Annual Report • Dec 31, 2012
Annual Report
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Baronsmead VCT 3 plc
Annual report & accounts for the year ended 31 December 2012 2012
| PERFORMANCE | |
|---|---|
| Investment objective | 1 |
| Financial headlines | 2 |
| Performance summary | 3 |
| Chairman's statement | 5 |
| Manager's review | 7 |
| Summary investment portfolio | 10 |
| Table of investments and realisations | 11 |
| Creating shareholder value | 13 |
| Ten largest investments | 14 |
| DIRECTORS' REPORTS | |
| Board of Directors | 19 |
| Report of the Directors | 20 |
| Corporate governance | 2 9 |
| Directors' remuneration report | 3 2 |
| Statement of Directors' responsibilities | 3 4 |
| FINANCIAL STATEMENTS | |
| Independent Auditor's report | 3 5 |
| Income statement | 3 7 |
| Reconciliation of movements in shareholders' funds |
3 7 |
| Balance sheet | 3 8 |
| Cash fl ow statement | 3 9 |
| Notes to the accounts | 40 |
| Notice of annual general meeting | 5 4 |
| Dividend history since launch | 5 8 |
|---|---|
| Cash returned to shareholders | 5 8 |
| Performance record since launch | 5 9 |
| Dividends paid since launch | 5 9 |
| Breakdown of shareholdings | 60 |
| Full investment portfolio | 60 |
| INFORMATION | |
| Shareholder information and contact details | 6 2 |
| Corporate information | 6 4 |
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 Registrar, Computershare, would make unsolicited telephone calls to shareholders and that any such calls would relate only to offi cial 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 6 2.
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.
Full details of the Company's published investment policy and risk management are contained in the Report of the Directors on pages 20 to 2 3.
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. There will be variations in the amount of dividends paid year on year. Since launch, the average annual tax-free dividend paid to shareholders (including the proposed fi nal dividend of 4.5p) has been 5.9p per ordinary share (equivalent to a pre-tax return of 7.9p per ordinary share for a higher rate taxpayer). For shareholders who received up front tax reliefs, their returns would have been higher.
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.
Net asset value ("NAV") per share increased 14.4 per cent. to 114.6p in the twelve months ended 31 December 2012, before deduction of the interim dividend.
$$
+14.4\%
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Dividends totalled 7.5p for the year to 31 December 2012, including the proposed fi nal dividend of 4.5p.
7.5p
Net annual dividend yield of 7.1 per cent. and gross annual yield of 9.5 per cent.
7.1%
NAV total return to shareholders for every 100.0p invested at launch.
217.4p
Source: ISIS EP LLP
* Includes proposed fi nal dividend of 4.5p .
Source: ISIS EP LLP
* Includes proposed fi nal dividend of 4.5p .
This Chairman's Statement forms part of the Report of the Directors.
Anthony Townsend Chairman
In the year to 31 December 2012 the Net Asset Value ("NAV") before payment of dividends grew by 14. 5p per share representing an increase of 14.4per cent. A fi nal dividend of 4.5p per share is proposed resulting in total dividends of 7.5 p per share for the year which will be paid predominantly out of profi ts generated from successful portfolio realisations in recent years.
The change in the NAV per share over the year is summarised in the table below:
| Pence per ordinary share |
|
|---|---|
| NAV as at 1 January 2012 Valuation uplift (14.44 per cent.) |
100.16 14.46 |
| 114.62 | |
| Interim dividend paid on 21 September 2012 | (3.0) |
| Proposed fi nal dividend of 4.5p, payable after shareholder approval, on 15 April 2013 |
(4.5) |
| NAV as at 31 December 2012 assuming fi nal dividend paid |
107.12 |
We are pleased with the consistent performance of the portfolio despite the poor economic environment since 2008. For instance, over the past three years the Company's top ten investments as at 31 December 2012, representing 52 per cent. of the portfolio by value , have generated an average annual growth of 17 per cent. in sales and 15 per cent. in profi ts. The number of jobs created by these portfolio companies has been signifi cant with the top ten investments now employing some 2,500 people, an increase of 22 per cent. over the last year. This helps to validate the wider aims of the VCT legislation which are to assist in generating growth in the UK economy. Overall, our portfolio of 67 companies remains in good health with 8 5 per cent. demonstrating steady to strong growth.
This strong performance has resulted in a steady fl ow of successful realisations which has enabled the Company to maintain a consistent annual dividend of 7.5p since 2007, which is tax free for qualifying shareholders. This dividend equates to an annual tax free dividend yield of 7.1 per cent. on the mid share price of 105. 4 p at 31 December 2012. Over the year, the valuations of the unquoted and AIM portfolios increased by 8and 38per cent. respectively. The largest gains came from the AIM investments in IDOX and Independent Living Services Limited, which increased in value by £3.12 million and £2.03 million respectively as a result of signifi cantly better trading results.
The Company's policy of investing in a diverse portfolio of established and profi table companies capable of strong growth aims to generate consistent returns over the long term.
The NAV total return over the past ten years has been 206.3 p for each 100p invested by Baronsmead VCT 3 compared with the sector average of 172.9p for VCT generalists over the same period (source AIC). Assuming the fi nal dividend is approved, founder shareholders will have received dividends totalling 70.8p per share compared to the initial net cost of 80.0p per share, after taking account of the maximum initial VCT income tax relief of 20 per cent. of amounts invested in new VCT shares that was available to qualifying investors in 2001. These dividends are tax free for qualifying investors.
The Company raised gross proceeds of £4. 1 million (£3.9 million net) in February 2012 by way of a top up share offer. A further offer for subscription by way of a prospectus launched in November 2012 raised its target of £5.0 million (£4.7 million net) proceeds by 21 December 2012. In deciding how much to raise during 2012 the Directors considered the level of cash that will be required by the Company for investment over the next few years as well as the need to maintain suffi cient liquidity to pay dividends and cover annual running costs.
Since inception the Board has, as a service to shareholders, maintained a buy back policy of acquiring shares through the market at a discount to NAV of approximately 10 per cent. Each year the level of shares bought back by the Company is relatively low. (For instance in the past three fi nancial years the Company has bought back an annual average of 2 per cent. of the shares in issue at the fi nancial year end). In addition, the results of the shareholder survey carried out in October 2012 confi rmed that a signifi cant majority of our shareholders intend to hold their shares for the long term. As a result, in November 2012 the Directors decided that in order to enable those shareholders who do wish to sell their shares to achieve a return closer to net asset value they would in future seek to buy back shares at a 5 per cent. discount to NAV. This should also improve the price of the Company's shares for ongoing shareholders and increase their attractiveness.
This discount control policy will be kept under review based on the number of shares bought back over the next 12 months and may therefore be subject to revision. The buying back of shares will depend on market conditions at the time and will only happen when the Directors believe any such purchase would be in the best interests of shareholders as a whole.
As anticipated in my half-yearly report the continued scarcity of bank debt in the UK and concerns regarding the stability of the European Union have resulted in both uncertain and slower growth for the UK economy.
Against this unpromising backdrop there has been steady progress across many of our portfolio companies as witnessed by the 'top ten' investees showing increases in turnover and profi ts. The relatively low levels of debt in the companies concerned should ensure that our investments are more resilient if trading conditions continue to be diffi cult.
We therefore view the next year with a mixture of caution and optimism as we continue to believe that good quality companies of the size in which we invest can prosper even in the current tough environment. We are fortunate that the investment manager ISIS has a strong track record of partnering with such companies and has the experience and knowledge to support them along a growth path.
I look forward to seeing as many shareholders as possible at our 12th Annual General Meeting which will be held this year on Wednesday 10 April 2013 at the Plaisterers' Hall, One London Wall, EC2Y 5JU at 10:30 am. The AGM will be followed by presentations from the Manager and one of our investee companies. Following these presentations we would be delighted if you could join us for a light lunch.
Anthony Townsend Chairman 1 5 February 2013
Andrew Garside Sheenagh Egan Michael Probin
Considering the ongoing uncertainty during the period under review in the national and European economies, the progress made by the Company's investees is creditable. Overall , the portfolio has performed very well including a number of signifi cant gains by a number of quoted shareholdings.
The net assets of £75 million were invested as follows:
| Asset class | NAV | % of NAV |
Number of investees |
Annual return % |
|---|---|---|---|---|
| Unquoted | 37,084,000 | 50 | 25 | 8 |
| Quoted | 22,641,000 | 30 | 42 | 38 |
| Wood Street Microcap | 4,525,000 | 6 | 33 | 18 |
| Cash and near cash | 10,312,000 | 14 |
During the year in total there were;
Each quarter the direction of general trading and profi tability of all investee companies is recorded so that the Board can monitor the overall health and trajectory of the portfolio. At 31 December 2012, 85 per cent. of the 67 companies in the portfolio were progressing steadily or better.
The unquoted portfolio has again performed well and there has been a steady increase in unquoted values of 8 per cent. 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 has come from operational improvements (revenue and margin growth), rather than fi nancial leverage.
The sale of TVC to the Economist Group realised £1.3 million in March 2012.
There has also been a signifi cant uplift in the quoted portfolio of 38 per cent. partially refl ecting a positive rerating of the small cap sector in the fi rst quarter of 2012. This recovery has been helpful to the quoted portfolio following several years of headwinds from a challenging AIM market environment and weak share prices.
The largest contributor to the uplift in the quoted portfolio was IDOX, a supplier of document management software to the UK local government, and global engineering sectors. The IDOX share price appreciated by 125 per cent. during the period aided by a combination of good organic growth and accretive acquisitions which led to successive earnings forecast upgrades.
Over the three years to 3 1 December 2012, the approach in quoted investments has been to concentrate on making fewer AIM investments and becoming a more engaged shareholder where possible and appropriate. This has taken time to implement as only a small minority of AIM companies qualify for VCT purposes. The average size by value of the AIM & Listed investments in the portfolio in December 2009 was £271,000 but this had increased by 99 per cent. to £539,000 by December 2012.
Due to the signifi cant uplift in the AIM and listed portfolio of £6.3 million during the year, the opportunity was taken to divest seven investments, mainly in legacy companies that were valued below cost, largely to reduce the tail of older and poorer performing investments. Of these, three were sold through trade sales (Clarity Commerce Solutions, Prologic and Stagecoach Theatre Arts), one through a market sale (The Real Good Food Company) and three written off (Colliers International UK, Music Festivals and Adventis Group). Proceeds from these seven divestments totalled £0.7 million. This represented an overall uplift in recognised value during the year of £0.2 million but a loss against cost of £1.5 million. Some profi ts were taken from the investment in IDOX, with 11 per cent. of the holding sold for £593,000 realising a profi t of £475,000 against cost.
