Annual Financial Report

RNS Number : 3993P

Baronsmead Venture Trust PLC

17 November 2016

Baronsmead Venture Trust plc

Annual Financial Report for the year ended 30 September 2016

Financial Headlines

· Net asset value ("NAV") per share increased 3.0 per cent to 105.6p in the year to 30 September 2016, before deduction of dividends.

· 363.4p NAV total return to shareholders for every 100.0p invested at launch.

· Dividends totalled 18.5p in the year to 30 September 2016, after the third interim dividend of 8.5p paid on 30 September 2016.

· Net annual dividend yield of 22.5 per cent and gross annual yield of 33.3 per cent.

Our Investment Objective

Baronsmead Venture Trust is a tax efficient listed company which aims to achieve long-term investment returns for private investors, including tax-free dividends.

Investment Policy

· To invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on AIM.

· Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.

Dividend Policy

The Board of Baronsmead Venture Trust aims to sustain a minimum annual dividend level at an average of 6.5p per ordinary share, mindful of the need to maintain net asset value. The ability to meet these twin objectives depends significantly on the level and timing of profitable realisations and cannot be guaranteed. There will be variations in the amount of dividends paid year on year.

CHAIRMAN'S STATEMENT

I am pleased to report a 3.0 per cent (3.03p) increase in the NAV per share for the year to 30 September 2016 before dividend payments.

Tax free dividends totalling 18.5p per share were paid during the year with interim dividends paid in December 2015, June 2016 and a third interim dividend in September 2016, in lieu of a final dividend. The Board seeks to maintain average annual dividends of 6.5p a share, so the additional payment should be viewed as exceptional, albeit welcome.

As this is the first annual report and accounts since the Company's merger with Baronsmead VCT plc in February 2016, the comparative figures in the accounts only relate to the Company prior to the merger and are therefore not a true comparison to the period under review.

Results

During the 12 months to 30 September 2016, the Company's NAV per share increased 3.0 per cent from 102.56 to 105.59p before taking account of dividends totalling 18.5p.

The Company's policy is to try to deliver an average annual payment of 6.5p per ordinary share. To achieve this, the Directors have sought to spread the distribution of realised capital profits from years when more gains are realised to years of fewer gains. However, the fiscal rules for VCTs penalise the Company for holding cash. As a result, during this period when the amounts realised from the sales on investments have exceeded new investments, a much higher dividend was paid out of necessity.

	Pence per ordinary share
NAV as at 1 October 2015	102.56
Valuation uplift (3.0 per cent)	3.03
NAV as at 30 September 2016 before dividends	105.59
Less: Interim dividend paid to the shareholders of Baronsmead VCT 2 plc on 18 December 2015	(3.50)
Second interim dividend paid on 3 June 2016	(6.50)
Third interim dividend paid on 30 September 2016	(8.50)
NAV as at 30 September 2016 after dividends	87.09

Future dividends are, of course, subject to the Company's ability to achieve profitable realisations as well as the impact of VCT rules. The dividends will therefore vary from time to time although we will strive to deliver the average dividend in accordance with our policy.

Portfolio Review

As at 30 September 2016, the portfolio comprised investments in 70 unquoted and AIM-traded companies. In addition, the Company's investment in Wood Street Microcap provides investment exposure to a further 42 AIM-traded and fully listed companies.

The Company's portfolio is diverse and this has helped from year to year to smooth investors returns. The underlying value of the unquoted portfolio increased by 21.4 per cent over the year with many of the current investments trading well. Combined with the 4.8 per cent increase in the value of the investment in Wood Street Microcap fund, this ensured good growth in NAV. Unfortunately, volatility has been a feature of the quoted markets since the beginning of 2016 and the overall value of the AIM-traded portfolio decreased by 4.9 per cent. This modest re-adjustment in value of the AIM-traded portfolio follows several consecutive years of growth in the underlying value of these investments. The Managers Review highlights some of those companies that made a notable contribution to these results.

Investments and Divestments

In the year to 30 September 2016, the Company invested a total of £4.5m in 5 new and 4 follow-on investments. The amount invested is lower than in previous years principally due to the introduction of new, more restrictive VCT rules in November 2015. These changes have required the Investment Manager to adapt its investment strategy to focus on the provision of development capital to younger companies. As a result, in common with other VCTs, the rate of new investment has slowed since their introduction. In the meantime, the Company continues to comply with the 70 per cent test and will continue to search for quality investments.

The Investment Manager has an active programme for directly approaching prospective investee companies and continues to invest in its capabilities to identify a supply of new and attractive investment opportunities. The pipeline of suitable investment opportunities is improving, although it is now taking longer to establish compliance with the new VCT rules and the subsequent conversion to completed investments has proved challenging.

A total of £15.5m was realised from the full sale of investments and from loan note redemptions during the period, taking account of amounts realised by Baronsmead VCT plc prior to the merger with the Company. This includes the sales of Nexus Vehicle Holdings, Kingsbridge Risk Solutions and Jelf Group, which generated returns of 4.5 times, 3.2 times and 2.5 times their costs respectively. Against these successes, losses were realised on underperforming investments such as Valldata Group and Fishers Outdoor Leisure Holdings.

Full details about the investments and divestments during the period are set out in the tables below and in view of the new VCT rules, the Company has updated and simplified its Investment Policy which is set out below.

Fundraising

The Company raised £9.7m net of expenses in February 2016 and realised £15.5m from the sale of the investments in the year to 30 September 2016. As a result, it is unlikely that the Company will seek to raise new funds in the current tax year, preferring to continue investing from the currently available cash resources.

Annual General Meeting

I look forward to meeting as many shareholders as possible at the Annual General Meeting to be held at 10.00 am on 14 February 2017, at Plaisterers' Hall, One London Wall London, EC2Y 5JU. As well as my own review of the year, there will also be presentations from the Manager.

OUTLOOK

Given the uncertainty over the timing and terms of the UK's exit from the European Union, it will take time for the impact of Brexit on the UK economy to be known. It is also too early to determine whether there will be any relaxation of VCT investment restrictions that have been heavily influenced by the EU State Aid rules. We are therefore proceeding on the basis that this will not be the case as it is likely to be a number of years before there will be clarity on that matter.

Reassuringly, our investment portfolio is diverse, gearing levels are low and the steady progress of trading activity has continued. There are a number of more mature investments that may be realised over the coming years which should assist in generating good returns for investors. The VCT industry is slowly adapting to the new legislation and the number of investment opportunities being considered by the Investment Manager is growing. The Manager is one of the most experienced in the sector with a track record of investing for the long term and we are therefore confident it can adapt to the challenges of the new VCT rules and any disruption that Brexit may bring.

Peter Lawrence

Chairman

17 November 2016

MANAGER'S REVIEW

The year has seen another strong performance from the unquoted portfolio. There have been a number of successful divestments across the portfolio including some longer held unquoted and quoted companies.

PORTFOLIO REVIEW

Overview

The net assets of £150.6 million were invested as follows:

Asset class	NAV (£m)	% of NAV*	Number of investees	% return in the year**
Unquoted	49.3	33	18	21.4
AIM-traded companies	60.6	40	52	(4.9)
Wood Street Microcap Investment Fund	18.4	12	42	4.8
Liquid assets	22.3	15	N/A	-
Totals	150.6	100	112	-

* By value as at 30 September 2016.

** Return includes interest received on unquoted realisations during the year.

Each quarter the direction of general trading and profitability of all investee companies is assessed so that the Board can monitor the overall health and trajectory of the portfolio. At 30 September 2016, 88 per cent of the 70 companies directly held in the portfolio (excluding the investments held by Wood Street Microcap) were progressing steadily or better.

