TIDMBVT
RNS Number : 3993P
Baronsmead Venture Trust PLC
17 November 2016
Baronsmead Venture Trust plc
Annual Financial Report for the year ended 30 September 2016
Financial Headlines
-- Net asset value ("NAV") per share increased 3.0 per cent to
105.6p in the year to 30 September 2016, before deduction of
dividends.
-- 363.4p NAV total return to shareholders for every 100.0p invested at launch.
-- Dividends totalled 18.5p in the year to 30 September 2016,
after the third interim dividend of 8.5p paid on 30 September
2016.
-- Net annual dividend yield of 22.5 per cent and gross annual yield of 33.3 per cent.
Our Investment Objective
Baronsmead Venture Trust is a tax efficient listed company which
aims to achieve long-term investment returns for private investors,
including tax-free dividends.
Investment Policy
-- 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.
Dividend Policy
The Board of Baronsmead Venture Trust aims to sustain a minimum
annual dividend level at an average of 6.5p per ordinary share,
mindful of the need to maintain net asset value. The ability to
meet these twin objectives depends significantly on the level and
timing of profitable realisations and cannot be guaranteed. There
will be variations in the amount of dividends paid year on
year.
CHAIRMAN'S STATEMENT
I am pleased to report a 3.0 per cent (3.03p) increase in the
NAV per share for the year to 30 September 2016 before dividend
payments.
Tax free dividends totalling 18.5p per share were paid during
the year with interim dividends paid in December 2015, June 2016
and a third interim dividend in September 2016, in lieu of a final
dividend. The Board seeks to maintain average annual dividends of
6.5p a share, so the additional payment should be viewed as
exceptional, albeit welcome.
As this is the first annual report and accounts since the
Company's merger with Baronsmead VCT plc in February 2016, the
comparative figures in the accounts only relate to the Company
prior to the merger and are therefore not a true comparison to the
period under review.
Results
During the 12 months to 30 September 2016, the Company's NAV per
share increased 3.0 per cent from 102.56 to 105.59p before taking
account of dividends totalling 18.5p.
The Company's policy is to try to deliver an average annual
payment of 6.5p per ordinary share. To achieve this, the Directors
have sought to spread the distribution of realised capital profits
from years when more gains are realised to years of fewer gains.
However, the fiscal rules for VCTs penalise the Company for holding
cash. As a result, during this period when the amounts realised
from the sales on investments have exceeded new investments, a much
higher dividend was paid out of necessity.
Pence per
ordinary
share
---------------------------------------------- ----------
NAV as at 1 October 2015 102.56
---------------------------------------------- ----------
Valuation uplift (3.0 per cent) 3.03
---------------------------------------------- ----------
NAV as at 30 September 2016 before dividends 105.59
---------------------------------------------- ----------
Less:
Interim dividend paid to the shareholders
of Baronsmead VCT 2 plc on 18 December
2015 (3.50)
---------------------------------------------- ----------
Second interim dividend paid on 3 June
2016 (6.50)
---------------------------------------------- ----------
Third interim dividend paid on 30 September
2016 (8.50)
---------------------------------------------- ----------
NAV as at 30 September 2016 after dividends 87.09
---------------------------------------------- ----------
Future dividends are, of course, subject to the Company's
ability to achieve profitable realisations as well as the impact of
VCT rules. The dividends will therefore vary from time to time
although we will strive to deliver the average dividend in
accordance with our policy.
Portfolio Review
As at 30 September 2016, the portfolio comprised investments in
70 unquoted and AIM-traded companies. In addition, the Company's
investment in Wood Street Microcap provides investment exposure to
a further 42 AIM-traded and fully listed companies.
The Company's portfolio is diverse and this has helped from year
to year to smooth investors returns. The underlying value of the
unquoted portfolio increased by 21.4 per cent over the year with
many of the current investments trading well. Combined with the 4.8
per cent increase in the value of the investment in Wood Street
Microcap fund, this ensured good growth in NAV. Unfortunately,
volatility has been a feature of the quoted markets since the
beginning of 2016 and the overall value of the AIM-traded portfolio
decreased by 4.9 per cent. This modest re-adjustment in value of
the AIM-traded portfolio follows several consecutive years of
growth in the underlying value of these investments. The Managers
Review highlights some of those companies that made a notable
contribution to these results.
Investments and Divestments
In the year to 30 September 2016, the Company invested a total
of GBP4.5m in 5 new and 4 follow-on investments. The amount
invested is lower than in previous years principally due to the
introduction of new, more restrictive VCT rules in November 2015.
These changes have required the Investment Manager to adapt its
investment strategy to focus on the provision of development
capital to younger companies. As a result, in common with other
VCTs, the rate of new investment has slowed since their
introduction. In the meantime, the Company continues to comply with
the 70 per cent test and will continue to search for quality
investments.
The Investment Manager has an active programme for directly
approaching prospective investee companies and continues to invest
in its capabilities to identify a supply of new and attractive
investment opportunities. The pipeline of suitable investment
opportunities is improving, although it is now taking longer to
establish compliance with the new VCT rules and the subsequent
conversion to completed investments has proved challenging.
A total of GBP15.5m was realised from the full sale of
investments and from loan note redemptions during the period,
taking account of amounts realised by Baronsmead VCT plc prior to
the merger with the Company. This includes the sales of Nexus
Vehicle Holdings, Kingsbridge Risk Solutions and Jelf Group, which
generated returns of 4.5 times, 3.2 times and 2.5 times their costs
respectively. Against these successes, losses were realised on
underperforming investments such as Valldata Group and Fishers
Outdoor Leisure Holdings.
Full details about the investments and divestments during the
period are set out in the tables below and in view of the new VCT
rules, the Company has updated and simplified its Investment Policy
which is set out below.
Fundraising
The Company raised GBP9.7m net of expenses in February 2016 and
realised GBP15.5m from the sale of the investments in the year to
30 September 2016. As a result, it is unlikely that the Company
will seek to raise new funds in the current tax year, preferring to
continue investing from the currently available cash resources.
Annual General Meeting
I look forward to meeting as many shareholders as possible at
the Annual General Meeting to be held at 10.00 am on 14 February
2017, at Plaisterers' Hall, One London Wall London, EC2Y 5JU. As
well as my own review of the year, there will also be presentations
from the Manager.
OUTLOOK
Given the uncertainty over the timing and terms of the UK's exit
from the European Union, it will take time for the impact of Brexit
on the UK economy to be known. It is also too early to determine
whether there will be any relaxation of VCT investment restrictions
that have been heavily influenced by the EU State Aid rules. We are
therefore proceeding on the basis that this will not be the case as
it is likely to be a number of years before there will be clarity
on that matter.
Reassuringly, our investment portfolio is diverse, gearing
levels are low and the steady progress of trading activity has
continued. There are a number of more mature investments that may
be realised over the coming years which should assist in generating
good returns for investors. The VCT industry is slowly adapting to
the new legislation and the number of investment opportunities
being considered by the Investment Manager is growing. The Manager
is one of the most experienced in the sector with a track record of
investing for the long term and we are therefore confident it can
adapt to the challenges of the new VCT rules and any disruption
that Brexit may bring.
Peter Lawrence
Chairman
17 November 2016
MANAGER'S REVIEW
The year has seen another strong performance from the unquoted
portfolio. There have been a number of successful divestments
across the portfolio including some longer held unquoted and quoted
companies.
PORTFOLIO REVIEW
Overview
The net assets of GBP150.6 million were invested as follows:
NAV % of Number of % return
Asset class (GBPm) NAV* investees in the year**
---------------------- -------- ------ ----------- ---------------
Unquoted 49.3 33 18 21.4
---------------------- -------- ------ ----------- ---------------
AIM-traded companies 60.6 40 52 (4.9)
---------------------- -------- ------ ----------- ---------------
Wood Street Microcap
Investment Fund 18.4 12 42 4.8
---------------------- -------- ------ ----------- ---------------
Liquid assets 22.3 15 N/A -
---------------------- -------- ------ ----------- ---------------
Totals 150.6 100 112 -
---------------------- -------- ------ ----------- ---------------
* By value as at 30 September 2016.
** Return includes interest received on unquoted realisations
during the year.
Each quarter the direction of general trading and profitability
of all investee companies is assessed so that the Board can monitor
the overall health and trajectory of the portfolio. At 30 September
2016, 88 per cent of the 70 companies directly held in the
portfolio (excluding the investments held by Wood Street Microcap)
were progressing steadily or better.
The tables below show the breakdown of new investments and
realisations over the course of the year and commentary is included
below on some of the key highlights in both the unquoted and quoted
portfolios.
Investment Activity
During the year, GBP4.5m was invested in 9 companies including 5
new additions to the portfolio and 4 follow on investments. Three
of the largest investments were:
-- Cerillion (quoted) provides Customer Relationship Management
("CRM") and billing software as an enterprise solution to telecoms
companies globally with clients in 36 countries.
-- Eden Research (quoted) is focused on IP exploitation in the
area of crop science where it has strong patents around micro
encapsulation which is a method of safely and effectively
delivering active ingredients to particular crops focused on
disease prevention. Our investment will be used to fund product
development.
-- Happy Days Consultancy (unquoted) is a chain of nurseries
based in the South West of England. Baronsmead Venture Trust made
an initial investment in 2012 and since then the company has opened
3 new nurseries and currently has 2 under development. A follow on
investment has been made to fund further new nurseries.
Unquoted Portfolio
The unquoted portfolio performance has been strong, growing by
around 21 per cent over the course of the year. This includes
capitalised interest received on the sale of investments. The
portfolio is valued by the Board using a consistent process every
quarter. The majority of the value created by portfolio companies
comes from trading and operational improvements including revenue
and margin growth, rather than financial leverage.
