Annual Financial Report - Replacement

RNS Number : 3573I

Baronsmead Venture Trust PLC

23 November 2018

 

Baronsmead Venture Trust plc

Annual Financial Report for the year ended 30 September 2018

Financial Headlines

·      Net asset value ("NAV") per share increased 6.9 per cent to 94.5p in the 12 months to 30 September 2018, before deduction of 2018 dividend payments.

·      423.7p - NAV total return to shareholders for every 100.0p invested at launch.

·      Dividends totalled 7.5p in the year to 30 September 2018, after the proposed final dividend of 4.5p to be paid on 8 March 2019.

·      £7.0m new investment made during the year.

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 6.9 per cent (6.1p) increase in NAV per share to 94.5p per share for the year to 30 September 2018, before dividend payments.

During the year to 30 September 2018 the Company has realised successful exits from both our unquoted and AIM-traded portfolio and I am delighted to report that the Company has also invested in 13 new and 3 follow on investments.

The Company paid an interim dividend of 3.0p in September 2018. The Board seeks to maintain average annual dividends of 6.5p per share. In line with this aim and underpinned by reserves accumulated from successful realisations this year, the Board has recommended, subject to shareholder approval, a final dividend of 4.5p to be paid in March 2019

Results

	Pence per ordinary share
NAV as at 1 October 2017 (after final dividend)	88.4
Valuation uplift (6.9 per cent)	6.1
NAV as at 30 September 2018 before dividends	94.5
Less: Interim dividend paid on 21 September 2018	(3.0)
Proposed final dividend of 4.5p payable, after shareholder approval, on 8 March 2019	(4.5)
Illustrative NAV as at 30 September 2018 after proposed dividend	87.0

Portfolio Review

As at 30 September 2018, the portfolio comprised direct investments in 77 unquoted and AIM-traded companies, giving shareholders with a diverse exposure. Providing yet further portfolio diversification, LF Livingbridge UK Micro Cap Fund (Micro Cap") consisted of 44 companies and furthermore, there were 45 companies held by LF Livingbridge UK Multi Cap Income Fund ("Multi Cap"), in which the Company has invested.

During the 12 months to 30 September 2018, the underlying value of the unquoted portfolio increased by 14.7 per cent reflecting the continued strong performance of the majority of investments. The AIM-traded portfolio increased by 5.9 per cent, Micro Cap increased by 18.8 per cent and Multi Cap also increased by 11.5 per cent in value. While the performance across the portfolio has been strong during the year, there is increasing volatility in the markets and given Brexit and the UK political situation we should anticipate that this will continue in 2019. However, the portfolio remains diverse with investments in established unquoted and AIM-traded companies and the early stage growth businesses. These are spread widely across the sectors which the Manager covers.

Investments and Divestments

As I reported in the Half-yearly Chairman's Statement, in line with the current VCT regulations, the Manager has adapted its investment strategy to focus on the provision of development capital to earlier stage companies helping them to grow organically rather than through acquisition. The Board are therefore pleased to report that during the year the Company invested a total of £7.0m in 13 new and 3 follow-on unquoted and AIM-traded smaller and riskier investments. The new investments in earlier stage opportunities may result in greater volatility in returns over time. However, the more mature, established portfolio of investments should continue to determine returns for shareholders for a number of years to come.

I am pleased to report that the Company fully realised 10 unquoted and AIM-traded investments during the year, as well as 3 loan repayments realising total proceeds (including interest due at time of realisation) of £21.5m. This includes the sale from the unquoted portfolio of Crew Clothing Company, one of the longest standing Baronsmead unquoted investments for a 2.3x return; Eque2 for a 3.0x return; and Key Travel for a 3.2x return. The AIM-traded portfolio realisations included a 1.4x return from the sale of FreeAgent Holdings; 1.1x return from the sale of Escher Group Holdings plc and EG Solutions which realised 1.5x return. Against these successes, losses were realised on In the Style Fashion, Ubisense Group and Plant Impact.

Details of the Company's investments and divestments during the period are set out in the tables below and further commentary on portfolio companies is provided in the Managers Report below.

Change of Management Arrangements

As I communicated in my letter to shareholders on 8 November 2018, the Investment Manager for Baronsmead Venture Trust VC LLP ("Livingbridge" or "the Manager"), Livingbridge, will change to Gresham House plc ("Gresham House"), a specialist alternative asset manager listed on the Stock Exchange, on or around 30 November 2018.

Since the Company was founded in 1998 there have been several changes in the ultimate ownership of the Manager. The business and focus of Livingbridge has also changed substantially during that time. Throughout these changes the Board has focused on ensuring there has been continuity in the executive team who make and manage the investments and can confirm that the team that has been responsible for the investment management of the Company will all transfer from Livingbridge to Gresham House. The sixteen transferring employees are led by a senior team of five people who have an average tenure of twelve years at Livingbridge working with Baronsmead VCTs. Livingbridge's two key Partners, Andrew Garside and Sheenagh Egan, will continue as consultants to Gresham House for up to three years to provide continuity and support. There are no changes made to the terms of the investment management and co-investment agreements for the Company. In addition, an agreement has been put in place between Livingbridge and Gresham House to enable a smooth transition over a three-year period including passing insight, best practice and networks for the future benefit of the Company and its shareholders.

The Board completed due diligence on Gresham House during the process, including lengthy meetings with both the executives of Gresham House and the individual team leaders of Livingbridge who are transferring. It is satisfied that Gresham House's management team appreciates the important heritage of the Baronsmead VCTs and is committed to maintaining the strong governance culture of the Company as well as its investment performance.

The Board is confident that this transaction will benefit both the Company and its shareholders, as it will provide additional resources for the team going forward. This will enable them to maintain and develop the VCT business, specifically focussing on increasing the deployment of capital under the new VCT rules as well as managing the existing diverse portfolio. The Board is satisfied that Gresham House is committed to working together to deliver consistent performance over the long term for all our shareholders.

Fundraising

The Board is pleased to confirm its intention to raise new funds in the 2018/2019 tax year. As announced in August this year, the Company plans to launch a joint fundraising with Baronsmead Second Venture Trust plc in early January 2019 to raise £25m in aggregate which is principally to fund new investments in the short to medium term. We will send the Prospectus containing the full details of the offer to shareholders as soon as it is available. Subscriptions to the fundraising will only be accepted on a first come, first served basis. However, this year for the first time, I can confirm that it will be possible to subscribe online as well as with the more traditional paper subscription form. We will include details of how to do this with the prospectus.

Annual General Meeting

I look forward to meeting as many Shareholders as possible at the Annual General Meeting to be held at 11.00 am on 27 February 2019, at Saddlers' Hall, 40 Gutter Lane, London, EC2V 6BR. As usual I will present my own review of the year and will be joined by members of investment management team. We would be delighted if you would then join us afterwards for lunch.