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

Investment Activity

During the year, £4.5m was invested in 9 companies including 5 new additions to the portfolio and 4 follow on investments. Three of the largest investments were:

· Cerillion (quoted) provides Customer Relationship Management ("CRM") and billing software as an enterprise solution to telecoms companies globally with clients in 36 countries.

· Eden Research (quoted) is focused on IP exploitation in the area of crop science where it has strong patents around micro encapsulation which is a method of safely and effectively delivering active ingredients to particular crops focused on disease prevention. Our investment will be used to fund product development.

· Happy Days Consultancy (unquoted) is a chain of nurseries based in the South West of England. Baronsmead Venture Trust made an initial investment in 2012 and since then the company has opened 3 new nurseries and currently has 2 under development. A follow on investment has been made to fund further new nurseries.

Unquoted Portfolio

The unquoted portfolio performance has been strong, growing by around 21 per cent over the course of the year. This includes capitalised interest received on the sale of investments. The portfolio is valued by the Board using a consistent process every quarter. The majority of the value created by portfolio companies comes from trading and operational improvements including revenue and margin growth, rather than financial leverage.

Unquoted Divestment Activity

During the year there were five full realisations which returned proceeds of approximately £13.6m for Baronsmead Venture Trust.

· Nexus Vehicle Holdings has been a longer hold as we invested in 2008. Sales have grown five fold since then and a full realisation was achieved to a Private Equity buyer in December 2015 delivering an excellent return of 4.5x cost. This was the largest investment by cost in the Company's unquoted portfolio.

· Kingsbridge Risk Solutions, generated a return of 3.2x its original cost when it was sold in May 2016 after a relatively short investment period of only 28 months. Kingsbridge is a specialist insurance broker providing services to freelance contractors in professions such as engineering and IT.

· Fisher Outdoor Leisure Holdings is a distributor of cycle accessories which Baronsmead Venture Trust has held since 2006. The investment was realised in April 2016 for 0.8x cost which was a good recovery from the full provision in 2014.

· Following a period of strong realisations, there have been two less successful exits to report. Independent Community Care Management (high acuity care) has been partially realised recovering 0.5x the original cost. Additionally, there was no recovery of the investment in Valldata Group at realisation, (payment processing for not-for-profit sector) which was sold to an investor.

While it is disappointing to have two poor realisations in one financial period, it is in the nature of private equity investment that some investments will fail to achieve their full potential. Our track record of realisations over many years remains strong.

Quoted Portfolio (AIM-traded investments)

The quoted portfolio has seen a decrease in value of 5 per cent following a number of years of strong performance. This reduction in value reflects the volatility of the quoted markets particularly in the months following the Brexit decision. The Manager is satisfied that the quoted portfolio is well diversified and positioned for longer term prospects, notwithstanding volatility which affects quoted markets from time to time.

Quoted Divestment Activity

Proceeds from two realisations during the year from the quoted portfolio totalled £1.9m and delivered an aggregate return of 1.5x cost. Jelf Group had been held since 2004 and was sold by way of a trade sale for 2.5x cost. Tangent Communications realised 0.5x cost.

Wood Street

Wood Street Microcap Investment Fund ("Wood Street") was established by Livingbridge in May 2009 to provide flexibility for the Baronsmead VCTs to invest in larger and more liquid non VCT qualifying AIM and Small Cap opportunities. It represents another innovation introduced by the Livingbridge quoted Team to seek performance improvement. At 30 September 2016, Baronsmead Venture Trust's cumulative £7.0m investment was valued at £18.4m, following a gain of a further 5 per cent over the year. As at 30 September 2016, Wood Street held investments in 42 AIM-traded and listed companies.

Liquid assets (cash and near cash)

Baronsmead Venture Trust had cash of approximately £22m at the year-end. This asset class is conservatively managed to take minimal or no capital risk, a strategy outlined in prospectuses that have been issued in the past.

Outlook

The current portfolio is diversified and provides a good foundation for the Company. The immediate challenge as highlighted in the Chairman's statement is to continue adapting to the new VCT regulations and increase the new investment rate whilst keeping a close eye on the risk/reward balance of the new investment activity.

Livingbridge VC LLP

Investment Manager

17 November 2016

Investments in the year

Company	Location	Sector	Activity	Book cost £'000
Unquoted investments Follow on
Happy Days Consultancy Ltd	Cornwall	Healthcare & Education	Provider of nursery based childcare in the South West of England	658
Total unquoted investments				658
AIM-traded investments New
Cerillion plc	London	TMT*	CRM and billing software to telecoms companies	900
Eden Research plc	Gloucestershire	Business Services	Developer of biological fungicides and bio equivalents	900
LoopUp Group plc	London	TMT*	Audio conferencing solutions	504
Wey Education plc	London	Healthcare & Education	Online independent UK secondary school	214
Science in Sport plc	London	Consumer Markets	A vertically integrated sports nutrition provider	143
Follow on
SysGroup plc (formerly Daily Internet plc	Liverpool	TMT*	IT managed services and hosting	612
Venn Life Sciences Holdings plc	London	Healthcare & Education	Clinical research organisation providing consulting and clinical trial services	387
Belvoir Lettings plc	Lincolnshire	Consumer Markets	UK based letting agency franchise network	157
Total AIM-traded investments				3,817
Total investments in the year				4,475^#

* Technology, Media & Telecommunications ("TMT").

# All investments with the exception of Eden Research, LoopUp Group and SysGroup were made prior to BVT (previously known as BVCT2) acquiring the assets of BVCT on 8 February 2016. Hence, the book cost of new investments shown (except for Eden Research, LoppUp Group and SysGroup) relate only to the investments made by BVCT2.

BVT acquired the BVCT investment portfolio (total £62,819,000) on 8 February 2016. This portfolio included the investments listed in the table above (with the exception of Eden Research, LoopUp Group and SysGroup).

Realisations in the year

Company		First investment date	Proceeds‡ £'000	Overall multiple return*
Unquoted realisations
Nexus Vehicle Holdings Ltd	Full trade sale	Feb 08	5,873	4.5
Kingsbridge Risk Solutions Ltd	Full trade sale	Jan 14	5,196	3.2
Fisher Outdoor Leisure Holdings Ltd	Full trade sale	Jun 06	2,013	0.8
Independent Community Care Management Ltd	Full trade sale	Oct 11	548	0.5
Valldata Group Ltd	Full trade sale	Jan 11	0	0.5
Total unquoted realisations			13,630
AIM-traded realisations
Jelf Group plc	Recommended offer	Oct 04	1,364	2.5
Tangent Communications plc	Full market sale	Mar 07	500	0.5
Total AIM-traded realisations			1,864
Total realisations in the year			15,494†

^‡ Proceeds at time of realisation including interest.

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

† Proceeds of £4,000 was received in respect of Bglobal plc which had been written off in a prior period. Deferred consideration of £100,000 was received in respect of Playforce Holdings and £56,000 in respect of CableCom II Networking Holdings, both of which had been sold in a prior periods. Carnell Contractors was fully realised on receipt of final earn-out dividend of £686,000.

With the exception of Kingsbridge Risk Solutions, Fisher Outdoor Leisure Holdings, Valldata Group and Tangent Communications all realisations were made before the acquisition of the BVCT investment portfolio and proceeds shown relate to those made prior to 8 February 2016.

