies. As part of the transaction, ICCM also acquired Excel at Care to ensure that industry leading training continues to be delivered to carers.
| All ISIS EP LLP managed funds | Year ended 31 May | |||
|---|---|---|---|---|
| First investment: | November 2001 | 2013 | 2012 | |
| Total cost: | £638,000 | £million | £million | |
| Total equity held: | 5.92% | Revenue: | 36.0 | 35.7 |
| EBITA: | 4.7 | 4.5 | ||
| Baronsmead VCT 3 only | Net Assets: | 24.3 | 21.3 | |
| Cost: | £319,000 | |||
| Valuation: | £1,502,000 | No. of employees: | 240 | 235 |
| Valuation basis: | Bid Price | |||
| % of equity held: | 2.96% | |||
www.murgitroyd.com (Source: Murgitroyd Group Plc, Directors' Report and Financial Statements 31 May 2013)
Murgitroyd Group PLC is the holding company of Murgitroyd & Company Limited, a European Patent and Trade Mark Attorney practice. The group is headquartered in Glasgow with offices in Aberdeen, Belfast, Dublin, Edinburgh, Helsinki, London, Milan, Munich, Newcastle, Nice, York and Business Development Offices in USA.
The group specialises in the provision of intellectual property services, including filing, prosecuting, litigating, licensing, assigning and renewing patents, trade marks and designs and advising on copyright. Patent services span the major sectors of the global economy including technology, engineering, electronics, chemistry and biotechnology with clients ranging from large multi-national corporations to individual inventors and both in-house and private practice patent attorneys. The practice services major trade mark clients from the personal care, clothing, food and drinks, tobacco, pharmaceuticals, chemicals and oil industries together with service sector, sport and entertainment and retail industry clients.
The Chairman's Statement on pages 5 to 7 and the Corporate Governance Statement on pages 31 to 34 form part of the Report of the Directors.
(age 66) has over 40 years experience in financial services and in industry. He is chairman of British & American Investment Trust plc, F&C Global Smaller Companies plc, Finsbury Growth & Income Trust plc and Miton Worldwide Growth Investment Trust plc, and a non-executive director of Hansa Capital Limited. He was previously a director of Rea Brothers Group plc, a nonexecutive director of Worldwide Healthcare Trust plc and was chairman of the Association of Investment Companies.
(Date of appointment 10 January 2001)
(age 71) was deputy chairman and a shareholder of Language Line Limited in which Baronsmead VCT 3, was an investor. He was formerly chairman of Integrity Action, an international integrity reform non governmental organisation. He was previously a director of The Guardian Media Group plc, Guardian News and Media Limited, Integrated Micro Products plc and a number of unquoted companies. He was a founder director of Cable London plc and an executive director of Logica plc. He is also a chartered engineer.
(Audit and Risk Committee Chairman)
(Date of appointment 10 January 2001)
(age 68) has in-depth understanding of private investors as chief executive of ProShare (1994– 1999). Previously she was responsible for the private equity portfolio at BP and has been on the board of the FSA, the predecessor to the Financial Conduct Authority. She is currently a nonexecutive director of BlackRock Smaller Companies Trust plc, Martin Currie Global Portfolio Investment Trust plc and JP Morgan Russian Securities plc and is chairman of Witan Pacific Investment Trust plc. She was also a director of Liverpool Victoria Friendly Society from May 2005 to May 2011 and was a deputy chairman of the Association of Investment Companies until January 2014. Gill is a non-executive director of Baronsmead VCT 2 and Baronsmead VCT 5.
(age 67) has wide experience having founded, developed and sold a number of businesses particularly focusing on the international media, technology and telecoms sectors, and has also worked at board level in quoted global organisations. He is currently a non-executive director of a number of private companies and was a non-executive director of Henderson Private Equity Investment Trust plc.
As a fully listed Company, Baronsmead VCT 3 plc is required to comply with the Financial Reporting Council's UK Corporate Governance Code. This Code requires the Company to be headed by an effective Board of Directors who provide entrepreneurial leadership of the Company within a framework of prudent and effective controls.
The directors of a VCT and the investment manager are required under the listing rules and continuing obligations of the London Stock Exchange to have sufficient and satisfactory experience in the management of a portfolio of unquoted investments of the size and type in which the VCT proposes to invest. The Directors are all members of the Audit and Risk Committee, Management Engagement and Remuneration Committee and Nomination Committee.
The Directors present the thirteenth Annual report and audited financial statements of the Company for the year ended 31 December 2013.
| Ordinary Shares | £'000 |
|---|---|
| Profit on ordinary shares after taxation | 9,108 |
| Final dividend of 4.5p per ordinary share paid on 15 April 2013 |
(3,006) |
| First interim dividend of 3.0p per ordinary share paid on 20 September 2013 |
(1,981) |
| Second interim dividend of 4.5p per ordinary share paid on 20 December 2013 |
(2,972) |
| Total dividends paid during the year | (7,959) |
During the period the Company bought back 770,000 ordinary shares with a nominal value of 10p to be held in treasury representing 1.0 per cent. of the issued share capital at a cost of £813,175. No shares were sold from treasury during the period. Shares will not be sold at a discount wider than the discount prevailing at the time the shares were initially bought back by the Company.
The Company holds 9,699,214 ordinary shares in treasury, being the maximum number of ordinary shares held in treasury during the year, representing 12.8 per cent. of the issued share capital as at 17 February 2014.
Biographies of the Directors who served during the year and at the date of this report are shown on page 24.
As explained in more detail under Corporate Governance on pages 31 to 34 and in accordance with the provisions of the AIC Code of Corporate Governance, the Board has agreed that Directors who have held office for more than nine years will retire annually. Accordingly, as Mr Karney and Mrs Nott have held office for a period of more than nine years, they will retire at the forthcoming Annual General Meeting of the Company and, being eligible, offer themselves for re-election. Mrs G Nott who is a director of Baronsmead VCT 2 plc and Baronsmead VCT 5 plc is also required to seek annual re-election under the terms of the UKLA's Listing Rules. Mr Townsend, who was elected at the Company's Annual General Meeting held in 2010, will in accordance with the Company's Articles of Association and the provisions of the AIC Code of Corporate Governance, retire by rotation at the forthcoming Annual General Meeting of the Company and, being eligible, offer himself for re-election.
The Board confirms that, following formal performance evaluations, the performance of each of the Directors continues to be effective and demonstrates commitment to the role. The Board believes that it is therefore in the best interests of shareholders that the retiring Directors be re-elected.
All Directors are members of the Audit and Risk, Management Engagement and Remuneration and Nomination Committees. With a relatively small Board, it is deemed both practical and proportionate to involve all the Directors in each committee.
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
In accordance with Schedule 7 of the Large and Medium Size Companies and Groups (Accounts and Reports) Regulations 2008 the Directors disclose the following information:
the rules concerning the appointment and replacement of Directors, amendment of the Articles of Association and powers to issue or buy back the Company's shares are contained in the Articles of Association of the Company and the Companies Act 2006;
there exist no agreements to which the Company is party that may affect its control following a takeover bid; and
When a new Director is appointed he or she is offered an induction programme that is arranged with the Manager. Directors are also provided on a regular basis with key information on the Company's policies, regulatory and statutory requirements and internal controls. Changes affecting directors' responsibilities are advised to the Board as they arise. Directors also regularly participate in industry seminars.
Directors' and officers' liability insurance cover is in place in respect of the Directors. The Company's Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as Directors, in which they are acquitted or judgement is given in their favour by the Court. Save for such indemnity provisions in the Company's Articles of Association and in the Directors' letters of appointment, there are no qualifying third party indemnity provisions.
The Directors have declared any conflicts or potential conflicts of interest to the Board of Directors which has the authority to approve such situations. The Company Secretary maintains the Register of Directors' Conflicts of Interests which is reviewed quarterly by the Board and when changes are notified. The Directors advise the Company Secretary and Board as soon as they become aware of any conflicts of interest. Directors who have conflicts of interest do not take part in discussions which relate to any of their conflicts.
The Board has considered the UK Corporate Governance Code's recommendations in respect of arrangements by which staff of the Manager or Secretary of the Company may, in confidence, raise concerns within their respective organisations about possible improprieties in matters of financial reporting or other matters. It has concluded that adequate arrangements are in place for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken within their respective organisations.
ISIS EP LLP manages the investments for the Company. The liquid assets within the portfolio (being cash, gilts and other assets, which are not categorised as venture capital investments for the purpose of the FCA's rules) have been managed by FPPE LLP. This is a limited liability partnership, which is authorised and regulated by the FCA and which has the same controlling members as the Manager. The Manager has continued to act as the Manager of the Company and as the investment manager of the Company's illiquid assets (being all AIM-traded and other venture capital investments).
The Manager also provides or procures the provision of accounting, secretarial, administrative and custodian services to the Company. The management agreement may be terminated at any date by either party giving twelve months' notice of termination. Under the management agreement, the Manager receives a fee of 2.5 per cent. per annum of the net assets of the Company. If the management agreement is terminated, the Manager is only entitled to the management fees paid to it and any interest due on unpaid fees.
In addition, the Manager receives an annual secretarial and accounting fee that was initially fixed at £33,816 in 2006 and is revised annually to reflect the movement in RPI, plus a variable fee of 0.125 per cent. of the net assets of the Company which exceed £5 million. The annual fee was initially capped at £102,212 per annum and is also revised annually to reflect the movement in RPI.
Annual running costs are capped at 3.5 per cent. of the net assets of the Company (excluding any performance fee payable to the Manager and irrecoverable VAT), any excess being refunded by the Manager by way of an adjustment to its management fee. The running cost as at 31 December 2013 was 3.0 per cent.
During the year the Management Engagement and Remuneration Committee met to discuss and consider the continuing appointment of the Manager. The Committee reviewed and considered the agreements between the Company and the Manager and the Manager's performance and after careful consideration the Committee recommended to the Board that ISIS EP LLP should continue as Manager of the Company. It is the Board's opinion that the continuing appointment of ISIS EP LLP on the terms agreed is in the best interests of shareholders as a whole. The Board believes that the knowledge and experience accumulated by the Manager in the period since the launch of the first Baronsmead VCT in 1995 is reflected in processes which are designed to find, manage and realise good quality growth businesses.