Outlook

When writing my Half-Yearly Chairman's Statement in May, I had hoped we would by now have had greater certainty on the timing and terms of the UK's exit from the European Union. However, with only a matter of a few months to go until the anticipated exit date, a final Brexit deal remains elusive. Although the UK economy has remained largely resilient over the past year, decreasing consumer confidence, the ongoing uncertainty in the UK and volatility in global markets has seen a drop in market indices which we anticipate may remain a feature in the short term.

Despite these macro-economic uncertainties, our investment strategy remains consistent. We invest in the future of British businesses, supporting innovative companies that we believe are the driving force of the UK economy. The investment management team remains disciplined when investing capital, especially in the earlier stage companies which carry more risk and, thereafter, closely manages the investments once they are in the portfolio. I continue to believe, therefore, that our extensive and diverse investment portfolio should underpin the returns to our Shareholders over the medium to long term.

Peter Lawrence

Chairman

22 November 2018

MANAGER'S REVIEW

The year has seen another strong performance from the investment portfolio. We have begun to increase the rate of investment following a period of adapting to the VCT legislation introduced in November 2015.

PORTFOLIO REVIEW

Overview

The net assets of £175m were invested as follows:

Asset class	NAV (£m)	% of NAV*	Number of investees	% return in  the year**
Unquoted	43	25	23	15
AIM-traded companies	73	41	54	6
LF Livingbridge UK   Micro Cap Fund	28	16	44	19
LF Livingbridge UK Multi Cap Income Fund	3	2	45	12
Liquid assets	28	16	N/A
Totals	175	100	166

* By value as at 30 September 2018.

** 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 2018, 83 per cent of the 77 companies directly held in the portfolio (excluding the investments held by Collective Investment Vehicles) were progressing steadily or better.

The tables below show the breakdown of new investments and realisations over the course of the year and below is commentary on some of the key highlights in both the unquoted and quoted portfolios.

Investment Activity - Unquoted and Quoted 

Below are descriptions of some of the new investments made;

·      SecureCloud+ (unquoted) is an accredited provider of specialist managed IT services to the defence and security sector focussed on delivering services to upper tiers of security including official-sensitive, secret and top-secret environments.

·      Pointr (unquoted) is an Internet of Things smart indoor location positioning business looking to improve the location accuracy for consumers when indoors and provide meaningful data and insight to businesses looking to better understand consumer behaviours in physical locations.

·      Equipsme Holdings (unquoted) is an innovative provider of health insurance products to SMEs, allowing them to customise products for employees whilst delivering an affordable, simple, modular and accessible solution.

·      Your Welcome (unquoted) supplies tablets and software into vacation rental, Airbnb and corporate letting properties, with their proprietary software improving the guest experience through an information portal, providing tips and recommendations on the local area and a guest communication tool.

·      Labrador (unquoted) is a technology business providing an automated energy switching service for consumers. This is a free consumer product which can be plugged into a home to deliver energy savings for life by monitoring energy usage and switching to the most appropriate and lowest cost tariffs.

·      Munnypot (unquoted) is a software business which delivers automated, regulated financial advice to its users ('robo-advisory'). The business provides its solution to financial institutions, employee benefits providers and IFA networks.

·      PCI-Pal (quoted) is a suite of secure card payment solutions designed to solve the payment card industry's compliance issues faced by contact centres & the world's largest organisations including All Saints, Virgin, IKEA and MADE.COM

·      IXICO (quoted) provides data analytics services for pharma companies and clinical research organisations with a particular focus on neurodegenerative diseases. IXICO's analytics solutions combine technology and specialist services for customers running clinical trials, as well as real world data applications.

Unquoted Portfolio

Performance

The unquoted portfolio has had a strong year of progress with 15 per cent increase in value over the course of the year. 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.

Divestments

During the year the unquoted portfolio returned £16.8m in proceeds following the full realisation of Key Travel (3.2x cost), Crew Clothing Holdings (2.3x cost) and Eque2 (3.0x cost). This represents an excellent trio of realisations. Kirona and Create Health made loan note repayments within the year.

Alongside this strong performance, we had one significant disappointment in realising our investment in In The Style Fashion at nil proceeds. This business needed investment beyond the levels we anticipated and rather than invest further we were diluted and replaced by another funder. The 15 per cent unquoted portfolio returns includes the negative impact of this divestment.

After the year end the Company realised its investment Symphony Ventures returning proceeds of £3.5m (2.4x cost).

Quoted Portfolio (AIM-traded investments)

Performance

The quoted portfolio has had a good overall performance during the year with an increase of 6 per cent. Stand out performers were: Ideagen, a provider of governance, risk and compliance ("GRC") software to highly regulated industries, following strong financial results and a successful oversubscribed placing to fund the acquisition of MK Insight; Netcall, a customer engagement software provider, which traded well through the year and completed the acquisition of low cost platform provider MatsSoft; and Cerillion, a provider of carrier-grade enterprise CRM and billing software to telecoms companies, following trading updates and some good customer wins. These were partially offset by weaker share price performance from IDOx, a software and services provider to the local government sector, following a profit downgrade and change of CEO, and Dods (Group), a business to business media and information provider, which was de-rated on no specific news.

Divestments

Proceeds totalled £4.7m during the year following 5 full realisations. Two largest divestments were EG Solutions and FreeAgent Holdings returning £2.2m and £1.1m respectively generating a return of 1.5x cost and 1.4x cost effectively.

Collective Investment Vehicle

Micro Cap Fund had strong performance over the year increasing in value by 18.8 per cent (2017: 27 per cent). At 30 September 2018, Baronsmead Venture Trust's cumulative £7.0m investment was valued at £27.7m. As at 30 September 2018, the Micro Cap Fund held investments in 44 AIM-traded and listed companies.

During the year Baronsmead Venture Trust invested £2.5m into LF Livingbridge UK Multi Cap which launched on 30 June 2017. This investment has had a good performance over the year increasing by 11.5 per cent. At 30 September 2018, Baronsmead Venture Trust's investment was valued at £2.8m. As at 30 September 2018, the Multi Cap Fund held investments in 45 AIM-traded and listed companies.

Liquid assets (cash and near cash)

Baronsmead Venture Trust had cash of approximately £30m at the year end. This asset class is conservatively managed to take minimal or no capital risk, a strategy outlined in past prospectuses.

OUTLOOK

The majority of investee companies continue to perform well, providing good returns over the year and a firm foundation for future returns. The investment management team continues to adapt its deal origination following the changes in VCT legislation which have resulted in the Company adding 6 unquoted and 7 AIM-traded companies to the portfolio. The Investment management team look forward to making further additions over the coming year.