Wood Street Microcap Investment Fund ("Wood Street") was established by ISIS in May 2009 to provide fl exibility for the Baronsmead VCTs to invest in generally larger and more liquid non VCT qualifying AIM and Small Cap opportunities. During the year, a further investment of £1 million was made into Wood Street. The Manager receives no additional fee for managing this fund. At 31 December 2012, Baronsmead VCT 3 had invested £3.5 million through Wood Street into a portfolio of 33 companies, valued at £4.5 million. Wood Street generated a positive return of 18 per cent. over the year.
Baronsmead VCT 3 had cash and near cash resources of approximately £10 million at the year-end. This asset class is conservatively managed to take minimal or no capital risk.
In addition, investments within the Wood Street fund are expected to be relatively more liquid than other investments as covered 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 £5.2 million was invested in 6 unquoted companies including three new companies seeking acquisitions of which one was used to make the investment in Impetus Holdings described below. Three new unquoted investments were;
• Impetus Holdings is a specialist business consultancy, supplying Sales and After Sales support services to the automotive industry. The business delivers a diverse range of programmes and projects for Vehicle Manufacturers, with much of their work taking place within Dealerships and National Sales Companies. Impetus Automotive has achieved strong growth in recent years with revenues increasing by 50 per cent. since 2010. Clients include VW, Land Rover, Audi, Toyota, BMW, Citro ën, Fiat, Ford and Jaguar. Approximately 15 per cent. of work is delivered outside of the UK. The investment by ISIS will support the business in its continued expansion into new markets, building on the strong presence established in the UK and further development of new services to clients.
The average investment value of the top ten companies held by Baronsmead VCT 3 is £3.1 million per company. Because these investments are normally held by the other four Baronsmead VCTs, the total managed by ISIS in each investee is signifi cantly larger than this, which enables ISIS to dedicate signifi cant resource to manage each investment and their progress. The top ten investees employ some 2, 500 people, which is an increase of 22 per cent. over the last year. Their turnover and profi ts had also grown by some 15 per cent. annually for the last three years. In this year's Annual Report, each of the top ten companies are described in more detail on pages 1 4 to 18 .
ISIS continues to invest in its skills and capacity with over 40 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 in depth sector research and specialisation and to its strong origination team that help the team to generate proprietary deal fl ow.
Its investments are supported from the outset by an experienced internal value enhancement team together with a panel of proven Operating Partners that work exclusively with ISIS to assist management teams to deliver both strategic development and operational effi ciencies. 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 the past fourteen 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:
A number of commentators believe that the UK economy is unlikely to experience signifi cant growth in the near future. At this stage of the recovery, this is hard to dispute and it is a fair working assumption for investors.
However many of our portfolio companies and their management teams are now more experienced at handling the 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 fi nancial structures.
ISIS is an active investment manager who works with our investee to help them to grow revenue and earnings whilst continuing to enhance customer service and build resilient businesses with good momentum. 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. We continue to be confi dent that good levels of performance can be maintained despite the ongoing challenging environment.
Investment Manage r 1 5 February 2013
| Book cost | ||||
|---|---|---|---|---|
| Company | Location | Sector | Activity | £'000 |
| Unquoted investments | ||||
| New | ||||
| Impetus Holdings Limited | London | Business Services | Automotive consultancy and outsourced service provider |
1,057 |
| Consumer Investment Partners Limited† |
London | Consumer Markets | Company seeking to acquire businesses in the consumer markets sector |
1,000 |
| Riccal Investments Limited‡ | London | Business Services | Company seeking to acquire businesses in the business services sector |
1,000 |
| Pho Holdings Limited | London | Consumer Markets | Restaurant group specialising in Vietnamese street food |
987 |
| Happy Days Consultancy Limited | Newquay | Healthcare & Education | Provider of nursery based childcare in Cornwall & Plymouth across 16 settings |
833 |
| Follow on | ||||
| Crew Clothing Holdings Limited | London | Consumer Markets | Multi-channel clothing retailer | 360 |
| Total unquoted investments | 5,237 | |||
| AIM-traded & listed investments | ||||
| New | ||||
| Zattikka plc | London | TMT* | Online games development | 316 |
| Follow on | ||||
| Dods (Group) plc | London | TMT* | Political information and communication | 678 |
| Hangar8 plc | Oxford | Business Services | Business jet management | 344 |
| Tangent Communications plc | London | Business Services | Digital direct marketing | 215 |
| Accumuli plc | Salford | TMT* | Managed IT security | 132 |
| Inspired Energy plc | Kirkham | Business Services | Energy procurement consultancy services | 100 |
| Electric Word plc | London | TMT* | Business to business publisher | 80 |
| Driver Group plc | Rossendale | Business Services | Dispute resolution | 60 |
| Total AIM-traded & listed investments | 1,925 | |||
| Collective investment vehicle | ||||
| Follow on | ||||
| Wood Street Microcap Investment Fund | 1,000 |
|---|---|
| Total collective investment vehicle | 1,000 |
| Total investments in the year | 8,162 |
* Technology, Media & Telecommunications ("TMT").
† Formerly named Ingleby (1887) Limited.
‡ Formerly named Ingleby (1885) Limited.
| 31 December | Realised | ||||
|---|---|---|---|---|---|
| First | 2011 | profi t/(loss) | Overall | ||
| investment | valuation | this period | multiple | ||
| Company | date | £'000 | £'000 | return | |
| Unquoted realisations | |||||
| TVC Group Limited | Full trade sale | Jul 08 | 1,298 | 26 | 1.1 |
| MLS Limited | Loan repayment | Jul 06 | 417 | 0 | 1.0 |
| Total unquoted realisations | 1,715 | 26 | |||
| AIM-traded & listed realisations | |||||
| IDOX plc | Market sale | Jan 09 | 357 | 236 | 5.0 |
| Stagecoach Theatre Arts plc | Full trade sale | Feb 01 | 153 | 140 | 0.7 |
| Real Good Food Company (The) plc | Full market sale | Dec 03 | 160 | 65 | 0.4 |
| Prologic plc | Full trade sale | Jun 04 | 103 | 48 | 0.5 |
| Clarity Commerce Solutions plc | Full trade sale | Oct 09 | 29 | 3 | 0.6 |
| Colliers International UK plc | Written off | Jul 01 | 4 | (4) | 0.0 |
| Adventis Group plc | Written off | Jun 04 | 10 | (9) | 0.0 |
| Music Festivals plc | Written off | Jun 11 | 87 | (87) | 0.0 |
| Total AIM-traded & listed realisations | 903 | 392 | |||
| Total realisations in the year | 2,618 | 418† |
† Proceeds of £8,000 were also received in respect of Getting Personal Limited, which had been sold in the year ended 31 December 2011.
Baronsmead VCT 3 plc gives shareholders access to a diverse portfolio of growth businesses, both unquoted private equity and AIM-traded companies.
Each business has already demonstrated profi table success from its business model before investment to provide a degree of stability and foundation from which to build. Each business is led by entrepreneurial management teams that are aspiring to achieve above average growth from attractive and differentiated market positions.
The Manager, ISIS, aspires to select the best opportunities and has a distinctive selection criteria based on;
In order to ensure there is a strong pipeline of opportunities, ISIS invests in sector knowledge and networks. It then undertakes signifi cant pro-active marketing to interesting unquoted targets in preferred sectors. This is building a database of businesses that are keen to maintain a relationship with ISIS ahead of possible investment opportunities.
For unquoted private equity investments, ISIS is an involved shareholder and representatives of the Manager join the investee board. The role of ISIS is to ensure that strategy is clear, the business plan is well thought through and the management resources are in place to deliver profi table growth. The intention is to build on the initial platform and grow the business so that it can become an attractive target able to be either sold or fl oated in the medium term.
The investment strategy for AIM-traded companies has increasingly focused on taking more infl uential stakes through the collective shareholdings of the Baronsmead family of VCTs.
The top ten investments by current value at 31 December 2012 illustrate the diversity and size of investee companies within the portfolio. This fi nancial information is taken from publicly available information published at Companies House, which has been audited by the auditors of the investee companies.
| 1 IDOX PLC London |
|||||
|---|---|---|---|---|---|
| All ISIS EP LLP managed funds | Year ended 31 October | ||||
| First investment: | May 2002 | 2011 | 2010 | ||
| Total cost: | £2,460,000 | £million | £million | ||
| Total equity held: | 7.51% | Revenue: | 38.6 | 31.3 | |
| EBITA: | 9.5 | 7.5 | |||
| Baronsmead VCT 3 only | Net Assets: | 34.4 | 31.0 | ||
| Cost: | £920,000 | ||||
| Valuation: | £5,184,000 | No of employees: | 363 | 332 | |
| Valuation basis: | Traded Price | ||||
| % of equity held: | 2.80% | ||||
| www.investors.idoxgroup.com | (Source: IDOX Plc, Directors' Report and Financial Statements 31 October 2011) |
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 fi rst invested in IDOX in 2002, approximately two years after the company fl oated 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.
First investment: February 2008 2011 2010 Total cost: £9,500,000 £million £million Total equity held: 56.00% Revenue: 38.3 33.5 EBITA: 4.3 4.0 Baronsmead VCT 3 only Net Assets: 1.7 0.8 Cost: £2,368,000 Valuation: £4,768,000 No of employees: 90 73 Valuation basis: Earnings Multiple % of equity held: 12.32%
All ISIS EP LLP managed funds Year ended 30 September
www.nexusrental.co.uk (Source: Nexus Vehicle Holdings Limited, Report and Financial Statements 30 September 2011)
Nexus enables corporate users to source all their vehicle rental needs from one source – a highly effi cient 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 fl eets and enables customers to benefi t from the buying scale of Nexus.
Vehicle rental in the UK represents a large market and Nexus is gaining market share through its innovative approach. Two acquisitions have also added to the growth of Nexus.
2
4
CABLECOM NETWORKING HOLDINGS LIMITED Clevedon
| All ISIS EP LLP managed funds | Year ended 30 September | |||
|---|---|---|---|---|
| First investment: | May 2007 | 2011 | 2010 | |
| Total cost: | £5,600,000 | £million | £million | |
| Total equity held: | 48.00% | Revenue: | 12.2 | 8.2 |
| EBITA: | 1.4 | 0.9 | ||
| Baronsmead VCT 3 only | Net Assets: | 0.3 | 0.5 | |
| Cost: | £1,381,000 | |||
| Valuation: | £4,328,000 | No. of employees: | 61 | 52 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 10.56% |
| EBITA: | 1.4 |
|---|---|
www.cablecomnetworking.co.uk (Source: CableCom Networking Holdings Limited, Report and Financial Statements 30 September 2011)
Cablecom is a leader in the provision of IT and communication managed services to accommodation blocks for the UK student and key worker sectors. Under term contracts, it manages the full range of communication services including broadband, telephony and TV at university sites. The business is also a provider of networking solutions to corporate clients.
