Final Results

Baronsmead VCT 3 PLC 10 February 2005 Baronsmead VCT 3 plc To: Company Announcements From: Baronsmead VCT 3 plc Date: 10 February 2005 Audited Results - Year Ended 31 December 2004 Highlights • NAV per ordinary share increased by 13.0 per cent before deduction of dividends giving a net change of 8.3 per cent after deduction of dividends • NAV per ordinary share after deduction of dividends was 105.26p • Revenue and capital dividends total 4.50p per ordinary share for the year RESULTS In the year to 31 December 2004, NAV per share increased by 13.0 per cent from 97.15p to 109.76p per share before providing for the full year dividends of 4.5p per share. These dividends comprise 3.3p per share from net realised capital profit and 1.2p per share from net revenue. The NAV per share at the year end was 105.3p per share. The increase in the FTSE All-Share Index (total return) was 12.8 per cent over the comparable period to 31 December 2004. The total return for Baronsmead VCT 3 of 27.5 per cent, net of all costs, since launch combines growth in NAV per share and reinvested dividends per share of 13.8p. This performance places your Company ahead of most other 'generalist' VCTs, which have a similar strategy investing across a range of unquoted and AiM companies. The FTSE All-Share Index over the comparable period since launch is down 10 per cent and so the performance of the Company remains substantially ahead of this index. The positive differential increases further if the benefits from the available VCT tax reliefs are also taken into account. THE PORTFOLIO In the year under review, £7.3m was invested. 17 new investments were made with five unquoted and twelve AiM-traded companies resulting in a 47 strong portfolio as at 31 December 2004. Two investments were fully realised. The overall health of investee companies is monitored quarterly by noting the direction of travel of operating profits/other non-financial measures across the portfolio. Some 90 per cent of these companies are reporting steady or better profits and progress. Although the Managers use similar investment disciplines to select unquoted and AiM investments, the geared nature of the former increases the individual company risk as their balance sheets have higher levels of debt. Successful trading typically makes the return for shareholders that much higher whereas problematic trading will have the opposite effect should their business plans not be met. MEETING SHAREHOLDER NEEDS The level of qualifying investment across the total portfolio at 31 December 2004 is approximately 72 per cent invested. The Board is mindful of the next phase of investment opportunities over the coming three years in order to build wider diversity across a larger number of investments and the business cycle. As previously announced, the Board is planning a C share fund raising later in 2005. Shareholder approval for this C share issue is being sought at the EGM to be held later after the AGM on the 23 March 2005. This will have the advantage of economies of scale but also will attract a wider base of new shareholders. In the meantime, existing shareholders may wish to take advantage of the current 40 per cent income tax relief on subscription for both the current tax year ending 5 April 2005 and also for next tax year 2005/06 by availing themselves of the top up offer on publication of the fourth annual report. To ensure that subscribers have at least three years to hold the new shares so as to retain the 40 per cent income tax relief, shareholders are being asked at the AGM to extend the life of the Company from 2008 to 2013. This longer horizon is consistent with the view of more than 80 per cent of shareholders, who in response as to how long they wished to hold their shares, stated that they did not intend to sell in the foreseeable future. Existing shareholders were issued with 331,991 shares via a 'top up' offer in early 2004 and 551,623 new shares were issued under the dividend reinvestment scheme during 2004. 1.49m shares were bought back and cancelled within the last year at approximately a 10 per cent discount to NAV per share and around the level anticipated from the shareholder survey in autumn 2003 As first stated in March 2004, the Board proposed an annual dividend policy, and this has been increased to 4.5p per share for 2004. This cannot be guaranteed as it depends on the level of realised capital profits from the realisation of portfolio companies and economic circumstances beyond our control. CORPORATE GOVERNANCE The Board operates within the Combined Code for fully listed companies and reviews quarterly the direction and control of the Company with the Investment Managers. The Managers continue to evolve their strategy to improve the way in which unquoted transactions are found, managed and sold. They have also made good progress in the application of private equity disciplines when subscribing into AiM-traded companies applying their sector knowledge and exerting influence as normally one of the larger institutional shareholders. OUTLOOK UK economic conditions are more settled than previously and provide a better environment in which the Managers can select and then manage both unquoted and AiM investments through to eventual sale. Worldwide growth should continue at least close to the long term trend given the absence of unforeseen shocks. The last year has seen sizeable growth in the portfolio and the task now is to sustain investment performance. The Board's role will be to continue to monitor such developments in order that we can sustain our twin investment objectives of achieving capital growth and paying attractive tax free dividends. Mark Cannon Brookes Chairman For further information contact: David Thorp, ISIS Equity Partners plc: 0207 506 1609 Rhonda Nicoll, F&C Asset Management plc: 