Livingbridge VC LLP

Investment Manager

22  November 2018

Investments in the year

Company	Location	Sector	Activity	Book cost £'000
Unquoted investments New
SecureCloud+ Ltd	Berkshire	TMT	Defence and public sector IT systems	700
Pointr Ltd	London	TMT	AI/ IOT Indoor Positioning Platform	466
Equipsme (Holdings) Ltd	London	Business Services	SME Health Insurance Plans Provider	373
Your Welcome Ltd	London	TMT	Supplier of tablets and software for vacation rental properties	327
Labrador Ltd	London	TMT	Smart energy switching technology	233
Munnypot Ltd	West Sussex	TMT	Automated online investment platform	223
Follow on
Custom Materials Ltd	London	Consumer Markets	Retailer of customisable products	591
SilkFred Ltd	London	Consumer Markets	Online fashion market place	225
Total unquoted investments				3,138
AIM-traded investments New
IXICO plc	London	Healthcare & Education	Provides technology enabled services to the biopharmaceutical industry worldwide	675
I-nexus Global plc	West Midlands	TMT	Strategy and continuous improvement software	563
Access Intelligence plc	London	Business Services	Provider of corporate communications and reputation management software	517
Fusion Antibodies plc	Belfast	Healthcare & Education	Development of antibodies for both therapeutic and diagnostic applications	450
KRM22 plc	London	TMT	Software as a service platform buy & build in risk and compliance software	450
PCI-PAL plc	London	TMT	Secure Payment services provider	405
Beeks Financial Cloud Group plc	Renfrewshire	TMT	Cloud hosting services for financial trading sector	337
Follow on
CloudCall Group plc	Leicestershire	TMT	Cloud based telephony platform	450
Total AIM-traded investments				3,847
Total investments in the year				6,985

Realisations in the year

Company		First investment date	Proceeds‡ £'000	Overall multiple return*
Unquoted realisations
Crew Clothing Holdings Ltd	Trade sale	Nov 16	5,362	2.3
Key Travel Ltd	Trade sale	Jul 13	5,261	3.2
Eque2 Ltd	Trade sale	Apr 13	4,197	3.0
Kirona Ltd	Loan repayment	Dec 14	983	1.2
IP Solutions Ltd	Loan repayment	Dec 14	525	0.3
Create Health Ltd	Loan repayment	Mar 13	450	1.0
In the Style Fashion Ltd	Write Off	Apr 17	0	0.0
Xention Pharma Ltd	Write Off	Jul 05	0	0.0
Total unquoted realisations			16,778
AIM-traded realisations
EG Solutions plc	Scheme of arrangement	May 05	2,155	1.5
FreeAgent Holdings plc	Scheme of arrangement	Nov 16	1,125	1.4
Escher Group Holdings plc	Take over	Aug 11	991	1.1
Plant Impact	Scheme of arrangement	Feb 15	403	0.3
Ubisense Group plc	Market sale	Jun 11	19	0.2
Total AIM-traded realisations			4,693
Total realisations in the year			21,471†

‡ Proceeds at time of realisation including interest.

* Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.

† Proceeds of £179,000 were received in respect of Optimisa which had been written off in a prior period. Deferred consideration of £258,000 was received in respect of Hypertec, £115,000 in respect of Nexus Vehicle Holdings and £44,000 in respect of Kingsbridge Risk Solutions, all of which had been sold or written off in a prior period.

Ten Largest Investments

The top ten investments by current value at 30 September 2018 illustrate the diversity of investee companies within the portfolio. For consistency across the top ten and based on guidance from the AIC, data extracted from the last set of published audited accounts is shown in the tables below. However, this may not always be representative of underlying financial performance for several reasons. Published accounts lodged at Companies House are out of date and the Manager works from up to date monthly management accounts and has access to draft but unpublished annual audited accounts. In addition, pre-tax profit in statutory accounts is often not a representative indicator of underlying profitability as it can be impacted by, for example, deductions of non-cash items such as amortisation that relates to investment structures rather than operating performance.

1. Staffline Group plc - Nottinghamshire

All funds managed by Livingbridge^†

First investment: July 2000

Total original cost: £174,000

Total equity held: 2.40%

Baronsmead Venture Trust only

Original cost: £174,000

Valuation: £8,329,000

Valuation basis: Last Traded Price

% of equity held: 2.40%

Year ended 31 December

	2017	2016
	£ million	£ million
Sales:	957.8	882.4
Pre-tax profits	36.3*	36.7
Net Assets:	95.8	83.7
No. of Employees :	2,357	2,793

(Source: Staffline Group plc, Annual Report 31 December 2017.)

* Excludes non-underlying results.

2. Ideagen - Nottinghamshire

All funds managed by Livingbridge^†

First investment: January 2013

Total original cost: £3,000,000

Total equity held: 5.10%

Baronsmead Venture Trust only

Original cost: £1,350,000

Valuation: £7,975,000

Valuation basis: Bid Price

% of equity held: 2.30%

Year ended 30 April

	2018	2017
	£ million	£ million
Sales:	36.1	27.1
Pre-tax profits	1.4	0.7
Net Assets:	50.5	46.4
No. of Employees:	375	305

(Source: Ideagen plc, Annual Report & Accounts 30 April 2018)

3. Netcall Plc - Hertfordshire

All funds managed by Livingbridge^†

First investment: July 2010

Total original cost: £4,354,000

Total equity held: 17.30%

Baronsmead Venture Trust only

Original cost: £1,738,000

Valuation: £6,190,000

Valuation basis: Bid Price

% of equity held: 6.90%

Year ended 30 June

	2018	2017
	£ million	£ million
Sales:	21.9	16.2
Pre-tax profits	0.0	1.7
Net Assets:	21.7	21.0
No. of Employees:	217	156

(Source: Netcall plc, Annual Report and Accounts, 30 June 2018.)

4. Bioventix plc - Surrey

All funds managed by Livingbridge^†

First investment: June 2013

Total original cost: £1,008,000

Total equity held: 7.50%

Baronsmead Venture Trust only

Original cost: £454,000

Valuation: £5,417,000

Valuation basis: Bid Price

% of equity held: 3.40%

Year ended 30 June

	2018	2017
	£ million	£ million
Sales:	8.0	7.2
Pre-tax profits	6.9	5.8
Net Assets:	11.0	10.1
No. of Employees:	15	16

(Source: Bioventix plc, Annual Report and Accounts, 30 June 2018.)

5. Happy Days Consultancy Ltd - Cornwall

All funds managed by Livingbridge

First investment: April 2012

Total original cost: £7,617,000

Total equity held: 65.00%

Baronsmead Venture Trust only

Original cost: £3,420,000

Valuation: £5,084,000

Valuation basis: Earnings Multiple

% of equity held: 25.70%

Year ended 31 December

	2017	2016
	£ million	£ million
Sales:	8.0	7.0
Pre-tax profits	(2.2)	(1.8)
Net Assets:	(6.5)	(4.2)
No. of Employees:	398	309

(Source: H. Days Holdings Limited Annual Report and Financial Statements 31 December 2017)

6. Carousel Logistics Ltd - Sittingbourne

All funds managed by Livingbridge

First investment: October 2013

Total original cost: £5,595,000

Total equity held: 40.00%

Baronsmead Venture Trust only

Original cost: £1,910,000

Valuation: £4,851,000

Valuation basis: Earnings Multiple

% of equity held: 12.00%

Year ended 31 December

	2017	2016
	£ million	£ million
Sales:	31.8	21.4
Pre-tax profits	0.0	0.3
Net Assets:	1.8	3.0
No. of Employees:	128	92

(Source: Carousel Logistics Limited Financial Statement 31 December 2017.)