Since investment, the proposition has been transformed by adding additional services such as a fully interactive web portal offering a wide range of services to both the accommodation owner and user. This is allowing Cablecom to capture a strong share of newly outsourced contracts.
Aberdeen
All ISIS EP LLP managed funds Year ended 30 September Cost: £1,599,000 Valuation basis: Earnings Multiple % of equity held: 15.60%
| All ISIS EP LLP managed funds | Year ended 30 September | ||||
|---|---|---|---|---|---|
| First investment: | September 2005 | 2011 | 2010 | ||
| Total cost: | £5,829,000 | £million | £million | ||
| Total equity held: | 65.68% | Revenue: | 20.1 | 17.2 | |
| EBITA: | 0.4 | 0.1 | |||
| Baronsmead VCT 3 only | Net Liabilities: | (1.9) | (0.7) | ||
| Cost: | £1,599,000 | ||||
| Valuation: | £3,322,000 | No of employees: | 1,468 | 1,254 | |
| Valuation basis: | Earnings Multiple | ||||
www.ilsscotland.com ( Source: ILS Group Limited, Annual Report year ended 30 September 2011)
ILS is one of the largest independent providers of domiciliary care in Scotland, providing carers to support individuals to live independently in their own homes. The business has grown from its single base at the time of investment to now cover a signifi cant part of the Scottish geography.
The market in Scotland is very fragmented and a signifi cant volume of this type of care is provided by Local Authorities. ILS is well placed to benefi t as some of this care is outsourced to the best private providers over time. The business has completed several acquisitions, expanding its footprint across Scotland.
| All ISIS EP LLP managed funds | Year ended 30 October | |||
|---|---|---|---|---|
| First investment: | November 2006 | 2011 | 2010 | |
| Total cost: | £5,395,000 | £million | £million | |
| Total equity held: | 25.51% | Revenue: | 40.7 | 34.6 |
| EBITA: | 3.3 | 2.7 | ||
| Baronsmead VCT 3 only | Net Assets: | 5.7 | 3.8 | |
| Cost: | £1,344,000 | |||
| Valuation: | £3,020,000 | No. of employees: | 311 | 284 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 6.08% | |||
www.crewclothing.co.uk (Source: Crew Clothing Holdings Limited, Report and Financial Statements 30 October 2011)
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 signifi cant 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.
| All ISIS EP LLP managed funds | Year ended 30 September | ||||
|---|---|---|---|---|---|
| First investment: | October 2005 | 2011 | 2010 | ||
| Total cost: | £5,024,000 | £million | £million | ||
| Total equity held: | 66.50% | Revenue: | 18.4 | 15.6 | |
| EBITA: | 1.9 | 2.0 | |||
| Baronsmead VCT 3 only | Net Assets: | 1.5 | 1.2 | ||
| Cost: | £1,252,000 | ||||
| Valuation: | £2,956,000 | No of employees: | 105 | 95 | |
| Valuation basis: | Earnings Multiple | ||||
| % of equity held: | 15.79% |
www.kafevend.co.uk ( Source: Kafevend Holdings Limited, Directors' Report and Financial Statements 30 September 2011)
Kafevend is a leading supplier of workplace refreshments and vending machines in the UK. The business offers a wide range of quality commercial coffee and vending machines for sale, rental and also an arrangement based on paying just for consumables. The revenues are predominantly recurring sales of consumables used in its installed base.
Kafevend is building a reputation as a quality supplier for UK companies of all sizes. The market is fragmented and the company is one of the few UK players with a true national presence and a network of engineers available at short notice to service clients.
| www.cscworld.com | |
|---|---|
| All ISIS EP LLP managed funds | Year ended 31 March | |||
|---|---|---|---|---|
| First investment: | January 2008 | 2012 | 2011 | |
| Total cost: | £6,450,000 | £million | £million | |
| Total equity held: | 40.03% | Revenue: | 7.9 | 7.3 |
| EBITA: | 2.4 | 2.3 | ||
| Baronsmead VCT 3 only | Net Liabilities: | (2.0) | (1.3) | |
| Cost: | £1,606,000 | |||
| Valuation: | £2,410,000 | No of employees: | 59 | 58 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 8.81% |
| EBITA: | 2.4 | 2.3 |
|---|---|---|
www.cscworld.com (Source: Cobco 867 Limited, Financial Statements 31 March 2012)
CSC provides market leading software solutions for structural engineers, including structural analysis and modelling, steelwork and concrete design. The business has been developing innovative software and providing technical support to structural engineers for over 35 years. The software tools allow engineers to deliver complex solutions and with effective compliance back up.
The current customer base comprises companies in the UK, Ireland, USA, Asia, Australia and India. CSC is a business with strong growth prospects and with plans to continue international market development opportunities.
All ISIS EP LLP managed funds Year ended 31 March First investment: January 2011 2012 2011 Total cost: £6,475,000 £million £million Total equity held: 39.84% Revenue: 7.1 6.3 EBITA: 0.8 0.9 Baronsmead VCT 3 only Net Assets: 0.8 0.6 Cost: £1,616,000 Valuation: £1,754,000 No of employees: 137 126 Valuation basis: Earnings Multiple
www.valldata.co.uk ( Source: Valldata Services Limited, Directors Report and Financial Statements 31 March 2012)
Valldata is the UK's leading provider of outsourced donation processing and fulfi lment services for the UK not-forprofi t 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.
% of equity held: 8.76%
Many functions of this nature are undertaken in house by large charities and Valldata is growing as some of this work is outsourced.
FISHER OUTDOOR LEISURE HOLDINGS LIMITED St. Albans
| All ISIS EP LLP managed funds | Year ended 31 July | ||||||
|---|---|---|---|---|---|---|---|
| First investment: | June 2006 | 20112 | 20101 | ||||
| Total cost: | £5,700,000 | £million | £million | ||||
| Total equity held: | 44.00% | Revenue: | 43.6 | 26.5 | |||
| EBITA: | 2.7 | 2.3 | |||||
| Baronsmead VCT 3 only | Net Assets: | 1.2 | 1.4 | ||||
| Cost: | £1,423,000 | ||||||
| Valuation: | £1,656,000 | No of employees: | 110 | 96 | |||
| Valuation basis: | Earnings Multiple | ||||||
| % of equity held: | 10.45% |
www.fi sheroutdoor.co.uk ( Source: Fisher Outdoor Leisure Holdings Limited, Directors' Report and Financial Statements 31 July 2011)
Fisher Outdoor Leisure is one of the UK's leading distributors of cycles and cycle accessories to retailers. Fisher's product range consists of over 30 exclusively distributed industry leading brands from international manufacturers which want Fisher's support for their brands. It also provides a strong range of service and spares products essential for the specialist cycle retailer and its own range of house brands.
Since investment in 2006, the business has grown on the back of signifi cant investment in people and systems, and improving its services for its end customers. It is a key added value distributor within a buoyant end market.
1 12 month period ended 31 January 2010
2 18 month period ended 31 July 2011. The Company changed its year end from 31 January to 31 July
| All ISIS EP LLP managed funds | Year ended 31 August | |||
|---|---|---|---|---|
| First investment: | May 2010 | 2011 | 2010 | |
| Total cost: | £3,200,000 | £ million | £ million | |
| Total equity held: | 22.50% | Revenue: | 21.5 | 12.9 |
| EBITA: | 1.4 | 1.0 | ||
| Baronsmead VCT 3 only | Net Assets: | 0.8 | 0.9 | |
| Cost: | £796,000 | |||
| Valuation: | £1,571,000 | No. of employees: | 117 | 96 |
| Valuation basis: | Earnings Multiple | |||
| % of equity held: | 4.95% |
www.inspiredthinkinggroup.com (Source: Inspired Thinking Group Holdings Limited, Report of the Directors and Consolidated Financial Statements for the year ended 31 August 2011)
ITG provides services that help marketing departments to operate more effi ciently. This includes outsourced print management services to major retailers and consumer facing businesses. ITG also owns and provides a workfl ow 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 fi xed budgets more effective.
The ITG management team are known as experienced and innovative in this fi eld and have been successful in winning large new accounts over time from blue chip clients.
As at 31 December 2012
(age 6 5) has over 40 years experience in fi nancial 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 and the Worldwide Healthcare Trust plc. He was previously a director of Rea Brothers Group plc and was chairman of the Association of Investment Companies.
(Senior Independent Director)
(Date of appointment 10 January 2001)
(age 70) was deputy chairman and a shareholder of Language Line Limited in which Baronsmead VCT 3, was an investor. He is a trustee (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 6 7) 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. She is currently a non-executive 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 Pacifi c Investment Trust plc as well as a deputy chairman of the Association of Investment Companies. She was also a director of Liverpool Victoria Friendly Society from May 2005 to May 2011. Gill is a non-executive director of Baronsmead VCT 2 and Baronsmead VCT 5.
(age 6 6) 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 Henderson Private Equity Investment Trust Plc and is a director of a number of private companies.
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 suffi cient 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 Chairman's Statement on pages 5 and 6 and the Corporate Governance Statement on pages 2 9 to 3 1 form part of the Report of the Directors.
The Directors present the twelfth Report and audited fi nancial statements of the Company for the year ended 31 December 2012.
| Ordinary Shares | £'000 |
|---|---|
| Profi t on ordinary activities after taxation | 8,959 |
| Interim dividend of 3.0p per ordinary share paid on 21 September 2012 |
(1,893) |
| Total dividends paid during the year | (1,893) |
Subject to approval at the forthcoming Annual General Meeting the fi nal proposal dividend in respect of the year ended 31 December 2012 of 4.5 p per ordinary share will be paid on 15 April 2013 to shareholders recorded on the register on 1 March 2013.
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 so as to comply with Section 274 of the Income Tax Act 2007 which grants approval as a VCT. A review of the Company's business during the year is contained in the Chairman's Statement and Manager's Review.
The Business Review has been prepared in accordance with the requirements of Section 417 of the Companies Act 2006 and best practice. The purpose of this review is to provide shareholders with a summary setting out the business objectives of the Company, the Board's strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators ("KPIs") used to measure performance.