Ten Largest Investments

The top ten investments by current value at 30 September 2016 illustrate the diversity and size of investee companies within the portfolio. This financial information is taken from publicly available information, which has been audited by the auditors of the investee companies.

1. Staffline Group plc - Nottinghamshire

All funds managed by Livingbridge

First investment: July 2000

Total original cost: £174,000

Total equity held: 2.40%

Baronsmead Venture Trust only

Original cost: £174,000

Valuation: £5,801,000

Valuation basis: Last Traded Price

% of equity held: 2.40%

Year ended 31 December

	2015	2014
	£ million	£ million
Sales:	702.2	503.2
EBITA:	30.3	19.4
Net Assets:	73.2	65.9
No of Employees :	3,768	1,611

(Source: Staffline Group plc, Annual Report 31 December 2015)

2. Netcall Plc - Hertfordshire

All funds managed by Livingbridge

First investment: July 2010

Total original cost: £4,354,000

Total equity held: 17.83%

Baronsmead Venture Trust only

Original cost: £1,738,000

Valuation: £5,249,000

Valuation basis: Bid Price

% of equity held: 7.15%

Year ended 30 June

	2016	2015
	£ million	£ million
Sales:	16.6	17.2
EBITA:	4.3	5.0
Net Assets:	22.6	22.7
No of Employees:	156	148

(Source: Netcall plc, Annual Report and Accounts, 30 June 2016)

3. Crew Clothing Holdings Limited - London

All funds managed by Livingbridge

First investment: November 2006

Total original cost: £5,833,000

Total equity held: 28.10%

Baronsmead Venture Trust only

Original cost: £2,904,000

Valuation: £5,023,000

Valuation basis: Earnings Multiple

% of equity held: 13.40%

Year ended 25 October

	2015	2014
	£ million	£ million
Sales:	55.0	59.2
EBITA:	2.0	1.1
Net Assets:	4.6	5.8
No of Employees :	411	401

(Source: Crew Clothing Holdings Ltd, Report and Financial Statements 25 October 2015)

4. Create Health Ltd - London

All funds managed by Livingbridge

First investment: March 2013

Total original cost: £4,235,000

Total equity held: 29.00%

Baronsmead Venture Trust only

Original cost: £1,906,000

Valuation: £4,800,000

Valuation basis: Earnings Multiple

% of equity held: 11.48%

Year ended 31 March

	2015	2014
	£ million	£ million
Sales:	7.6	4.9
EBITA:	1.4	1.1
Net Assets:	4.5	3.3
No of Employees:	90	58

(Source: Create Health Ltd Abbreviated Accounts 31 March 2015)

5. IDOX Plc - Berkshire

All funds managed by Livingbridge

First investment: May 2002

Total original cost: £1,641,000

Total equity held: 4.90%

Baronsmead Venture Trust only

Original cost: £614,000

Valuation: £4,387,000

Valuation basis: Last Traded Price

% of equity held: 1.83%

Year ended 31 October

	2015	2014
	£ million	£ million
Sales:	62.6	60.7
EBITA:	17.4	15.6
Net Assets:	53.6	48.6
No of Employees :	572	554

(Source: IDOX PLC Annual Report & Accounts 2015)

6. Tasty Plc - London

All funds managed by Livingbridge

First investment: September 2006

Total original cost: £3,223,000

Total equity held: 14.40%

Baronsmead Venture Trust only

Original cost: £1,188,000

Valuation: £4,045,000

Valuation basis: Bid Price

% of equity held: 5.00%

Year ended 27 December

	2015	2014
	£ million	£ million
Sales:	35.8	29.7
EBITA:	3.3	2.8
Net Assets:	22.3	19.6
No of Employees:	846	642

(Source: Tasty Plc, Report and Financial Statements 27 December 2015)

7. Happy Days Consultancy Ltd - Cornwall

All funds managed by Livingbridge

First investment: April 2012

Total original cost: £7,617,000

Total equity held: 65.00%

Baronsmead Venture Trust only

Original cost: £3,420,000

Valuation: £4,005,000

Valuation basis: Earnings Multiple

% of equity held: 25.74%

Year ended 31 December

	2015	2014
	£ million	£ million
Sales:	6.2	5.7
EBITA:	(0.5)	(0.4)
Net Assets:	8.8	5.5
No of Employees:	258	212

(Source: H. Days Holdings Ltd, Annual Report and Financial Statements 31 December 2015 )

8. Pho Holdings Ltd - London

All funds managed by Livingbridge

First investment: July 2012

Total original cost: £4,415,000

Total equity held: 28.00%

Baronsmead Venture Trust only

Original cost: £1,982,000

Valuation: £3,851,000

Valuation basis: Earnings Multiple

% of equity held: 11.08%

Year ended 1 March

	2015*	2014
	£ million	£ million
Sales:	14.1	9.7
EBITA:	0.9	0.4
Net Assets:	2.0	1.3
No of Employees:	290	205

(Source: Pho Holdings Ltd, Directors' Report and Financial Statements 1 March 2015)

*53 week period ended 1 March 2015.

9. Dods (Group) plc - London

All funds managed by Livingbridge

First investment: March 2003

Total original cost: £5,289,000

Total equity held: 20.12%

Baronsmead Venture Trust only

Original cost: £2,022,000

Valuation: £3,678,000

Valuation basis: Bid Price

% of equity held: 8.02%

Year ended 31 March

	2016	2015
	£ million	£ million
Sales:	19.6	18.3
EBITA:	2.3	0.2
Net Assets:	25.7	24.6
No of Employees:	210	268

(Source: Dods (Group) plc, Annual Report & Accounts, 31 March 2016)

10. CableCom II Networking Holdings Ltd - Somerset

All funds managed by Livingbridge

First investment: October 2013

Total original cost: £5,000,000

Total equity held: 10.54%

Baronsmead Venture Trust only

Original cost: £2,500,000

Valuation: £3,187,000

Valuation basis: Earnings Multiple

% of equity held: 4.92%

Year ended 31 October

	2015	2014
	£ million	£ million
Sales:	17.5	17.9
EBITA:	1.9	2.0
Net Assets:	(17.5)*	(10.9)*
No of Employees:	104	83

(Source: Cablecom Bidco Limited Report and Financial Statements 31 October 2015)

*negative net assets due to investment structure

Principal Risks & Uncertainties

The Board has included below details of the principal risks & uncertainties facing the Company and the appropriate measures taken in order to mitigate these risks as far as practicable.

Principal 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 audit 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 HM Treasury ("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 Board has appointed an Investment Manager that has a strong and consistent track record over a long period, invests in profitable companies in sectors in which it has specialised for the past eighteen years, undertakes extensive due diligence on all prospective investments, has an experienced value enhancement team who actively manage its investments and who take board seats and appoint experienced non-executive directors on all unquoted and significant quoted investments.
Economic, 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.	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 buybacks 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 makeup 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, 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 including 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 is set out in full in the Annual Report and Accounts, is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs. As referred to in the Chairman's Statement, the investment policy has been updated and simplified, in line with the new VCT rules.

Investing in the Right Companies

Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas. Investments are selected in the expectation that the application of private equity disciplines, including an active management style for unquoted companies, will enhance value and enable profits to be realised from planned exits.

The Board has delegated the management of the investment portfolio to Livingbridge VC LLP ("Livingbridge" or the "Manager"). The Manager has adopted a 'top-down, sector-driven' approach to identifying and evaluating potential investment opportunities, by assessing a forward view of firstly the business environment, then the sector and finally the specific potential investment opportunity.