The Co-investment Scheme was introduced in November 2004. Members of the Manager's investment team invest their own capital into a proportion of the ordinary shares of each and every unquoted investment made by the Baronsmead VCTs. The shares held by the members of the Co-investment Scheme in any portfolio company can only be sold at the same time as the investment held by the Baronsmead VCTs is sold. In addition, any prior ranking financial instruments, such as loan stock, held by the Baronsmead VCTs have to be repaid in full together with the agreed priority annual return before any gain accrues to the ordinary shares. This ensures that the Baronsmead VCTs achieve a good priority return before profits accrue to the Coinvestment Scheme.
The Board is keen to ensure that the Manager continues to have one of the best investment teams in the VCT and private equity market place and considers the Scheme to be essential in order to attract, retain and incentivise the best talent. The Scheme is in line with current market practice in the private equity industry and the Board believes that it aligns the interests of the Manager with those of the Baronsmead VCTs since executives have to invest their own capital in every unquoted transaction and cannot decide selectively in which investments to participate. In addition the Co-investment only delivers a return after each VCT has realised a priority return built into the structure.
The executives participating in the Co-investment Scheme subscribe jointly for a proportion (currently 12 per cent.) of the ordinary shares available to the Baronsmead VCTs in each unquoted investment. The level of participation was increased from 5 per cent. in 2007 when the Manager's performance fee was reduced from 20 per cent. to its current level of 10 per cent.
Since the formation of the Scheme in 2004, 52 executives have invested a total of £1.2 million in 39 companies. At 31 December 2013 14 of these investments have been realised generating proceeds of £148 million for the Baronsmead VCTs and £8 million for the co-investment scheme. For Baronsmead VCT 3 the average money multiple on these nine realisations was 2.6 times cost. Had the co-investment shares been held instead by the Baronsmead VCTs that money multiple would have been 2.7 times cost. Over the period of eight years (based upon the current number of shares in issue) this equates to approximately 3.09p a share.
During the year to 31 December 2013, ISIS EP LLP received net income of £174,000 (2012: £96,550) in connection with advisory fees and incurred abort fees of £Nil (2012: £59,382) with respect to investments attributable to Baronsmead VCT 3 plc.
Directors' fees of £211,000 were received in relation to companies in the investment portfolio during the year.
The Company has retained PricewaterhouseCoopers LLP ('PwC') as its VCT Tax Status Advisers to advise it on compliance with VCT requirements. PwC reviews new investment opportunities, as appropriate, and reviews regularly the investment portfolio of the Company. PwC works closely with the Manager but reports directly to the Board.
The Company seeks to conduct its affairs responsibly and environmental factors are, where appropriate, taken into consideration with regard to investment decisions.
The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio.
At 31 December 2013 and since 31 December 2013 to the date of this report, the Company was not aware of any beneficial interest exceeding 3 per cent. of ordinary share capital in circulation.
After making enquires, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion the Directors have considered the liquidity of the Company and its ability to meet obligations as they fall due for a period of at least twelve months from the date that these financial statements were approved. As at 31 December 2013 the Company held cash balances and investments in interest bearing securities and Money Market Funds with a combined value of £11,062,000. Cash flow projections have been reviewed and show that the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the share buy-back programme and dividend policy. The Company has no external loan finance in place and therefore is not exposed to any gearing covenants.
A notice for the Annual General Meeting of the Company to be held at 10:30 a.m. on Monday, 14 April 2014 at Plaisterers' Hall, One London Wall, London EC2Y 5JU is set out on pages 56 to 59. The following notes provide an explanation of Resolutions 7 to 12 which together with Resolutions 1 to 6, will be proposed at the meeting. Resolutions 1 to 8 will be proposed as ordinary resolutions requiring the approval of more than 50 per cent. of the votes cast at the meeting and Resolutions 9 to 12 will be proposed as special resolutions requiring the approval of 75 per cent. of the votes cast at the meeting. The Board considers that the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole. The Directors will be voting in favour of all the resolutions and the Board unanimously recommends that shareholders do so as well.
Our auditor, KPMG Audit Plc, has instigated an orderly wind down of business. The Board has decided to recommend the approval of the successor firm, KPMG LLP, to be appointed as auditor. Resolution 7 to be proposed at the Annual General Meeting relates to such appointment.
The authority proposed under Resolution 8 will authorise Directors, until the fifth anniversary of the passing of the resolution, to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £3,301,635, representing 50 per cent. of the issued share capital (excluding treasury shares) as at the date of this document. Any consequent increase in the size of the Company will, in the opinion of the Directors, be in the interests of shareholders generally. Any issue proceeds will be available for investment in line with the Company's investment policy and may be used to purchase ordinary shares of the Company.
The Directors intend to use this authority for the purposes described below.
Resolution 9 renews and extends, subject to the passing of Resolution 8, the Directors' authority to allot equity securities for cash without pre-emption rights applying in certain circumstances. This resolution will authorise the Directors, until the date falling 15 months after the date of the passing of the resolution or, if earlier, the conclusion of the next Annual General Meeting of the Company, to issue ordinary shares for cash without pre-emption rights applying of (i) up to an aggregate nominal amount representing 30 per cent. of the Company's issued share capital (excluding treasury shares) as at the date of the passing of the resolution pursuant to one or more offers for subscription, (ii) up to an aggregate nominal amount representing 10 per cent. of the issued share capital (excluding treasury shares) from time to time pursuant to a dividend reinvestment scheme (which may be at a discount to NAV) and (iii) up to an aggregate nominal amount representing 10 per cent. of the issued share capital (excluding treasury shares) from time to time (which may be at a discount to NAV) for allotments from time to time. This power will be exercised only if, in the opinion of the Directors, it would be in the best interests of shareholders as a whole.
The Company currently holds 9,699,214 ordinary shares in treasury representing 12.8 per cent. of the Company's issued ordinary shares. If Resolution 9 is passed, the Board will be authorised to re-issue ordinary shares out of treasury through a dividend reinvestment scheme or at a discount to the prevailing NAV per ordinary share if the Board considers it in the best interests of the Company to do so. However, ordinary shares will never be re-issued out of treasury at a discount wider than the discount prevailing at the time the shares were initially bought back by the Company. Resolution 9 will also allow the Company to re-issue shares out of treasury without preemption rights applying.
Currently there is a two way secondary market in the Company's shares. It is the Board's intention only to use the mechanism of re-issuing treasury shares when demand for the Company's shares is greater than the supply available in the market place. Although shares re-issued from treasury will not attract the 30 per cent. initial income tax relief, under existing tax legislation all further dividends will be tax-free and if these shares are subsequently sold no capital gains tax will be payable by qualifying shareholders.
For more information please see note 3.1 to the Financial Statements on page 51.
The current authority of the Company to make market purchases of up to approximately 14.99 per cent. of its issued share capital expires at the end of the Annual General Meeting and Resolution 10 seeks renewal of such authority until the next Annual General Meeting (or the expiry of 15 months after the passing of the resolution, if earlier). The price paid for shares will not be less than the nominal value nor more than the maximum amount permitted to be paid in accordance with the rules of the UK Listing Authority. This power will be exercised only if, in the opinion of the Directors, a repurchase would be in the best interests of shareholders as a whole. Any shares repurchased under this authority will either be cancelled or held in treasury for future re-issue in appropriate market conditions.
The Board believes that it is in the best interests of shareholders of the Company to have the ability to call meetings on 14 days' clear notice should a matter require urgency. The Board is therefore proposing Resolution 11 to approve the reduction in the minimum notice period from 21 clear days to 14 clear days for all general meetings other than Annual General Meetings. The Directors do not intend to use less than 21 clear days' notice unless prompt action is required.
One of the main principles of company law is that the capital of a company should be maintained and, therefore, a company with share capital must obtain proper consideration for the shares that it issues and must not return funds which have been subscribed for shares except in certain prescribed ways. The principle of maintenance of capital underlies various provisions of the Companies Act 2006. For example, a company may only make distributions to its members out of distributable profits and a company may only buy back its own shares in limited circumstances.
A company can, however, reduce its share capital in circumstances where creditors will not be adversely affected, provided that the company complies with certain procedural requirements. A company may reduce its capital by special resolution, subject to confirmation by the court. A special reserve will then be created from the sums set free from such a cancellation which can be regarded as a distributable reserve.
The Company has completed previous cancellations of its share premium account and the special reserve created by such cancellation has assisted the Company in buying back shares, writing off losses and enhancing the ability to make distributions.
Buy-backs can result in the creation of capital redemption reserves and the issue of new shares will create further share premium. The Board, therefore, considers it appropriate to obtain the approval of shareholders at the Annual General Meeting to cancel further share premium (subject to confirmation by the court) to create further distributable reserves to fund buy-backs and distributions, to set off or write off losses and for other corporate purposes of the Company.
Resolution 12 to be proposed at the Annual General Meeting will authorise the cancellation of the amount standing to the credit of the share premium account of the Company at the date an order confirming such cancellation is made.
By Order of the Board, ISIS EP LLP Secretary 100 Wood Street London EC2V 7AN
17 February 2014
This Corporate Governance Statement forms part of the Report of the Directors.
Arrangements in respect of corporate governance, appropriate to a venture capital trust, have been made by the Board. The Board has considered the principles and recommendations of the Association of Investment Companies' Code of Corporate Governance issued in February 2013 ('AIC Code') by reference to the AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). A copy of the AIC Code can be found at www.theaic.co.uk. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012 ('UK Code'), as well as setting out additional principles and recommendations on issues which are of specific relevance to the Company. A copy of the UK Code can be found at www.frc.org.uk.
The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code) will provide better information to shareholders.
Except as disclosed below, the Company complied throughout the period with the recommendations of the 2010 and 2013 AIC Codes and the relevant provisions of the UK Code. Since all the Directors are non-executive the provisions of the UK Code in respect of the role of the chief executive are not relevant to the Company and, likewise, the provisions of the UK Code relating to directors' remuneration are not relevant except in so far as they relate specifically to non-executive directors. For the reasons set out in the AIC Guide, and in the preamble to the UK Code, the Board considers that these provisions are not relevant to the Company, being an externally managed venture capital trust. The Company has therefore not reported further in respect of these provisions.