Baronsmead VCT 3 plc is a tax effi cient company listed on the London Stock Exchange's main market for listed securities and aims to achieve long-term investment returns for private investors.
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 fi xed 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 compan ies ("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 the Income Tax Act 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 profi ts 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 .
The Manager's members and staff 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 and 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 Board has delegated the management of the investment portfolio to the Manager. The Manager also provides or procures the provision of company secretarial, administrative, accounting 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 fi rstly the business environment, then the sector and fi nally the specifi c 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. Diversifi cation 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 7 to 9 provides a review of the investment portfolio and of market conditions during the year.
The Board believes that the principal risks faced by the Company are:
Events such as a continuing economic recession and movement in interest rates could affect smaller companies' valuations. The Manager's strategy to invest in a diverse portfolio of companies seeks to mitigate this risk.
General changes in legislation, regulations or government policy could signifi cantly infl uence the decisions of investors or impact upon the markets in which the Company invests and the status of the Company as a VCT.
– Loss of approval as a Venture Capital Trust – the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a VCT, qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
An inappropriate strategy, lack of good investment opportunities and increased competitiveness for deals, and poor asset allocation might lead to under performance and poor returns to shareholders. The Company's investment strategy is regularly reviewed by the Board and performance of the investment portfolio is considered at each meeting.
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 non -government instruments invested in and this is updated on a regular basis to minimise the risk.
Retention of key personnel of the Manager is vital to the success of the Company. The Manager provides appropriate incentive schemes and a career development strategy to ensure retention of key personnel.
Investments in AIM-traded and unquoted companies, by their nature, involve a higher degree of risk than investment in companies traded on the main market. In particular, smaller companies often have limited product lines, markets or fi nancial resources and may be dependent for their management on a smaller number of key individuals.
The Company's investments may be diffi cult 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.
Inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.
Failure of the Manager's and administrator's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring. Internal controls reporting on all service providers is provided to the Board for review on a regular basis.
The Board has identifi ed the Company's principal fi nancial risks which are set out in the notes to the Financial Statements on pages 50 to 53. Inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations.
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 FRC's "Internal Controls: Guidance to Directors". Details of the Company's internal controls are contained in the Corporate Governance section on page 3 1.
The Board expects the Manager to deliver a performance which meets the objective of achieving long term investment returns, including tax-free dividends, for private investors. A review of the Company's performance during the fi nancial period, 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 and 6.
The Board assesses the performance of the Manager in meeting the Company's objective against the primary KPIs highlighted on pages 2 to 4 and 59 of the Report.
Pursuant to a top-up offer in February 2012, the Company allotted 3,853,400 ordinary shares at a price of 107.30p representing 5.4 per cent. of the then issued share capital with an aggregate nominal value of £ 385,340 raising £4,135,000 of new funds in total. The terms of issue were set out in the Offer Document dated 12 January 2012 and the offer price was set on 20 February 2012.
As a result of an offer for subscription launched on 20 November 2012, the Company allotted a further 4,258,668 ordinary shares at a price of 117.40p representing 5.6 per cent. of the then issued share capital with an aggregate nominal value of £425,8 66.80 raising £5,000,000 of new funds in total. The terms of issue were set out in the Securities Note dated 20 November 2012 and the offer price was set on 21 December 2012.
During the period the Company bought back 1,306,897 ordinary shares with a nominal value of 10p to be held in treasury representing 1. 7 per cent. of the issued share capital at a cost of £ 1,257,743 . 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 8,929,214 ordinary shares in treasury, being the maximum number of ordinary shares held in treasury during the year, representing 11.8 per cent. of the issued share capital as at 15 February 2013.
Biographies of the Directors who served during the year and at the date of this report are shown on page 19.
As explained in more detail under Corporate Governance on pages 2 9 to 3 1 and in accordance with the provisions of the AIC Code of Corporate Governance, the Board has agreed that Directors who have held offi ce for more than nine years will retire annually. Accordingly, as Mr A Karney and Mrs G Nott have held offi ce for a period of more than nine years, they will retire by rotation 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 Orrock, who was elected at the Company's Annual General Meeting held in 201 1, will in accordance with the Company's Articles of Association and the provisions of the AIC Code of Corporate Governance, retire at the forthcoming Annual General Meeting of the Company and, being eligible, offer himself for re-election.
The Board confi rms 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.
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 2012 | 31 December 2011 |
|---|---|
| Ordinary 10p shares |
Ordinary 10p shares |
| 44,439 | 7,609 |
| 86,548 | 82,709 |
| 82,739 | 55,900 |
| 15,535 | – |
| 229,261 | 146,218 |
There have been no changes in the holdings of the Directors between 31 December 2012 and 15 February 2013 .
No Director has a service contract with the Company.
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 offi ce at the date of approval of this Directors' Report confi rm 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 Company does not have an employees' share scheme;
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;
The Board recognises the requirement under Section 417(5) of the Companies Act 2006 to detail information about environmental matters (including the impact of the Company's business on the environment), any Company employees and social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. The Company has no employees and has limited direct impact on the environment. The Company aims to conduct itself responsibly, ethically and fairly.
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 offi cers' 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 confl icts or potential confl icts of interest to the Board of Directors which has the authority to approve such situations. The Company Secretary maintains the Register of Directors' Confl icts of Interests which is reviewed quarterly by the Board and when changes are notifi ed. The Directors advise the Company Secretary and Board as soon as they become aware of any confl icts of interest. Directors who have confl icts of interest do not take part in discussions which relate to any of their confl icts.
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 confi dence, raise concerns within their respective organisations about possible improprieties in matters of fi nancial 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 FSA's rules) have been managed by FPPE LLP. This is a limited liability partnership, which is authorised and regulated by the FSA 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 fi xed at £33,816 in 2006 and is revised annually to refl ect 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 refl ect 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 2012 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 fi rst Baronsmead VCT in 1995 is refl ected in processes which are designed to fi nd, 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 fi nancial 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 profi ts accrue to the Coinvestment S cheme.
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 £696k in 32 companies. At 31 December 2012 nine of these investments have been realised generating proceeds of £81million for the Baronsmead VCTs and £4.7 million for the co-investment scheme. For Baronsmead VCT 3 the average money multiple on these nine realisations was 2.3 times cost. Had the co-investment shares been held instead by the Baronsmead VCTs that money multiple would have been 2.4 times cost. Over the period of eight years (based upon the current number of shares in issue) this equates to approximately 1.8p a share.
A performance fee is payable to the Manager when the total return on net proceeds of the ordinary share offers exceeds 8 per cent. per annum (simple) on net funds raised. The performance fee payable in any one year is capped at 5 per cent. of net assets.
To the extent that the total return exceeds the threshold, a performance fee (plus VAT) will be paid to the Manager of 10 per cent. of excess performance. No performance fee was paid in 2011 and there is no performance fee payable for the year to 31 December 2012.
During the year to 31 December 2012, ISIS EP LLP received net income of £ 96,550 (2011: £71,250) in connection with advisory fees and incurred abort fees of £ 59 , 382 (2011: £15,246) with respect to investments attributable to Baronsmead VCT 3.
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's payment policy is to settle investment transactions in accordance with market practice and to ensure settlement of supplier invoices in accordance with stated terms. At 31 December 2012, there were no outstanding supplier invoices (2011: none).
The Company seeks to conduct its affairs responsibly and environmental factors are, where appropriate, taken into consideration with regard to investment decisions.
At 15 February 2013 the Company was not aware of any benefi cial 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 fi nancial statements were approved. As at 31 December 2012 the Company held cash balances & investments in interest bearing securities and Money Market Funds with a combined value of £ 5,72 8,000. Cash fl ow projections have been reviewed and show that the Company has suffi cient funds to meet both its contracted expenditure and its discretionary cash outfl ows in the form of the share buy-back programme and dividend policy. The Company has no external loan fi nance 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 1 0:30 am on Wednesday, 10 April 2013 at Plaisterers' Hall, One London Wall , London EC 2Y 5JU is set out on pages5 4 to 5 7. The following notes provide an explanation of Resolutions 7 to 1 2 which together with Resolutions 1 to 6 , will be proposed at the meeting. Resolutions 1 to 9 will be proposed as ordinary resolutions requiring the approval of more than 50 per cent. of the votes cast at the meeting and Resolutions 10 to 1 2 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.
KPMG Audit Plc have expressed their willingness to continue in offi ce as auditors and Resolution 7 propos es their re-appointment for the forthcoming year. The authority proposed under Resolution 8 will authorise the Directors to determine the remuneration of the auditors.
The authority proposed under Resolution 9 will authorise Directors, until the fi fth 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 £ 3,340,135, 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 under Resolution 10.
Resolution 10 renews and extends, subject to the passing of Resolution 9, 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 8,929,214 ordinary shares in treasury representing 11.8 per cent. of the Company's issued ordinary shares. If Resolution 9 is passed, the Board will be authorised to reissue 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. The resolution will also allow the Company to issue shares out of treasury without pre-emption 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.
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 1 1 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-sale 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 1 2 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.
By Order of the Board, ISIS EP LLP Secretary 100 Wood Street London EC2V 7AN
15 February 2013
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 October 2010 ('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 June 2010 ('UK Code'), as well as setting out additional principles and recommendations on issues which are of specifi c 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 AIC Code 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 specifi cally 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 specifi ed 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 infl uence 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.
The Audit and Risk Committee, chaired by Mrs Nott, comprises the full Board and operates within clearly defi ned 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 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 nonexecutive 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 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.
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.
All of the Directors meet quarterly to consider in detail the valuations of the unquoted investments in the Company's portfolio.
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.
| Board of Directors (Quarterly) (4 meetings held) |
Board of Directors (ad hoc) (2 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 | Eligible Attended | ||
| Anthony Townsend | 4 | 4 | 2 | 0 | 2 | 2 | 1 | 1 | 1 | 1 |
| Andrew Karney | 4 | 4 | 2 | 1 | 2 | 2 | 1 | 1 | 1 | 1 |
| Gillian Nott | 4 | 4 | 2 | 2 | 2 | 2 | 1 | 1 | 1 | 1 |
| Ian Orrock | 4 | 4 | 2 | 1 | 2 | 2 | 1 | 1 | 1 | 1 |
The table below sets out the number of Board and Committee meetings held during the year to 31 December 2012 and the number of meetings attended by each Director.