Based on its research, the Manager has selected a number of sectors that it believes will offer attractive growth prospects and investment opportunities. Diversification is also achieved by spreading investments across different asset classes and making investments for a variety of different periods.

The Manager's Review above provides a review of the investment portfolio and of market conditions during the year, including the main trends and factors likely to affect the future development, performance and position of the business.

Risk is spread by investing in a number of different businesses within different qualifying industry sectors using a mixture of securities. The maximum the Company will invest in a single company (including a collective investment vehicle) is 15 per cent of its investments by value of its investments calculated in accordance with Section 278 of the Income Tax Act 2007 (as amended) ("VCT Value"). The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities and permitted non qualifying investments as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks or preference shares, while AIM-traded investments are primarily held in ordinary shares. Pending investment in VCT qualifying investments, the Company's cash and liquid funds are held in permitted non qualifying investments.

VCTs are required to comply with a number of different regulations and the Company has appointed Philip Hare & Associates LLP ("Philip Hare & Associates") as its VCT Tax Status Advisers to advise it on compliance with VCT requirements. Philip Hare & Associates reviews new investment opportunities, as appropriate, and regularly reviews the investment portfolio of the Company. Philip Hare & Associates works closely with the Manager but reports directly to the Board.

Environmental, Human Rights, Employee, Social and Community Issues

The Company seeks to conduct its affairs responsibly and the Manager is encouraged to consider environmental, human rights, social and community issues, where appropriate, with regard to investment decisions.

The Company is required, by company law, to provide details of environmental (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and the effectiveness of these policies. The Company does not have any employees and as a result does not maintain specific policies in relation to these matters.

Livingbridge as Investment Manager has an Environmental, Social and Governance ("ESG") policy. As a responsible investor, Livingbridge fully incorporates ESG factors into its investment programme. The ESG policy focuses on environmental, social and corporate governance factors, including risks and opportunities, affecting both the Company and/or specific portfolio companies.

Livingbridge undertakes an in-house risk assessment questionnaire pre-investment to highlight any significant or material ESG issues. Should any such issues be identified, these are then addressed via specific due diligence pre-investment.

Upon completion of an investment the completed in-house questionnaires are assessed by an external consultant to corroborate risks identified, advise the company how to address any ESG issues and also to identify any potential upside opportunities (e.g. energy savings). Relevant ESG matters are then included in the portfolio company board meetings as appropriate and also in the standard Livingbridge portfolio progress reports allowing Livingbridge to assess the impact of any interventions or recommendations.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio.

Gender Diversity

The Board of Directors of the Company comprises two female and two male Directors. The Manager has an equal opportunity policy and currently employs 45 men and 30 women.

Appointment of the Manager

The Board expects the Manager to deliver a performance which meets the objective of achieving long-term investment returns, including tax free dividends. A review of the Company's performance during the financial year, the position of the Company at the year end and the outlook for the coming year is contained within the Chairman's Statement above. The Board assesses the performance of the Manager in meeting the Company's objective against the Key Performance Indicators ("KPIs").

The management agreement

Under the management agreement, the Manager receives a fee of 2.0 per cent per annum of the net assets of the Company. In addition, the Manager is responsible for providing all secretarial, administrative and accounting services to the Company. The Manager has appointed Capita Sinclair Henderson to provide these services to the Company on its behalf. The Company is responsible for paying the fee charged by Capita Sinclair Henderson to the Manager in relation to the performance of these services.

Annual running costs are capped at 3.5 per cent of the net assets of the Company (excluding any performance fee payable to the Manager and irrecoverable VAT), any excess being refunded by the Manager by way of an adjustment to its management fee. The running cost as at 30 September 2016 was 2.30 per cent.

The management agreement may be terminated at any date by either party giving twelve months' notice of termination and if terminated, the Manager is only entitled to the management fees paid to it and any interest due on unpaid fees.

Performance fees

A performance fee will not be payable to the Manager until the total return on shareholders' funds exceeds an annual threshold of the higher of 4 per cent or base rate plus 2 per cent calculated on a compound basis. To the extent that the total return exceeds the threshold over the relevant period then a performance fee of 10 per cent of the excess will be paid to the Manager. The amount of any performance fee which is paid in an accounting period shall be capped at 5 per cent of shareholders' funds for that period.

During the financial year the threshold has not been exceeded and no performance fee is payable (2015: £588,000).

Management retention

The Board is keen to ensure that the Manager continues to have one of the best investment teams in the VCT and private equity sector. A co-investment scheme was introduced in November 2004 under which members of the Manager's investment team invest their own money into a proportion of the ordinary shares of each unquoted investment made by the Baronsmead VCTs. The Board regularly monitors the co-investment scheme arrangements but considers the scheme to be essential in order to attract, retain and incentivise the best talent. The scheme is in line with current market practice in the private equity industry and the Board believes that it aligns the interests of the Manager with those of the Baronsmead VCTs.

Executives have to invest their own capital in every unquoted transaction and cannot decide selectively which investments to participate in. In addition the co-investment only delivers a return after each VCT has realised a priority return built into the structure. The shares held by the members of the co-investment scheme in any portfolio company can only be sold at the same time as the investment held by the Baronsmead VCTs is sold. Any prior ranking financial instruments, such as loan stock, held by the Baronsmead VCTs have to be repaid in full together with the agreed priority annual return before any gain accrues to the ordinary shares. This ensures that the Baronsmead VCTs achieve a good priority return before profits accrue to the co-investment scheme.

The executives participating in the co-investment scheme subscribe jointly for a proportion (currently 12 per cent) of the ordinary shares available to the Baronsmead VCTs in each unquoted investment. The level of participation was increased from 5 per cent in 2007 when the Manager's performance fee was reduced from 20 per cent to its current level of 10 per cent.

Since the formation of the scheme in 2004, 58 executives have invested a total of £895k in 47 companies. At 30 September 2016, 30 of these investments have been realised generating proceeds of £259m for the Baronsmead VCTs and £13.4m for the co-investment scheme. For Baronsmead Venture Trust the average money multiple on these 30 realisations was 1.9 times cost. Had the co-investment shares been held instead by the Baronsmead VCTs, the extra return to shareholders would have been the equivalent of 3.8p a share (based on the current number of shares in issue). The Board considers this small cost to retain quality people to be in the best interests of shareholders.

Advisory fees

During the year to 30 September 2016, the Manager received income of £nil (2015: BVCT £152,000 & BVCT2 £152,000) in connection with advisory fees and incurred abort fees of £12,000 (2015: BVCT £9,000 & BVCT2 £9,000), with respect to investments attributable to Baronsmead Venture Trust.

Directors' fees of £309,000 (2015: BVCT £206,000 & BVCT2 £206,000) were received by the Manager in relation to services provided to companies in the investment portfolio, during the year, with respect to investments attributable to Baronsmead Venture Trust.

Alternative Investment Fund Manager's Directive ("AIFMD")

The AIFMD regulates the management of alternative investment funds, including VCTs. On 22 July 2014 the Company was registered as a Small UK registered AIFM under the AIFMD.

Viability Statement

In accordance with principle 21 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over the three year period to 30 September 2019. This period is used by the board during the strategic planning process and is considered reasonable for a business of our nature and size.

The three year period is considered the most appropriate given the forecasts that the Board require from the Manager and the estimated timeline for finding, assessing and completing investments.

In making this statement the Board carried out a robust assessment of the principal risks facing the Company, including those that might threaten its business model, future performance, solvency, or liquidity.

The Board also considered the ability of the Company to raise finance and deploy capital. Their assessment took account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact of the underlying risks.