In view of the requirement in the Articles of Association that all Directors be subject to retirement by rotation, the Board considers that it is not appropriate for the Directors to be appointed for a specified term as recommended by principle 3 of the AIC Code and provision B.2.3 of the UK Code. However, the Board has agreed that each Director will retire and, if appropriate, seek re-election after each three years' service, and annually after serving on the Board for more than nine years.
The Board, of which Mr Townsend is Chairman, consists solely of non-executive Directors and Mr Karney is Senior Independent Director. All Directors are considered by the Board to be independent of the Company's Manager.
As explained earlier, Mrs Nott is a director of Baronsmead VCT 2 plc and Baronsmead VCT 5 plc, both of which are managed by ISIS EP LLP. The Board believes that appointments to other companies managed by ISIS EP LLP does not impede independence of character and judgement. The Board also does not consider that a Director's tenure reduces their ability to act independently. The Board believes that, as a whole, it comprises an appropriate balance of skills, experience and diversity of background and knowledge. It also believes that each Director is independent in character and judgement and that there are no relationships or circumstances which are likely to affect the judgement of any Director.
The Company has no executive Directors or employees.
A management agreement between the Company and its Manager, ISIS EP LLP, sets out the matters over which the Manager has authority and the limits above which Board approval must be sought. All other matters, including strategy, investment and dividend policies, approval of valuations, gearing, and corporate governance procedures, are reserved for the approval of the Board of Directors. The Board meets at least quarterly and receives full information about the Company's investment performance, assets, liabilities and other relevant information in advance of Board meetings. The Manager, in the absence of explicit instructions from the Board, is empowered to exercise discretion in the use of the Company's voting rights.
All shareholdings are voted, where practicable, in accordance with the Manager's own corporate governance policy, which is to seek to maximise shareholder value by constructive use of votes at company meetings and by endeavouring to use its influence as an investor with a principled approach to corporate governance.
Throughout the period a number of committees have been in operation. The committees are the Audit and Risk Committee, the Management Engagement and Remuneration Committee and the Nomination Committee. The terms of reference of all the committees are available from the Company on request.
All of the Directors meet quarterly to consider in detail the valuations of the unquoted investments in the Company's portfolio.
The Audit and Risk Committee, chaired by Mrs Nott, comprises the full Board and operates within clearly defined terms of reference. The duties of the Audit and Risk Committee include reviewing the annual and interim accounts, the system of internal controls, the terms of appointment of the auditors together with their remuneration, and ensuring that auditor objectivity and independence is safeguarded in the provision of non– audit services by the auditors. It meets at least twice yearly and provides a forum through which the auditors may report to the Board of Directors.
The Audit Committee is responsible for considering and reporting on any significant issues that arise in relation to the audit of the financial statements. The Audit Committee can confirm that there were no significant issues to report to the shareholders in respect of the audit of the financial statements for the year ended 31 December 2013.
The Audit Committee has identified and considered the following key areas of risk in relation to the business activities and financial statements of the company:
These issues were discussed with the Manager and the auditor at the conclusion of the audit of the financial statements, as explained below.
Valuation of unquoted investments: the Manager and the auditor confirmed to the Audit Committee that the investment valuations had been performed consistently with prior periods and in accordance with published industry guidelines, taking account of the latest available information about investee companies and current market data. The Directors have met quarterly to assess the estimates and judgements made by the Investment Manager in the investment valuations for their appropriateness. These were then further reviewed by the Audit Committee.
Venture capital trust status: the Manager confirmed to the Audit Committee that the conditions for maintaining the Company's status as an approved venture capital trust had been met throughout the year. The position was also reviewed by PricewaterhouseCoopers LLP in its capacity as adviser to the Company on taxation matters.
Carrying value of quoted investments: as part of the annual audit, the Auditor has agreed the valuation of all of the listed investments in the portfolio to independent pricing providers. The Auditor also validated the existence of all the securities held by the Company to the records of the Custodian.
The Manager and auditor confirmed to the Audit Committee that they were not aware of any material misstatements. Having reviewed the reports received from the Manager and auditor, the Audit Committee is satisfied that the key areas of risk and judgement have been addressed appropriately in the financial statements and that the significant assumptions used in determining the value of assets and liabilities have been properly appraised and are sufficiently robust. The committee considers that KPMG Audit Plc has carried out its duties as auditor in a diligent and professional manner.
During the year, the Audit Committee assessed the effectiveness of the current external audit process. In accordance with guidance issued by the Auditing Practices Board the audit partner is rotated every five years ensuring that objectivity and independence is not impaired. The current audit partner has been in place for two year-ends. KPMG Audit Plc was appointed as Auditor to the Company in 2003. No tender for the audit of the Company has been undertaken since this date. As part of its review of the continuing appointment of the auditors, the Audit Committee regularly considers the need to put the audit out to tender, its fees and independence from the Investment Manager along with any matters raised during each audit.
The Audit Committee considered the performance of the auditor during the year and agreed that KPMG continued to provide a high level of service and maintained a good knowledge of the venture capital trust market, making sure audit quality continued to be maintained.
The Audit Committee advised the Board that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable in accordance with the UK Corporate Governance Code (September 2012).
Management Engagement and Remuneration Committee
The Management Engagement and Remuneration Committee, chaired by Mr Townsend, comprises the full Board and reviews the remuneration and terms of appointment of the Manager and the Boards' fees. The recommendations of the AIC Code under Principle 5 state that the Chairman may be a member of, but not chair, the Management Engagement and Remuneration Committee. The Board, having considered the recommendations, believe that Mr Townsend remains the most suitable Director to chair the committee. When considering the chairmanship of the committee, the Board took account of factors including the size of the Board and the remit of the committee; which extends to the consideration of non-executive remuneration only. Matters relating to the remuneration of the Chairman are considered by the committee in the absence of the Chairman and under the leadership of the Senior Independent Director.
The Management Engagement and Remuneration Committee also determines and agrees with the Board the framework or broad policy for the remuneration of the Company's Chairman and non-executive Directors. In determining such policy, the Committee takes into account all factors which it deems necessary including relevant legal and regulatory requirements, the provisions and recommendations of the Corporate Governance Code and associated guidance. Further information regarding the work carried out during the year can be found in the Directors' Remuneration Report.
The Nomination Committee, chaired by Mr Townsend, comprises the full Board and is convened for the purpose of considering the appointment of additional Directors as and when considered appropriate. In considering appointments to the Board, the Nomination Committee takes into account the ongoing requirements of the Company and the need to have a balance of skills and experience within the Board.
The Board believes that diversity of experience and approach, including gender diversity, amongst Board members is of great importance and it is the Company's policy to give careful consideration to issues of board balance and diversity when making new appointments.
The Nomination Committee also considers the resolutions in regards to the annual re-election of directors.
Principle 7 of the AIC Code and Principle B.6 of the UK Code recommends that the Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. It is the Board's policy to evaluate the performance of the Board, Committees and individual Directors annually through an assessment process, led by the Chairman, with the performance of the Chairman being evaluated by the other Directors under the leadership of the Senior Independent Director. During this process the Directors considered each Director's independence and discussed performance during the year, the existing corporate governance arrangements and areas where the Board and individual Directors could develop.
Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
The table below sets out the number of Board and Committee meetings held during the year to 31 December 2013 and the number of meetings attended by each Director.
| Board of Directors‡ (Quarterly) (4 meetings held) |
Audit and Risk Committee (2 meetings held) |
Management Engagement and Remuneration Committee (1 meeting held) |
Nomination Committee (1 meeting held) |
|||||
|---|---|---|---|---|---|---|---|---|
| Eligible | Attended | Eligible | Attended | Eligible | Attended | Eligible Attended | ||
| Anthony Townsend | 4 | 4 | 2 | 2 | 1 | 1 | 1 | 1 |
| Andrew Karney | 4 | 4 | 2 | 2 | 1 | 1 | 1 | 1 |
| Gillian Nott | 4 | 4 | 2 | 2 | 1 | 1 | 1 | 1 |
| Ian Orrock | 4 | 4 | 2 | 2 | 1 | 1 | 1 | 1 |
‡ In addition the Board established specific Committees to approve financial statements, the payment of interim dividends and fundraising.
The Company welcomes the views of shareholders and places great importance on communication with its shareholders. The Chairman and other Directors are available to meet shareholders if required. The Annual General Meeting of the Company provides a forum both formal and informal, for shareholders to meet and discuss issues with the Directors and Manager of the Company.
Details of the resolutions to be proposed at the forthcoming Annual General Meeting on 14 April 2014 can be found in the Notice of Meeting on pages 56 to 59. Shareholders seeking to communicate with the Board can do so by contacting the Investor Relations Manager in the first instance.
The Board is responsible for the Company's system of internal controls and for reviewing its effectiveness. The Board has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed. The process adopted is one whereby the Board identifies all of the risks to which the Company is exposed including, among others, market risk, investment risk, operational and regulatory risks which are recorded on a risk register. The controls employed to mitigate these risks are identified and the residual risks are rated taking into account the impact of the mitigating factors.
This register is updated at least twice a year and reports are produced to the board highlighting any material changes in the nature of each risk and where necessary corrective action taken. A formal annual review of the risks and related controls is carried out by the Audit and Risk Committee.
These procedures are designed to manage, rather than eliminate, risk and by their nature can provide reasonable, but not absolute, assurance against material misstatement or loss. The Board monitors the investment performance of the Company in comparison to a benchmark index and to comparable venture capital trusts at each Board meeting. The Board also reviews the Company's activities since the previous Board meeting to ensure that the Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approve changes to such policy and guidelines.
The Board has reviewed the need for an internal audit function and has concluded that the systems and procedures employed by the Manager, provide sufficient assurance that a sound system of internal control, which safeguards shareholders' investment and the Company's assets, is maintained. An internal audit function, specific to the Company, is therefore considered unnecessary.
The Board has prepared this report, in accordance with the requirements of Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Ordinary resolutions for the approval of this report and the directors' remuneration policy will be put to the members at the forthcoming Annual General Meeting.
The law requires the Company's auditors, KPMG Audit Plc, to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such.
The auditors' opinion is included in the 'Independent Auditors' Report'.