Unquoted Divestment Activity
During the year there were five full realisations which returned
proceeds of approximately GBP13.6m for Baronsmead Venture
Trust.
-- Nexus Vehicle Holdings has been a longer hold as we invested
in 2008. Sales have grown five fold since then and a full
realisation was achieved to a Private Equity buyer in December 2015
delivering an excellent return of 4.5x cost. This was the largest
investment by cost in the Company's unquoted portfolio.
-- Kingsbridge Risk Solutions, generated a return of 3.2x its
original cost when it was sold in May 2016 after a relatively short
investment period of only 28 months. Kingsbridge is a specialist
insurance broker providing services to freelance contractors in
professions such as engineering and IT.
-- Fisher Outdoor Leisure Holdings is a distributor of cycle
accessories which Baronsmead Venture Trust has held since 2006. The
investment was realised in April 2016 for 0.8x cost which was a
good recovery from the full provision in 2014.
-- Following a period of strong realisations, there have been
two less successful exits to report. Independent Community Care
Management (high acuity care) has been partially realised
recovering 0.5x the original cost. Additionally, there was no
recovery of the investment in Valldata Group at realisation,
(payment processing for not-for-profit sector) which was sold to an
investor.
While it is disappointing to have two poor realisations in one
financial period, it is in the nature of private equity investment
that some investments will fail to achieve their full potential.
Our track record of realisations over many years remains
strong.
Quoted Portfolio (AIM-traded investments)
The quoted portfolio has seen a decrease in value of 5 per cent
following a number of years of strong performance. This reduction
in value reflects the volatility of the quoted markets particularly
in the months following the Brexit decision. The Manager is
satisfied that the quoted portfolio is well diversified and
positioned for longer term prospects, notwithstanding volatility
which affects quoted markets from time to time.
Quoted Divestment Activity
Proceeds from two realisations during the year from the quoted
portfolio totalled GBP1.9m and delivered an aggregate return of
1.5x cost. Jelf Group had been held since 2004 and was sold by way
of a trade sale for 2.5x cost. Tangent Communications realised 0.5x
cost.
Wood Street
Wood Street Microcap Investment Fund ("Wood Street") was
established by Livingbridge in May 2009 to provide flexibility for
the Baronsmead VCTs to invest in larger and more liquid non VCT
qualifying AIM and Small Cap opportunities. It represents another
innovation introduced by the Livingbridge quoted Team to seek
performance improvement. At 30 September 2016, Baronsmead Venture
Trust's cumulative GBP7.0m investment was valued at GBP18.4m,
following a gain of a further 5 per cent over the year. As at 30
September 2016, Wood Street held investments in 42 AIM-traded and
listed companies.
Liquid assets (cash and near cash)
Baronsmead Venture Trust had cash of approximately GBP22m at the
year-end. This asset class is conservatively managed to take
minimal or no capital risk, a strategy outlined in prospectuses
that have been issued in the past.
Outlook
The current portfolio is diversified and provides a good
foundation for the Company. The immediate challenge as highlighted
in the Chairman's statement is to continue adapting to the new VCT
regulations and increase the new investment rate whilst keeping a
close eye on the risk/reward balance of the new investment
activity.
Livingbridge VC LLP
Investment Manager
17 November 2016
Investments in the year
Book
cost
Company Location Sector Activity GBP'000
----------------------------- ----------------- -------------- ------------------------------------- ---------
Unquoted investments
Follow on
----------------------------- ----------------- -------------- ------------------------------------- ---------
Happy Days Consultancy Healthcare Provider of nursery based childcare
Ltd Cornwall & Education in the South West of England 658
----------------------------- ----------------- -------------- ------------------------------------- ---------
Total unquoted investments 658
------------------------------------------------------------------------------------------------------- ---------
AIM-traded investments
New
----------------------------- ----------------- -------------- ------------------------------------- ---------
CRM and billing software to
Cerillion plc London TMT* telecoms companies 900
----------------------------- ----------------- -------------- ------------------------------------- ---------
Business Developer of biological fungicides
Eden Research plc Gloucestershire Services and bio equivalents 900
----------------------------- ----------------- -------------- ------------------------------------- ---------
LoopUp Group plc London TMT* Audio conferencing solutions 504
----------------------------- ----------------- -------------- ------------------------------------- ---------
Healthcare Online independent UK secondary
Wey Education plc London & Education school 214
----------------------------- ----------------- -------------- ------------------------------------- ---------
Consumer A vertically integrated sports
Science in Sport plc London Markets nutrition provider 143
----------------------------- ----------------- -------------- ------------------------------------- ---------
Follow on
----------------------------- ----------------- -------------- ------------------------------------- ---------
SysGroup plc (formerly
Daily Internet plc Liverpool TMT* IT managed services and hosting 612
----------------------------- ----------------- -------------- ------------------------------------- ---------
Clinical research organisation
Venn Life Sciences Holdings Healthcare providing consulting and clinical
plc London & Education trial services 387
----------------------------- ----------------- -------------- ------------------------------------- ---------
Consumer UK based letting agency franchise
Belvoir Lettings plc Lincolnshire Markets network 157
----------------------------- ----------------- -------------- ------------------------------------- ---------
Total AIM-traded investments 3,817
------------------------------------------------------------------------------------------------------- ---------
Total investments in the year 4,475(#)
------------------------------------------------------------------------------------------------------- ---------
* Technology, Media & Telecommunications ("TMT").
# All investments with the exception of Eden Research, LoopUp
Group and SysGroup were made prior to BVT (previously known as
BVCT2) acquiring the assets of BVCT on 8 February 2016. Hence, the
book cost of new investments shown (except for Eden Research,
LoppUp Group and SysGroup) relate only to the investments made by
BVCT2.
BVT acquired the BVCT investment portfolio (total GBP62,819,000)
on 8 February 2016. This portfolio included the investments listed
in the table above (with the exception of Eden Research, LoopUp
Group and SysGroup).
Realisations in the year
First Overall
investment Proceeds++ multiple
Company date GBP'000 return*
--------------------------------------- ------------- ------------- ------------- ----------
Unquoted realisations
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Nexus Vehicle Holdings Ltd sale Feb 08 5,873 4.5
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Kingsbridge Risk Solutions Ltd sale Jan 14 5,196 3.2
--------------------------------------- ------------- ------------- ------------- ----------
Fisher Outdoor Leisure Holdings Full trade
Ltd sale Jun 06 2,013 0.8
--------------------------------------- ------------- ------------- ------------- ----------
Independent Community Care Management Full trade
Ltd sale Oct 11 548 0.5
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Valldata Group Ltd sale Jan 11 0 0.5
--------------------------------------- ------------- ------------- ------------- ----------
Total unquoted realisations 13,630
--------------------------------------------------------------------- ------------- ----------
AIM-traded realisations
--------------------------------------- ------------- ------------- ------------- ----------
Recommended
Jelf Group plc offer Oct 04 1,364 2.5
--------------------------------------- ------------- ------------- ------------- ----------
Full market
Tangent Communications plc sale Mar 07 500 0.5
--------------------------------------- ------------- ------------- ------------- ----------
Total AIM-traded realisations 1,864
--------------------------------------------------------------------- ------------- ----------
Total realisations in the year 15,494
--------------------------------------------------------------------- ------------- ----------
(++) Proceeds at time of realisation including interest.
* Includes interest/dividends received, loan note redemptions
and partial realisations accounted for in prior periods.
Proceeds of GBP4,000 was received in respect of Bglobal plc
which had been written off in a prior period. Deferred
consideration of GBP100,000 was received in respect of Playforce
Holdings and GBP56,000 in respect of CableCom II Networking
Holdings, both of which had been sold in a prior periods. Carnell
Contractors was fully realised on receipt of final earn-out
dividend of GBP686,000.
With the exception of Kingsbridge Risk Solutions, Fisher Outdoor
Leisure Holdings, Valldata Group and Tangent Communications all
realisations were made before the acquisition of the BVCT
investment portfolio and proceeds shown relate to those made prior
to 8 February 2016.
Ten Largest Investments
The top ten investments by current value at 30 September 2016
illustrate the diversity and size of investee companies within the
portfolio. This financial information is taken from publicly
available information, which has been audited by the auditors of
the investee companies.