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 10 April 2013 can be found in the Notice of Meeting on pages 5 4 and 5 5. Shareholders seeking to communicate with the Board can do so by contacting the Investor Relations Manager in the fi rst 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 identifi es 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 identifi ed 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 suffi cient assurance that a sound system of internal control, which safeguards shareholders' investment and the Company's assets, is maintained. An internal audit function, specifi c 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) Regulations 2008. An ordinary resolution for the approval of this report 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 profi led on page 19 consists solely of independent non-executive Directors and is considered to be entirely independent. The Management Engagement and Remuneration Committee comprises all the Directors of the Company and is chaired by Mr Townsend. The Company has no executive Directors, but the Management Engagement and Remuneration Committee meets, at least annually, to review the remuneration and terms of appointment of the Manager and 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 Management Engagement and Remuneration Committee (or Board) concluded following a review of the level of Directors' fees for the forthcoming year, that, to refl ect the increase in the level and quality of work that the Directors were required to undertake, it was appropriate to increase the Directors' fees to £18,000 per annum, the Chairman of the Audit and Risk Committee's fees to £20,500 per annum and the Chairman's fee to £25,750 with effect from 1 January 2013.
The Board's policy is that the remuneration of nonexecutive Directors should refl ect 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 suffi cient to attract and retain the Directors needed to oversee properly the Company and to refl ect the specifi c circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company's affairs. It is intended that this policy will continue for the year ending 31 December 201 3 and subsequent years.
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 fi rst 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/election.
| Director | Date of original appointment |
Due date for re-election |
|---|---|---|
| Anthony Townsend | 4 August 2009 | AGM 2014 |
| Andrew Karney | 10 January 2001 | AGM 2013 |
| Gillian Nott | 10 January 2001 | AGM 2013 |
| Ian Orrock | 21 October 2010 | AGM 2013 |
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 fi veyears ended 31 December 2012, 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 50 generalist VCTs (Source: AIC). An explanation of the performance of the Company is given in the Chairman's Statement and Manager's Review.
Share Price and VCT Gene ralist Sector Share Price Total Return performance graph
*Source: AIC
The Directors who served in the year received the following emoluments in the form of fees:
| Fees | Fees | |
|---|---|---|
| 2012 | 2011 | |
| £ | £ | |
| Anthony Townsend | 25,000 | 23,875 |
| Andrew Karney | 17,500 | 16,000 |
| Gillian Nott | 20,000 | 16,625 |
| Ian Orrock | 17,500 | 16,000 |
| Total | 80,000 | 72,500 |
Approved by the Board of Directors and signed by:
Chairman of the Management Engagement and Remuneration Committee
15 February 2013
The Directors are responsible for preparing the Annual Report and the fi nancial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare fi nancial statements for each fi nancial year. Under that law they have elected to prepare the fi nancial statements in accordance with UK Accounting Standards.
The fi nancial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profi t or loss of the Company for that period.
In preparing these fi nancial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the fi nancial position of the Company and enable them to ensure that its fi nancial 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 fi nancial 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 fi nancial statements may differ from legislation in other jurisdictions.
We confi rm that to the best of our knowledge:
On behalf of the Board, Anthony Townsend Chairman
15 February 2013
We have audited the fi nancial statements of Baronsmead VCT 3 plc for the period ended 31 December 2012 set out on pages 3 7 to 5 3. The fi nancial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Statement of Directors' Responsibilities set out on page 3 4, the directors are responsible for the preparation of the fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
A description of the scope of an audit of fi nancial statements is provided on the APB's website at www.frc.org.uk/a uditscopeukprivate.
In our opinion the fi nancial statements:
In our opinion:
We have nothing to report in respect of the following:
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:
Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
15 February 2013
For the year ended 31 December 2012
| 2012 | 2011 | ||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Unrealised gains on investments | 8 | – | 9,373 | 9,373 | – | 1,403 | 1,403 |
| Realised gains on investments | 8 | – | 426 | 426 | – | 1,824 | 1,824 |
| Income | 2 | 1,187 | – | 1,187 | 1,963 | – | 1,963 |
| Investment management fee | 3 | (409) | (1,228) | (1,637) | (385) | (1,155) | (1,540) |
| Other expenses | 4 | (390) | – | (390) | (365) | – | (365) |
| Profi t on ordinary activities before taxation | 388 | 8,571 | 8,959 | 1,213 | 2,072 | 3,285 | |
| Taxation on ordinary activities | 5 | (25) | 25 | – | (244) | 244 | – |
| Profi t on ordinary activities after taxation | 363 | 8,596 | 8,959 | 969 | 2,316 | 3,285 | |
| Return per ordinary share: | |||||||
| Basic | 7 | 0.58p | 13.67p | 14.25p | 1.61p | 3.85p | 5.46p |
The 'Total' column of this statement is the profi t and loss account of the Company.
All revenue and capital items in this statement derive from continuing operations.
No operations were acquired or discontinued in the year.
There are no recognised gains and losses other than those disclosed in the Income Statement therefore a separate statement of total recognised gains and losses has not been prepared.
For the year ended 31 December 2012
| Closing shareholders' funds | (474) (1,893) 74,562 |
(7,214) 60,095 |
|---|---|---|
| Dividends paid 6 |
||
| Expenses of share issue and buybacks 12 |
(6) | |
| Purchase and sale of shares for treasury 12 |
(1,260) | (613) |
| Gross proceeds of share issues 11/12 |
9,135 | – |
| Profi t for the year | 8,959 | 3,285 |
| Opening shareholders' funds | 60,095 | 64,643 |
| Notes | 2012 £'000 |
2011 £'000 |
As at 31 December 2012
| 2012 | 2011 | ||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Fixed assets | |||
| Investments | 8 | 66,740 | 59,312 |
| Current assets | |||
| Debtors | 9 | 5,261 | 562 |
| Cash at bank | 1,438 | 683 | |
| Cash on deposit | 1,800 | – | |
| 8,499 | 1,245 | ||
| Creditors (amounts falling due within one year) | 10 | (677) | (462) |
| Net current assets | 7,822 | 783 | |
| Net assets | 74,562 | 60,095 | |
| Capital and reserves | |||
| Called-up share capital | 11 | 7,573 | 6,762 |
| Share premium account | 12 | 22,866 | 15,012 |
| Capital redemption reserve | 12 | 10,862 | 10,862 |
| Capital reserve | 12 | 18,928 | 24,262 |
| Revaluation reserve | 12 | 13,649 | 2,876 |
| Revenue reserve | 12 | 684 | 321 |
| Equity shareholders' funds | 13 | 74,562 | 60,095 |
| Net asset value per share | |||
| – Basic | 13 | 111.62p | 100.16p |
| – Treasury | 13 | 110.88p | 99.16p |
The fi nancial statements on pages 3 7 to 5 3 were approved by the Board of Directors on 15 February 2013 and were signed on its behalf by:
Anthony Townsend (Chairman)
For the year ended 31 December 2012
| Notes | 2012 £'000 |
2011 £'000 |
|
|---|---|---|---|
| Operating activities | |||
| Investment income received | 1,337 | 1,787 | |
| Deposit interest received | 7 | 3 | |
| Other income received | – | 63 | |
| Investment management fees paid | (1,572) | (1,570) | |
| Other cash payments | (378) | (357) | |
| Net cash outfl ow from operating activities 15 |
(606) | (74) | |
| Capital expenditure and fi nancial investment | |||
| Purchases of investments | (63,220) | (91,893) | |
| Disposals of investments | 65,620 | 99,215 | |
| Net cash infl ow from capital expenditure and fi nancial investment | 2,400 | 7,322 | |
| Dividends | |||
| Equity dividends paid | 6 | (1,893) | (7,214) |
| Net cash (outfl ow)/infl ow before fi nancing | (99) | 34 | |
| Financing | |||
| Gross proceeds of share issues | 4,135 | – | |
| Purchase and sale of shares for treasury | (1,260) | (613) | |
| Expenses on share issue and buybacks | (221) | (6) | |
| Net cash infl ow/(outfl ow) from fi nancing | 2,654 | (619) | |
| Increase/(decrease) in cash at bank and on deposit in the year | 2,555 | (585) | |
| Reconciliation of net cash fl ow to movement in net cash at bank and on deposit | |||
| Increase/(decrease) in cash at bank and on deposit | 2,555 | (585) | |
| Opening cash at bank and on deposit | 683 | 1,268 | |
| Closing cash at bank and on deposit 14 |
3,238 | 683 | |
These fi nancial 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.
The Company is no longer an investment company as defi ned by Section 833 of the Companies Act 2006, as investment company status was revoked on 4 February 2004 in order to permit the distribution of capital profi ts.
The principal accounting policies adopted are set out below.
In order to better refl ect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement.
Profi t/(loss) on ordinary activities after taxation is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 of the Income Tax Act 2007.
Purchases or sales of investments are recognised at the date of transaction.
Investments are valued at fair value. For AIM traded, listed securities and collective investment vehicles 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 fair valued by the Directors using methodology which is consistent with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines. 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 profi t or loss on disposal is calculated net of transaction costs on disposal.
Interest income on loan stock 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 stocks 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 fi xed interest securities and deposit interest is included on an effective interest rate basis.
Dividends on quoted shares are recognised as income on the date that the related investments are marked exdividend and where no dividend date is quoted, when the Company's right to receive payment is established.
All expenses are recorded on an accruals basis.
The revenue column of the income statement includes all income and expenses. The capital column accounts for the realised and unrealised profi t and loss on investments and the proportion of management fee charged to capital.
Issue costs are deducted from the share premium account.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or the right to pay less, tax in future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profi ts from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profi ts and its results as stated in the fi nancial statements which are capable of reversal in one or more subsequent periods.
† All investments have been designated fair value through profi t or loss on initial recognition, therefore all investment income arises on investments at fair value through profi t or loss.
‡ Other income on fi nancial assets not designated fair value through profi t or loss.
(i) Capital Reserve
Gains and losses on realisation of investments of a capital nature are dealt with in this reserve. Purchase 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.
Changes in fair value of unrealised investments, are dealt with in this reserve.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Investment management fee | 1,637 | 1,540 |
| Performance fee | – | – |
| 1,637 | 1,540 | |
For the purposes of the revenue and capital columns in the income statement, the management fee has been allocated 25 per cent. to revenue and 75 per cent. to capital, in line with the Board's expected long term return in the form of income and capital gains respectively from the Company's investment portfolio.
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 share offers exceeds 8 per cent. per annum (on a simple basis) on net funds raised. To the extent that the Total Return exceeds this threshold, a performance fee (plus VAT) will be paid to the Manager of 10 per cent. of the excess. The performance fee payable in any one year will 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 2012 (2011: £nil).
In addition, the Manager receives an annual secretarial and accounting fee that was initially fi xed at £33,816 in 2006 and is revised annually to refl ect 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 refl ect the movement in RPI. It is chargeable 100 per cent. to revenue.