The Board which is profiled on page 24 consists solely of non-executive Directors and is considered to be entirely independent. The Board considers, at least annually, the level of the Board's fees, in accordance with the AIC Code of Corporate Governance. The Company Secretary provides information on comparative levels of directors fees to the Board in advance of each review.
The Board has undertaken a review of the fees paid across a selection of its peer group for comparison purposes but has decided to extend the review across a larger selection of the industry in order to make a more informed decision. The Board will consider the current level of fees paid once this review has been completed.
The Board's policy is that the remuneration of nonexecutive Directors should reflect the experience of the Board as a whole, be fair and comparable to that of other relevant venture capital trusts that are similar in size and have similar investment objectives and structures. Furthermore the level of remuneration should be sufficient to attract and retain the Directors needed to oversee properly the Company and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company's affairs.
Assuming this policy is approved by the members at the forthcoming AGM, it is intended that this policy will continue for the year ending 31 December 2014 and subsequent years. In accordance with the Enterprise Regulatory Reform Act 2013, an ordinary resolution to approve the Director's remuneration policy will be put to shareholders at least once every three years.
The Directors are not eligible to receive pension entitlements, bonuses and no other benefits are provided. They are not entitled to participate in any long-term incentive plan or share option schemes. Fees are paid to the Directors on a monthly basis and are not performance related. As the Directors do not have service contracts, the Company does not have a policy on termination payments. There is no notice period and no payments for loss of office were made during the period.
Shareholders' views in respect of Directors' remuneration are communicated at the Company's AGM and are taken into account in formulating the Directors remuneration policy. At the last AGM, over 94 per cent. of shareholders voted for the resolution approving the Directors' Remuneration Report showing significant shareholder support.
The Management Engagement and Remuneration Committee comprises all the Directors of the Company and is chaired by Mr Townsend. As the Company has no executive directors, the Management Engagement and Remuneration Committee meets, at least annually, to consider the Directors' remuneration.
The interests of the Directors in the shares of the Company at the end of the current and prior year were as follows:
| 31 December 2013 | 31 December 2012 | |
|---|---|---|
| Ordinary 10p shares |
Ordinary 10p shares |
|
| Anthony Townsend | 44,439 | 44,439 |
| Andrew Karney | 86,548 | 86,548 |
| Gillian Nott | 57,278 | 82,739 |
| Ian Orrock | 15,535 | 15,535 |
| Total shares held | 203,800 | 229,261 |
There have been no changes in the holdings of the Directors between 31 December 2013 and 17 February 2014. All Directors have applied for shares in the fundraising launched on 22 January 2014.
It is the Board's policy that Directors do not have service contracts, but new Directors are provided with a letter of appointment. The terms of Directors' appointments provide that Directors should retire and be subject to election at the first Annual General Meeting after their appointment.
Directors are thereafter obliged to retire by rotation and, if willing, to offer themselves for re-election by shareholders at least every three years after that. In accordance with the AIC Code, Directors who have served on the Board for more than 9 years must offer themselves for re-election on an annual basis. There is no notice period and no provision for compensation upon early termination of appointment. Below is a table which sets out each Director's date of appointment and due date for re-election.
| Director | Date of original appointment |
Due date for re-election |
|---|---|---|
| Anthony Townsend | 4 August 2009 | AGM 2014 |
| Andrew Karney | 10 January 2001 | AGM 2014 |
| Gillian Nott | 10 January 2001 | AGM 2014 |
| Ian Orrock | 21 October 2010 | AGM 2015 |
The Board is responsible for the Company's investment strategy and performance, although the management of the Company's investment portfolio is delegated to the Manager through the management agreement, as referred to in the 'Report of the Directors'. The graph below compares, for the five years ended 31 December 2013, the percentage change over each period in the share price total return (assuming all dividends are reinvested) to shareholders compared to the share price total return of approximately 70 generalist VCTs (Source: AIC), which the Board considers to be most appropriate benchmark for investment performance measurement purposes. An explanation of the performance of the Company is given in the Chairman's Statement and Manager's Review.
Relative Importance of Spend on Pay
| 2013 | 2012 | Percentage | |
|---|---|---|---|
| £ | £ | increase | |
| Dividend | 4,953,000 | 4,899,000 | 1.10 |
| Total directors fees | 82,250 | 80,000 | 2.81 |
Ordinary Share Price total return and the weighted average performance for the AIC members' Generalist VCTs (for the last five years)
*Source: AIC
The Directors who served in the year received the following emoluments in the form of fees:
| Fees 2013 £ |
Fees 2012 £ |
|
|---|---|---|
| Anthony Townsend | 25,750 | 25,000 |
| Andrew Karney | 18,000 | 17,500 |
| Gillian Nott | 20,500 | 20,000 |
| Ian Orrock | 18,000 | 17,500 |
| Total | 82,250 | 80,000 |
Approved by the Board of Directors and signed by:
Chairman of the Management Engagement and Remuneration Committee
17 February 2014
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards.
The financial statements are required by law to 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:
The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report (including Business Review), Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, www.baronsmeadvct3.co.uk. Visitors to the website should be aware that legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
On behalf of the Board, Anthony Townsend Chairman
17 February 2014
We have audited the financial statements of Baronsmead VCT 3 plc for the year ended 31 December 2013 set out on pages 41 to 55. In our opinion the financial statements:
In arriving at our audit opinion above on the financial statements, the risks of material misstatement that had the greatest effect on our audit were as follows:
Refer to page 32 (Audit and Risk Committee section of the Corporate Governance report) and pages 45 and 46 (accounting policy and financial disclosures).
Refer to page 32 (Audit and Risk Committee section of the Corporate Governance report), and pages 45 and 46 (accounting policy and financial disclosures).
The materiality for the financial statements as a whole was set at £1,510,000. This has been determined with reference to a benchmark of Total Assets (of which it represents 2%). Total Assets, which is primarily composed of the Company's investment portfolio, is considered the key driver of the Company's capital and revenue performance and, as such, we believe that it is one of the principal considerations for members of the Company in assessing its financial performance.
We agreed with the Audit Committee to report to it all corrected and uncorrected misstatements we identified through our audit with a value in excess of £75,000, in addition to other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above and was performed at the Investment Manager, ISIS Equity Partners, head office in London and at the Administrator, Capita Asset Services, in Exeter.
In our opinion:
Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
We have nothing to report in respect of the above responsibilities.
As explained more fully in the Directors' Responsibilities Statement set out on page 37, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company's members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
17 February 2014
For the year ended 31 December 2013
| Notes | Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|
| Unrealised gains on movements in fair value of investments | 2.3 | – | 8,624 | 8,624 | – | 9,373 | 9,373 |
| Realised (losses)/gains on disposal of investments | 2.3 | – | (1,069) | (1,069) | – | 426 | 426 |
| Income | 2.5 | 3,763 | – | 3,763 | 1,187 | – | 1,187 |
| Investment management fee | 2.6 | (443) | (1,329) | (1,772) | (409) | (1,228) | (1,637) |
| Other expenses | 2.6 | (438) | – | (438) | (390) | – | (390) |
| Profit on ordinary activities before taxation | 2,882 | 6,226 | 9,108 | 388 | 8,571 | 8,959 | |
| Taxation on ordinary activities | 2.9 | (560) | 560 | – | (25) | 25 | – |
| Profit on ordinary activities after taxation | 2,322 | 6,786 | 9,108 | 363 | 8,596 | 8,959 | |
| Return per ordinary share: | |||||||
| Basic | 2.2 | 3.50p | 10.23p | 13.73p | 0.58p | 13.67p | 14.25p |
All items in the above statement derive from continuing operations.
There are no recognised gains and losses other than those disclosed in the Income Statement.
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.
For the year ended 31 December 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Opening shareholders' funds | 74,562 | 60,095 | |
| Profit on ordinary activities after taxation | 9,108 | 8,959 | |
| Net proceeds of share issues & buybacks | 3.2 | (817) | 7,401 |
| Other costs charged to capital | 3.2 | (15) | – |
| Dividends paid | 2.4 | (7,959) | (1,893) |
| Closing shareholders' funds | 74,879 | 74,562 | |
| 2013 | 2012 | ||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Fixed assets | |||
| Investments | 2.3 | 67,727 | 66,740 |
| Current assets | |||
| Debtors | 2.7 | 178 | 5,261 |
| Cash at bank and on deposit | 7,564 | 3,238 | |
| Creditors (amounts falling due within one year) | 2.8 | 7,742 (590) |
8,499 (677) |
| Net current assets | 7,152 | 7,822 | |
| Net assets | 74,879 | 74,562 | |
| Capital and reserves | |||
| Called-up share capital | 3.1 | 7,573 | 7,573 |
| Share premium | 3.2 | – | 22,866 |
| Capital redemption reserve | 3.2 | – | 10,862 |
| Other reserve | 3.2 | 33,718 | – |
| Capital reserve | 3.2 | 19,906 | 18,928 |
| Revaluation reserve | 3.2 | 12,992 | 13,649 |
| Revenue reserve | 3.2 | 690 | 684 |
| Equity shareholders' funds | 2.1 | 74,879 | 74,562 |
| Net asset value per share | |||
| – Basic | 2.1 | 113.40p | 111.62p |
| – Treasury | 2.1 | 112.48p | 110.88p |
The financial statements were approved by the Board of Directors on 17 February 2014 and were signed on its behalf by:
ANTHONY TOWNSEND (Chairman)
For the year ended 31 December 2013
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Operating activities | ||
| Investment income received | 3,931 | 1,337 |
| Deposit interest received | 18 | 7 |
| Investment management fees paid | (1,744) | (1,572) |
| Other cash payments | (410) | (378) |
| Net cash inflow/(outflow) from operating activities | 1,795 | (606) |
| Financial investment | ||
| Purchases of investments | (36,380) | (63,220) |
| Disposals of investments | 42,948 | 65,620 |
| Net cash inflow from financial investment | 6,568 | 2,400 |
| Equity dividends paid | (7,959) | (1,893) |
| Net cash inflow/(outflow) before financing | 404 | (99) |
| Financing | ||
| Net proceeds of share issues & buybacks | 3,930 | 2,654 |
| Other costs charged to capital | (8) | – |
| Net cash inflow from financing | 3,922 | 2,654 |
| Increase in cash | 4,326 | 2,555 |
| Reconciliation of net cash flow to movement in net cash | ||
| Increase in cash | 4,326 | 2,555 |
| Opening cash position | 3,238 | 683 |
| Closing cash at bank and on deposit | 7,564 | 3,238 |
| Reconciliation of profit on ordinary activities before taxation to net cash inflow/(outflow) from operating activities | ||
| Profit on ordinary activities before taxation | 9,108 | 8,959 |
| Gains on investments | (7,555) | (9,799) |
| Decrease in debtors | 197 | 187 |
| Increase in creditors | 45 | 76 |
| Income reinvested | – | (29) |
| Net cash inflow/(outflow) from operating activities | 1,795 | (606) |
In preparing the 2013 financial statements, Baronsmead VCT 3 has made a number of changes in structure, layout and wording in order to make the financial statements less complex and more relevant for shareholders and other users.