This review has considered the principal risks as outlined below. The Board concentrated its efforts on the major factors which affect the economic, regulatory and political environment. The Board also paid particular attention to the importance of its close working relationship with the Manager, Livingbridge.

The Directors have also considered the Company's income and expenditure projections and find these to be realistic and sensible.

Based on the Company's processes for monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model, asset allocation and the portfolio risk profile, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 30 September 2019.

Returns to Investors

Dividend policy

Since launch, the average annual tax free dividend paid to shareholders has been 7.6p per ordinary share (equivalent to a pre-tax return of 11.3p per ordinary share on dividends otherwise subject to tax at the higher rate of 32.5 per cent). For shareholders who received up front tax reliefs of 20 per cent, 30 per cent or 40 per cent, their returns would have been even higher.

Shareholder choice

The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in Baronsmead Venture Trust in ways that best suit their personal investment and tax planning and in a way that treats all shareholders equally.

· Fund raising | From time to time the Company seeks to raise additional funds by issuing new shares at a premium to the latest published net asset value to account for costs. In February 2016, the Company's offer for subscription to raise £10m (£9.7m after costs) was fully subscribed.

· Dividend Reinvestment Plan a Dividend Reinvestment Plan which enables shareholders to purchase additional shares through the market in lieu of cash dividends. Approximately 3,409,000 shares were bought in this way during the year to 30 September 2016.

· Buy back of shares | From time to time the Company buys its own shares through the market in accordance with its share price discount policy. Subject to the likely impact on shareholders as a w hole, 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 Compa ny's shares are listed on the London Stock Exchange and can be bought using a stockbroker or authorised share dealing service in the same way as shares of any other listed company. Approximately 1,109,000 shares were bought by investors in the Company's existing shares in the year to 30 September 2016.

On behalf of the Board

Peter Lawrence

Chairman

17 November 2016

Extract of the Directors' Report

Shares and shareholders

Share capital

As a result of the reconstruction and winding up of Baronsmead VCT plc, on 8 February 2016, the Company allotted 79,425,134 ordinary shares. On 8 February 2016, the Company also allotted a further 9,727,419 ordinary shares as a result of an offer for subscription.

During the year the Company bought back a total of 2,040,000 ordinary shares to be held in Treasury, representing 1.1 per cent of the issued share capital as at 30 September 2016, with an aggregate nominal value of £204,000. The total amount paid for these shares was £1,912,675. The Company's remaining authority to buy back shares from the 2016 Annual General Meeting ("AGM") is 9,002,066. During the year the Company also sold 2,750,000 ordinary shares from Treasury. These shares were sold for a total amount of £2,344,187.50.

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	184,124,685	100.0	£18,412,469
Held in treasury	11,253,819	6.11	£1,125,382
In circulation	172,870,866	93.89	£17,287,087

The maximum number of shares held in Treasury during the year was 13,743,819. Shares will not be sold out of Treasury at a discount wider than the discount at which the shares were initially bought back by the Company.

Shareholders

Each 10p ordinary share entitles the holder to attend and vote at general meetings of the Company, to participate in the profits of the Company, to receive a copy of the Annual Report & Accounts and to participate in a final distribution upon the winding up of the Company.

There are no restrictions on voting rights, no securities carry special rights and the Company is not aware of any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights. There are no agreements to which the Company is party that may affect its control following a takeover bid.

In addition to the powers provided to the Directors under UK Company Law and the Company's Articles of Association, at each AGM the shareholders are asked to authorise certain powers in relation to the issuing and purchasing of the Company's own shares. Details of the powers granted at the 2016 AGM, all of which remain valid, can be found in the last notice of AGM.

The Board is not, and has not been throughout the year, aware of any beneficial interests exceeding 3 per cent of the total voting rights.

Tax free dividends

The Company paid the following dividends for the year ended 30th September 2016:

Tax Free Dividends	£'000
Interim dividend of 3.5p per ordinary share paid on 18 December 2015	2,905
Second interim dividend of 6.5p per ordinary share paid on 3 June 2016	11,075
Third interim dividend of 8.5p per ordinary share paid on 30 September 2016	14,532
Total dividends paid for the year	28,512

Annual General Meeting

The notice of the AGM of the Company to be held at 10.00am on 14 February 2017 at Plaisterers' Hall, One London Wall, London EC2Y 5JU has been sent to shareholders and is available on the Company's website.

Directors

Appointments

The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association and the Companies Act 2006. Further details in relation to the appointed Directors and the governance arrangements of the Board can be found in the Corporate Governance Statement.

Directors are not compensated by the Company for loss of office in the event of a takeover bid.

Directors' Indemnity

Directors' and Officers' liability insurance cover is in place in respect of the Directors. The Company's Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as Directors, in which they are acquitted or judgement is given in their favour by the Court.

Save for such indemnity provisions in the Company's Articles of Association and in the Directors' letters of appointment, there are no qualifying third party indemnity provisions in force.

Conflicts of Interest

The Directors have declared any conflicts or potential conflicts of interest to the Board of Directors which has the authority to approve such situations. The Company Secretary maintains the Register of Directors' Conflicts of Interests which is reviewed quarterly by the Board. Directors advise the Company Secretary and the Board as soon as they become aware of any conflicts of interest and do not take part in discussions which relate to any of their conflicts.

Responsibility for accounts and going concern

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

After making enquires, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion the Directors have considered the liquidity of the Company and its ability to meet obligations as they fall due for a period of at least twelve months from the date that these financial statements were approved. As at 30 September 2016, the Company held cash balances and with a value of £21,591,000. Cash flow projections have been reviewed and show that the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the share buyback programme and dividend policy. The Company has no external loan finance in place and therefore is not exposed to any gearing or covenants.

The Directors have chosen to include its report on global greenhouse emissions in its Strategic Report under the section on environmental, human rights, employee, social and community issues.

By Order of the Board

Livingbridge VC LLP

Secretary

100 Wood Street London EC2V 7AN

17 November 2016

Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments and estimates that are reasonable and prudent;

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

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company taken as a whole; and

· the strategic report/Directors' report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position and performance, business model and strategy.

On behalf of the Board

Peter Lawrence

Chairman

17 November 2016

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2015 and 2016 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at www.baronsmeadvcts.co.uk

Income Statement

For the year ended 30 September 2016

		Year ended 30 September 2016			Year ended 30 September 2015
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Unrealised gains on movements in fair value of investments	2.3	-	3,190	3,190	-	8,847	8,847
Realised gains on disposal of investments	2.3	-	2,931	2,931	-	522	522
Income	2.5	2,115	-	2,115	1,869	-	1,869
Investment management fee	2.6	(650)	(1,949)	(2,599)	(398)	(1,780)	(2,178)
Other expenses	2.6	(990)	-	(990)	(469)	-	(469)
Profit on ordinary activities before taxation		475	4,172	4,647	1,002	7,589	8,591
Taxation on ordinary activities	2.9	-	-	-	(89)	89	-
Profit for the year, being total comprehensive income for the year		475	4,172	4,647	913	7,678	8,591
Return per ordinary share:
Basic	2.2	0.34p	2.98p	3.32p	1.10p	9.20p	10.30p

All items in the above statement derive from continuing operations.

There are no recognised gains and losses other than those disclosed in the Income Statement.