7. Create Health - London

All funds managed by Livingbridge

First investment: March 2013

Total original cost: £1,253,000

Total equity held: 29.00%

Baronsmead Venture Trust only

Original cost: £556,000

Valuation: £4,682,000

Valuation basis: Earnings Multiple

% of equity held: 11.50%

Year ended 31 March

	2017	2016
	£ million	£ million
Sales:	13.7	11.5
Pre-tax profits	1.1	1.5
Net Assets:	4.0	3.0
No. of Employees:	94	71

(Source: Create Health Holding Annual Report and Consolidated Financial Statements 31 March 2017.)

8. Pho Holdings Ltd - London

All funds managed by Livingbridge

First investment: July 2012

Total original cost: £4,415,000

Total equity held: 28.00%

Baronsmead Venture Trust only

Original cost: £1,982,000

Valuation: £4,134,000

Valuation basis: Earnings Multiple

% of equity held: 11.10%

Year ended 28 February

	2017*	2016**
	£ million	£ million
Sales:	25.9	19.4
Pre-tax profits	0.0	0.0
Net Assets:	4.5	4.5
No. of Employees:	540	399

(Source: Source: Pho 2012 Limited, Directors' Report and Financial Statements 26 February 2017.) * 52 week period ended 26 February 2017. ** 52 week period ended 28 February 2016.)

9. Cerillion Plc - London

All funds managed by Livingbridge

First investment: November 2015

Total original cost: £4,000,000

Total equity held: 17.80%

Baronsmead Venture Trust only

Original cost: £1,800,000

Valuation: £3,837,000

Valuation basis: Bid Price

% of equity held: 8.00%

Year ended 30 September

	2017	2016*
	£ million	£ million
Sales:	16.0	8.4
Pre-tax profits	2.0	0.2
Net Assets:	13.8	13.0
No. of Employees:	171	162

(Source: Cerillion Plc, Annual Report and Accounts 2017.) *Revenue from acquisition, as the Group came into existence on 18 March 2016.

† Excludes collective investment vehicles.

10. Inspired Energy Plc - Lancashire

All funds managed by Livingbridge^†

First investment: November 2011

Total original cost: £1,437,000

Total equity held: 7.60%

Baronsmead Venture Trust only

Original cost: £574,000

Valuation: £3,832,000

Valuation basis: Bid Price

% of equity held: 3.00%

Year ended 31 December

	2017	2016
	£ million	£ million
Sales:	27.5	21.5
Pre-tax profits	3.6	4.0
Net Assets:	25.1	14.9
No. of Employees:	266	200

(Source: Inspired Energy Plc Annual Report and Accounts 2017.)

† Excludes collective investment vehicles

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 Risk	Context	Specific risks we face	Possible impact	Mitigation
Loss of approval as a Venture Capital Trust	The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns.	Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status. This risk is particularly affected by recent legislation and EU State Aid.	The loss of VCT status would result in shareholders who have not held their shares for the designated holding period having to repay the income tax relief they had already obtained and future dividends and gains would be subject to income tax and capital gains tax.	The Board maintains a safety margin on all VCT tests to ensure that breaches are very unlikely to be caused by unforeseen events or shocks. The Investment Manager monitors all of the VCT tests on an ongoing basis and the Board reviews the status of these tests on a quarterly basis. Specialist advisors review the tests on a bi-annual basis and report to the audit committee on their findings.
Legislative	VCTs were established in 1995 to encourage private individuals to invest in early stage companies that are considered to be risky and therefore have limited funding options. In return the state provides these investors with tax reliefs which fall under the definition of state aid.	A change in government policy regarding the funding of small companies or changes made to VCT regulations to comply with EU State Aid rules could result in a cessation of the tax reliefs for VCT investors or changes to the reliefs that make them less attractive to investors.	The Company might not be able to maintain its asset base leading to its gradual decline and potentially an inability to maintain either its buy back or dividend policies.	The Board and the Investment Manager engage on a regular basis with HMT and industry representative bodies to demonstrate the cost benefit of VCTs to the economy in terms of employment generation and taxation revenue. 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 performance	The Company invests in small, mainly UK based companies, both unquoted and quoted. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals and hence tend to be riskier than larger businesses.	Investment in poor quality companies with the resultant risk of a high level of failure in the portfolio.	Reduction in both the capital value of investors shareholdings and in the level of income distributed.	The Company has a diverse portfolio where the cost of any one investment is typically less than 5 per cent of NAV thereby limiting the impact of any one failed investment. The Investment Management team has a strong and consistent track record over a long period. The sixteen transferring employees are led by a senior team of five people who have an average tenure of twelve years working with the Baronsmead VCTs. The Investment Manager undertakes extensive due diligence procedures on every new investment and reviews the portfolio composition maintaining a wide spread of holdings in terms of financing stage and industry sector..
Economic, political and other external factors	Whilst the Company invests in predominantly UK businesses, it relies heavily on Europe as one of its largest trading partners. This, together with the increase in globalisation, means that economic unrest and shocks in other jurisdictions, as well as in the UK, can impact on UK companies, particularly smaller ones that are more vulnerable to changes in trading conditions. In addition the potential impact of leaving the European Union remains uncertain.	Events such as economic recession, movement in interest or currency rates, civil unrest, war or political uncertainty or pandemics can adversely affect the trading environment for underlying investments and impact on their results and valuations.	Reduction in the value of the Company's assets with a corresponding impact on its share price may result in the loss of investors through buy backs and may limit its ability to pay dividends.	The Company invests in a diversified portfolio of companies across a number of industry sectors, which provides protection against shocks as the impact on individual sectors can vary depending upon the circumstances. In addition, the Manager uses a limited amount of bank gearing in its investments which enables its investments to continue trading through 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 make up and progress of the portfolio each quarter to ensure that it remains appropriately diversified and funded.
Regulatory & Compliance	The Company is authorised as a self managed Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD") and is also subject to the Prospectus and Transparency Directives. It is required to comply with the Companies Act 2006 and the UKLA Listing Rules.	Failure of the Company to comply with any of its regulatory or legal obligations could result in the suspension of its listing by the UKLA and/or financial penalties and sanction by the regulator or a qualified audit report.	The Company's performance could be impacted severely by financial penalties and a loss of reputation resulting in the alienation of shareholders, a significant demand to buy back shares and an inability to attract future investment. The suspension of its shares would result in the loss of its VCT taxation status and most likely the ultimate liquidation of the Company.	The Board and the Investment Manager employ the services of leading regulatory lawyers, sponsors, auditors and other advisers to ensure the Company complies with all of its regulatory obligations. The Board has strong systems in place to ensure that the Company complies with all of its regulatory responsibilities. The Investment Manager has a strong compliance culture and employs dedicated compliance specialists within its team who support the Board in ensuring that the Company is compliant.
Operational	The Company relies on a number of third parties, in particular the Investment Manager, to provide it with the necessary services such as registrar, sponsor, custodian, receiving agent, lawyers and tax advisers.	The risk of failure of the systems and controls of any of the Company's advisers leading to an inability to service shareholder needs adequately, to provide accurate reporting and accounting and to ensure adherence to all VCT legislation rules.	Errors in shareholders records or shareholdings, incorrect marketing literature, non compliance with listing rules, loss of assets, breach of legal duties and inability to provide accurate reporting and accounting all leading to reputational risk and the potential for litigation.	The Board has appointed an audit committee who, along with the external auditors, review the internal control ("ISAE3402") and/or internal audit reports from all significant third party service providers, including the Investment Manager, on a 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 can be found in the full Annual Report and Financial Statements, is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs.