1. Staffline Group plc - Nottinghamshire
All funds managed by Livingbridge
First investment: July 2000
Total original cost: GBP174,000
Total equity held: 2.40%
Baronsmead Venture Trust only
Original cost: GBP174,000
Valuation: GBP5,801,000
Valuation basis: Last Traded Price
% of equity held: 2.40%
Year ended 31 December
2015 2014
----------------- ------------ ------------
GBP million GBP million
----------------- ------------ ------------
Sales: 702.2 503.2
----------------- ------------ ------------
EBITA: 30.3 19.4
----------------- ------------ ------------
Net Assets: 73.2 65.9
----------------- ------------ ------------
No of Employees
: 3,768 1,611
----------------- ------------ ------------
(Source: Staffline Group plc, Annual Report 31 December
2015)
2. Netcall Plc - Hertfordshire
All funds managed by Livingbridge
First investment: July 2010
Total original cost: GBP4,354,000
Total equity held: 17.83%
Baronsmead Venture Trust only
Original cost: GBP1,738,000
Valuation: GBP5,249,000
Valuation basis: Bid Price
% of equity held: 7.15%
Year ended 30 June
2016 2015
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 16.6 17.2
------------------ ------------ ------------
EBITA: 4.3 5.0
------------------ ------------ ------------
Net Assets: 22.6 22.7
------------------ ------------ ------------
No of Employees: 156 148
------------------ ------------ ------------
(Source: Netcall plc, Annual Report and Accounts, 30 June
2016)
3. Crew Clothing Holdings Limited - London
All funds managed by Livingbridge
First investment: November 2006
Total original cost: GBP5,833,000
Total equity held: 28.10%
Baronsmead Venture Trust only
Original cost: GBP2,904,000
Valuation: GBP5,023,000
Valuation basis: Earnings Multiple
% of equity held: 13.40%
Year ended 25 October
2015 2014
----------------- ------------ ------------
GBP million GBP million
----------------- ------------ ------------
Sales: 55.0 59.2
----------------- ------------ ------------
EBITA: 2.0 1.1
----------------- ------------ ------------
Net Assets: 4.6 5.8
----------------- ------------ ------------
No of Employees
: 411 401
----------------- ------------ ------------
(Source: Crew Clothing Holdings Ltd, Report and Financial
Statements 25 October 2015)
4. Create Health Ltd - London
All funds managed by Livingbridge
First investment: March 2013
Total original cost: GBP4,235,000
Total equity held: 29.00%
Baronsmead Venture Trust only
Original cost: GBP1,906,000
Valuation: GBP4,800,000
Valuation basis: Earnings Multiple
% of equity held: 11.48%
Year ended 31 March
2015 2014
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 7.6 4.9
------------------ ------------ ------------
EBITA: 1.4 1.1
------------------ ------------ ------------
Net Assets: 4.5 3.3
------------------ ------------ ------------
No of Employees: 90 58
------------------ ------------ ------------
(Source: Create Health Ltd Abbreviated Accounts 31 March
2015)
5. IDOX Plc - Berkshire
All funds managed by Livingbridge
First investment: May 2002
Total original cost: GBP1,641,000
Total equity held: 4.90%
Baronsmead Venture Trust only
Original cost: GBP614,000
Valuation: GBP4,387,000
Valuation basis: Last Traded Price
% of equity held: 1.83%
Year ended 31 October
2015 2014
----------------- ------------ ------------
GBP million GBP million
----------------- ------------ ------------
Sales: 62.6 60.7
----------------- ------------ ------------
EBITA: 17.4 15.6
----------------- ------------ ------------
Net Assets: 53.6 48.6
----------------- ------------ ------------
No of Employees
: 572 554
----------------- ------------ ------------
(Source: IDOX PLC Annual Report & Accounts 2015)
6. Tasty Plc - London
All funds managed by Livingbridge
First investment: September 2006
Total original cost: GBP3,223,000
Total equity held: 14.40%
Baronsmead Venture Trust only
Original cost: GBP1,188,000
Valuation: GBP4,045,000
Valuation basis: Bid Price
% of equity held: 5.00%
Year ended 27 December
2015 2014
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 35.8 29.7
------------------ ------------ ------------
EBITA: 3.3 2.8
------------------ ------------ ------------
Net Assets: 22.3 19.6
------------------ ------------ ------------
No of Employees: 846 642
------------------ ------------ ------------
(Source: Tasty Plc, Report and Financial Statements 27 December
2015)
7. Happy Days Consultancy Ltd - Cornwall
All funds managed by Livingbridge
First investment: April 2012
Total original cost: GBP7,617,000
Total equity held: 65.00%
Baronsmead Venture Trust only
Original cost: GBP3,420,000
Valuation: GBP4,005,000
Valuation basis: Earnings Multiple
% of equity held: 25.74%
Year ended 31 December
2015 2014
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 6.2 5.7
------------------ ------------ ------------
EBITA: (0.5) (0.4)
------------------ ------------ ------------
Net Assets: 8.8 5.5
------------------ ------------ ------------
No of Employees: 258 212
------------------ ------------ ------------
(Source: H. Days Holdings Ltd, Annual Report and Financial
Statements 31 December 2015 )
8. Pho Holdings Ltd - London
All funds managed by Livingbridge
First investment: July 2012
Total original cost: GBP4,415,000
Total equity held: 28.00%
Baronsmead Venture Trust only
Original cost: GBP1,982,000
Valuation: GBP3,851,000
Valuation basis: Earnings Multiple
% of equity held: 11.08%
Year ended 1 March
2015* 2014
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 14.1 9.7
------------------ ------------ ------------
EBITA: 0.9 0.4
------------------ ------------ ------------
Net Assets: 2.0 1.3
------------------ ------------ ------------
No of Employees: 290 205
------------------ ------------ ------------
(Source: Pho Holdings Ltd, Directors' Report and Financial
Statements 1 March 2015)
*53 week period ended 1 March 2015.
9. Dods (Group) plc - London
All funds managed by Livingbridge
First investment: March 2003
Total original cost: GBP5,289,000
Total equity held: 20.12%
Baronsmead Venture Trust only
Original cost: GBP2,022,000
Valuation: GBP3,678,000
Valuation basis: Bid Price
% of equity held: 8.02%
Year ended 31 March
2016 2015
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 19.6 18.3
------------------ ------------ ------------
EBITA: 2.3 0.2
------------------ ------------ ------------
Net Assets: 25.7 24.6
------------------ ------------ ------------
No of Employees: 210 268
------------------ ------------ ------------
(Source: Dods (Group) plc, Annual Report & Accounts, 31
March 2016)
10. CableCom II Networking Holdings Ltd - Somerset
All funds managed by Livingbridge
First investment: October 2013
Total original cost: GBP5,000,000
Total equity held: 10.54%
Baronsmead Venture Trust only
Original cost: GBP2,500,000
Valuation: GBP3,187,000
Valuation basis: Earnings Multiple
% of equity held: 4.92%
Year ended 31 October
2015 2014
------------------ ------------ ------------
GBP million GBP million
------------------ ------------ ------------
Sales: 17.5 17.9
------------------ ------------ ------------
EBITA: 1.9 2.0
------------------ ------------ ------------
Net Assets: (17.5)* (10.9)*
------------------ ------------ ------------
No of Employees: 104 83
------------------ ------------ ------------
(Source: Cablecom Bidco Limited Report and Financial Statements
31 October 2015)
*negative net assets due to investment structure
Principal Risks & Uncertainties
The Board has included below details of the principal risks
& uncertainties facing the Company and the appropriate measures
taken in order to mitigate these risks as far as practicable.
Principal Context Specific risks we Possible impact Mitigation
Risk face
--------------- ------------------------ ------------------------ ------------------------ -----------------------
Loss of The Company must Breach of any of The loss of VCT status The Board maintains a
approval comply with section the rules enabling would result in safety
as a Venture 274 of the Income the Company to hold shareholders margin on all VCT
Capital Tax Act 2007 which VCT status could who have not held tests to ensure
Trust enables its investors result in the loss their that breaches are
to take advantage of that status. shares for the very unlikely
of tax relief on This risk is designated to be caused by
their investment particularly holding period having unforeseen events
and on future returns. affected by recent to repay the income or shocks. The
legislation and tax Investment Manager
EU State Aid. relief they had monitors all of the
already VCT tests
obtained and future on an ongoing basis
dividends and the
and gains would be Board reviews the
subject status of
to income tax and these tests on a
capital quarterly basis.
gains tax. Specialist advisors
audit the
tests on a bi-annual
basis and
report to the audit
committee
on their findings.
--------------- ======================== ======================== ======================== =======================
Legislative VCTs were established A change in government The Company might not The Board and the
in 1995 to encourage policy regarding be able to maintain Investment
private individuals the funding of small its Manager engage on a
to invest in early companies or changes asset base leading to regular
stage companies made to VCT its gradual decline basis with HM
that are considered regulations and Treasury ("HMT")
to be risky and to comply with EU potentially an and industry
therefore have limited State Aid rules inability representative
funding options. could result in to maintain either its bodies to demonstrate
In return the state a cessation of the buy back or dividend the cost
provides these tax reliefs for policies. benefit of VCTs to
investors VCT investors or the economy
with tax reliefs changes to the reliefs in terms of
which fall under that make them less employment generation
the definition of attractive to and taxation revenue.
state aid. investors. In addition
the Board and the
Investment
Manager have
considered the
options available to
the Company
in the event of the
loss of
tax reliefs to ensure
that it
can continue to
provide a strong
investment
proposition for its
shareholders despite
the loss
of tax reliefs.
--------------- ======================== ======================== ======================== =======================
Investment The Company invests Investment in poor Reduction in both the The Company has a
performance in small, mainly quality companies capital value of diverse portfolio
UK based companies, with the resultant investors where the cost of any
both unquoted and risk of a high level shareholdings and in one investment
quoted. Smaller of failure in the the is typically less
companies often portfolio. level of income than 5 per
have limited product distributed. cent of NAV thereby
lines, markets or limiting
financial resources the impact of any one
and may be dependent failed
for their management investment. The Board
on a smaller number has appointed
of key individuals an Investment Manager
and hence tend to that has
be riskier than a strong and
larger businesses. consistent track
record over a long
period, invests
in profitable
companies in sectors
in which it has
specialised
for the past eighteen
years,
undertakes extensive
due diligence
on all prospective
investments,
has an experienced
value enhancement
team who actively
manage its
investments and who
take board
seats and appoint
experienced
non-executive
directors on all
unquoted and
significant quoted
investments.
--------------- ======================== ======================== ======================== =======================
Economic, Whilst the Company Events such as Reduction in the value The Company invests
political invests in economic of the Company's in a diversified
and other predominantly recession, movement assets portfolio of
external UK businesses, it in interest or with a corresponding companies across
factors relies heavily on currency impact a number of industry
Europe as one of rates, civil unrest, on its share price may sectors
its largest trading war or political result in the loss of which provides
partners. This, uncertainty or investors through protection against
together with the pandemics buybacks shocks as the impact
increase in can adversely affect and may limit its on individual
globalisation, the trading ability sectors can vary
means that economic environment to pay dividends. depending upon
unrest and shocks for underlying the circumstances. In
in other investments addition,
jurisdictions, and impact on their the Manager uses a
as well as in the results and limited amount
UK, can impact on valuations. of bank gearing in
UK companies, its investments
particularly which enables its
smaller ones that investments
are more vulnerable to continue trading
to changes in trading through
conditions. difficult economic
conditions.