Amounts payable to the Manager at the year end are disclosed in note 10.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Directors' fees | 80 | 73 |
| Secretarial and accounting fees | 121 | 113 |
| Remuneration of the auditors and their associates: | ||
| – audit | 21 | 22 |
| – other services supplied pursuant to legislation (interim review) | 5 | 5 |
| – other services supplied relating to taxation | 7 | 9 |
| Other | 156 | 143 |
| 390 | 365 | |
The Chairman received £25,000 per annum (2011: £23,875) and the Audit Chairman received £20,000 per annum (2011: £ 16, 625). Each of the other Directors received £17,500 per annum (2011: £16,000).
Charges for other services provided by the auditors in the year ended 31 December 2012 were in relation to the interim review and tax compliance work (including iXBRL). The Audit and Risk Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. The Directors consider the auditors were best placed to provide these services.
All fi gures include VAT, where applicable. The Company is not registered for VAT.
5a. Analysis of charge for the year
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| UK corporation tax | – | – |
The income statement shows the tax charge allocated between revenue and capital.
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 |
2012 Capital £'000 |
Total £'000 |
Revenue £'000 |
2011 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Profi t on ordinary activities before taxation | 388 | 8,571 | 8,959 | 1,213 | 2,072 | 3,285 |
| Corporation tax at a rate of 24.5 per cent. (2011: 26.5 per cent.) | 95 | 2,100 | 2,195 | 321 | 549 | 870 |
| Effect of: | ||||||
| Non-taxable dividend income | (70) | – | (70) | (74) | – | (74) |
| Non-taxable investment gains | – | (2,401) | (2,401) | – | (855) | (855) |
| Marginal relief | – | – | – | (3) | 3 | – |
| Losses carried forward | – | 276 | 276 | – | 59 | 59 |
| Tax charge for the year (note 5a) | 25 | (25) | – | 244 | (244) | – |
At 31 December 2012 the Company had surplus management expenses of £ 3,045,000 (2011: £1,856,000) 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.
| Revenue £'000 |
2012 Capital £'000 |
Total £'000 |
Revenue £'000 |
2011 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| Amounts recognised as distributions to equity holders in the year: | ||||||
| For the year ended 31 December 2010 | ||||||
| – Final dividend of 4.5p per ordinary share paid on 8 April 2011 | – | – | – | 546 | 2,183 | 2,729 |
| For the year ended 31 December 2011 | ||||||
| – Interim dividend of 3.0p per ordinary share paid on 29 September 2011 |
– | – | – | 389 | 1,407 | 1,796 |
| – Second interim dividend of 4.5p per ordinary share paid on 9 December 2011 |
– | – | – | 597 | 2,092 | 2,689 |
| For the year ended 31 December 2012 | ||||||
| – Interim dividend of 3.0p per ordinary share paid on 21 September 2012 |
– | 1,893 | 1,893 | – | – | – |
| – | 1,893 | 1,893 | 1,532 | 5,682 | 7,214 | |
In the 201 1 fi nancial year Baronsmead VCT 3 paid a second interim dividend in lieu of a fi nal dividend which resulted in three dividend payments in th at year.
The 14.25p return per ordinary share (2011: 5.46p return) is based on the net profi t from ordinary activities after taxation of £ 8,959,000 (2011: £3,285,000 profi t) and on 62,863,845 ordinary shares (2011: 60,112,945), being the weighted average number of shares in circulation during the year.
All investments are designated fair value through profi t or loss at initial recognition, therefore all gains and losses arise on investments designated at fair value through profi t or loss.
Financial Reporting Standard 29 'Financial Instruments: Disclosures' (the Standard) requires an analysis of investments valued at fair value based on the reliability and signifi cance of the information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is signifi cant to the fair value measurement for the individual investment in its entirety as follows:
| 2012 | 2011 | |
|---|---|---|
| £'000 | £'000 | |
| Level 1 | ||
| Listed interest bearing securities | 2,490 | 9,979 |
| Investments traded on AIM | 20,833 | 14,402 |
| Investments listed on LSE | 1,808 | 1,318 |
| 25,131 | 25,699 | |
| Level 2 | ||
| Collective investment vehicle (Wood Street Microcap Investment Fund) | 4,525 | 2,826 |
| Level 3 | ||
| Unquoted investments | 37,084 | 30,787 |
| 66,740 | 59,312 | |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Equity shares | 38,946 | 28,324 |
| Loan notes | 25,226 | 21,009 |
| Preference shares | 78 | – |
| Fixed income securities | 2,490 | 9,979 |
| 66,740 | 59,312 | |
| Level 1 | Level 2 | Level 3 | ||||
|---|---|---|---|---|---|---|
| Listed interest bearing securities £'000 |
Traded on AIM £'000 |
Listed on LSE £'000 |
Collective investment vehicle £'000 |
Unquoted £'000 |
Total £'000 |
|
| Opening book cost | 9,979 | 17,310 | 1,729 | 2,525 | 24,893 | 56,436 |
| Opening unrealised (depreciation)/appreciation | – | (2,908) | (411) | 301 | 5,894 | 2,876 |
| Opening valuation | 9,979 | 14,402 | 1,318 | 2,826 | 30,787 | 59,312 |
| Movements in the year: | ||||||
| Purchases at cost | 55,087 | 1,925 | – | 1,000 | 5,237 | 63,249 |
| Sales – proceeds | (62,576) | (1,295) | – | – | (1,749) | (65,620) |
| – realised gains on sales | – | 392 | – | – | 34 | 426 |
| Unrealised (losses)/gains realised during the year | – | (1,465) | – | – | 65 | (1,400) |
| Increase in unrealised appreciation | – | 6,874 | 490 | 699 | 2,710 | 10,773 |
| Closing valuation | 2,490 | 20,833 | 1,808 | 4,525 | 37,084 | 66,740 |
| Closing book cost | 2,490 | 16,867 | 1,729 | 3,525 | 28,480 | 53,091 |
| Closing unrealised appreciation | – | 3,966 | 79 | 1,000 | 8,604 | 13,649 |
| Closing valuation | 2,490 | 20,833 | 1,808 | 4,525 | 37,084 | 66,740 |
During the year the Company incurred brokerage costs on purchases of £ 1,500 (2011: £1,800) and brokerage costs on sales of £ 2,100 (2011: £1,000) in respect of ordinary shareholder interests.
The gains and losses included in the above table have all been recognised in the income statement on page 3 7.
The Standard requires disclosure, by class of fi nancial instruments, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a signifi cant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specifi c underlying circumstances and position of the investee company. The portfolio has been reviewed and both downside and upside reasonable possible alternatives have been identifi ed and applied to the valuation of each of the unquoted investments. Applying the downside alternatives the value of the unquoted investments would be £ 2.5 million or 6.8 per cent. lower. Using the upside alternative the value would be increased by £ 2.6 million or 7.0 per cent.
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Prepayments and accrued income | 375 | 562 |
| Amounts due from fundraising | 4,886 | – |
| 5,261 | 562 | |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Management, performance, secretarial and accounting fees due to the Manager | 474 | 405 |
| Fundraising costs | 139 | – |
| Other creditors | 64 | 57 |
| 677 | 462 | |
| Allotted, called-up and fully paid: | |
|---|---|
| Ordinary shares | £'000 |
| 67,619,851 ordinary shares of 10p each listed at 31 December 2011 | 6,762 |
| 8,112,068 ordinary shares of 10p each issued during the year | 811 |
| 75,731,919 ordinary shares of 10p each listed at 31 December 2012 | 7,573 |
| 7,622,317 ordinary shares of 10p each held in treasury at 31 December 2011 | (762) |
| 1,306,897 ordinary shares of 10p each repurchased during the year and held in treasury | (131) |
| 8,929,214 ordinary shares of 10p each held in treasury at 31 December 2012 | (893) |
| 66,802,705 ordinary shares of 10p each in circulation at 31 December 2012 | 6,680 |
As at 15 February 2013 the Company's issued share capital was 75,731,919 ordinary shares of 10 pence each, of which 8,929,214 were held in treasury. The number of shares in circulation was 66,802,705 ordinary shares carrying one vote each.
The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objectives, both of which are detailed in the Report of the Directors on pages 20 and 21.
The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 came into force on 1 December 2003 and allowed the Company to hold shares acquired by way of market purchase as treasury shares, rather than having to cancel them. Shareholders have previously approved a resolution permitting the Company to issue shares from treasury at a discount to the prevailing NAV if the Board considers it in the best interests of the Company to do so. However, treasury 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. It is the Board's intention only to use the mechanism of reissuing treasury shares when demand for the Company's shares is greater than the supply available in the market place. Treasury shares would not be considered by HM Revenue & Customs to be new shares entitling the purchaser to initial income tax relief, and therefore shares are unlikely to be issued from treasury in the same year as a ''top up'' offer for subscription.
The Company does not have any externally imposed capital requirements. Where shares are bought back but not cancelled the issued share capital remains unchanged. The NAV is calculated by using the number of shares in issue less those bought back and held in treasury.
| Share premium account £'000 |
Capital redemption reserve £'000 |
Capital reserve £'000 |
Revaluation reserve £'000 |
Revenue reserve £'000 |
|
|---|---|---|---|---|---|
| At 31 December 2011 | 15,012 | 10,862 | 24,262 | 2,876 | 321 |
| Gross proceeds of share issues | 8,324 | – | – | – | – |
| Purchase of shares for treasury | – | – | (1,260) | – | – |
| Expenses of share issue and buybacks | (470) | – | (4) | – | – |
| Reallocation of prior year unrealised gains | – | – | (1,400) | 1,400 | – |
| Realised gain on disposal of investments* | – | – | 426 | – | – |
| Net increase in value of investments* | – | – | – | 9,373 | – |
| Management fee capitalised* | – | – | (1,228) | – | – |
| Taxation relief from capital expenses* | – | – | 25 | – | – |
| Revenue profi t on ordinary activities after taxation* | – | – | – | – | 363 |
| Dividends paid in the year | – | – | (1,893) | – | – |
| At 31 December 2012 | 22,866 | 10,862 | 18,928 | 13,649 | 684 |
At 31 December 2012, reserves distributable by way of dividend amounted to £ 19, 612,000 (2011: £21,264,000), comprising the capital reserve and revenue reserve less the net unrealised loss on those level one investments whose prices are quoted in an active market and deemed readily realisable.
* The total of these items is £ 8,959,000 which agrees to the total profi t on ordinary activities after taxation on page 3 7.