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. 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

PricewaterhouseCoopers ("PwC") as VCT Tax Status Advisers to advise it on compliance with VCT requirements. PwC reviews new investment opportunities, as appropriate, and regularly reviews the investment portfolio of the Company. PwC 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 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 56 men and 40 women.

Appointment of the Manager

As announced on 8 November 2018, the Investment Manager for Baronsmead Venture Trust, Livingbridge, will change to Gresham House, a specialist alternative asset manager listed on the London Stock Exchange, on or around 30 November 2018.

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 KPIshighlighted above.

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 Link Alternative Fund Administrators Ltd to provide these services to the Company on its behalf. The Company is responsible for paying the fee charged by Link Alternative Fund Administrators Ltd 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 2018 was 2.2 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 was exceeded and a £548,000 performance fee is payable (2017: £704,000).

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 VCT incentive 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 eligible unquoted investment made by the Baronsmead VCTs. The Board regularly monitors the VCT incentive 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 eligible unquoted transaction and cannot decide selectively which investments to participate in. In addition the VCT incentive scheme only delivers a return after each VCT has realised a priority return built into the structure. The shares held by the members of the VCT incentive 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 VCT incentive scheme.

Prior to January 2017, executives participating in the VCT incentive scheme subscribed jointly for a proportion (12 per cent) of the ordinary shares (but not the prior ranking financial instruments) available to the Baronsmead VCTs in each eligible unquoted investment. The level of participation was increased from 5 per cent in 2007 when the Managers performance fee was reduced from 20 per cent to its current level of 10 per cent. With effect from January 2017, an additional limb was added to the VCT incentive scheme to accommodate the increasing number of "permanent equity" investments being made by the Baronsmead VCTs (being investments in which the Baronsmead VCTs hold an insufficient number of prior ranking instruments (if any) relative to the number of ordinary shares they hold in order to yield a priority return for the Baronsmead VCTs before any gain accrues to the ordinary shares).

Under the terms of the amended VCT incentive scheme, in circumstances where the Baronsmead VCTs hold a sufficient number of prior ranking financial instruments (a "Traditional Structure"), the terms are identical to those set out above. However, in circumstances where the Baronsmead VCTs "make a permanent equity" investment, the executives participating in the incentive scheme are required to coinvest alongside the Baronsmead VCTs for a proportion (currently 0.75 per cent) of the ordinary shares available to the Baronsmead VCTs and they also receive an option over a further proportion (currently 12 per cent) of the ordinary shares available to the Baronsmead VCTs. The ordinary shares can only be sold and the option can only be exercised by the scheme participants when the investment held by the Baronsmead VCTs is sold. The option exercise price has a built in hurdle rate to ensure that the options are only "in the money" if the Baronsmead VCTs achieve a good return (equivalent to the priority return they would have to achieve prior to any value accruing to the ordinary shares in a Traditional Structure).

Since the formation of the scheme in 2004, 74 executives have invested a total of £943,000 in 57 companies. At 30 September 2018, 37 of these investments have been realised generating proceeds of £307m for the Baronsmead VCTs and £15m for the VCT incentive scheme. For Baronsmead Venture Trust the average money multiple on these 36 realisations was 1.9 times cost. Had the VCT incentive scheme shares been held instead by the Baronsmead VCTs, the extra return to shareholders would have been the equivalent of 3.9p 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 and Directors' fees

During the year the Manager and an affiliate received £14,100 (2017: £39,000) advisory fees, £292,000 (2017: £367,000) directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £34,000 (2017: £11,000) with respect to investments attributable to BVT.

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 ("AIC Code"), the Directors have assessed the prospects of the Company over the three year period to 30 September 2021. 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, and the large listed portfolio that could be liquidated if necessary.

This review has considered the principal risks as outlined above. 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 2021.

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.

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. The Company has announced its intention to raise funds in early 2019.

·      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 1,417,000 shares were bought in this way during the year to 30 September 2018.

·      Buy back of shares span class="aso">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 737,000 shares were bought by investors in the Company's existing shares in the year to 30 September 2018.

On behalf of the Board

Peter Lawrence

Chairman

22 November 2018

Extract of the Directors' Report

Shares and shareholders

Share capital

During the year the Company bought back a total of 3,335,000 ordinary shares to be held in Treasury, representing 1.6 per cent of the issued share capital as at 30 September 2018, with an aggregate nominal value of £333,500. The total amount paid for these shares was £2,877,531. The Company's remaining authority to buy back shares from the AGM held in 2018 is 26,922,692. During the year the Company did not sell any ordinary shares from Treasury.

As at the date of this report the Company's issued share capital was as follows:

Share	Total	% of Shares in issue	Nominal Value
In issue	206,285,223	100.00	£20,628,522.30
Held in treasury	14,438,819	7.00	£1,143,881.90
In circulation	191,846,404	93.00	£19,184,640.40

The maximum number of shares held in Treasury during the year was 14,438,819. 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 & Financial Statements 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 AGM held in 2018, 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 or declared the following dividends for the year ended 30 September 2018:

Dividends	£'000
Interim dividend of 3.0p per ordinary share paid on 21 September 2018	5,769
Final dividend of 4.5p per ordinary share to be paid on 8 March 2019	8,633*
Total dividends paid for the year	14,402

*Calculated on shares in issue as at 30 September 2018

Subject to shareholder approval at the AGM, a final dividend of 4.5p per share will be paid on 8 March 2019 to shareholder on the register at 8 February 2019.