The Company always
maintains
healthy cash balances
so that
it can support
portfolio companies
with further
investment should
the investment case
support
it. The Board reviews
the makeup
and progress of the
portfolio
each quarter to
ensure that
it remains
appropriately
diversified
and funded.
--------------- ======================== ======================== ======================== =======================
Regulatory The Company is Failure of the Company The Company's The Board and the
& Compliance authorised to comply with any performance Investment
as a self managed of its regulatory could be impacted Manager employ the
Alternative Investment or legal obligations severely services
Fund Manager ("AIFM") could result in by financial penalties of leading regulatory
under the Alternative the suspension of and a loss of lawyers,
Investment Fund its listing by the reputation sponsors, auditors
Managers Directive UKLA and/or financial resulting in the and other
("AIFMD") and is penalties and sanction alienation advisers to ensure
also subject to by the regulator of shareholders, a the Company
the Prospectus and or a qualified audit significant complies with all of
Transparency report. demand to buy back its regulatory
Directives. shares obligations. The
It is required to and an inability to Board has strong
comply with the attract systems in place to
Companies Act 2006, future investment. The ensure that
the UKLA Listing suspension of its the Company complies
Rules. shares with all
would result in the of its regulatory
loss responsibilities.
of its VCT taxation The Investment
status Manager has a
and most likely the strong compliance
ultimate culture and
liquidation of the employs dedicated
Company. compliance
specialists within
its team
who support the Board
in ensuring
that the Company is
compliant.
--------------- ======================== ======================== ======================== =======================
Operational The Company relies The risk of failure Errors in shareholders The Board has
on a number of third of the systems and records or appointed an audit
parties including controls of any shareholdings, committee who, along
the Investment Manager of the Company's incorrect marketing with the
to provide it with advisers leading literature, external auditors,
the necessary services to an inability non-compliance with review the
such as registrar, to service shareholder listing internal control
sponsor, custodian, needs adequately, rules, loss of assets, ("ISAE3402")
receiving agent, to provide accurate breach of legal duties and/or internal audit
lawyers and tax reporting and and inability to reports
advisers. accounting provide from all significant
and to ensure accurate reporting and third party
adherence accounting all leading service providers,
to all VCT legislation to reputational risk including
rules. and the Investment
the potential for Manager, on a
litigation. bi-annual basis to
ensure that
they have strong
systems and
controls in place
including
Business Continuity
Plans. The
Board regularly
reviews the
performance of its
service providers
to ensure that they
continue
to have the necessary
expertise
and resources to
provide a high
class service and
always where
there has been any
changes in
key personnel or
ownership.
=============== ======================== ======================== ------------------------ -----------------------
The financial risks faced by the Company are covered within the
Notes to the Financial Statements.
Extract of the Strategic Report
Applying the Business Model
This section of the Strategic Report sets out the practical
steps that the Board has taken in order to apply the business
model, achieve the investment objective and adhere to the
investment policy. The investment policy, which is set out in full
in the Annual Report and Accounts, is designed to ensure that the
Company continues to qualify and is approved as a VCT by HM Revenue
and Customs. As referred to in the Chairman's Statement, the
investment policy has been updated and simplified, in line with the
new VCT rules.
Investing in the Right Companies
Investments are primarily made in companies which are
substantially based in the UK, although many of these investees may
have some trade overseas. Investments are selected in the
expectation that the application of private equity disciplines,
including an active management style for unquoted companies, will
enhance value and enable profits to be realised from planned
exits.
The Board has delegated the management of the investment
portfolio to Livingbridge VC LLP ("Livingbridge" or the "Manager").
The Manager has adopted a 'top-down, sector-driven' approach to
identifying and evaluating potential investment opportunities, by
assessing a forward view of firstly the business environment, then
the sector and finally the specific potential investment
opportunity.
Based on its research, the Manager has selected a number of
sectors that it believes will offer attractive growth prospects and
investment opportunities. Diversification is also achieved by
spreading investments across different asset classes and making
investments for a variety of different periods.
The Manager's Review above provides a review of the investment
portfolio and of market conditions during the year, including the
main trends and factors likely to affect the future development,
performance and position of the business.
Risk is spread by investing in a number of different businesses
within different qualifying industry sectors using a mixture of
securities. The maximum the Company will invest in a single company
(including a collective investment vehicle) is 15 per cent of its
investments by value of its investments calculated in accordance
with Section 278 of the Income Tax Act 2007 (as amended) ("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.
The Company invests in a range of securities including, but not
limited to, ordinary and preference shares, loan stocks,
convertible securities and permitted non qualifying investments as
well as cash. Unquoted investments are usually structured as a
combination of ordinary shares and loan stocks or preference
shares, while AIM-traded investments are primarily held in ordinary
shares. Pending investment in VCT qualifying investments, the
Company's cash and liquid funds are held in permitted non
qualifying investments.
VCTs are required to comply with a number of different
regulations and the Company has appointed Philip Hare &
Associates LLP ("Philip Hare & Associates") as its VCT Tax
Status Advisers to advise it on compliance with VCT requirements.
Philip Hare & Associates reviews new investment opportunities,
as appropriate, and regularly reviews the investment portfolio of
the Company. Philip Hare & Associates works closely with the
Manager but reports directly to the Board.
Environmental, Human Rights, Employee, Social and Community
Issues
The Company seeks to conduct its affairs responsibly and the
Manager is encouraged to consider environmental, human rights,
social and community issues, where appropriate, with regard to
investment decisions.
The Company is required, by company law, to provide details of
environmental (including the impact of the Company's business on
the environment), employee, human rights, social and community
issues; including information about any policies it has in relation
to these matters and the effectiveness of these policies. The
Company does not have any employees and as a result does not
maintain specific policies in relation to these matters.
Livingbridge as Investment Manager has an Environmental, Social
and Governance ("ESG") policy. As a responsible investor,
Livingbridge fully incorporates ESG factors into its investment
programme. The ESG policy focuses on environmental, social and
corporate governance factors, including risks and opportunities,
affecting both the Company and/or specific portfolio companies.
Livingbridge undertakes an in-house risk assessment
questionnaire pre-investment to highlight any significant or
material ESG issues. Should any such issues be identified, these
are then addressed via specific due diligence pre-investment.
Upon completion of an investment the completed in-house
questionnaires are assessed by an external consultant to
corroborate risks identified, advise the company how to address any
ESG issues and also to identify any potential upside opportunities
(e.g. energy savings). Relevant ESG matters are then included in
the portfolio company board meetings as appropriate and also in the
standard Livingbridge portfolio progress reports allowing
Livingbridge to assess the impact of any interventions or
recommendations.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the
operations of the Company, nor does it have responsibility for any
other emissions producing sources under the Companies Act 2006
(Strategic Report and Directors' Reports) Regulations 2013,
including those within its underlying investment portfolio.
Gender Diversity
The Board of Directors of the Company comprises two female and
two male Directors. The Manager has an equal opportunity policy and
currently employs 45 men and 30 women.
Appointment of the Manager
The Board expects the Manager to deliver a performance which
meets the objective of achieving long-term investment returns,
including tax free dividends. A review of the Company's performance
during the financial year, the position of the Company at the year
end and the outlook for the coming year is contained within the
Chairman's Statement above. The Board assesses the performance of
the Manager in meeting the Company's objective against the Key
Performance Indicators ("KPIs").
The management agreement
Under the management agreement, the Manager receives a fee of
2.0 per cent per annum of the net assets of the Company. In
addition, the Manager is responsible for providing all secretarial,
administrative and accounting services to the Company. The Manager
has appointed Capita Sinclair Henderson to provide these services
to the Company on its behalf. The Company is responsible for paying
the fee charged by Capita Sinclair Henderson to the Manager in
relation to the performance of these services.
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 30 September 2016 was 2.30 per cent.
The management agreement may be terminated at any date by either
party giving twelve months' notice of termination and if
terminated, the Manager is only entitled to the management fees
paid to it and any interest due on unpaid fees.
Performance fees
A performance fee will not be payable to the Manager until the
total return on shareholders' funds exceeds an annual threshold of
the higher of 4 per cent or base rate plus 2 per cent calculated on
a compound basis. To the extent that the total return exceeds the
threshold over the relevant period then a performance fee of 10 per
cent of the excess will be paid to the Manager. The amount of any
performance fee which is paid in an accounting period shall be
capped at 5 per cent of shareholders' funds for that period.
During the financial year the threshold has not been exceeded
and no performance fee is payable (2015: GBP588,000).
Management retention
The Board is keen to ensure that the Manager continues to have
one of the best investment teams in the VCT and private equity
sector. A co-investment scheme was introduced in November 2004
under which members of the Manager's investment team invest their
own money into a proportion of the ordinary shares of each unquoted
investment made by the Baronsmead VCTs. The Board regularly
monitors the co-investment scheme arrangements but 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.
Executives have to invest their own capital in every unquoted
transaction and cannot decide selectively which investments to
participate in. In addition the co-investment only delivers a
return after each VCT has realised a priority return built into the
structure. 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. Any prior
ranking financial instruments, such as loan stock, held by the
Baronsmead VCTs have to be repaid in full together with the agreed
priority annual return before any gain accrues to the ordinary
shares. This ensures that the Baronsmead VCTs achieve a good
priority return before profits accrue to the co-investment
scheme.