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

Statement of Changes in Equity

For the year ended 30 September 2016

	Notes	Non-distributable reserves			Distributable Reserves		Total £'000
	Notes	Called-up share capital £'000	Share premium £'000	Revaluation Reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
At 1 October 2015		9,497	16,561	24,820	34,152	102	85,132
Profit on ordinary activities after taxation		-	-	418	3,754	475	4,647
Shares issued following the acquisition of Baronsmead VCT plc		7,942	71,227	-	-	-	79,169
Net proceeds of share issues, share buybacks & sale of shares from treasury		973	8,727	-	422	-	10,122
Dividends paid	2.4	-	-	-	(28,239)	(273)	(28,512)
At 30 September 2016		18,412	96,515	25,238	10,089	304	150,558

For the year ended 30 September 2015

	Notes	Non-distributable reserves			Distributable Reserves
	Notes	Called-up share capital £'000	Share premium £'000	Revaluation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
At 1 October 2014		9,497	16,545	16,497	40,330	270	83,139
Profit/(loss) on ordinary activities after taxation		-	-	8,323	(645)	913	8,591
Net proceeds of share buybacks & sale of shares from treasury		-	16	-	(1,226)	-	(1,210)
Dividends paid	2.4	-	-	-	(4,307)	(1,081)	(5,388)
At 30 September 2015		9,497	16,561	24,820	34,152	102	85,132

Balance Sheet

As at 30 September 2016

	Notes	As at 30 September 2016 £'000	As at 30 September 2015 £'000
Fixed assets
Investments	2.3	128,261	75,319

Current assets
Debtors	2.7	1,770	240
Cash at bank and on deposit		21,591	10,707
		23,361	10,947
Creditors (amounts falling due within one year)	2.8	(1,064)	(1,134)
Net current assets		22,297	9,813
Net assets		150,558	85,132
Capital and reserves
Called-up share capital	3.1	18,412	9,497
Share premium	3.2	96,515	16,561
Capital reserve	3.2	10,089	34,152
Revaluation reserve	3.2	25,238	24,820
Revenue reserve	3.2	304	102
Equity shareholders' funds		150,558	85,132
Net asset value per share
- Basic	2.1	87.09p	102.56p
- Treasury	2.1	86.80p	101.65p

The financial statements were approved by the Board of Directors on 17 November 2016 and were signed on its behalf by:

Peter Lawrence

Chairman

Statement of Cash Flows

For the year ended 30 September 2016

	Year ended 30 September 2016 £'000	Year ended 30 September 2015 £'000
Cash flows from operating activities
Investment income received	2,225	1,806
Deposit interest received	73	43
Investment management fees paid	(3,006)	(2,134)
Other cash payments	(564)	(473)
Merger costs paid	(246)	-
Net cash outflow from operating activities	(1,518)	(758)
Cash flows from investing activities
Purchases of investments	(33,957)	(56,951)
Disposals of investments	49,955	65,034
Net cash inflow from investing activities	15,998	8,083
Equity dividends paid	(28,512)	(5,388)
Net cash (outflow)/inflow before financing activities	(14,032)	1,937
Cash flows from financing activities
Net proceeds of share issues, share buybacks & sale of shares from treasury	8,554	(1,369)
Net proceeds received from merger	16,362	-
Net cash inflow/(outflow) from financing activities	24,916	(1,369)
Increase in cash	10,884	568

Reconciliation of net cash flow to movement in net cash
Increase in cash	10,884	568
Opening cash position	10,707	10,139
Closing cash at bank and on deposit	21,591	10,707

Reconciliation of profit on ordinary activities before taxation to net cash outflow from operating activities
Profit on ordinary activities before taxation	4,647	8,591
Gains on investments	(6,121)	(9,369)
Decrease/(increase) in debtors	37	(13)
(Decrease)/increase in creditors	(72)	36
Written off expenses from merger	(9)	-
Income reinvested	-	(3)
Net cash outflow from operating activities	(1,518)	(758)

Notes to the Financial Statements

We have grouped notes into sections under three key categories:

1. Basis of preparation

2. Investments, performance and shareholder returns

3. Other required disclosures

The key accounting policies have been incorporated throughout the Notes to the Financial Statements adjacent to the disclosure to which they relate. All accounting policies are included within an outlined box.

1. Basis of Preparation

1.1 Basis of accounting

These Financial Statements have been prepared under FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and in accordance with the Statement of Recommended Practice ("SORP") for investment trust companies and venture capital trusts issued by the Association of Investment Companies ("AIC") in November 2014 and on the assumptions that the Company maintains VCT status. The Company has early adopted the amendments made to FRS 102, paragraph 34.22, issued in March 2016, revising the fair value hierarchy disclosure requirements.

The Financial Statements have been prepared on a going concern basis, under historical cost convention. The functional currency in which the Company operates is Sterling.

2. Investments, performance and shareholder returns

2.1 Net asset value per share

	Number of ordinary shares		Net asset value per share attributable		Net asset value attributable
	30 September 2016 number	30 September 2015 number	30 September 2016 pence	30 September 2015 pence	30 September 2016 £'000	30 September 2015 £'000
Ordinary shares (basic)	172,870,866	83,008,313	87.09	102.56	150,558	85,132
Ordinary shares (including treasury)	184,124,685	94,972,132	86.80	101.65	159,828	96,543

The treasury net asset value per share as at 30 September 2016 included ordinary shares held in treasury valued at the mid share price of 82.38p at 30 September 2016 (2015: 95.38p).

2.2 Return per share

	Weighted average number of ordinary shares		Return per ordinary share		Net profit on ordinary activities after taxation
	30 September 2016 number	30 September 2015 number	30 September 2016 pence	30 September 2015 pence	30 September 2016 £'000	30 September 2015 £'000
Revenue	139,821,872	83,436,491	0.34	1.10	475	913
Capital	139,821,872	83,436,491	2.98	9.20	4,172	7,678
Total			3.32	10.30	4,647	8,591

2.3 Investments

The Company has fully adopted sections 11 and 12 of FRS 102.

Purchases or sales of investments are recognised at the date of transaction.

Investments are measured at fair value. For AIM-traded securities this is either bid price or the last traded price, depending on the convention of the exchange on which the investment is traded.

In respect of unquoted investments, these are valued at fair value by the Directors using methodology which is consistent with the International Private Equity and Venture Capital Valuation guidelines ("IPEV"). This means investments are valued using an earnings multiple, which has a discount or premium applied which adjusts for points of difference to appropriate stock market or comparable transaction multiples. Alternative methods of valuation will include application of an arm's length third party valuation, a provision on cost or a net asset value basis.

Gains and losses arising from changes in the fair value of the investments are included in the Income Statement for the year as a capital item. Transaction costs on acquisition are included within the initial recognition and the profit or loss on disposal is calculated net of transaction costs on disposal.

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement. The details of which are set out in the box above.

The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.

· Level 1 - Fair value is measured based on quoted prices in an active market.

· Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

· Level 3 - Fair value is measured using a valuation technique that is not based on data from an observable market.