The net asset value per share and the net asset values attributable to the ordinary shares at the year end are calculated in accordance with their entitlements in the Articles of Association and were:
| Net asset value | ||||||
|---|---|---|---|---|---|---|
| Number of shares | per share attributable | Net asset value attributable | ||||
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| number | number | pence | pence | £'000 | £'000 | |
| Ordinary shares (basic) | 66,802,705 | 59,997,534 | 111.62 | 100.16 | 74,562 | 60,095 |
| Ordinary shares (treasury) | 75,731,919 | 67,619,851 | 110.88 | 99.16 | 83,971 | 67,050 |
Basic net asset value per share is based on net assets at the year end, and on 66,802,705 (2011: 59,997,534) ordinary shares, being the respective number of shares in circulation at the year end.
The treasury net asset value per share as at 31 December 2012 included ordinary shares held in treasury valued at the mid share price of 105.3 8p at 31 December 2012 (2011: 91.25p).
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Beginning of year | 683 | 1,268 |
| Net cash infl ow/(outfl ow) | 2,555 | (585) |
| As at 31 December 2012 | 3,238 | 683 |
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Profi t on ordinary activities before taxation | 8,959 | 3,285 |
| Gains on investments | (9,799) | (3,227) |
| Decrease/(increase) in debtors | 187 | (101) |
| Increase/(decrease) in creditors | 76 | (31) |
| Income reinvested | (29) | – |
| Net cash outfl ow from operating activities | (606) | (74) |
At 31 December 2012 there were no contingent liabilities, guarantees or fi nancial commitments of the Company.
There are no interests of 20 per cent. or more of any class of share capital in any underlying holdings in investee companies.
Further information on the signifi cant interests is disclosed on page 26.
The Company's fi nancial instruments comprise equity and fi xed interest investments, cash balances and liquid resources. The Company holds fi nancial assets in accordance with its investment policy to invest in a diverse portfolio of established and profi table UK unquoted companies and companies raising new share capital on AIM.
Fixed asset investments held (see note 8) are valued at fair value. For quoted securities this is either bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. In respect of unquoted investments, these are valued at fair value by the Directors (using rules consistent with IPEV (International Private Equity and Venture Capital Valuation) guidelines). The fair value of all other fi nancial assets and liabilities is represented by their carrying value in the Balance sheet.
The Company's investing activities expose it to various types of risk that are associated with fi nancial instruments and markets in which it invests. The most important types of fi nancial risk to which the Company is exposed are market risk, interest rate risk, credit risk and liquidity risk. The nature and extent of the fi nancial instruments held at the balance sheet date and the risk management policies employed by the Company are discussed in notes 19 to 22.
Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.
The Company's strategy on the management of investment risk is driven by the Company's investment objective as outlined in note 18. The management of market risk is part of the investment management process and is typical of private equity investment. The portfolio is managed in accordance with policies and procedures in place as described in more detail in the Report of the Directors on pages 20 to 22 , with an awareness of the effects of adverse price movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders. Investments in unquoted stocks and AIM traded companies, by their nature, involve a higher degree of risk than investments in the main market. Some of that risk can be mitigated by diversifying the portfolio across business sectors and asset classes. The Company's overall market positions are monitored by the Board on a quarterly basis.
Details of the Company's investment portfolio at the balance sheet date are disclosed in the schedule of investments set out on pages 60 and 6 1. An analysis of investments between debt and equity instruments is disclosed in note 8.
41 per cent. (2011: 31 per cent.) of the Company's investments are listed on the London Stock Exchange, traded on AIM or invested through Wood Street Microcap Fund. A 5 per cent. increase in stock prices as at 31 December 2012 would have increased the net assets attributable to the Company's shareholders and the total profi t for the year by £ 1,358,000 (2011: £927,000); an equal change in the opposite direction would have decreased the net assets attributable to the Company's shareholders and the total profi t for the year by an equal amount.
56 per cent. (2011: 52 per cent.) of the Company's investments are in unquoted companies held at fair value. 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 be indirectly affected by price movements on the listed exchanges. A 5 per cent. increase in the valuations of unquoted investments at 31 December 2012 would have increased the net assets attributable to the Company's shareholders and the total profi t for the year by £ 1,854,000 (2011: £1,539,000); an equal change in the opposite direction would have decreased the net assets attributable to the Company's shareholders and the total profi t for the year by an equal amount.
At 31 December 2012 £ 2,000,000 (2011: £6,799,000) fi xed rate securities were held by the Company. As a result, the Company is exposed to fair value interest rate risk due to fl uctuations in the prevailing levels of market interest rates. However the effect of these interest rate changes is not materially signifi cant.
At 31 December 2012 £ 25,226,000 (2011: £21,009,000) fi xed rate loan notes were held by the Company. The weighted average coupon rate for the loan note securities is 9.38 per cent. as at 31 December 2012 (2011: 9.34 per cent.). Due to the complexity of the instruments and uncertainty surrounding timing of redemption the weighted average time for which the rate is fi xed has not been calculated.
The table below summarises weighted average effective interest rates for the other fi xed interest-bearing fi nancial instruments:
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| Weighted | Weighted | |||||
| Total | Weighted | average | Total | Weighted | average | |
| fi xed | average | time for | fi xed | average | time for | |
| rate | interest | which rate | rate | interest | which rate | |
| portfolio | rate | is fi xed | portfolio | rate | is fi xed | |
| £'000 | % | days | £'000 | % | days | |
| Fixed interest instruments | 2,000 | 0.12 | 21 | 6,799 | 0.2 | 3 |
When the Company retains cash balances, the majority of cash is ordinarily held on interest bearing deposit accounts and, where appropriate, within an interest bearing money market open ended investment company ("OEIC"). The benchmark rate which determines the interest payments received on interest bearing cash balances is the bank base rate which was 0.5 per cent. as at 31 December 2012 (2011: 0.5 per cent.).
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Floating rate | ||
| Floating rate instruments ("OEIC") | 490 | 3,180 |
| Cash at bank | 1,438 | 683 |
| Cash on deposit | 1,800 | – |
| 3,728 | 3,863 | |
Credit risk is the risk that a counterparty to a fi nancial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of fi nancial assets represent the maximum credit risk exposure at the balance sheet date.
At the reporting date, the Company's fi nancial assets exposed to credit risk amounted to the following:
| 2012 £'000 |
2011 £'000 |
|
|---|---|---|
| Investments in fi xed interest instruments | 2,000 | 6,799 |
| Investments in fl oating rate instruments | 490 | 3,180 |
| Cash at bank | 1,438 | 683 |
| Cash on deposit | 1,800 | – |
| Interest, dividends and other receivables | 5,261 | 562 |
| 10,989 | 11,224 | |
Credit risk arising on unquoted loan notes is considered in conjunction with the associated equity investment in the portfolio company.
Credit risk arising on fi xed interest instruments is mitigated by investing in UK Government Stock.
Credit risk arising on fl oating rate instruments is mitigated by investing in money market open ended investment companies managed by BlackRock. Credit risk on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed in note 19.
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 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 on page 3 1.
The cash held by the Company is held by JPM and Lloyds TSB. The Board monitors the Company's risk by reviewing regularly the internal control reports of these banks. Should the credit quality or the fi nancial position of either bank deteriorate signifi cantly the Investment Manager will seek to move the cash holdings to another bank.
There were no signifi cant concentrations of credit risk to counterparties at 31 December 2012 or 31 December 2011. No individual investment exceeded 6.9 per cent . of the net assets attributable to the Company's shareholders at 31 December 2012 (2011: 9.4 per cent .).
The Company's fi nancial instruments include investments in unquoted companies which are not traded in an organised public market as well as AIM-traded equity investments both 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 specifi c 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 as described in the Report of the Directors on page 22. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains suffi cient investments in cash and readily realisable securities to pay accounts payable and accrued expenses.
At 31 December 2012 these investments were valued at £ 5,72 8,000 (2011: £10,662,000).
Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager, ISIS EP LLP, as disclosed in notes 3 and 4, and fees paid to the Directors as disclosed in note 4. In addition, the Manager operates a Co-Investment Scheme, detailed in the Report of the Directors on page s 25 and 26, whereby employees of the Manager are entitled to participate in certain unquoted investments alongside the Company.
Notice is hereby given that the twelfth Annual General Meeting of Baronsmead VCT 3 plc will be held at Plaisterers' Hall, One London Wall, London EC2Y 5JU on Wednesday, 10 April 2013 at 10:30 a.m. for the purposes of considering and, if thought fi t, passing the following resolutions, Resolutions 1 to 9 being proposed as ordinary resolutions and Resolutions 10 to 1 2 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 Annual General Meeting of the Company to be held in 201 4, 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 Offi ce: Secretary 100 Wood Street
15 February 2013 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 amon 8 April 2013 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 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.
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.
A resolution may properly be moved or a matter may properly be included in the business unless:
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, must be received by the Company not later than 26 February 201 3, being the date six clear weeks before the meeting.
* Includes proposed fi nal dividend of 4.5p .
| 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) | 100.0 | 20.0 | 80.0 | 70.8 | 7.4 | 9.9 |
| 2005 (March) – C share | 100.0 | 40.0 | 60.0 | 39.1 | 8.3 | 11.1 |
| 2010 (March) | 103.1 | 30.9 | 72.2 | 22.5 | 11.2 | 15.0 |
The table below shows the cash returned to shareholders dependent on their subscription cost, including their income tax reclaimed on subscription.
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.
‡ Includes proposed fi nal dividend of 4.5p .
* 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.). The gross equivalent yield based on additional rate of tax on dividends (42.5 per cent. in the tax year 2011/12 and 2012/13 and 37.5 per cent. from the 2013/14 tax year), has not been included. 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 fi gures stated above .
Dividends paid to C shareholders post conversion have been adjusted by the conversion ratio (0.85642528).
| 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† |
* Source: ISIS EP LLP and AIC.
† 31 December 2012 fi gure is 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 |
* Includes proposed fi nal dividend of 4.5p .