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, 58 executives have
invested a total of GBP895k in 47 companies. At 30 September 2016,
30 of these investments have been realised generating proceeds of
GBP259m for the Baronsmead VCTs and GBP13.4m for the co-investment
scheme. For Baronsmead Venture Trust the average money multiple on
these 30 realisations was 1.9 times cost. Had the co-investment
shares been held instead by the Baronsmead VCTs, the extra return
to shareholders would have been the equivalent of 3.8p a share
(based on the current number of shares in issue). The Board
considers this small cost to retain quality people to be in the
best interests of shareholders.
Advisory fees
During the year to 30 September 2016, the Manager received
income of GBPnil (2015: BVCT GBP152,000 & BVCT2 GBP152,000) in
connection with advisory fees and incurred abort fees of GBP12,000
(2015: BVCT GBP9,000 & BVCT2 GBP9,000), with respect to
investments attributable to Baronsmead Venture Trust.
Directors' fees of GBP309,000 (2015: BVCT GBP206,000 & BVCT2
GBP206,000) were received by the Manager in relation to services
provided to companies in the investment portfolio, during the year,
with respect to investments attributable to Baronsmead Venture
Trust.
Alternative Investment Fund Manager's Directive ("AIFMD")
The AIFMD regulates the management of alternative investment
funds, including VCTs. On 22 July 2014 the Company was registered
as a Small UK registered AIFM under the AIFMD.
Viability Statement
In accordance with principle 21 of the AIC Code of Corporate
Governance, the Directors have assessed the prospects of the
Company over the three year period to 30 September 2019. This
period is used by the board during the strategic planning process
and is considered reasonable for a business of our nature and
size.
The three year period is considered the most appropriate given
the forecasts that the Board require from the Manager and the
estimated timeline for finding, assessing and completing
investments.
In making this statement the Board carried out a robust
assessment of the principal risks facing the Company, including
those that might threaten its business model, future performance,
solvency, or liquidity.
The Board also considered the ability of the Company to raise
finance and deploy capital. Their assessment took account of the
availability and likely effectiveness of the mitigating actions
that could be taken to avoid or reduce the impact of the underlying
risks.
This review has considered the principal risks as outlined
below. The Board concentrated its efforts on the major factors
which affect the economic, regulatory and political environment.
The Board also paid particular attention to the importance of its
close working relationship with the Manager, Livingbridge.
The Directors have also considered the Company's income and
expenditure projections and find these to be realistic and
sensible.
Based on the Company's processes for monitoring costs, share
price discount, the Manager's compliance with the investment
objective, policies and business model, asset allocation and the
portfolio risk profile, the Directors have concluded that there is
a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the
three year period to 30 September 2019.
Returns to Investors
Dividend policy
The Board of Baronsmead Venture Trust aims to sustain a minimum
annual dividend level at an average of 6.5p per ordinary share,
mindful of the need to maintain net asset value. The ability to
meet these twin objectives depends significantly on the level and
timing of profitable realisations 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 has been 7.6p per ordinary share (equivalent to a
pre-tax return of 11.3p per ordinary share on dividends otherwise
subject to tax at the higher rate of 32.5 per cent). For
shareholders who received up front tax reliefs of 20 per cent, 30
per cent or 40 per cent, their returns would have been even
higher.
Shareholder choice
The Board wishes to provide shareholders with a number of
choices that enable them to utilise their investment in Baronsmead
Venture Trust in ways that best suit their personal investment and
tax planning and in a way that treats all shareholders equally.
-- Fund raising | From time to time the Company seeks to raise
additional funds by issuing new shares at a premium to the latest
published net asset value to account for costs. In February 2016,
the Company's offer for subscription to raise GBP10m (GBP9.7m after
costs) was fully subscribed.
-- Dividend Reinvestment Plan | The Company offers a Dividend
Reinvestment Plan which enables shareholders to purchase additional
shares through the market in lieu of cash dividends. Approximately
3,409,000 shares were bought in this way during the year to 30
September 2016.
-- Buy back of shares | From time to time the Company buys its
own shares through the market in accordance with its share price
discount policy. Subject to the likely impact on shareholders as a
whole, the funding requirements of the Company and market
conditions at the time, the Company seeks to maintain a mid-share
price discount of approximately 5 per cent to net asset value.
-- Secondary market | The Company's shares are listed on the
London Stock Exchange and can be bought using a stockbroker or
authorised share dealing service in the same way as shares of any
other listed company. Approximately 1,109,000 shares were bought by
investors in the Company's existing shares in the year to 30
September 2016.
On behalf of the Board
Peter Lawrence
Chairman
17 November 2016
Extract of the Directors' Report
Shares and shareholders
Share capital
As a result of the reconstruction and winding up of Baronsmead
VCT plc, on 8 February 2016, the Company allotted 79,425,134
ordinary shares. On 8 February 2016, the Company also allotted a
further 9,727,419 ordinary shares as a result of an offer for
subscription.
During the year the Company bought back a total of 2,040,000
ordinary shares to be held in Treasury, representing 1.1 per cent
of the issued share capital as at 30 September 2016, with an
aggregate nominal value of GBP204,000. The total amount paid for
these shares was GBP1,912,675. The Company's remaining authority to
buy back shares from the 2016 Annual General Meeting ("AGM") is
9,002,066. During the year the Company also sold 2,750,000 ordinary
shares from Treasury. These shares were sold for a total amount of
GBP2,344,187.50.
As at the date of this report the Company's issued share capital
was as follows:
% of
Shares
Share Total in issue Nominal Value
================== ============ ========= ==============
In issue 184,124,685 100.0 GBP18,412,469
================== ============ ========= ==============
Held in treasury 11,253,819 6.11 GBP1,125,382
================== ============ ========= ==============
In circulation 172,870,866 93.89 GBP17,287,087
================== ============ ========= ==============
The maximum number of shares held in Treasury during the year
was 13,743,819. Shares will not be sold out of Treasury at a
discount wider than the discount at which the shares were initially
bought back by the Company.
Shareholders
Each 10p ordinary share entitles the holder to attend and vote
at general meetings of the Company, to participate in the profits
of the Company, to receive a copy of the Annual Report &
Accounts and to participate in a final distribution upon the
winding up of the Company.
There are no restrictions on voting rights, no securities carry
special rights and the Company is not aware of any agreement
between holders of securities that result in restrictions on the
transfer of securities or on voting rights. There are no agreements
to which the Company is party that may affect its control following
a takeover bid.
In addition to the powers provided to the Directors under UK
Company Law and the Company's Articles of Association, at each AGM
the shareholders are asked to authorise certain powers in relation
to the issuing and purchasing of the Company's own shares. Details
of the powers granted at the 2016 AGM, all of which remain valid,
can be found in the last notice of AGM.
The Board is not, and has not been throughout the year, aware of
any beneficial interests exceeding 3 per cent of the total voting
rights.
Tax free dividends
The Company paid the following dividends for the year ended 30th
September 2016:
Tax Free Dividends GBP'000
============================= =======
Interim dividend of 3.5p
per ordinary share
paid on 18 December 2015 2,905
============================= =======
Second interim dividend
of 6.5p per ordinary share
paid on 3 June 2016 11,075
============================= =======
Third interim dividend of
8.5p per ordinary share
paid on 30 September 2016 14,532
============================= =======
Total dividends paid for
the year 28,512
============================= =======
Annual General Meeting
The notice of the AGM of the Company to be held at 10.00am on 14
February 2017 at Plaisterers' Hall, One London Wall, London EC2Y
5JU has been sent to shareholders and is available on the Company's
website.
Directors
Appointments
The rules concerning the appointment and replacement of
Directors are contained in the Company's Articles of Association
and the Companies Act 2006. Further details in relation to the
appointed Directors and the governance arrangements of the Board
can be found in the Corporate Governance Statement.
Directors are not compensated by the Company for loss of office
in the event of a takeover bid.
Directors' Indemnity
Directors' and Officers' liability insurance cover is in place
in respect of the Directors. The Company's Articles of Association
provide, subject to the provisions of UK legislation, an indemnity
for Directors in respect of costs which they may incur relating to
the defence of any proceedings brought against them arising out of
their positions as Directors, in which they are acquitted or
judgement is given in their favour by the Court.
Save for such indemnity provisions in the Company's Articles of
Association and in the Directors' letters of appointment, there are
no qualifying third party indemnity provisions in force.
Conflicts of Interest
The Directors have declared any conflicts or potential conflicts
of interest to the Board of Directors which has the authority to
approve such situations. The Company Secretary maintains the
Register of Directors' Conflicts of Interests which is reviewed
quarterly by the Board. Directors advise the Company Secretary and
the Board as soon as they become aware of any conflicts of interest
and do not take part in discussions which relate to any of their
conflicts.
Responsibility for accounts and going concern
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
Auditor is 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
Auditor is aware of that information.
After making enquires, and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for the foreseeable future. In arriving at this conclusion the
Directors have considered the liquidity of the Company and its
ability to meet obligations as they fall due for a period of at
least twelve months from the date that these financial statements
were approved. As at 30 September 2016, the Company held cash
balances and with a value of GBP21,591,000. Cash flow projections
have been reviewed and show that the Company has sufficient funds
to meet both its contracted expenditure and its discretionary cash
outflows in the form of the share buyback programme and dividend
policy. The Company has no external loan finance in place and
therefore is not exposed to any gearing or covenants.
The Directors have chosen to include its report on global
greenhouse emissions in its Strategic Report under the section on
environmental, human rights, employee, social and community
issues.
By Order of the Board
Livingbridge VC LLP
Secretary
100 Wood Street London EC2V 7AN
17 November 2016
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with UK
Accounting Standards, including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the
Annual Financial Report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company taken as a whole; and
-- the strategic report/Directors' report includes a fair review
of the development and performance of the business and the position
of the issuer, together with a description of the principal risks
and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the company's position and
performance, business model and strategy.