Annual General Meeting

The notice of the AGM of the Company to be held at 11.00am on 27 February 2019 at Saddlers' Hall, 40 Gutter Lane, London EC2V 6BR 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 full Annual Report and Financial Statements.

Directors are entitled to a payment in lieu of three month notice 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 2018, the Company held cash balances and investments in readily realisable securities with a value of £30,110,000. 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

22 November 2017

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 judgements and estimates that are reason able and prudent;

·      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

·      assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

·      use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

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 its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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 financial statements, 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

22 November 2018

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2017 and 2018 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 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 2018

		Year ended 30 September 2018			Year ended 30 September 2017
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	2.3	-	10,925	10,925	-	15,242	15,242
Income	2.5	5,104	-	5,104	2,569	-	2,569
Investment management fee and performance fee	2.6	(833)	(3,048)	(3,881)	(750)	(2,955)	(3,705)
Other expenses	2.6	(590)	-	(590)	(501)	-	(501)
Profit before taxation		3,681	7,877	11,558	1,318	12,287	13,605
Taxation	2.9	(330)	330	-	-	-	-
Profit for the year, being total comprehensive income for the year		3,351	8,207	11,558	1,318	12,287	13,605
Return per ordinary share:
Basic and Diluted	2.2	1.75p	4.28p	6.03p	0.76p	7.08p	7.84p

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 and updated in January 2017 by the Association of Investment Companies ("AIC SORP").

Statement of Changes in Equity

For the year ended 30 September 2018

	Notes	Non-distributable reserves			Distributable Reserves		Total £'000
		Called-up share capital £'000	Share premium £'000	Revaluation Reserve £'000	Capital reserve £'000	Revenue reserve £'000
At 1 October 2017		18,412	-	41,352	97,963	1,275	159,002
Share premium cancellation costs		-	-	-	2	-	2
Profit/(loss) after taxation		-	-	8,931	(724)	3,351	11,558
Net proceeds of share issues & share buybacks		2,216	18,154	-	(2,892)	-	17,478
Dividends paid	2.4	-	-	-	(11,345)	(1,220)	(12,565)
At 30 September 2018		20,628	18,154	50,283	83,004	3,406	175,475

For the year ended 30 September 2017

	Notes	Non-distributable reserves			Distributable Reserves
		Called-up share capital £'000	Share premium £'000	Revaluation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
At 1 October 2016		18,412	96,515	25,238	10,089	304	150,558
Cancellation of share premium		-	(96,515)	-	96,515	-	-
Share Premium cancellation		-	-	-	(31)	-	(31)
Profit/ (loss) after taxation		-	-	16,114	(3,827)	1,318	13,605
Net Proceeds of share buybacks & sale of shares from treasury		-	-	-	79	-	79
Dividends paid	2.4	-	-	-	(4,862)	(347)	(5,209)
At 30 September 2017		18,412	-	41,352	97,963	1,275	159,002

Balance Sheet

As at 30 September 2018

	Notes	As at 30 September 2018 £'000	As at 30 September 2017 £'000
Fixed assets
Investments	2.3	175,746	160,130
Current assets
Debtors	2.7	231	175
Cash at bank and on deposit		1,090	409
		1,321	584
Creditors (amounts falling due within one year)	2.8	(1,592)	(1,712)
Net current liabilities		(271)	(1,128)
Net assets		175,475	159,002
Capital and reserves
Called-up share capital	3.1	20,628	18,412
Share premium	3.2	18,154	-
Capital reserve	3.2	83,004	97,963
Revaluation reserve	3.2	50,283	41,352
Revenue reserve	3.2	3,406	1,275
Equity shareholders' funds		175,475	159,002
Net asset value per share
- Basic and diluted	2.1	91.47p	91.90p

The financial statements were approved by the Board of Directors on 22 November 2018 and were signed on its behalf by:

Peter Lawrence

Chairman

Statement of Cash Flows

For the year ended 30 September 2018

	Year ended 30 September 2018 £'000	Year ended 30 September 2017 £'000
Cash flows from operating activities
Investment income received	5,041	2,587
Deposit interest received	8	7
Investment management fees paid	(3,956)	(2,955)
Other cash payments	(602)	(493)
Merger costs paid	(8)	(136)
Net cash inflow/ (outflow) from operating activities	483	(990)
Cash flows from investing activities
Purchases of investments	(31,664)	(32,014)
Disposals of investments	26,973	15,387
Net cash inflow from investing activities	(4,691)	(16,627)
Equity dividends paid	(12,565)	(5,209)
Net cash outflow before financing activities	(16,773)	(22,826)
Cash flows from financing activities
Net proceeds of share issues, share buybacks & sale of shares from treasury	17,479	1,648
Share premium cancellation costs	(25)	(4)
Net cash inflow from financing activities	17,454	1,644
Increase/ (decrease) in cash	681	(21,182)
Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash	681	(21,182)
Opening cash position	409	21,591
Closing cash at bank and on deposit	1,090	409
Reconciliation of profit before taxation to net cash inflow/(outflow) from operating activities
Profit before taxation	11,558	13,605
Gains on investments	(10,925)	(15,242)
(Increase)/decrease in debtors	(56)	28
(Decrease) / increase in creditors	(94)	619
Net cash inflow/ (outflow) from operating activities	483	(990)

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 updated in January 2017 and February 2018 and on the assumptions that the Company maintains VCT status. The application of the Company's accounting policies requires judgement, estimation and assumptions about the carrying amount of assets and liabilities. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. 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 of ordinary shares		Net asset value per share attributable		Net asset value attributable
	30 September  2018 number	30 September 2017 number	30 September 2018 pence	30 September 2017 pence	30 September 2018 £'000	30 September 2017 £'000
Ordinary shares (basic)	191,846,404	173,020,866	91.47	91.90	175,475	159,002

2.2  Return per share

	Weighted average number of ordinary shares		Return per ordinary share		Net profit after taxation
	30 September 2018 number	30 September 2017 number	30 September 2018 pence	30 September 2017 pence	30 September 2018 £'000	30 September 2017 £'000
Revenue	191,698,288	173,485,578	1.75	0.76	3,351	1,318
Capital	191,698,288	173,485,578	4.28	7.08	8,207	12,287
Total			6.03	7.84	11,558	13,605