	30 September 2016 £'000	30 September 2015 £'000
Level 1
Listed interest bearing securities	-	4,498
Investments traded on AIM	60,575	32,141
	60,575	36,639
Level 2
Collective investment vehicle (Wood Street Microcap Investment Fund)	18,400	8,778
Level 3
Unquoted investments	49,286	29,902
	128,261	75,319

	Level 1		Level 2	Level 3
	Listed interest bearing securities £'000	Traded on AIM £'000	Collective investment vehicle £'000	Unquoted £'000	Total £'000
Opening book cost	4,498	19,443	3,525	23,033	50,499
Opening unrealised appreciation	-	12,698	5,253	6,869	24,820
Opening valuation	4,498	32,141	8,778	29,902	75,319
Movements in the year:
Purchases at cost	29,481	3,817	-	1,450	34,748
Holdings acquired following the acquisition of Baronsmead VCT plc	-	28,301	8,926	25,592	62,819
Sale - proceeds	(33,979)	(1,868)	-	(14,899)	(50,746)
- realised gains on sales	-	288	-	2,643	2,931
Unrealised gains realised during the year	-	428	-	2,344	2,772
(Decrease)/increase in unrealised appreciation	-	(2,532)	696	2,254	418
Closing valuation	-	60,575	18,400	49,286	128,261
Closing book cost	-	50,409	12,451	40,163	103,023
Closing unrealised appreciation	-	10,166	5,949	9,123	25,238
Closing valuation	-	60,575	18,400	49,286	128,261
Equity shares	-	60,575	18,400	12,264	91,239
Loan notes	-	-	-	37,022	37,022
Closing valuation	-	60,575	18,400	49,286	128,261

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

For Level 3 unquoted investments, the effect on fair value of changing one or more assumptions to reasonably possible alternatives has been considered. The portfolio has been reviewed and both downside and upside reasonable possible alternatives have been identified and applied to the valuation of each of the investments. The inputs flexed in determining the reasonably possible alternative assumptions include the earnings stream and marketability discount.

Applying the downside alternatives the value of the unquoted investments would be £3.5 million or 7.1 per cent lower. Using the upside alternatives the value would be increased by £3.0 million or 6.0 per cent.

2.4 Dividends

	Year ended 30 September 2016			Year ended 30 September 2015
	Year ended 30 September 2016			Year ended 30 September 2015
	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 2016
-First interim dividend of 3.5p per ordinary share paid on 18 December 2015	-	2,905	2,905	-	-	-
-Second interim dividend of 6.5p per ordinary share paid on 3 June 2016	85	10,990	11,075	-	-	-
- Third interim dividend of 8.5p per ordinary share paid on 30 September 2016	188	14,344	14,532	-	-	-
For the year ended 30 September 2015
-First interim dividend of 2.5p per ordinary share paid on 19 June 2015	-	-	-	1,081	999	2,080
-Second interim dividend of 4.0p per ordinary share paid on 18 September 2015	-	-	-	-	3,308	3,308
	273	28,239	28,512	1,081	4,307	5,388

2.5 Income

Interest income on loan notes and dividends on preference shares are accrued on a daily basis. Provision is made against this income where recovery is doubtful.

Where the terms of unquoted loan notes only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income once redemption is reasonably certain. Until such date interest is accrued daily and included within the valuation of the investment. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return the redemption premium should be recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. No redemption premiums were received for the year ended 30 September 2016.

Income from fixed interest securities and deposit interest is included on an effective interest rate basis.

Dividends on quoted shares are recognised as income when the related investments are marked ex-dividend and where no dividend date is quoted, when the Company's right to receive payment is established.

	Year ended 30 September 2016			Year ended 30 September 2015
	Quoted securities £'000	Unquoted securities £'000	Total £'000	Quoted securities £'000	Unquoted securities £'000	Total £'000
Income from investments†
UK franked	1,452	-	1,452	567	-	567
UK unfranked	33	558	591	27	1,228	1,255
UK unfranked - reinvested	-	-	-	-	3	3
	1,485	558	2,043	594	1,231	1,825
Other income‡
Deposit interest			60			27
Other income			12			17
Total income			2,115			1,869
Total income comprises:
Dividends			1,465			567
Interest			650			1,302
			2,115			1,869

† All investments have been included at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss.

‡ Other income on financial assets not including at fair value through profit or loss.

2.6 Investment management fee and other expenses

All expenses are recorded on an accruals basis.

	Year ended 30th September 2016			Year ended 30th September 2015
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	650	1,949	2,599	398	1,192	1,590
Performance fee	-	-	-	-	588	588
	650	1,949	2,599	398	1,780	2,178

Management fees are allocated 25 per cent income and 75 per cent capital derived in accordance with the Board's expected split between long term income and capital returns. Performance fees are allocated 100 per cent capital.

The management agreement may be terminated by either party giving twelve months' notice of termination.

The Manager, Livingbridge VC LLP, receives a fee of 2 per cent per annum of the net assets of the Company, calculated and payable on a quarterly basis.

The Manager is entitled to a performance fee if at the end of any calculation period, the total return on shareholders' funds exceeds the threshold of the higher of 4 per cent or base rate plus 2 per cent on shareholders' funds (calculated on a compound basis). The Manager is entitled to 10 per cent of the excess. The amount of any performance fee which is paid in respect of a calculation period shall be capped at 5 per cent of shareholders' funds at the end of the period.

Amounts payable to the Manager at the year-end are disclosed in note 2.8.

Other expenses

	Year ended	Year ended
	30 September	30 September
	2016	2015
	£'000	£'000
Directors' fees	123	98
Secretarial and accounting fees paid to the Manager	147	137
Remuneration of the auditors and their associates:
- audit	31	23
- other services supplied pursuant to legislation (interim review)	6	-
- other services supplied relating to taxation	7	7
Merger costs	415	-
Other	261	204
	990	469

Information on directors' remuneration is given in the directors' emoluments table in the full Annual Report and Accounts.

Charges for other services provided by the auditors in the year ended 30 September 2016 were in relation to the interim review and tax compliance work (including iXBRL). The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. The Directors consider that the auditors were best placed to provide such services.

2.7 Debtors

	As at	As at
	30 September	30 September
	2016	2015
	£'000	£'000
Prepayments and accrued income	203	240
Amounts due from sale of shares from treasury	1,567	-
	1,770	240

2.8 Creditors (amounts falling due within one year)

	As at	As at
	30 September	30 September
	2016	2015
	£'000	£'000
Management, secretarial and accounting fees due to the Manager	792	1,056
Merger costs	169	-
Other creditors	103	78
	1,064	1,134

2.9 Tax

UK corporation tax payable is provided on taxable profits at the current rate.

Provision is made for deferred taxation on all timing differences calculated at the current rate of tax relevant to the benefit or liability.

The tax charge for the year is lower than the standard rate of corporation tax in the UK for a company. The differences are explained below:

	Year ended			Year ended
	30 September 2016			30 September 2015
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Profit on ordinary activities before taxation	475	4,172	4,647	1,002	7,589	8,591
Corporation tax at 20.0 per cent (2015: 20.5 per cent)*	95	834	929	205	1,556	1,761
Effect of:
Non-taxable gains	-	(1,224)	(1,224)	-	(1,921)	(1,921)
Non-taxable dividend income	(293)	-	(293)	(116)	-	(116)
Losses carried forward	198	390	588	-	276	276
Tax charge/(credit) for the year	-	-	-	89	(89)	-

* The corporation tax rate applied is based on the average tax rates for the financial years ended 30 September 2016 and 2015. The actual rates were 21 per cent until 31 March 2015 and 20 per cent from 1 April 2016.

At 30 September 2016 the Company had surplus management expenses of £7,583,134 (2015: £4,648,934) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus expenses. Due to the Company's status as a VCT, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

3. Other Required Disclosures

3.1 Called-up share capital

Allotted, called-up and fully paid:


Ordinary shares	£'000
94,972,132 ordinary shares of 10p each listed at 30 September 2015	9,497
9,727,419 ordinary shares of 10p each issued during the year	973
79,425,134 ordinary shares of 10p each issued as consideration shares following the acquisition of BVCT	7,942
184,124,685 ordinary shares of 10p each listed at 30 September 2016	18,412
11,963,819 ordinary shares of 10p each held in treasury at 30 September 2015	‌(1,196)
2,040,000 ordinary shares of 10p each repurchased during the year and held in treasury	‌‌(204)
(2,750,000) ordinary shares of 10p each sold from treasury during the year	275
11,253,819 ordinary shares of 10p each held in treasury at 30 September 2016	(1,125)‌‌
172,870,866 ordinary shares of 10p each in circulation* at 30 September 2016	17,287

* Carrying one vote each.