On behalf of the Board
Peter Lawrence
Chairman
17 November 2016
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 30 September 2015
and 2016 but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies, and those
for 2016 will be delivered in due course. The Auditors have
reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The text of the Auditors' report can be
found in the Company's full Annual Report and Accounts at
www.baronsmeadvcts.co.uk
Income Statement
For the year ended 30 September 2016
Year ended Year ended
30 September 2016 30 September 2015
------------------------------------- ---------------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- --------------- --------- --------- ---------------- ----------- --------
Unrealised gains on
movements
in fair value of
investments 2.3 - 3,190 3,190 - 8,847 8,847
Realised gains on disposal
of investments 2.3 - 2,931 2,931 - 522 522
Income 2.5 2,115 - 2,115 1,869 - 1,869
Investment management fee 2.6 (650) (1,949) (2,599) (398) (1,780) (2,178)
Other expenses 2.6 (990) - (990) (469) - (469)
----------------------------- ------- --------------- --------- --------- ---------------- ----------- --------
Profit on ordinary
activities
before taxation 475 4,172 4,647 1,002 7,589 8,591
Taxation on ordinary
activities 2.9 - - - (89) 89 -
----------------------------- ------- --------------- --------- --------- ---------------- ----------- --------
Profit for the year, being
total comprehensive income
for the year 475 4,172 4,647 913 7,678 8,591
----------------------------- ------- --------------- --------- --------- ---------------- ----------- --------
Return per ordinary share:
Basic 2.2 0.34p 2.98p 3.32p 1.10p 9.20p 10.30p
----------------------------- ------- --------------- --------- --------- ---------------- ----------- --------
All items in the above statement derive from continuing
operations.
There are no recognised gains and losses other than those
disclosed in the Income Statement.
The revenue column of the Income Statement includes all income
and expenses. The capital column accounts for the realised and
unrealised profit or loss on investments and the proportion of the
management fee charged to capital.
The total column of this statement is the Statement of Total
Comprehensive Income of the Company prepared in accordance with
Financial Reporting Standards ("FRS"). The supplementary revenue
return and capital return columns are prepared in accordance with
the Statement of Recommended Practice issued in November 2014 by
the Association of Investment Companies ("AIC SORP").
Statement of Changes in Equity
For the year ended 30 September 2016
Distributable
Non-distributable reserves Reserves
------------------------------ ----- --------------------------------------- ---------------------- --------
Called-up
share Share Revaluation Capital Revenue
capital premium Reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----- ------------ ---------- ------------- -------- ------------ --------
At 1 October 2015 9,497 16,561 24,820 34,152 102 85,132
------------------------------ ----- ------------ ---------- ------------- -------- ------------ --------
Profit on ordinary activities
after taxation - - 418 3,754 475 4,647
Shares issued following the
acquisition of Baronsmead
VCT plc 7,942 71,227 - - - 79,169
Net proceeds of share issues,
share buybacks & sale of
shares from treasury 973 8,727 - 422 - 10,122
Dividends paid 2.4 - - - (28,239) (273) (28,512)
------------------------------ ----- ------------ ---------- ------------- -------- ------------ --------
At 30 September 2016 18,412 96,515 25,238 10,089 304 150,558
------------------------------------- ------------ ---------- ------------- -------- ------------ --------
For the year ended 30 September 2015
Non-distributable reserves Distributable Reserves
-------------------------- ----- ------------------------------------- ------------------------ ---------
Called-up Share Revaluation Capital Revenue
share capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ----- -------------- -------- ----------- ----------- ----------- ---------
At 1 October 2014 9,497 16,545 16,497 40,330 270 83,139
Profit/(loss) on ordinary
activities
after taxation - - 8,323 (645) 913 8,591
Net proceeds of share
buybacks & sale of
shares from treasury - 16 - (1,226) - (1,210)
Dividends paid 2.4 - - - (4,307) (1,081) (5,388)
-------------------------- ----- -------------- -------- ----------- ----------- ----------- ---------
At 30 September 2015 9,497 16,561 24,820 34,152 102 85,132
-------------------------- ----- -------------- -------- ----------- ----------- ----------- ---------
Balance Sheet
As at 30 September 2016
As at As at
30 September 30 September
2016 2015
Notes GBP'000 GBP'000
--------------------------------------- ------ -------------- ---------------------
Fixed assets
Investments 2.3 128,261 75,319
Current assets
Debtors 2.7 1,770 240
Cash at bank and on deposit 21,591 10,707
--------------------------------------- ------ -------------- ---------------------
23,361 10,947
Creditors (amounts falling due within
one year) 2.8 (1,064) (1,134)
--------------------------------------- ------ -------------- ---------------------
Net current assets 22,297 9,813
--------------------------------------- ------ -------------- ---------------------
Net assets 150,558 85,132
--------------------------------------- ------ -------------- ---------------------
Capital and reserves
Called-up share capital 3.1 18,412 9,497
Share premium 3.2 96,515 16,561
Capital reserve 3.2 10,089 34,152
Revaluation reserve 3.2 25,238 24,820
Revenue reserve 3.2 304 102
--------------------------------------- ------ -------------- ---------------------
Equity shareholders' funds 150,558 85,132
--------------------------------------- ------ -------------- ---------------------
Net asset value per share
- Basic 2.1 87.09p 102.56p
- Treasury 2.1 86.80p 101.65p
--------------------------------------- ------ -------------- ---------------------
The financial statements were approved by the Board of Directors
on 17 November 2016 and were signed on its behalf by:
Peter Lawrence
Chairman
Statement of Cash Flows
For the year ended 30 September 2016
Year ended Year ended
30 September 30 September
2016 2015
GBP'000 GBP'000
Cash flows from operating activities
Investment income received 2,225 1,806
Deposit interest received 73 43
Investment management fees paid (3,006) (2,134)
Other cash payments (564) (473)
Merger costs paid (246) -
Net cash outflow from operating activities (1,518) (758)
------------------------------------------------------ ------------- -------------
Cash flows from investing activities
Purchases of investments (33,957) (56,951)
Disposals of investments 49,955 65,034
Net cash inflow from investing activities 15,998 8,083
------------------------------------------------------ ------------- -------------
Equity dividends paid (28,512) (5,388)
------------------------------------------------------ ------------- -------------
Net cash (outflow)/inflow before financing activities (14,032) 1,937
Cash flows from financing activities
Net proceeds of share issues, share buybacks & sale
of shares from treasury 8,554 (1,369)
Net proceeds received from merger 16,362 -
Net cash inflow/(outflow) from financing activities 24,916 (1,369)
------------------------------------------------------ ------------- -------------
Increase in cash 10,884 568
Reconciliation of net cash flow to movement in net
cash
Increase in cash 10,884 568
Opening cash position 10,707 10,139
Closing cash at bank and on deposit 21,591 10,707
------------------------------------------------------ ------------- -------------
Reconciliation of profit on ordinary activities
before taxation to net cash outflow from operating
activities
Profit on ordinary activities before taxation 4,647 8,591
Gains on investments (6,121) (9,369)
Decrease/(increase) in debtors 37 (13)
(Decrease)/increase in creditors (72) 36
Written off expenses from merger (9) -
Income reinvested - (3)
Net cash outflow from operating activities (1,518) (758)
====================================================== ============= =============
Notes to the Financial Statements
We have grouped notes into sections under three key
categories:
1. Basis of preparation
2. Investments, performance and shareholder returns
3. Other required disclosures
The key accounting policies have been incorporated throughout
the Notes to the Financial Statements adjacent to the disclosure to
which they relate. All accounting policies are included within an
outlined box.
1. Basis of Preparation
1.1 Basis of accounting
These Financial Statements have been prepared under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' 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 November 2014 and on the assumptions that the Company
maintains VCT status. The Company has early adopted the amendments
made to FRS 102, paragraph 34.22, issued in March 2016, revising
the fair value hierarchy disclosure requirements.
The Financial Statements have been prepared on a going concern
basis, under historical cost convention. The functional currency in
which the Company operates is Sterling.
2. Investments, performance and shareholder returns
2.1 Net asset value per share
Number Net asset value Net asset value
of ordinary shares per share attributable attributable
=========================== ========================== ========================== ==========================
30 September 30 September 30 September 30 September 30 September 30 September
2016 2015 2016 2015 2016 2015
number number pence pence GBP'000 GBP'000
=========================== ============ ============ ============ ============ ============ ============
Ordinary shares (basic) 172,870,866 83,008,313 87.09 102.56 150,558 85,132
Ordinary shares (including
treasury) 184,124,685 94,972,132 86.80 101.65 159,828 96,543
=========================== ============ ============ ============ ============ ============ ============
The treasury net asset value per share as at 30 September 2016
included ordinary shares held in treasury valued at the mid share
price of 82.38p at 30 September 2016 (2015: 95.38p).
2.2 Return per share
Weighted average number Return per Net profit on ordinary
of ordinary shares ordinary share activities after taxation
======== ========================== ========================== ============================
30 September 30 September 30 September 30 September 30 September 30 September
2016 2015 2016 2015 2016 2015
number number pence pence GBP'000 GBP'000
Revenue 139,821,872 83,436,491 0.34 1.10 475 913
Capital 139,821,872 83,436,491 2.98 9.20 4,172 7,678
Total 3.32 10.30 4,647 8,591
======== ============ ============ ============ ============ ============= =============
2.3 Investments
The Company has fully adopted sections 11 and 12 of FRS 102.
Purchases or sales of investments are recognised at the date of
transaction.
Investments are measured at fair value. For AIM-traded
securities this is either bid price or the last traded price,
depending on the convention of the exchange on which the investment
is traded.
In respect of unquoted investments, these are valued at fair
value by the Directors using methodology which is consistent with
the International Private Equity and Venture Capital Valuation
guidelines ("IPEV"). This means investments are valued using an
earnings multiple, which has a discount or premium applied which
adjusts for points of difference to appropriate stock market or
comparable transaction multiples. Alternative methods of valuation
will include application of an arm's length third party valuation,
a provision on cost or a net asset value basis.