We have grouped notes into sections under three key categories:
The key accounting policies have been incorporated throughout the notes to the financial statements adjacent to the disclosure to which they relate. All accounting policies are included within an outlined box.
These financial statements have been prepared under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice ("SORP") for investment trust companies and venture capital trusts issued by the Association of Investment Companies ("AIC") in January 2009 and on the assumption that the Company maintains VCT status.
| Number of | Net asset value per | Net asset value | ||||
|---|---|---|---|---|---|---|
| ordinary shares | share attributable | attributable | ||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |
| number | number | pence | pence | £'000 | £'000 | |
| Ordinary shares (basic) | 66,032,705 | 66,802,705 | 113.40 | 111.62 | 74,879 | 74,562 |
| Ordinary shares (including treasury) | 75,731,919 | 75,731,919 | 112.48 | 110.88 | 85,184 | 83,971 |
The treasury net asset value per share as at 31 December 2013 included ordinary shares held in treasury valued at the mid share price of 106.25p at 31 December 2013 (2012: 105.38p).
| Weighted average number of ordinary shares |
Return per ordinary share |
Net profit on ordinary activities after taxation |
||||
|---|---|---|---|---|---|---|
| 2013 number |
2012 number |
2013 pence |
2012 pence |
2013 £'000 |
2012 £'000 |
|
| Revenue | 66,308,458 | 62,863,845 | 3.50 | 0.58 | 2,322 | 363 |
| Capital | 66,308,458 | 62,863,845 | 10.23 | 13.67 | 6,786 | 8,596 |
| Total | 13.73 | 14.25 | 9,108 | 8,959 | ||
Purchases or sales of investments are recognised at the date of transaction.
Investments are measured at fair value. For AIM-traded, ISDX and listed securities this is either bid price or the last traded price, depending on the convention of the exchange on which the investment is traded.
In respect of unquoted investments, these are valued at fair value by the Directors using methodology which is consistent with the International Private Equity and Venture Capital Valuation guidelines ("IPEV"). This means investments are valued using an earnings multiple, which has a discount or premium applied which adjusts for points of difference to appropriate stock market or comparable transaction multiples. Alternative methods of valuation will include application of an arm's length third party valuation, a provision on cost or a net asset value basis.
Gains and losses arising from changes in the fair value of the investments are included in the Income Statement for the period as a capital item. Transaction costs on acquisition are included within the initial recognition and the profit or loss on disposal is calculated net of transaction costs on disposal.
All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.
The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Level 1 | ||
| Listed interest bearing securities | 3,498 | 2,490 |
| Investments traded on AIM | 25,722 | 20,833 |
| Investments traded on ISDX | 346 | – |
| Investments listed on LSE | 2,850 | 1,808 |
| 32,416 | 25,131 | |
| Level 2 | ||
| Collective investment vehicle (Wood Street Microcap Investment Fund) | 7,012 | 4,525 |
| Level 3 | ||
| Unquoted investments | 28,299 | 37,084 |
| 67,727 | 66,740 | |
| Level 1 | Level 2 | Level 3 | |||||
|---|---|---|---|---|---|---|---|
| Listed Interest bearing securities £'000 |
Traded on AIM £'000 |
Traded on ISDX £'000 |
Listed on LSE £'000 |
Collective investment vehicle £'000 |
Unquoted £'000 |
Total £'000 |
|
| Opening book cost | 2,490 | 16,867 | – | 1,729 | 3,525 | 28,480 | 53,091 |
| Opening unrealised appreciation | – | 3,966 | – | 79 | 1,000 | 8,604 | 13,649 |
| Opening valuation | 2,490 | 20,833 | – | 1,808 | 4,525 | 37,084 | 66,740 |
| Movements in the year: | |||||||
| Purchases at cost | 27,491 | 2,314 | 227 | – | – | 6,348 | 36,380 |
| Sales – proceeds | (26,483) | (3,373) | – | – | – | (13,092) | (42,948) |
| – realised gains/(losses) on sales | – | 419 | – | – | – | (1,488) | (1,069) |
| Unrealised gains realised during the year | – | 1,240 | – | – | – | 8,041 | 9,281 |
| Increase/(decrease) in unrealised appreciation | – | 4,289 | 119 | 1,042 | 2,487 | (8,594) | (657) |
| Closing valuation | 3,498 | 25,722 | 346 | 2,850 | 7,012 | 28,299 | 67,727 |
| Closing book cost | 3,498 | 17,467 | 227 | 1,729 | 3,525 | 28,289 | 54,735 |
| Closing unrealised appreciation | – | 8,255 | 119 | 1,121 | 3,487 | 10 | 12,992 |
| Closing valuation | 3,498 | 25,722 | 346 | 2,850 | 7,012 | 28,299 | 67,727 |
| Equity shares | – | 25,722 | 346 | 2,850 | 7,012 | 5,383 | 41,313 |
| Loan notes | – | – | – | – | – | 22,916 | 22,916 |
| Fixed income securities | 3,498 | – | – | – | – | – | 3,498 |
| Closing valuation | 3,498 | 25,722 | 346 | 2,850 | 7,012 | 28,299 | 67,727 |
The gains and losses included in the above table have all been recognised in the Income Statement above.
For Level 3 unquoted investments, the effect on fair value of changing one or more assumptions to reasonably possible alternatives has been considered. The portfolio has been reviewed and both downside and upside reasonable possible alternatives have been identified and applied to the valuation of each of the investments. The inputs flexed in determining the reasonably possible alternative assumptions include the earnings stream and marketability discount.
Applying the downside alternatives the value of the unquoted investments would be £2.8 million or 9.3 per cent. lower. Using the upside alternatives the value would be increased by £2.6 million or 10.1 per cent.
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Amounts recognised as distributions to equity holders in the year: | ||||||
| For the year ended 31 December 2013 | ||||||
| – First interim dividend of 3.0p per ordinary share paid on 20 September 2013 |
991 | 990 | 1,981 | – | – | – |
| – Second interim dividend of 4.5p per ordinary share paid on 20 December 2013 |
991 | 1,981 | 2,972 | – | – | – |
| For the year ended 31 December 2012 | ||||||
| – Interim dividend of 3.0p per ordinary share paid on 21 September 2012 | – | – | – | – | 1,893 | 1,893 |
| – Final dividend of 4.5p per ordinary share paid on 15 April 2013 | 334 | 2,672 | 3,006 | – | – | – |
| 2,316 | 5,643 | 7,959 | – | 1,893 | 1,893 | |
Interest income on loan notes and dividends on preference shares are accrued on a daily basis. Provision is made against this income where recovery is doubtful.
Where the terms of unquoted loan notes only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income once redemption is reasonably certain. Until such date interest is accrued daily and included within the valuation of the investment.
Income from fixed interest securities and deposit interest is included on an effective interest rate basis.
Dividends on quoted shares are recognised as income when the related investments are marked ex-dividend and where no dividend date is quoted, when the Company's right to receive payment is established.
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Quoted securities |
Unquoted securities |
Total | Quoted securities |
Unquoted securities |
Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Income from investments† | ||||||
| UK franked | 472 | – | 472 | 285 | – | 285 |
| UK unfranked | 8 | 2,351 | 2,359 | 13 | 807 | 820 |
| UK unfranked – reinvested | – | – | – | – | 29 | 29 |
| Redemption premium | – | 913 | 913 | – | 45 | 45 |
| 480 | 3,264 | 3,744 | 298 | 881 | 1,179 | |
| Other income‡ | ||||||
| Deposit interest | 19 | 8 | ||||
| Total income | 3,763 | 1,187 | ||||
| Total income comprises: | ||||||
| Dividends | 472 | 285 | ||||
| Interest | 3,291 | 902 | ||||
| 3,763 | 1,187 | |||||
† All investments have been designated at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss.
‡ Other income on financial assets not designated fair value through profit or loss.
| All expenses are recorded on an accruals basis. | ||||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
| Investment management fee | 443 | 1,329 | 1,772 | 409 | 1,228 | 1,637 |
| Performance fee | – | – | – | – | – | – |
| 443 | 1,329 | 1,772 | 409 | 1,228 | 1,637 | |
Management fees are allocated 25 per cent. income: 75 per cent. capital derived in accordance with the Board's expected split between long term income and capital returns. Performance fees are allocated 100 per cent. capital.
The management agreement may be terminated by either party giving twelve months notice of termination.
The Manager, ISIS EP LLP, receives a fee of 2.5 per cent. per annum of the net assets of the Company, calculated and payable on a quarterly basis.
The Manager is entitled to a performance fee when the total return on net proceeds of the ordinary shares exceeds 8 per cent. per annum (on a simple basis). The Manager is entitled to 10 per cent. of the excess. The amount of any performance fee which is paid in respect of a calculation period shall be capped at 5 per cent. of the shareholders' funds at the end of the calculation period. No performance fee is payable for the year ended 31 December 2013 (2012: £nil).
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Directors' fees | 82 | 80 |
| Secretarial and accounting fees paid to the Manager | 130 | 121 |
| Remuneration of the auditors and their associates: | ||
| – audit | 22 | 21 |
| – other services supplied pursuant to legislation (interim review) | 5 | 5 |
| – other services supplied relating to taxation | 6 | 7 |
| – other services supplied relating to financial statements' reorganisation | 5 | – |
| Other | 188 | 156 |
| 438 | 390 | |
Information on directors' remuneration is given in the directors' remuneration table on page 36.