The shareholdings of ordinary shares as at 31 December 2012 (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 | 321 | 8.67 | 393,392 | 0.52 | |
| 2,001 – 5,000 | 926 | 24.99 | 3,359,415 | 4.44 | |
| 5,001 – 10,000 | 884 | 23.86 | 6,675,543 | 8.81 | |
| 10,001 – 25,000 | 929 | 25.07 | 15,324,640 | 20.23 | |
| 25,001 – 50,000 | 410 | 11.07 | 14,621,266 | 19.31 | |
| 50,001 – 100,000 | 163 | 4.40 | 11,530,966 | 15.23 | |
| 100,001 – 1,500,000 | 72 | 1.94 | 23,826,697 | 31.46 | |
| Total | 3,705 | 100.00 | 75,731,919 | 100.00 |
| 31 December | 31 December | % of Equity | |||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 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 | 4,768 | 5,658 | 6.4 | 12.3 | 56.0 |
| CableCom Networking Holdings Limited | TMT* | 1,381 | 4,328 | 3,707 | 5.8 | 10.6 | 48.0 |
| Independent Living Services Limited | Healthcare & Education | 1,599 | 3,322 | 1,293 | 4.5 | 15.6 | 65.7 |
| Crew Clothing Holdings Limited | Consumer Markets | 1,344 | 3,020 | 2,676 | 4.1 | 6.1 | 25.5 |
| Kafevend Holdings Limited | Consumer Markets | 1,252 | 2,956 | 1,991 | 4.0 | 15.8 | 66.5 |
| CSC (World) Limited | TMT* | 1,606 | 2,410 | 1,940 | 3.2 | 8.8 | 40.0 |
| Valldata Group Limited | Business Services | 1,616 | 1,754 | 1,694 | 2.4 | 8.8 | 39.8 |
| Fisher Outdoor Leisure Holdings Limited | Consumer Markets | 1,423 | 1,656 | 1,777 | 2.2 | 10.5 | 44.0 |
| Inspired Thinking Group Limited | Business Services | 796 | 1,571 | 1,368 | 2.1 | 5.0 | 22.5 |
| Independent Community Care Management Limited |
Healthcare & Education | 1,346 | 1,491 | 1,346 | 2.0 | 10.9 | 55.0 |
| Impetus Holdings Limited | Business Services | 1,057 | 1,057 | – | 1.4 | 7.8 | 39.3 |
| Arcas Investments Limited | Business Services | 1,000 | 1,000 | 1,000 | 1.3 | 9.6 | 48.6 |
| Consumer Investment Partners Limited† | Consumer Markets | 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 | – | 1.3 | 9.6 | 48.6 |
| Pho Holdings Limited | Consumer Markets | 987 | 987 | – | 1.3 | 5.5 | 28.0 |
| MLS Limited | TMT* | 93 | 956 | 1,043 | 1.3 | 5.3 | 22.5 |
| Happy Days Consultancy Limited | Healthcare & Education | 833 | 833 | – | 1.1 | 8.4 | 42.5 |
| Playforce Holdings Limited | Business Services | 1,033 | 512 | 512 | 0.7 | 9.7 | 44.0 |
| Surgi C Limited | Healthcare & Education | 1,102 | 350 | 650 | 0.5 | 13.3 | 57.5 |
| Kidsunlimited Group Limited | Business Services | 113 | 113 | 113 | 0.2 | N/A | N/A |
| Carnell Contractors Limited | Business Services | 941 | 0 | 0 | 0.0 | ## | ## |
| Empire World Trade Limited | Business Services | 1,297 | 0 | 321 | 0.0 | ‡ | ‡ |
| Music Festivals plc Loan note | Consumer Markets | 400 | 0 | 400 | 0.0 | N/A | N/A |
| Xention Discovery Limited | Healthcare & Education | 893 | 0 | 0 | 0.0 | 0.4 | 3.0 |
| Total unquoted | 28,480 | 37,084 | 49.7 |
* Technology, Media & Telecommunications ("TMT").
‡ Following a restructuring, the effective ownership percentage is dependent on fi nal exit proceeds.
† Formerly named Ingleby (1887) Limited.
^ Formerly named Ingleby (1885) Limited.
| 31 December | 31 December | % of Equity | |||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 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 | |||||||
| IDOX plc | TMT* | 920 | 5,184 | 2,661 | 6.9 | 2.8 | 7.5 |
| Netcall plc | TMT* | 869 | 1,337 | 842 | 1.8 | 4.1 | 20.5 |
| Murgitroyd Group plc | Business Services | 319 | 1,173 | 791 | 1.6 | 3.0 | 6.0 |
| Jelf Group plc | Financial Services | 761 | 1,024 | 877 | 1.4 | 1.4 | 5.6 |
| Escher Group Holdings plc | TMT* | 614 | 885 | 564 | 1.2 | 1.9 | 9.7 |
| Driver Group plc | Business Services | 563 | 786 | 259 | 1.0 | 4.1 | 19.4 |
| Dods (Group) plc | TMT* | 1,219 | 649 | 105 | 0.9 | 4.2 | 20.1 |
| Accumuli plc | TMT* | 465 | 636 | 473 | 0.9 | 4.3 | 23.6 |
| FFastFill plc | TMT* | 314 | 612 | 448 | 0.8 | 0.9 | 5.9 |
| Tasty plc | Consumer Markets | 469 | 595 | 547 | 0.8 | 2.5 | 17.1 |
| TLA Worldwide plc | Business Services | 620 | 589 | 620 | 0.8 | 3.5 | 17.7 |
| Vianet Group plc | Business Services | 646 | 508 | 388 | 0.7 | 1.9 | 9.7 |
| Anpario plc | Healthcare & Education | 275 | 506 | 315 | 0.7 | 2.0 | 14.7 |
| Tangent Communications plc | Business Services | 483 | 495 | 175 | 0.7 | 2.0 | 10.3 |
| Sinclair IS Pharma plc | Healthcare & Education | 524 | 490 | 399 | 0.6 | 0.4 | 2.2 |
| Hangar8 plc | Business Services | 388 | 456 | 31 | 0.6 | 2.5 | 11.3 |
| PROACTIS Holdings plc | TMT* | 619 | 426 | 341 | 0.6 | 5.4 | 26.3 |
| Inspired Energy plc | Business Services | 300 | 405 | 217 | 0.5 | 2.4 | 11.8 |
| EG Solutions plc | TMT* | 375 | 379 | 256 | 0.5 | 3.1 | 14.2 |
| Sanderson Group plc | TMT* | 387 | 379 | 201 | 0.5 | 1.8 | 6.9 |
| Electric Word plc | TMT* | 696 | 366 | 312 | 0.5 | 5.2 | 28.2 |
| Synectics plc | Business Services | 296 | 352 | 261 | 0.5 | 0.6 | 2.1 |
| GB Group plc | TMT* | 150 | 341 | 176 | 0.4 | 0.3 | 1.7 |
| Plastics Capital plc | Business Services | 473 | 317 | 321 | 0.4 | 1.7 | 9.8 |
| Paragon Entertainment Limited | Consumer Markets | 200 | 300 | 425 | 0.4 | 3.1 | 17.3 |
| Brady plc | TMT* | 176 | 292 | 217 | 0.4 | 0.4 | 2.1 |
| InterQuest Group plc | Business Services | 310 | 265 | 298 | 0.4 | 1.7 | 6.8 |
| Begbies Traynor Group plc | Financial Services | 231 | 203 | 156 | 0.3 | 0.6 | 2.5 |
| Ubisense Group plc | TMT* | 130 | 165 | 137 | 0.2 | 0.3 | 1.6 |
| Cohort plc | Business Services | 179 | 144 | 119 | 0.2 | 0.3 | 1.4 |
| Zattikka plc | TMT* | 316 | 136 | – | 0.2 | 1.4 | 7.1 |
| Tristel plc | Healthcare & Education | 217 | 114 | 145 | 0.2 | 1.0 | 5.4 |
| Aimshell Acquisitions plc | Business Services | 400 | 96 | 77 | 0.1 | 3.1 | 12.3 |
| STM Group plc | Financial Services | 162 | 84 | 52 | 0.1 | 0.6 | 4.0 |
| Active Risk Group plc | TMT* | 159 | 54 | 125 | 0.1 | 1.1 | 5.6 |
| Bglobal plc | Business Services | 176 | 50 | 67 | 0.1 | 0.4 | 2.5 |
| Green Compliance plc | Business Services | 882 | 29 | 450 | 0.0 | 4.0 | 19.8 |
| Zoo Digital Group plc | TMT* | 584 | 11 | 8 | 0.0 | 0.2 | 0.6 |
| Total AIM | 16,867 | 20,833 | 28.0 | ||||
| Listed | |||||||
| Vectura Group plc | Healthcare & Education | 771 | 1,343 | 900 | 1.8 | 0.5 | 1.3 |
| Chime Communications plc | TMT* | 369 | 396 | 293 | 0.5 | 0.2 | 0.8 |
| Marwyn Management Partners plc | Financial Services | 525 | 36 | 81 | 0.1 | 0.3 | 1.6 |
| Marwyn Value Investors Limited | Financial Services | 64 | 33 | 44 | 0.0 | 1.3 | 6.0 |
| Total listed | 1,729 | 1,808 | 2.4 | ||||
| Listed interest bearing securities | |||||||
| UK T-Bill 21/01/13 | 2,000 | 2,000 | – | 2.7 | |||
| BlackRock ICS plc – Institutional Sterling Liquidity Fund |
490 | 490 | 1,590 | 0.6 | |||
| Total listed interest bearing securities | 2,490 | 2,490 | 3.3 | ||||
| Collective investment vehicle | |||||||
| Wood Street Microcap Investment Fund | 3,525 | 4,525 | 2,826 | 6.1 | |||
| Total collective investment vehicle | 3,525 | 4,525 | 6.1 | ||||
| Total investments | 53,091 | 66,740 | 89.5 | ||||
| Net current assets | 7,822 | 10.5 | |||||
| Net assets | 74,562 | 100.0 | |||||
* Technology, Media & Telecommunications ("TMT").
The Registrar for Baronsmead VCT 3 is Computershare Investor Services PLC ("Computershare"). The Registrar will deal with all of your queries with regard to your shareholder account, such as:
| 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 certifi cate and dividend tax voucher and which you should always keep confi dential 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 web site | ||
| You should have your ("SRN") to hand, which is available on your share certifi cate and dividend tax voucher and which you should always keep confi dential for security reasons |
||
| Email: | [email protected] | |
| Post: | Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ |
The Baronsmead VCT 3 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 fi nancial 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 |
| Winterfl ood Securities Limited | 020 3400 0251 |
| 1 0 April 2013 | Twelfth Annual General Meeting |
|---|---|
| August 2013 | Announcement of interim results and posting of half-yearly report |
| February 2014 | Announcement of fi nal results for year to 31 December 2013 |
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 FSA. 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 benefi t from:
The UK tax treatment of VCTs is on a fi rst in fi rst 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 32 50
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
‡ Chairman of the Nomination Committee and Chairman of the Management Engagement and Remuneration Committee
† Senior Independent Director
* Chairman of the Audit and Risk Committee
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