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 collective investment vehicles, which consists of investments in open ended investment companies authorised in the UK, this is the closing price. 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"). Judgements The key judgements in the fair valuation process are: i)          The Manager's determination of the appropriate application of the International Private Equity and Venture Capital guidelines ('IPEV') to each unquoted investment; ii)          The Directors' consideration of whether each fair value is appropriate following detailed review and challenge. The judgement applied in the selection of the methodology used for determining the fair value of each unquoted investment can have a significant impact upon the valuation. Estimates The key estimate in the Financial Statements is the determination of the fair value of the unquoted investments by the Managers for consideration by the Directors. This estimate is key as it significantly impacts the valuation of the unlisted investments at the balance sheet date. The fair valuation process involves estimates using inputs that are unobservable (for which market data is unavailable). Fair value estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimate. As the valuation outcomes may differ from the fair value estimates a price sensitivity analysis is provided in other risk sensitivity in the table 3.3 below. The risk of an over or underestimation of fair values is greater when methodologies are applied using more subjective inputs. Assumptions The determination of fair value by the Managers involves key assumptions dependent upon the valuation methodology used. The primary methodologies applied are: i)     Rebased Cost ii)    Earnings Multiple iii)   Offer Less 10% The Earnings Multiple approach involves more subjective inputs than the Rebased Cost and Offer approaches and therefore presents a greater risk of over or under estimation. The key assumption for the Rebased Cost valuation method is that price used remain a reasonable proxy for fair value typically for a period for up to six months from the date of the relevant transaction. All recent investment prices are compared to movements in relevant benchmarks and the wider market over the period since the date of the relevant transaction. As the time from the reference transaction increases, the valuation is cross-checked to a Multiples based method to ensure reasonableness. The key assumption for the Multiples approach are that the selection of comparable companies (chosen on the basis of their business characteristics and growth patterns) and using either historic or forecast revenues (as considered most appropriate) provide a reasonable basis for identifying relationships between enterprise value and growth to apply in the determination of fair value. Other assumptions include the appropriateness of the discount magnitude applied for reduced liquidity and other qualitative factors. 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 2018 £'000	30 September 2017 £'000
Level 1
Investments traded on AIM	72,814	68,720
Level 2
Collective investment vehicles	59,549	38,675
Level 3
Unquoted investments	43,383	51,644
Investments traded on AIM	-	1,091
	175,746	160,130

	Level 1	Level 2	Level 3
	Traded on AIM £'000	Collective investment vehicles £'000	Traded on AIM £'000	Unquoted £'000	Total £'000
Opening book cost	48,755	27,781	2,315	39,927	118,778
Closing unrealised appreciation/ (depreciation)	19,965	10,894	(1,224)	11,717	41,352
Opening valuation	68,720	38,675	1,091	51,644	160,130
Movements in the year:
Transfer between levels	1,561	-	(2,315)	754	-
Purchases at cost	3,847	24,470	-	3,347	31,664
Sale - proceeds	(4,872)	(8,280)	-	(13,821)	(26,973)
- realised losses on sales	(191)	-	-	(2,560)	(2,751)
Unrealised gains realised during the year	816	-	-	3,929	4,745
Increase in unrealised appreciation	2,933	4,684	1,224	90	8,931
Closing valuation	72,814	59,549	-	43,383	175,746
Closing book cost	49,916	43,971	-	31,576	125,463
Closing unrealised appreciation	22,898	15,578	-	11,807	50,283
Closing valuation	72,814	59,549	-	43,383	175,746
Equity shares	72,814	-	-	18,579	91,393
Loan notes	-	-	-	24,804	24,804
Collective investment vehicles	-	59,549	-	-	59,549
Closing valuation	72,814	59,549	-	43,383	175,746

The gains and losses included in the above table have all been recognised in the Income Statement above.

TLA Worldwide plc has been changed to a level 1 investment due to the suspension of trading being lifted during the year. InterQuest Group plc has been changed to a level 3 investment due to it being delisted from AIM.

2.4  Dividends

In accordance with FRS 102, dividends are recognised as a liability in the period in which they are paid.

	Year ended 30 September 2018			Year ended 30 September 2017
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Amounts recognised as distributions to equity holders in the year:
For the year ended 30 September 2018
-Interim dividend of 3.0p per ordinary share paid on 21 September 2018	288	5,481	5,769	-	-	-
For the year ended 30 September 2017
-Interim dividend of 3.0p per ordinary share paid on 31 March 2017	-	-	-	347	4,862	5,209
-Final dividend of 3.5p per ordinary share paid on 2 March 2018	932	5,864	6,796	-	-	-
	1,220	11,345	12,565	347	4,862	5,209

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. A redemption premium of £332,000 was received for the year ended 30 September 2018. 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 30 September 2018			Year ended 30 September 2017
	Quoted securities £'000	Unquoted securities £'000	Total £'000	Quoted securities £'000	Unquoted securities £'000	Total £'000
Income from investments†
Dividend income	1,042	-	1,042	1,200	-	1,200
Interest Income	116	3,606	3,722	14	1,350	1,364
Redemption premium	-	332	332	-	-	-
	1,158	3,938	5,096	1,214	1,350	2,564
Other income‡
Deposit interest			8			5
Total income			5,104			2,569

† 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. 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.

	Year ended 30th September 2018			Year ended 30th September 2017
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	833	2,500	3,333	750	2,251	3,001
Performance fee	-	548	548	-	704	704
	833	3,048	3,881	750	2,955	3,705

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 collective investment vehicles, Micro Cap, are also managed by Livingbridge. Arrangements are in place to avoid the double charging of fees.

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
	2018	2017
	£'000	£'000
Directors' fees	105	99
Secretarial and accounting fees paid to the Manager	147	143
Remuneration of the auditors and their associates:
- audit	30	30
- other services supplied pursuant to legislation (interim review)	5	5
Merger costs*	8	(33)
Other	295	257
	590	501

* The negative merger costs reflected in the year ended 30 September 2017 relate to an over provision in the year ended 30 September 2016 which has been written off. In the year ended 30 September 2018, further merger costs were subsequently paid.

Information on directors' remuneration is given in the directors' emoluments table in the Annual Report and Financial Statements.

Charges for other services provided by the auditors in the year ended 30 September 2018 were in relation to the interim review. 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
	2018	2017
	£'000	£'000
Prepayments and accrued income	231	175
	231	175

2.8  Creditors (amounts falling due within one year)

	As at	As at
	30 September	30 September
	2018	2017
	£'000	£'000
Management, secretarial and accounting fees due to the Manager	1,469	1,542
Share premium cancellation costs	-	27
Other creditors	123	143
	1,592	1,712

2.9  Tax

UK corporation tax payable is provided on taxable profits at the current rate. Provision is made for deferred taxation on the liability method, without discounting, 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 2018			30 September 2017
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Profit before taxation	3,681	7,877	11,556	1,318	12,287	13,605
Corporation tax at 19.0 per cent (2017: 19.5 per cent) *	699	1,497	2,196	257	2,396	2,653
Effect of:
Non-taxable gains	-	(2,076)	(2,076)	-	(2,972)	(2,972)
Non-taxable dividend income	(198)	-	(198)	(234)	-	(234)
Non-deductible expenses	2	-	2	(7)	-	(7)
Losses carried forward	(173)	249	76	(16)	576	560
Tax charge/(credit) for the year	330	(330)	-	-	-	-

* The corporation tax rate applied is based on the average tax rates for the financial year ended 30 September 2017. The actual rates were 20 per cent until 31 March 2017 and 19 per cent from 1 April 2017.