0131 465 1074 Audited Profit and Loss Account Year to 31 December 2004 Revenue Capital Total £'000 £'000 £'000 Profit on realisation of investments - 200 200 Income 987 - 987 Investment management fee (248) (745) (993) Other expenses (253) - (253) ---------- ----------- ----------- Profit/(loss)on ordinary activities before taxation 486 (545) (59) Tax on ordinary activities (76) 76 - ---------- ----------- ----------- Profit/(loss) on ordinary activities after taxation 410 (469) (59) Dividend paid/payable (402) (1,110) (1,512) ----------- ----------- ----------- Transfer to/(from) reserves 8 (1,579) (1,571) ---------- ---------- ----------- Return per ordinary share 1.21p (1.38)p (0.17)p ______ ______ _____ Statement of Total Recognised Gains and Losses for the year ended 31 December 2004 Year to 31 December 2004 Revenue Capital Total £'000 £'000 £'000 Profit/(loss) on ordinary activities after taxation 410 (469) (59) Unrealised profit on revaluation of investments - 4,173 4,173 ---------- ----------- ----------- Total recognised gain during the year 410 3,704 4,114 ---------- ----------- ----------- Total recognised gain per ordinary share 1.21p 10.92p 12.13p Audited Profit and Loss Account Year to 31 December 2003 Revenue Capital Total £'000 £'000 £'000 Profit on realisation of investments - 1,199 1,199 Income 1,472 - 1,472 Investment management fee (193) (581) (774) Other expenses (241) - (241) ---------- ----------- ----------- Profit on ordinary activities before taxation 1,038 618 1,656 Tax on ordinary activities (268) 185 (83) ---------- ----------- ----------- Profit on ordinary activities after taxation 770 803 1,573 Dividends paid/payable (747) (679) (1,426) ----------- ----------- ----------- Transfer to reserves 23 124 147 ---------- ---------- ----------- Return per ordinary share 2.27p 2.37p 4.64p ______ ______ _____ Statement of Total Recognised Gains and Losses for the year ended 31 December 2003 Year to 31 December 2003 Revenue Capital Total £'000 £'000 £'000 Profit on ordinary activities after taxation 770 803 1,573 Unrealised profit on revaluation of investments - 638 638 ---------- ----------- ----------- Total recognised gain during the year 770 1,441 2,211 ---------- ----------- ----------- Total recognised gain per ordinary share 2.27p 4.25p 6.52p Audited Balance Sheet As at As at 31 December 31 December 2004 2003 £'000 £'000 Fixed Assets Quoted on the Alternative Investment Market 13,123 7,645 Unquoted investments 14,053 10,586 Fixed interest securities 7,048 5,715 _______ _______ 34,224 23,946 Net current assets 892 9,048 ______ ______ Total assets less current liabilities 35,116 32,994 ______ ______ Financed by: Shareholders' funds 35,116 32,994 ______ ______ Net asset value per share: 105.26p 97.15p Ordinary shares in issue 33,361,024 33,962,410 Summarised Audited Statement of Cash Flows Year to Year to 31 December to 31 December 2004 2003 £'000 £'000 Net cash(outflow)/ inflow from operating activities (308) 504 Taxation paid (83) (215) Capital expenditure and financial investment (6,353) 6,651 Equity dividends paid (1,733) (778) ----------- ----------- Net cash (outflow)/inflow before financing (8,477) 6,162 Financing (480) 159 ----------- ----------- (Decrease)/increase in cash (8,957) 6,321 ----------- ----------- Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash (8,957) 6,321 Opening net cash 10,908 4,587 ----------- ----------- Net cash at 31 December 2004 1,951 10,908 ----------- ----------- Reconciliation of operating profit before taxation to net cash inflow from operating activities (Loss)/profit on ordinary activities before taxation (59) 1,656 Loss on realisation of investments (200) (1,199) (Increase)/decrease in debtors (137) 66 Increase/(decrease) in creditors 88 (19) ----------- ----------- Net cash (outflow)/inflow from operating activities (308) 504 ----------- ----------- Notes 1. The audited results which cover the year to 31 December 2004 have been prepared under the historical cost convention, modified to include the revaluation of fixed asset investments. These financial statements are presented in accordance with the Investment Trust Companies SORP (including the provision of additional information) except where departures are necessary to comply with schedule 4 of the Companies Act 1985 as a result of the fact that the Company has relinquished its investment company status under the Act. 2. There were 33,361,024 Ordinary Shares in issue at 31 December 2004 (2003: 33,962,410). 883,614 Ordinary Shares were issued during the year. The Company bought back 1,485,000 Ordinary Shares for cancellation during the year. 3. Revenue and capital returns for the year to 31 December 2004 are based on a weighted average of 33,920,111 (2003: 33,895,164) Ordinary Shares in issue during the year. 4. Income for the year to 31 December is derived from: 2004 2003 £'000 £'000 Dividend Income 174 108 Fixed Interest Investment 744 1,136 Deposit Interest 69 228 987 1,472 5. The final proposed dividend of 2.7 pence per Ordinary Share will be paid on 24 March 2005 to shareholders on the register on 18 February 2005. 6. These are not full accounts in terms of Section 240 of the Companies Act 1985. Full audited accounts for the year to 31 December 2003 have been lodged with the Registrar of Companies. The annual report for the year to 31 December 2004 will be sent to shareholders shortly and will then be available for inspection at Exchange House, Primrose Street, London, the registered office of the Company. Both the audited accounts for the year to 31 December 2004 and the year to 31 December 2003 contain unqualified audit reports. 7. The Annual General Meeting will be held on 23 March 2005. This information is provided by RNS The company news service from the London Stock Exchange

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