Charges for other services provided by the auditors in the year ended 31 December 2013 were in relation to the interim reviews, tax compliance work (including iXBRL) and financial statements' reorganisation. The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. The Directors consider that the auditors were best placed to provide such services.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Prepayments and accrued income | 178 | 375 |
| Amounts due from fundraising | – | 4,886 |
| 178 | 5,261 | |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Management, performance, secretarial and accounting fees due to the Manager | 471 | 474 |
| Share premium and capital redemption reserve cancellation costs | 7 | – |
| Fundraising costs | – | 139 |
| Other creditors | 112 | 64 |
| 590 | 677 | |
UK corporation tax payable is provided on taxable profits at the current rate.
Provision is made for deferred taxation on all timing differences calculated at the current rate of tax relevant to the benefit or liability.
The tax charge for the year is lower than the standard rate of corporation tax in the UK for a company. The differences are explained below:
| Revenue £'000 |
2013 Capital £'000 |
Total £'000 |
Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Profit on ordinary activities before taxation | 2,882 | 6,226 | 9,108 | 388 | 8,571 | 8,959 |
| Corporation tax at 23.25 per cent. (2012: 24.5 per cent.) | 670 | 1,448 | 2,118 | 95 | 2,100 | 2,195 |
| Effect of: | ||||||
| Non-taxable gains | – | (1,757) | (1,757) | – | (2,401) | (2,401) |
| Non-taxable dividend income | (110) | – | (110) | (70) | – | (70) |
| Losses carried forward | – | (251) | (251) | – | 276 | 276 |
| Tax charge/(credit) for the year | 560 | (560) | – | 25 | (25) | – |
At 31 December 2013 the Company had surplus management expenses of £1,964,000 (2012: £3,045,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus expenses. Due to the Company's status as a VCT, 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.
| Ordinary shares | £'000 |
|---|---|
| 75,731,919 ordinary shares of 10p each listed at 31 December 2012 | 7,573 |
| 75,731,919 ordinary shares of 10p each listed at 31 December 2013 | 7,573 |
| 8,929,214 ordinary shares of 10p each held in treasury at 31 December 2012 | (893) |
| 770,000 ordinary shares of 10p each repurchased during the year and held in treasury | (77) |
| 9,699,214 ordinary shares of 10p each held in treasury at 31 December 2013 | (970) |
| 66,032,705 ordinary shares of 10p each in circulation* at 31 December 2013 | 6,603 |
* Carrying one vote each.
During the year the Company bought into treasury 770,000 ordinary shares representing 1.0 per cent. of the ordinary shares in issue at the beginning of the financial year.
There were no changes in share capital between the year end and when the financial statements were approved.
When the Company reacquires its own shares, they are held as treasury shares and not cancelled.
Shareholders have authorised the Board to re-issue treasury shares at a discount to the prevailing NAV subject to the following conditions:
Gains and losses on realisation of investments of a capital nature are dealt with in the capital reserve. Purchases of the Company's own shares to be either held in treasury or cancelled are also funded from this reserve. 75 per cent. of management fees are allocated to the capital reserve in accordance with the Board's expected split between long term income and capital returns.
| Distributable reserves | Non-distributable reserves | |||||||
|---|---|---|---|---|---|---|---|---|
| Capital | ||||||||
| Capital | Revenue | Share | redemption | Other | Revaluation | |||
| reserve £'000 |
reserve £'000 |
Total £'000 |
premium £'000 |
reserve £'000 |
reserve £'000 |
reserve* £'000 |
Total £'000 |
|
| At 1 January 2013 | 18,928 | 684 | 19,612 | 22,866 | 10,862 | – | 13,649 | 47,377 |
| Cancellation of share premium and capital redemption reserve |
– | – | – | (22,866) | (10,862) | 33,728 | – | – |
| Share premium and capital redemption reserve cancellation costs |
– | – | – | – | – | (10) | – | (10) |
| Purchase of shares for treasury | (813) | – | (813) | – | – | – | – | – |
| Expenses of share issue and buybacks | (4) | – | (4) | – | – | – | – | – |
| Other costs charged to capital | (5) | – | (5) | – | – | – | – | – |
| Reallocation of prior year unrealised gains | 9,281 | – | 9,281 | – | – | – | (9,281) | (9,281) |
| Realised loss on disposal of investments# | (1,069) | – | (1,069) | – | – | – | – | – |
| Net increase in value of investments# | – | – | – | – | – | – | 8,624 | 8,624 |
| Management fee capitalised# | (1,329) | – | (1,329) | – | – | – | – | – |
| Taxation relief from capital expenses# | 560 | – | 560 | – | – | – | – | – |
| Revenue return on ordinary activities after taxation# | – | 2,322 | 2,322 | – | – | – | – | – |
| Dividends paid in the year | (5,643) | (2,316) | (7,959) | – | – | – | – | – |
| At 31 December 2013 | 19,906 | 690 | 20,596 | – | – | 33,718 | 12,992 | 46,710 |
* Changes in fair value of investments are dealt with in this reserve.
The Company does not have any externally imposed capital requirements.
On 18 December 2013 the court granted orders allowing the Company to cancel its share premium account and capital redemption reserve. The amounts of £22,866,000 (share premium) and £10,862,000 (capital redemption reserve) will become distributable during 2014 once all creditors at the date of cancellation have been discharged.
The Company's financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in a diverse portfolio of UK growth businesses.
The Company's investing activities expose it to a range of financial risks. These key risks and the associated risk management policies to mitigate these risks are described below.
Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities.
The investment portfolio is managed in accordance with the policies and procedures described on pages 12 to 15 of the Strategic Report.
Investments in unquoted stocks, AIM & ISDX quoted companies involve a higher degree of risk than investments in the main market. The Company aims to reduce this risk by diversifying the portfolio across business sectors and asset classes.
Management performs continuing analysis on the fair value of investments and the Company's overall market positions are monitored by the Board on a quarterly basis.
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| 5% | 5% | 5% | 5% | |||
| increase in | decrease in | increase in | decrease in | |||
| share price | share price | share price | share price | |||
| effect on | effect on | effect on | effect on | |||
| % of total | net assets | net assets | % of total | net assets | net assets | |
| investment | and profit | and profit | investment | and profit | and profit | |
| £'000 | £'000 | £'000 | £'000 | |||
| LSE, AIM, ISDX & CIV | 53 | 1,797 | (1,797) | 41 | 1,358 | (1,358) |
| Unquoted | 42 | 1,415 | (1,415) | 56 | 1,854 | (1,854) |
Valuation methodology includes the application of earnings multiples derived from either listed companies with similar characteristics or recent comparable transactions. Therefore the value of the unquoted element of the portfolio may also indirectly be affected by price movements on the listed exchanges.
The Company has the following investments in fixed and floating rate financial assets:
| Total investment £'000 |
Weighted average interest rate % |
Weighted average time for which rate is fixed days |
Total investment £'000 |
Weighted average interest rate % |
Weighted average time for which rate is fixed days |
|---|---|---|---|---|---|
| 22,916 | 7.89 | # | 25,226 | 9.38 | # |
| 3,498 | 0.26 | 48 | 2,000 | 0.12 | 21 |
| – | – | – | 490 | – | – |
| 7,564 | – | – | 3,238 | – | – |
| 33,978 | 30,954 | ||||
| 2013 | 2012 |
Credit risk refers to the risk that counterparty will default on its obligation resulting to a financial loss to the Company. The Investment Manager monitors credit risk on an ongoing basis.
At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Investments in fixed rate instruments | 3,498 | 2,000 |
| Investments in floating rate instruments | – | 490 |
| Cash at bank & on deposit | 7,564 | 3,238 |
| Interest, dividends and other receivables | 178 | 5,261 |
| 11,240 | 10,989 | |
Credit risk arising on fixed interest instruments is mitigated by investing in UK Government Stock.
Credit risk on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed earlier in the note.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.
All the assets of the Company which are traded on a recognised exchange are held by JP Morgan Chase ("JPM"), the Company's custodian. The Board monitors the Company's risk by reviewing the custodian's internal controls reports as described in the Corporate Governance section of this report.
The cash held by the Company is held by JPM and Lloyds. The Board monitors the Company's risk by reviewing regularly the internal control reports of these banks. Should the credit quality or the financial position of either bank deteriorate significantly the Investment Manager will seek to move the cash holdings to another bank.
There were no significant concentrations of credit risk to counterparties at 31 December 2013 or 31 December 2012. No individual investment exceeded 6.2 per cent. of the net assets attributable to the Company's shareholders at 31 December 2013 (2012: 6.9 per cent.).
The Company's financial instruments include investments in unquoted companies which are not traded in an organised public market, as well as AIM and ISDX traded equity investments, all of which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Extract from the Report of the Directors above. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 31 December 2013 these investments were valued at £11,062,000 (2012: £5,728,000).
Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager, ISIS EP LLP, as disclosed in notes 2.6 and 2.8, and fees paid to the Directors as disclosed in note 2.6. In addition, the Manager operates a Co-investment Scheme, detailed in the Extract from the Report of the Directors, whereby employees of the Manager are entitled to participate in all unquoted investments alongside the Company.
An offer for subscription to raise gross proceeds of up to £10m was launched on 22 January 2014. The Fundraising Offer costs are capped at 3 per cent. of the gross proceeds of the Offer and the Manager agreed to underwrite any costs and expenses in excess of this amount. If there are surplus funds the Manager expects most or all of the money received in respect of the underwriting of the costs of the Offer to be fully utilised in the payment of future trail commission for which it is responsible.
A new investment of £952,000 was made in Kingsbridge Risk Solutions Ltd on 10 January 2013.
An offer for subscription to raise gross proceeds of up to £10 million was launched on 22 January 2014. Based on subscriptions to date, it is expected that the Company's offer will be fully subscribed during February 2014.