At 30 September 2018 the Company had surplus management expenses of £10,411,258 (2017: £10,024,604) 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	£'000
184,124,685 ordinary shares of 10p each listed at 30 September 2017	18,412
22,160,538 ordinary shares of 10p each issued during the year	2,216
206,285,223 ordinary shares of 10p each listed at 30 September 2018	20,628
11,103,819 ordinary shares of 10p each held in treasury at 30 September 2017	(1,110)
3,335,000 ordinary shares of 10p each repurchased during the year and held in treasury	(333)
14,438,819 ordinary shares of 10p each held in treasury at 30 September 2018	(1,443)‌‌
191,846,404 ordinary shares of 10p each in circulation* at 30 September 2018	19,185

* Carrying one vote each.

The 22,160,538 ordinary shares were issued at an average price of 94.8p.

During the year the Company bought back 3,335,000 ordinary shares representing 1.81 per cent of the ordinary shares in issue at the beginning of the financial year.

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 reserve £'000	Revenue reserve £'000	Total £'000	Share premium £'000	Revaluation reserve* £'000	Total £'000
At 1 October 2017	97,963	1,275	99,238	-	41,352	41,352
Gross proceeds of share issues	-	-	-	18,784	-	18,784
Share premium cancellation costs	2	-	2	-	-	-
Purchase of shares for treasury	(2,878)	-	(2,878)	-	-	-
Expenses of share issue and buybacks	(14)	-	(14)	(630)	-	(630)
Reallocation of prior year unrealised gains	4,745	-	4,745	-	(4,745)	(4,745)
Realised loss on disposal of investments#	(2,751)	-	(2,751)	-	-	-
Net increase in value of investments#	-	-	-	-	13,676	13,676
Management fee charged to capital#	(3,048)	-	(3,048)	-	-	-
Taxation relief from capital expenses#	330	-	330	-	-	-
Profit after taxation#	-	3,351	3,351	-	-	-
Dividends paid in the year	(11,345)	(220)	(12,565)	-	-	-
At 30 September 2018	83,004	3,406	86,410	18,154	50,283	68,437

^# The total of these items is £11,557,000, which agrees to the total profit for the year.

* Changes in fair value of investments are dealt with in this reserve.

Distributable reserves may also include any net unrealised gains 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 above.

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. Management are comfortable that a 5 per cent movement in share price is a reasonable estimate of the upside and downside alternatives.

	As at 30 September 2018			As at 30 September 2017
	% of total investment	5% increase in share price effect on net assets and profit £'000	5% decrease in share price effect on net assets and profit £'000	% of total investment	5% increase in share price effect on net assets and profit £'000	5% decrease in share price effect on net assets and profit £'000
AIM & CIV	75	6,618	(6,618)	68	5,424	(5,424)
Unquoted	25	2,169	(2,169)	32	2,582	(2,582)

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.

Price Sensitivity

The fair valuation of unquoted investments is influenced by the estimates, assumptions and judgements made in the fair valuation process (see 2.3 above). A sensitivity analysis is provided below which recognises that the valuation methodologies employed involve different levels or subjectivity in their inputs. The sensitivity analysis below is applied a wider range of input variable sensitivity to the earnings multiple method due to the increased subjectivity involved in the use of this method compared to the rebased cost method. No variable sensitivity has been applied to the offer method as the input for this calculation was the agreed sale price of the investment.

Valuation Basis
	Fair Value £'000	Sensitivity %	Impact £'000	Impact % of Net Assets
Rebased Cost	5,719	+/-10	+/-572	+/-0.3
Earnings Multiple	34,385	+/-20	+/-6,877	+/-3.9
Offer less 10%	3,279	-	-	-

Interest rate risk

The Company has the following investments in fixed and floating rate financial assets:

	As at 30 September 2018			As at 30 September 2017
	Total investment £'000	Weighted average interest rate %	Weighted average time for which rate is fixed years	Total investment £'000	Weighted average interest rate %	Weighted average time for which rate is fixed years
Fixed rate loan note securities	24,804	9.39	2.09	34,353	9.28	2.12
Floating rate sterling liquidity funds	29,020	-	-	15,330	-	-
Cash at bank and on deposit	1,090	-	-	409	-	-
	54,914			50,092

Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profits.

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
	2018	2017
	£'000	£'000
Cash at bank and on deposit	1,090	409
Interest, dividends & other receivables	231	175
	1,321	584

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 within 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 2018 or 30 September 2017.No individual investment exceeded 4.8 per cent of the net assets attributable to the Company's shareholders at 30 September 2018 (2017: 4.9 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 2018 these investments were valued at £30,110,000 (2017: £15,739,000).

3.4 Investment in Associates

The Company has chosen not to rebut the presumption that the following holdings are investments in associates, owing to the proportion of equity held and representation on the board representing significant influence over the operations of the company. The investments held are held as part of an investment portfolio, and are therefore measured at fair value through profit and loss, as detailed in note 2.3, rather than using the equity method, as permitted by section 14 of FRS 102:

Name	Location	Class of Shares held	% of Equity	Profit (£m)	Net Assets (£m)	Results for year ended
Happy Days Consultancy	UK	A Ordinary	25.74	(2.2)	(6.5)	31 December 2017

3.5  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 along with their shareholdings as disclosed in the Directors' Remuneration Report. In addition, the Manager operates a VCT Incentive Scheme, detailed in the Management retention section of 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 the Manager and an affiliate received £14,100 (2017: £39,000) advisory fees, £292,000 (2017: £367,000) was received in connection with directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £34,000 (2017: £11,000) with respect to investments attributable to BVT.

A related party relationship exists between Baronsmead Venture Trust and Happy Days Consultancy Limited, owing to the significant influence held over the operations of the company. During the year the Company accrued for £448,000 from Happy Days Consultancy relating to interest due on loan balances. As at 30 September 2018, the loan balance stood at £5,084,000, including £1,706,000 of capitalised interest.

3.6 Segmental reporting

The Company has one reportable segment being investing in primarily a portfolio of UK growth businesses, whether unquoted or traded on AIM.

3.7 Post balance sheet events

Change in Manager

On 8^th November, Livingbridge VC LLP ("Livingbridge") announced the sale of its fund and investment management business, including its Baronsmead VCT business, to a subsidiary of Gresham House plc ("Gresham House"), a specialist alternative asset manager listed on the London Stock Exchange. The core management, investment and operational teams involved with the Company will all be transferred to Gresham House in connection with the transaction.

The Company has consented to the novation of the existing investment manager and co-investment agreements to Gresham House, which is expected to become effective around 30 November 2018. No changes are being made to the terms of investment management and co-investment agreements.

Realisations

Following the balance sheet, the Company realised its investment in Symphony Ventures Limited returning proceeds totalling £3.5m and making a return of 2.4x cost.

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.

 

END

 

 

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