Gains and losses arising from changes in the fair value of the
investments are included in the Income Statement for the year as a
capital item. Transaction costs on acquisition are included within
the initial recognition and the profit or loss on disposal is
calculated net of transaction costs on disposal.
All investments are initially recognised and subsequently
measured at fair value. Changes in fair value are recognised in the
Income Statement. The details of which are set out in the box
above.
The methods of fair value measurement are classified into a
hierarchy based on reliability of the information used to determine
the valuation.
-- Level 1 - Fair value is measured based on quoted prices in an active market.
-- Level 2 - Fair value is measured based on directly observable
current market prices or indirectly being derived from market
prices.
-- Level 3 - Fair value is measured using a valuation technique
that is not based on data from an observable market.
30 September 30 September
2016 2015
GBP'000 GBP'000
==================================================== ====================== ============
Level 1
Listed interest bearing securities - 4,498
Investments traded on AIM 60,575 32,141
60,575 36,639
==================================================== ====================== ============
Level 2
==================================================== ====================== ============
Collective investment vehicle (Wood Street Microcap
Investment Fund) 18,400 8,778
==================================================== ====================== ============
Level 3
==================================================== ====================== ============
Unquoted investments 49,286 29,902
==================================================== ====================== ============
128,261 75,319
==================================================== ====================== ============
Level 1 Level 2 Level 3
Listed
interest Collective
bearing Traded investment
securities on AIM vehicle Unquoted Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 4,498 19,443 3,525 23,033 50,499
Opening unrealised appreciation - 12,698 5,253 6,869 24,820
------------------------------------ ----------- -------- ----------- -------- --------
Opening valuation 4,498 32,141 8,778 29,902 75,319
------------------------------------ ----------- -------- ----------- -------- --------
Movements in the year:
Purchases at cost 29,481 3,817 - 1,450 34,748
Holdings acquired following
the acquisition of Baronsmead
VCT plc - 28,301 8,926 25,592 62,819
Sale - proceeds (33,979) (1,868) - (14,899) (50,746)
- realised gains on sales - 288 - 2,643 2,931
Unrealised gains realised
during the year - 428 - 2,344 2,772
(Decrease)/increase in
unrealised appreciation - (2,532) 696 2,254 418
------------------------------------ ----------- -------- ----------- -------- --------
Closing valuation - 60,575 18,400 49,286 128,261
------------------------------------ ----------- -------- ----------- -------- --------
Closing book cost - 50,409 12,451 40,163 103,023
Closing unrealised appreciation - 10,166 5,949 9,123 25,238
------------------------------------ ----------- -------- ----------- -------- --------
Closing valuation - 60,575 18,400 49,286 128,261
------------------------------------ ----------- -------- ----------- -------- --------
Equity shares - 60,575 18,400 12,264 91,239
Loan notes - - - 37,022 37,022
Closing valuation - 60,575 18,400 49,286 128,261
------------------------------------ ----------- -------- ----------- -------- --------
The gains and losses included in the above table have all been
recognised in the Income Statement above.
For Level 3 unquoted investments, the effect on fair value of
changing one or more assumptions to reasonably possible
alternatives has been considered. The portfolio has been reviewed
and both downside and upside reasonable possible alternatives have
been identified and applied to the valuation of each of the
investments. The inputs flexed in determining the reasonably
possible alternative assumptions include the earnings stream and
marketability discount.
Applying the downside alternatives the value of the unquoted
investments would be GBP3.5 million or 7.1 per cent lower. Using
the upside alternatives the value would be increased by GBP3.0
million or 6.0 per cent.
2.4 Dividends
Year ended Year ended
30 September 2016 30 September 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------- -------- ------------- ----------- ------- ------- -------
Amounts recognised as distributions
to equity holders in the year:
For the year ended 30 September
2016
* First interim dividend of 3.5p per ordinary share
paid on 18 December 2015 - 2,905 2,905 - - -
* Second interim dividend of 6.5p per ordinary share
paid on 3 June 2016 85 10,990 11,075 - - -
* Third interim dividend of 8.5p per ordinary share
paid on 30 September 2016 188 14,344 14,532 - - -
For the year ended 30 September
2015
* First interim dividend of 2.5p per ordinary share
paid on 19 June 2015 - - - 1,081 999 2,080
* Second interim dividend of 4.0p per ordinary share
paid on 18 September 2015 - - - - 3,308 3,308
273 28,239 28,512 1,081 4,307 5,388
--------------------------------------------------------- -------- ------------- ----------- ------- ------- -------
2.5 Income
Interest income on loan notes and dividends on preference shares
are accrued on a daily basis. Provision is made against this income
where recovery is doubtful.
Where the terms of unquoted loan notes only require interest or
a redemption premium to be paid on redemption, the interest and
redemption premium is recognised as income once redemption is
reasonably certain. Until such date interest is accrued daily and
included within the valuation of the investment. When a redemption
premium is designed to protect the value of the instrument holder's
investment rather than reflect a commercial rate of revenue return
the redemption premium should be recognised as capital. The
treatment of redemption premiums is analysed to consider if they
are revenue or capital in nature on a company by company basis. No
redemption premiums were received for the year ended 30 September
2016.
Income from fixed interest securities and deposit interest is
included on an effective interest rate basis.
Dividends on quoted shares are recognised as income when the
related investments are marked ex-dividend and where no dividend
date is quoted, when the Company's right to receive payment is
established.
Year ended Year ended
30 September 2016 30 September 2015
Quoted Unquoted Quoted Unquoted
securities securities Total securities securities Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income from investments
UK franked 1,452 - 1,452 567 - 567
UK unfranked 33 558 591 27 1,228 1,255
UK unfranked - reinvested - - - - 3 3
1,485 558 2,043 594 1,231 1,825
-------------------------- ----------- ----------- -------- --------------- -------------- ----------
Other income++
Deposit interest 60 27
Other income 12 17
Total income 2,115 1,869
Total income comprises:
Dividends 1,465 567
Interest 650 1,302
2,115 1,869
-------------------------- ----------- ----------- -------- --------------- -------------- ----------
All investments have been included at fair value through profit
or loss on initial recognition, therefore all investment income
arises on investments at fair value through profit or loss.
++ Other income on financial assets not including at fair value
through profit or loss.
2.6 Investment management fee and other expenses
All expenses are recorded on an accruals basis.
Year ended 30th September Year ended 30th September
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee 650 1,949 2,599 398 1,192 1,590
Performance fee - - - - 588 588
---------------------- --------- -------- -------- --------- -------- --------
650 1,949 2,599 398 1,780 2,178
---------------------- --------- -------- -------- --------- -------- --------
Management fees are allocated 25 per cent income and 75 per cent
capital derived in accordance with the Board's expected split
between long term income and capital returns. Performance fees are
allocated 100 per cent capital.
The management agreement may be terminated by either party
giving twelve months' notice of termination.
The Manager, Livingbridge VC LLP, receives a fee of 2 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 if at the end of
any calculation period, the total return on shareholders' funds
exceeds the threshold of the higher of 4 per cent or base rate plus
2 per cent on shareholders' funds (calculated on a compound basis).
The Manager is entitled to 10 per cent of the excess. The amount of
any performance fee which is paid in respect of a calculation
period shall be capped at 5 per cent of shareholders' funds at the
end of the period.
Amounts payable to the Manager at the year-end are disclosed in
note 2.8.
Other expenses
Year ended Year ended
30 September 30 September
2016 2015
GBP'000 GBP'000
Directors' fees 123 98
Secretarial and accounting fees paid to the Manager 147 137
Remuneration of the auditors and their associates:
- audit 31 23
- other services supplied pursuant to legislation
(interim review) 6 -
- other services supplied relating to taxation 7 7
Merger costs 415 -
Other 261 204
990 469
==================================================== ============ ============
Information on directors' remuneration is given in the
directors' emoluments table in the full Annual Report and
Accounts.
Charges for other services provided by the auditors in the year
ended 30 September 2016 were in relation to the interim review and
tax compliance work (including iXBRL). The Audit Committee reviews
the nature and extent of non-audit services to ensure that
independence is maintained. The Directors consider that the
auditors were best placed to provide such services.
2.7 Debtors
As at As at
30 September 30 September
2016 2015
GBP'000 GBP'000
Prepayments and accrued income 203 240
Amounts due from sale of shares from treasury 1,567 -
============================================== ============ ============
1,770 240
============================================== ============ ============
2.8 Creditors (amounts falling due within one year)
As at As at
30 September 30 September
2016 2015
GBP'000 GBP'000
Management, secretarial and accounting fees due
to the Manager 792 1,056
Merger costs 169 -
Other creditors 103 78
1,064 1,134
================================================ ============ ============
2.9 Tax
UK corporation tax payable is provided on taxable profits at the
current rate.
Provision is made for deferred taxation on all timing
differences calculated at the current rate of tax relevant to the
benefit or liability.
The tax charge for the year is lower than the standard rate of
corporation tax in the UK for a company. The differences are
explained below:
Year ended Year ended
30 September 2016 30 September 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit on ordinary activities
before taxation 475 4,172 4,647 1,002 7,589 8,591
Corporation tax at 20.0
per cent
(2015: 20.5 per cent)* 95 834 929 205 1,556 1,761
Effect of:
Non-taxable gains - (1,224) (1,224) - (1,921) (1,921)
Non-taxable dividend income (293) - (293) (116) - (116)
Losses carried forward 198 390 588 - 276 276
============================== ======== ======== ======== ======== ======== ========
Tax charge/(credit) for
the year - - - 89 (89) -
============================== ======== ======== ======== ======== ======== ========
* The corporation tax rate applied is based on the average tax
rates for the financial years ended 30 September 2016 and 2015. The
actual rates were 21 per cent until 31 March 2015 and 20 per cent
from 1 April 2016.