Notice is hereby given that the thirteenth Annual General Meeting of Baronsmead VCT 3 plc will be held at Plaisterers' Hall, One London Wall, London EC2Y 5JU on Monday, 14 April 2014 at 10:30 a.m. for the purposes of considering and, if thought fit, passing the following resolutions, resolutions 1 to 8 being proposed as ordinary resolutions and resolutions 9 to 12 being proposed as special resolutions:
in each case where such proceeds of issue may be used to purchase shares in the Company and the power conferred by this resolution shall expire on the date falling 15 months after the date of the passing of this resolution (unless previously revoked, varied, renewed or extended by the Company in general meeting) or, if earlier, at the conclusion of the next Annual General Meeting of the Company, except that the Company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted after such expiry and the Directors of the Company shall be authorised to allot equity securities pursuant to any such offers or agreements as if the power conferred by this resolution had not expired.
By Order of the Board
ISIS EP LLP Registered Office: Secretary 100 Wood Street
17 February 2014 London EC2V 7AN
Should a member wish to appoint a proxy electronically, such proxy appointment must be registered electronically at www.eproxyappointment.com, so as to be received not later than 10:30 am on 12 April 2014 or 48 hours before the time appointed for any adjourned meeting or, in the case of a poll taken subsequent to the date of the meeting or adjourned meeting, so as to be received by no later than 24 hours before the time appointed to take the poll. To vote electronically, you will be asked to provide the Control Number, Shareholder Reference Number (SRN) and PIN, details of which are contained in the personalised proxy form enclosed. This is the only acceptable means by which proxy instructions may be submitted electronically.
10.CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the meeting and any adjournment(s) thereof by utilising the procedures described in the CREST manual, which is available to download from the Euroclear website (www.euroclear.com/CREST). CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
Such a request may be in hard copy form or in electronic form, and must identify the resolution of which notice is to be given or the matter to be included in the business, must be authorised by the person or persons making it and must be received by the Company not later than 28 February 2014, being the date six clear weeks before the meeting.
18.Any electronic address provided either in this Notice or in any related documents (including the proxy form) may not be used to communicate with the Company for any purposes other than those expressly stated.
| Ordinary share | |||||
|---|---|---|---|---|---|
| Year ended 31 December |
Total net assets £m |
Net asset value p |
Share price (mid) P |
Net asset value total return* p |
Total expense ratio % |
| 2001 | 31.1 | 93.85 | 88.00 | 101.21 | 2.9 |
| 2002 | 32.1 | 94.85 | 85.50 | 105.35 | 3.3 |
| 2003 | 33.0 | 97.15 | 90.00 | 112.65 | 3.1 |
| 2004 | 35.1 | 106.38 | 92.50 | 125.64 | 3.5 |
| 2005 | 56.2 | 117.31 | 100.50 | 144.77 | 3.5 |
| 2006 | 66.5 | 130.77 | 116.50 | 169.27 | 3.4 |
| 2007 | 65.2 | 120.44 | 111.50 | 170.56 | 3.4 |
| 2008 | 55.1 | 102.72 | 90.50 | 149.56 | 3.0 |
| 2009 | 52.9 | 97.50 | 86.25 | 159.89 | 3.1 |
| 2010 | 64.6 | 106.60 | 94.25 | 180.19 | 3.0 |
| 2011 | 60.1 | 100.16 | 91.25 | 189.74 | 3.0 |
| 2012 | 74.6 | 111.62 | 105.38 | 217.38 | 3.0† |
| 2013 | 74.9 | 113.40 | 106.25 | 245.38 | 3.0† |
* Source: ISIS EP LLP and AIC.
† Figures from 31 December 2012 are based on the new AIC guidelines for the calculation of ongoing charges.
| Ordinary share | ||||||
|---|---|---|---|---|---|---|
| Year ended 31 December |
Revenue dividend p |
Capital dividend p |
Total annual dividend p |
Cumulative dividends p |
Average total annual dividend p |
|
| 2001 | 2.30 | – | 2.30 | 2.30 | 2.30 | |
| 2002 | 2.80 | – | 2.80 | 5.10 | 2.55 | |
| 2003 | 2.20 | 2.00 | 4.20 | 9.30 | 3.10 | |
| 2004 | 1.20 | 3.30 | 4.50 | 13.80 | 3.45 | |
| 2005 | 2.00 | 3.50 | 5.50 | 19.30 | 3.86 | |
| 2006 | 1.75 | 4.75 | 6.50 | 25.80 | 4.30 | |
| 2007 | 2.30 | 5.20 | 7.50 | 33.30 | 4.76 | |
| 2008 | 2.40 | 5.10 | 7.50 | 40.80 | 5.10 | |
| 2009 | 1.20 | 6.30 | 7.50 | 48.30 | 5.37 | |
| 2010 | 2.00 | 5.50 | 7.50 | 55.80 | 5.58 | |
| 2011 | 1.65 | 5.85 | 7.50 | 63.30 | 5.75 | |
| 2012 | 0.50 | 7.00 | 7.50 | 70.80 | 5.90 | |
| 2013 | 3.00 | 4.50 | 7.50 | 78.30 | 6.02 |
The shareholdings of ordinary shares as at 31 December 2013 (excluding shares held in treasury) are analysed as follows:
| Ordinary shares | ||||||
|---|---|---|---|---|---|---|
| Size of shareholding | Number of shareholders |
Percentage of total number of shareholders |
Number of shares |
Percentage of shares |
||
| 1 – 2,000 | 292 | 8.21 | 355,285 | 0.54 | ||
| 2001 – 5000 | 889 | 25.01 | 3,215,215 | 4.87 | ||
| 5001 – 10000 | 820 | 23.07 | 6,116,865 | 9.26 | ||
| 10001 – 25000 | 917 | 25.79 | 14,979,949 | 22.69 | ||
| 25001 – 50000 | 406 | 11.42 | 14,410,143 | 21.82 | ||
| 50001 – 100000 | 158 | 4.44 | 11,271,327 | 17.07 | ||
| 100001 – 9999999999 | 73 | 2.06 | 15,683,921 | 23.75 | ||
| Total | 3,555 | 100.00 | 66,032,705 | 100.00 |
| 31 December | 31 December | % of Equity | |||||
|---|---|---|---|---|---|---|---|
| 2013 | 2012 | held by | % of Equity | ||||
| Book cost | Valuation | Valuation | % of net | Baronsmead | held by all | ||
| Company | Sector | £'000 | £'000 | £'000 | assets | VCT 3 plc | funds# |
| Unquoted | |||||||
| Nexus Vehicle Holdings Limited | Business Services | 2,368 | 4,621 | 4,768 | 6.2 | 12.3 | 56.0 |
| Crew Clothing Holdings Limited | Consumer Markets | 1,453 | 2,336 | 3,020 | 3.1 | 6.1 | 25.5 |
| Inspired Thinking Group Limited | Business Services | 796 | 2,056 | 1,571 | 2.7 | 5.0 | 22.5 |
| Valldata Group Limited | Business Services | 1,220 | 1,701 | 1,754 | 2.3 | 13.9 | 58.9 |
| Independent Community Care Management Limited |
Healthcare & Education | 1,346 | 1,583 | 1,491 | 2.1 | 10.9 | 55.0 |
| Create Health Limited | Healthcare & Education | 1,065 | 1,384 | – | 1.9 | 5.7 | 29.0 |
| CableCom II Networking Holdings Limited | TMT* | 1,250 | 1,250 | – | 1.7 | 2.4 | 11.2 |
| Impetus Holdings Limited | Business Services | 1,305 | 1,174 | 1,057 | 1.6 | 8.8 | 45.6 |
| Eque2 Limited | TMT* | 877 | 1,131 | – | 1.5 | 7.6 | 38.5 |
| Pho Holdings Limited | Consumer Markets | 987 | 1,090 | 987 | 1.5 | 5.5 | 28.0 |
| Arcas Investments Limited | Business Services | 1,000 | 1,000 | 1,000 | 1.3 | 9.6 | 48.6 |
| HealthTech Innovation Partners Limited | Healthcare & Education | 1,000 | 1,000 | 1,000 | 1.3 | 9.6 | 48.6 |
| Quest Venture Partners Limited | Business Services | 1,000 | 1,000 | 1,000 | 1.3 | 9.6 | 48.6 |
| Riccal Investments Limited | Business Services | 1,000 | 1,000 | 1,000 | 1.3 | 9.6 | 48.6 |
| Fisher Outdoor Leisure Holdings Limited | Consumer Markets | 1,423 | 961 | 1,656 | 1.3 | 10.5 | 44.0 |
| Carousel Logistics Limited | Business Services | 955 | 955 | – | 1.3 | 6.0 | 40.0 |
| Key Travel Limited | Business Services | 954 | 954 | – | 1.3 | 4.0 | 40.0 |
| Happy Days Consultancy Limited | Healthcare & Education | 833 | 833 | 833 | 1.1 | 8.4 | 42.6 |
| CableCom Networking Holdings Limited | TMT* | 0 | 741 | 4,328 | 1.0 | N/A | N/A |
| Armstrong Craven Limited | Business Services | 673 | 673 | – | 0.9 | 7.7 | 46.0 |
| Luxury For Less Limited | Consumer Markets | 955 | 429 | 1,000 | 0.6 | 4.0 | 40.0 |
| Playforce Holdings Limited | Business Services | 1,196 | 402 | 512 | 0.5 | 16.5 | 75.0 |
| Empire World Trade Limited | Business Services | 1,297 | 25 | 0 | 0.0 | ‡ | ‡ |
| Carnell Contractors Limited | Business Services | 941 | 0 | 0 | 0.0 | ## | ## |
| Music Festivals plc Loan note | Consumer Markets | 400 | 0 | 0 | 0.0 | N/A | N/A |
| Surgi C Limited | Healthcare & Education | 1,102 | 0 | 350 | 0.0 | 13.3 | 57.5 |
| Xention Discovery Limited | Healthcare & Education | 893 | 0 | 0 | 0.0 | 1.7 | 2.3 |
| 28,289 | 28,299 | 37.8 | |||||
| Total unquoted | |||||||
| AIM | |||||||
| Netcall plc | TMT* | 869 | 2,847 | 1,337 | 3.8 | 4.0 | 20.0 |
| IDOX plc | TMT* | 614 | 2,081 | 5,184 | 2.8 | 1.8 | 5.0 |
| Tasty plc | Consumer Markets | 594 | 1,634 | 595 | 2.2 | 2.5 | 14.5 |
| Murgitroyd Group plc | Business Services | 319 | 1,502 | 1,173 | 2.0 | 3.0 | 5.9 |
| Driver Group plc | Business Services | 563 | 1,332 | 786 | 1.8 | 4.0 | 18.9 |
| Anpario plc | Healthcare & Education | 275 | 1,315 | 506 | 1.8 | 2.0 | 14.7 |
| Accumuli plc | TMT* | 505 | 1,309 | 636 | 1.7 | 4.3 | 23.4 |
| TLA Worldwide plc | Business Services | 733 | 1,091 | 589 | 1.5 | 4.1 | 20.4 |
| Jelf Group plc | Financial Services | 761 | 1,036 | 1,024 | 1.4 | 1.4 | 5.6 |
| Escher Group Holdings plc | TMT* | 614 | 867 | 885 | 1.2 | 1.9 | 9.7 |
| Plastics Capital plc | Business Services | 662 | 820 | 317 | 1.1 | 2.2 | 11.7 |
| Inspired Energy plc | Business Services | 300 | 810 | 405 | 1.1 | 2.3 | 11.6 |
| Sanderson Group plc | TMT* | 612 | 793 | 379 | 1.1 | 2.3 | 9.3 |
| Synectics plc | Business Services | 296 | 626 | 352 | 0.8 | 0.6 | 2.1 |
| Tangent Communications plc | Business Services | 523 | 580 | 495 | 0.8 | 2.2 | 11.2 |
| Electric Word plc | TMT* | 696 | 575 | 366 | 0.8 | 5.1 | 27.7 |
| GB Group plc | TMT* | 150 | 544 | 341 | 0.7 | 0.3 | 1.7 |
| Hangar8 plc | Business Services | 388 | 533 | 456 | 0.7 | 2.5 | 11.3 |
| Sinclair IS Pharma plc | Healthcare & Education | 524 | 511 | 490 | 0.7 | 0.4 | 2.2 |
| InterQuest Group plc | Business Services | 310 | 506 | 265 | 0.7 | 1.7 | 6.6 |
| Dods (Group) plc | TMT* | 1,219 | 469 | 649 | 0.6 | 4.2 | 20.1 |
| MartinCo plc | Consumer Markets | 343 | 436 | – | 0.6 | 1.6 | 6.9 |
| Everyman Media Group plc | Consumer Markets | 391 | 391 | – | 0.5 | 1.3 | 5.8 |
| Vianet Group plc | Business Services | 646 | 388 | 508 | 0.5 | 1.9 | 9.7 |
| EG Solutions plc Ideagen plc |
TMT TMT |
453 225 |
378 329 |
379 – |
0.5 0.4 |
3.4 1.0 |
15.5 4.3 |
* Technology, Media & Telecommunications ("TMT").