During the year the Company bought back 2,040,000 ordinary shares and sold from treasury 2,750,000 ordinary shares, representing (0.75) per cent of the ordinary shares in issue at the beginning of the financial year.

There were no changes in share capital between the year end and when the financial statements were approved.

Treasury shares

When the Company reacquires its own shares, they are held as treasury shares and not cancelled.

Shareholders have authorised the Board to sell treasury shares at a discount to the prevailing NAV subject to the following conditions:

- It is in the best interests of the Company;

- Demand for the Company's shares exceeds the shares available in the market;

- A full prospectus must be produced if required; and

- HMRC will not consider these 'new shares' for the purposes of the purchasers' entitlement to initial income tax relief.

3.2 Reserves

Gains and losses on realisation of investments of a capital nature are dealt with in the capital reserve. Purchases of the Company's own shares to be either held in treasury or cancelled are also funded from this reserve. 75 per cent of management fees are allocated to the capital reserve in accordance with the Board's expected split between long term income and capital returns.

	Distributable reserves			Non-distributable reserves
	Capital reserve £'000	Revenue reserve £'000	Total £'000	Share premium £'000	Revaluation reserve* £'000	Total £'000
At 1st October 2015	34,152	102	34,254	16,561	24,820	41,381
Gross proceeds of share issues	-	-	-	9,027	-	9,027
Shares issued as consideration following the acquisition of BVCT	-	-	-	71,227	-	71,227
Purchase of shares for treasury	(1,912)	-	(1,912)	-	-	-
Sale of shares from treasury	2,344	-	2,344	-	-	-
Expenses of share issue and buybacks	(10)	-	(10)	(300)	-	(300)
Reallocation of prior year unrealised gains	2,772	-	2,772	-	(2,772)	(2,772)
Realised gain on disposal of investments#	2,931	-	2,931	-	-	-
Net increase in value of investments#	-	-	-	-	3,190	3,190
Management fee capitalised#	(1,949)	-	(1,949)	-	-	-
Revenue return on ordinary activities after taxation#	-	475	475	-	-	-
Dividends paid in the year	(28,239)	(273)	(28,512)	-	-	-
At 30 September 2016	10,089	304	10,393	96,515	25,238	121,753

# The total of these items is £4,647,000, which agrees to the total profit on ordinary activities.

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

Distributable reserves include the net unrealised loss on investments whose prices are quoted in an active market and deemed readily realisable in cash.

Share premium is recognised net of issue costs.

The Company does not have any externally imposed capital requirements.

3.3 Financial instruments risks

The Company's financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in a diverse portfolio of UK growth businesses.

The Company's investing activities expose it to a range of financial risks. These key risks and the associated risk management policies to mitigate these risks are described below.

Market risk

Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities.

Price Risk

The investment portfolio is managed in accordance with the policies and procedures described in the Strategic Report.

Investments in unquoted stocks & AIM-traded companies involve a higher degree of risk than investments in the main market. The Company aims to reduce this risk by diversifying the portfolio across business sectors and asset classes.

Management performs continuing analysis on the fair value of investments and the Company's overall market positions are monitored by the Board on a quarterly basis.

	As at 30 September 2016			As at 30 September 2015
	% 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	62	3,949	(3,949)	54	2,046	(2,046)
Unquoted	38	2,464	(2,464)	40	1,495	(1,495)

Valuation methodology includes the application of earnings multiples derived from either listed companies with similar characteristics or recent comparable transactions. Therefore the value of the unquoted element of the portfolio may also indirectly be affected by price movements on the listed exchanges.

Interest rate risk

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

	As at 30 September 2016			As at 30 September 2015
	Total investment £'000	Weighted average interest rate %	Weighted average time for which rate is fixed days	Total investment £'000	Weighted average interest rate %	Weighted average time for which rate is fixed days

Fixed rate loan note securities	37,022	8.95	#	20,322	8.54	#
Fixed interest instruments	-	-	-	4,498	0.39	26
Cash at bank and on deposit	21,591	-	-	10,707	-	-
	58,613			35,527

# Due to the complexity of the instruments and uncertainty surrounding timing of realisation the weighted average time for which the rate is fixed has not been calculated.

Credit risk

Credit risk refers to the risk that counterparty will default on its obligation resulting to a financial loss to the Company. The Investment Manager monitors credit risk on an ongoing basis.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

	As at	As at
	30 September	30 September
	2016	2015
	£'000	£'000
Investments in fixed rate instruments	-	4,498
Cash at bank and on deposit	21,591	10,707
Interest, dividends & other receivables	1,770	240
	23,361	15,445

Credit risk arising on fixed interest instruments is mitigated by investing in UK Treasury Bills.

Credit risk on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed earlier in the note.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.

All the assets of the Company which are traded on a recognised exchange are held by JP Morgan Chase ("JPM"), the Company's custodian. The Board monitors the Company's risk by reviewing the custodian's internal controls reports as described in the Corporate Governance section in the full Annual Report and Accounts.

The cash held by the Company is held by JPM. The Board monitors the Company's risk by reviewing regularly the internal control reports of these banks. Should the credit quality or the financial position of either bank deteriorate significantly the Investment Manager will seek to move the cash holdings to another bank.

There were no significant concentrations of credit risk to counterparties at 30 September 2016 or 30 September 2015. No individual investment exceeded 3.9 per cent of the net assets attributable to the Company's shareholders at 30 September 2016 (2015: 6.1 per cent).

Liquidity risk

The Company's financial instruments include investments in unquoted companies which are not traded in an organised public market, as well as AIM traded equity investments, all of which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.

The Company's liquidity risk is managed on an ongoing basis by the Investment Manager. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 30 September 2016 these investments were valued at £21,591,000 (2015: £15,205,000).

3.4 Related parties

Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager, Livingbridge VC LLP, as disclosed in notes 2.6 and 2.8, and fees paid to the Directors as disclosed in note 2.6. In addition, the Manager operates a Co-investment Scheme, detailed in the Management retention section in the Strategic Report above, whereby members and staff of the Manager are entitled to participate in all unquoted investments alongside the Company.

During the year ended 30 September 2016, the Manager received income of £nil (2015: BVCT £152,000 & BVCT2 £152,000) in connection with advisory fees and incurred abort fees of £12,000 (2015: BVCT £9,000 & BVCT2 £9,000), with respect to investments attributable to Baronsmead Venture Trust.

3.5 Segmental reporting

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

National Storage Mechanism

A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: http://www.morningstar.co.uk/uk/NSM

END

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UNRRRNVAAAUA

Companies

Baronsmead Venture Trust (BVT)

Friday, 22nd November 2024

COMPANIES COVERED:

GAW AMGO ITH

Games Workshop shares jump in early trade as interim results are on track to impress, and Ithaca Energy continues its march higher off yesterday’s dividend news but Amigo slips as options for the future remain limited.

Full Archive

UK 100

Latest directors dealings

20 hours ago Cerillion
21 hours ago Associated British Foods
22 hours ago B&M European Value Retail S.A. (DI)
22 hours ago B&M European Value Retail S.A. (DI)
22 hours ago Haleon

All directors dealings today