At 30 September 2016 the Company had surplus management expenses
of GBP7,583,134 (2015: GBP4,648,934) 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.
3. Other Required Disclosures
3.1 Called-up share capital
Allotted, called-up and fully paid:
Ordinary shares GBP'000
================================================================== =======
94,972,132 ordinary shares of 10p each listed at 30 September
2015 9,497
9,727,419 ordinary shares of 10p each issued during the year 973
79,425,134 ordinary shares of 10p each issued as consideration
shares following the acquisition of BVCT 7,942
================================================================== =======
184,124,685 ordinary shares of 10p each listed at 30 September
2016 18,412
================================================================== =======
11,963,819 ordinary shares of 10p each held in treasury at 30
September 2015 (1,196)
2,040,000 ordinary shares of 10p each repurchased during the year
and held in treasury (204)
(2,750,000) ordinary shares of 10p each sold from treasury during
the year 275
------------------------------------------------------------------ -------
11,253,819 ordinary shares of 10p each held in treasury at 30
September 2016 (1,125)
------------------------------------------------------------------ -------
172,870,866 ordinary shares of 10p each in circulation* at 30
September 2016 17,287
------------------------------------------------------------------ -------
* Carrying one vote each.
During the year the Company bought back 2,040,000 ordinary
shares and sold from treasury 2,750,000 ordinary shares,
representing (0.75) per cent of the ordinary shares in issue at the
beginning of the financial year.
There were no changes in share capital between the year end and
when the financial statements were approved.
Treasury shares
When the Company reacquires its own shares, they are held as
treasury shares and not cancelled.
Shareholders have authorised the Board to sell treasury shares
at a discount to the prevailing NAV subject to the following
conditions:
- It is in the best interests of the Company;
- Demand for the Company's shares exceeds the shares available
in the market;
- A full prospectus must be produced if required; and
- HMRC will not consider these 'new shares' for the purposes of
the purchasers' entitlement to initial income tax relief.
3.2 Reserves
Gains and losses on realisation of investments of a capital
nature are dealt with in the capital reserve. Purchases of the
Company's own shares to be either held in treasury or cancelled are
also funded from this reserve. 75 per cent of management fees are
allocated to the capital reserve in accordance with the Board's
expected split between long term income and capital returns.
Distributable reserves Non-distributable reserves
=============================== ======================================= =======================================
Capital Revenue Share Revaluation
reserve reserve Total premium reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ========== ================ ========= ============= ============== ========
At 1st October 2015 34,152 102 34,254 16,561 24,820 41,381
Gross proceeds of share
issues - - - 9,027 - 9,027
Shares issued as consideration
following the acquisition
of BVCT - - - 71,227 - 71,227
Purchase of shares for
treasury (1,912) - (1,912) - - -
Sale of shares from treasury 2,344 - 2,344 - - -
Expenses of share issue
and buybacks (10) - (10) (300) - (300)
Reallocation of prior year
unrealised gains 2,772 - 2,772 - (2,772) (2,772)
Realised gain on disposal
of investments# 2,931 - 2,931 - - -
Net increase in value of
investments# - - - - 3,190 3,190
Management fee capitalised# (1,949) - (1,949) - - -
Revenue return on ordinary
activities after taxation# - 475 475 - - -
Dividends paid in the year (28,239) (273) (28,512) - - -
=============================== ========== ================ ========= ============= ============== ========
At 30 September 2016 10,089 304 10,393 96,515 25,238 121,753
=============================== ========== ================ ========= ============= ============== ========
# The total of these items is GBP4,647,000, which agrees to the
total profit on ordinary activities.
* Changes in fair value of investments are dealt with in this
reserve.
Distributable reserves include the net unrealised loss on
investments whose prices are quoted in an active market and deemed
readily realisable in cash.
Share premium is recognised net of issue costs.
The Company does not have any externally imposed capital
requirements.
3.3 Financial instruments risks
The Company's financial instruments comprise equity and fixed
interest investments, cash balances and liquid resources including
debtors and creditors. The Company holds financial assets in
accordance with its investment policy to invest in a diverse
portfolio of UK growth businesses.
The Company's investing activities expose it to a range of
financial risks. These key risks and the associated risk management
policies to mitigate these risks are described below.
Market risk
Market risk includes price risk on investments and interest rate
risk on investments and other financial assets and liabilities.
Price Risk
The investment portfolio is managed in accordance with the
policies and procedures described in the Strategic Report.
Investments in unquoted stocks & AIM-traded companies
involve a higher degree of risk than investments in the main
market. The Company aims to reduce this risk by diversifying the
portfolio across business sectors and asset classes.
Management performs continuing analysis on the fair value of
investments and the Company's overall market positions are
monitored by the Board on a quarterly basis.
As at 30 September 2016 As at 30 September 2015
5% increase 5% decrease 5% increase 5% decrease
in share in share in share in share
price price price price
effect on effect on effect on effect on
net assets net assets net assets net assets
% of total and profit and profit % of total and profit and profit
investment GBP'000 GBP'000 investment GBP'000 GBP'000
AIM & CIV 62 3,949 (3,949) 54 2,046 (2,046)
Unquoted 38 2,464 (2,464) 40 1,495 (1,495)
========== =========== =========== =========== =========== =========== ===========
Valuation methodology includes the application of earnings
multiples derived from either listed companies with similar
characteristics or recent comparable transactions. Therefore the
value of the unquoted element of the portfolio may also indirectly
be affected by price movements on the listed exchanges.
Interest rate risk
The Company has the following investments in fixed and floating
rate financial assets:
As at 30 September 2016 As at 30 September 2015
Weighted Weighted
Weighted average Weighted average
average time for average time for
Total interest which rate Total interest which rate
investment rate is fixed investment rate is fixed
GBP'000 % days GBP'000 % days
-------------------------------- ----------- --------- ----------- ------------- ---------- -----------
Fixed rate loan note securities 37,022 8.95 # 20,322 8.54 #
Fixed interest instruments - - - 4,498 0.39 26
Cash at bank and on deposit 21,591 - - 10,707 - -
58,613 35,527
================================ =========== ====================== ============= =======================
# Due to the complexity of the instruments and uncertainty
surrounding timing of realisation the weighted average time for
which the rate is fixed has not been calculated.
Credit risk
Credit risk refers to the risk that counterparty will default on
its obligation resulting to a financial loss to the Company. The
Investment Manager monitors credit risk on an ongoing basis.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
As at As at
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Investments in fixed rate instruments - 4,498
Cash at bank and on deposit 21,591 10,707
Interest, dividends & other receivables 1,770 240
23,361 15,445
======================================== ============ ============
Credit risk arising on fixed interest instruments is mitigated
by investing in UK Treasury Bills.
Credit risk on unquoted loan stock held within unlisted
investments is considered to be part of market risk as disclosed
earlier in the note.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved and the high credit quality of the brokers used.
The Board monitors the quality of service provided by the brokers
used to further mitigate this risk.
All the assets of the Company which are traded on a recognised
exchange are held by JP Morgan Chase ("JPM"), the Company's
custodian. The Board monitors the Company's risk by reviewing the
custodian's internal controls reports as described in the Corporate
Governance section in the full Annual Report and Accounts.
The cash held by the Company is held by JPM. The Board monitors
the Company's risk by reviewing regularly the internal control
reports of these banks. Should the credit quality or the financial
position of either bank deteriorate significantly the Investment
Manager will seek to move the cash holdings to another bank.
There were no significant concentrations of credit risk to
counterparties at 30 September 2016 or 30 September 2015. No
individual investment exceeded 3.9 per cent of the net assets
attributable to the Company's shareholders at 30 September 2016
(2015: 6.1 per cent).
Liquidity risk
The Company's financial instruments include investments in
unquoted companies which are not traded in an organised public
market, as well as AIM traded equity investments, all of which
generally may be illiquid. As a result, the Company may not be able
to liquidate quickly some of its investments in these instruments
at an amount close to their fair value in order to meet its
liquidity requirements, or to respond to specific events such as
deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed on an ongoing basis by
the Investment Manager. The Company's overall liquidity risks are
monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
At 30 September 2016 these investments were valued at GBP21,591,000
(2015: GBP15,205,000).
3.4 Related parties
Related party transactions include Management, Secretarial,
Accounting and Performance fees payable to the Manager,
Livingbridge VC LLP, as disclosed in notes 2.6 and 2.8, and fees
paid to the Directors as disclosed in note 2.6. In addition, the
Manager operates a Co-investment Scheme, detailed in the Management
retention section in the Strategic Report above, whereby members
and staff of the Manager are entitled to participate in all
unquoted investments alongside the Company.
During the year ended 30 September 2016, the Manager received
income of GBPnil (2015: BVCT GBP152,000 & BVCT2 GBP152,000) in
connection with advisory fees and incurred abort fees of GBP12,000
(2015: BVCT GBP9,000 & BVCT2 GBP9,000), with respect to
investments attributable to Baronsmead Venture Trust.
Directors' fees of GBP309,000 (2015: BVCT GBP206,000 & BVCT2
GBP206,000) were received by the Manager in relation to services
provided to companies in the investment portfolio, during the year,
with respect to investments attributable to Baronsmead Venture
Trust.
3.5 Segmental reporting
The Company has one reportable segment being investing in
primarily a portfolio of UK growth businesses, whether unquoted or
traded on AIM.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism ("NSM") and
will be available for inspection at the NSM, which is situated at:
http://www.morningstar.co.uk/uk/NSM
END
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement (or
any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UNRRRNVAAAUA
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Baronsmead Venture (LSE:BVT)
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