‡ Following a restructuring, the effective ownership percentage is dependent on final exit proceeds.
| 31 December | 31 December | % of Equity | |||||
|---|---|---|---|---|---|---|---|
| 2013 | 2012 | held by | % of Equity | ||||
| Book cost | Valuation | Valuation | % of net | Baronsmead | held by all | ||
| Company | Sector | £'000 | £'000 | £'000 | assets | VCT 3 plc | funds# |
| AIM (continued) | |||||||
| Paragon Entertainment Limited | Consumer Markets | 245 | 293 | 300 | 0.4 | 3.5 | 18.5 |
| Cohort plc | Business Services | 179 | 248 | 144 | 0.3 | 0.3 | 1.4 |
| Begbies Traynor Group plc | Financial Services | 231 | 239 | 203 | 0.3 | 0.6 | 2.5 |
| Daily Internet plc | TMT* | 225 | 225 | – | 0.3 | 4.1 | 18.0 |
| Brady plc | TMT* | 176 | 214 | 292 | 0.3 | 0.4 | 2.1 |
| Ubisense Group plc | TMT* | 130 | 175 | 165 | 0.2 | 0.3 | 1.6 |
| Tristel plc | Healthcare & Education | 217 | 171 | 114 | 0.2 | 1.0 | 5.4 |
| AimShell Acquisitions plc | Business Services | 400 | 102 | 96 | 0.1 | 3.1 | 12.3 |
| Pinnacle Technology Group plc | TMT* | 169 | 96 | – | 0.1 | 1.7 | 7.6 |
| One Media iP Group plc | TMT* | 56 | 93 | – | 0.1 | 1.1 | 4.8 |
| STM Group plc | Financial Services | 162 | 77 | 84 | 0.1 | 0.6 | 4.0 |
| Green Compliance plc | Business Services | 932 | 42 | 29 | 0.1 | 0.8 | 4.1 |
| Bglobal plc | Business Services | 176 | 35 | 50 | 0.0 | 0.4 | 2.5 |
| Zoo Digital Group plc | TMT* | 584 | 9 | 11 | 0.0 | 0.2 | 0.6 |
| Total AIM | 17,467 | 25,722 | 34.3 | ||||
| Listed | |||||||
| Vectura Group plc | Healthcare & Education | 771 | 2,239 | 1,343 | 3.0 | 0.5 | 1.3 |
| Chime Communications plc | TMT* | 369 | 578 | 396 | 0.8 | 0.2 | 0.7 |
| Marwyn Value Investors Limited | Financial Services | 64 | 18 | 33 | 0.0 | 1.3 | 6.0 |
| Marwyn Management Partners plc | Financial Services | 525 | 15 | 36 | 0.0 | 0.3 | 1.6 |
| Total listed | 1,729 | 2,850 | 3.8 | ||||
| ISDX | |||||||
| Bioventix plc | Healthcare & Education | 227 | 346 | – | 0.4 | 1.7 | 7.7 |
| Total ISDX | 227 | 346 | 0.4 | ||||
| Listed interest bearing securities | |||||||
| UK T-Bill 17/02/14 | 3,498 | 3,498 | – | 4.7 | |||
| Total listed interest bearing securities | 3,498 | 3,498 | 4.7 | ||||
| Collective investment vehicle | |||||||
| Wood Street Microcap Investment Fund | 3,525 | 7,012 | 4,525 | 9.4 | |||
| Total collective investment vehicle | 3,525 | 7,012 | 9.4 | ||||
| Total investments | 54,735 | 67,727 | 90.4 | ||||
| Net current assets | 7,152 | 9.6 | |||||
| Net assets | 74,879 | 100.0 |
* Technology, Media & Telecommunications ("TMT").
The Registrar for Baronsmead VCT 3 plc is Computershare Investor Services PLC ("Computershare"). The Registrar will deal with all of your queries with regard to your shareholder account, such as:
| You can contact Computershare with your queries in several ways: | |||
|---|---|---|---|
| Telephone: | 0870 889 3250 (calls charged at geographical and national rates) |
This is an automated self-service system It is available 24 hours a day, 7 days a week You should have your Shareholder Reference Number ("SRN") to hand, which is available on your share certificate and dividend tax voucher and which you should always keep confidential for security reasons |
|---|---|---|
| Press '0' if you wish to speak to someone The Contact Centre in Bristol is available on UK business days between 8.30am – 5.00pm Monday to Friday |
||
| On-line: | Investor Centre www.investorcentre.co.uk |
Computershare's secure website, Investor Centre, allows you to manage your own shareholding online You will need to register to use this service on the Investor Centre website You should have your ("SRN") to hand, which is available on your share certificate and dividend tax voucher and which you should always keep confidential for security reasons |
| Email: | [email protected] | |
| Post: | Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ |
The Baronsmead VCT 3 plc website is www.baronsmeadvct3.co.uk
The Investment Manager for Baronsmead VCT 3 plc is ISIS EP LLP who can be contacted as follows:
Email: [email protected] Telephone: 020 7506 5717 Facsimile: 020 7506 5718
The Company's ordinary shares are listed on the London Stock Exchange. The mid-price of the Company's shares is given daily in the Financial Times in the Investment Companies section of the London Share Service. Share price information can also be obtained from the link on the Company's website and many financial websites.
The Company's shares can be bought and sold in the same way as any other quoted company on the London Stock Exchange via a stockbroker. As buying and selling existing shares in VCTs is complex, Shareholders should seek to trade shares on a "best execution" basis if appropriate.
The marketmakers in the shares of Baronsmead VCT 3 plc are:
| Panmure Gordon & Co | 020 7886 2500 |
|---|---|
| Singer Capital Markets Limited | 020 3205 7500 |
| Winterflood Securities Limited | 020 3400 0251 |
| February 2014 | Announcement of final results for year to 31 December 2013 |
|---|---|
| April 2014 | Thirteenth Annual General Meeting |
| August 2014 | Announcement of interim results and posting of half-yearly report |
The information provided in this report has been produced in order for shareholders to be informed of the activities of the Company during the period it covers. ISIS EP LLP does not give investment advice and the naming of companies in this report is not a recommendation to deal in them.
Baronsmead VCT 3 plc is managed by ISIS EP LLP which is authorised and regulated by the FCA. Past performance is not necessarily a guide to future performance. Stock markets and currency movements may cause the value of investments and the income from them to fall as well as rise and investors may not get back the amount they originally invested. Where investments are made in unquoted securities and smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investment.
The existing shares of the Company are listed on the London Stock Exchange and can be bought and sold using a stockbroker in the same way as shares of any other listed company.
Qualifying investors* who invest in the existing shares of the Company can benefit from:
The UK tax treatment of VCTs is on a first in first out basis and therefore tax advice should be obtained before shareholders dispose of their shares and also if they deferred a capital gain in respect of new shares acquired prior to 6 April 2004.
* UK income tax payers, aged 18 or over, who acquire no more than £200,000 worth of VCT shares in a tax year.
Anthony Townsend (Chairman)‡ Andrew Karney† Gillian Nott OBE* Ian Orrock
ISIS EP LLP
100 Wood Street London EC2V 7AN
ISIS EP LLP 100 Wood Street London EC2V 7AN 020 7506 5717
FPPE LLP (liquid assets only) 100 Wood Street London EC2V 7AN
04115341
Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Tel: 0870 889 3250
KPMG Audit Plc Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
Norton Rose LLP 3 More London Riverside London SE1 2AQ
PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
www.baronsmeadvct3.co.uk
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