Half-yearly Report
Baronsmead VCT 3 plc
Half Yearly Financial Report
30 June 2010
The Directors announce the unaudited half-yearly financial report for the six
months to 30 June 2010 as follows:-
Copies of the half yearly report can be obtained from the following website:
www.baronsmeadvct3.co.uk .
Investment Objective
Baronsmead VCT 3 is a tax efficient listed company which aims to achieve
long-term investment returns for private investors.
Investment policy
• To invest primarily in a diverse portfolio of UK growth companies, 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 VCT 3 has the objective to maintain a minimum annual
dividend level of around 4.5p per ordinary share if possible, but this depends
primarily on the level of realisations achieved and cannot be guaranteed.
There will be variations in the amount of dividends paid year on year. Since
launch the average annual tax-free dividend paid to shareholders including the
declared interim dividend of 3.0p ) has been 5.4p per ordinary share (equivalent
to a pre-tax return of 8.0p per ordinary share for a higher rate taxpayer). For
shareholders who received up front tax reliefs, their returns would have been
even higher.
Secondary market in the shares of Baronsmead VCT 3
The existing shares of the Company are listed on the London Stock Exchange and
can be bought and sold using a stockbroker in the same way as shares of any
other listed company.
Qualifying investors* who invest in the existing shares of the Company can
benefit from:
• Tax free dividends
• Realised gains not subject to capital gains tax (although any realised losses
are not allowable)
• No minimum holding period
• No need to include VCT dividends in annual tax returns
The UK tax treatment of VCTs is on a first in first out basis and therefore tax
advice should be obtained before shareholders dispose of their shares and also
if they deferred a capital gain in respect of new shares acquired prior to 6
April 2004.
* UK income tax payers, aged 18 or over, who acquire no more than £200,000
worth of VCT shares in a tax year.
FINANCIAL HEADLINES
â— 3.0p - Interim dividend of 3.0p per share (unchanged from prior year) payable
on 15 September 2010 to shareholders on the register at 20 August 2010.
â— +3.8% - NAV per share increased by 3.8 per cent over the six month period to
30 June 2010 from 97.50p to 101.24p before payment of the 3.0p interim dividend.
â— + 166.1% - NAV total return to ordinary shareholders for every 100p invested
since launch.
â— 8.4% - Dividend yield of 8.4 per cent tax free to qualifying shareholders
(gross equivalent yield for a higher rate taxpayer is 12.5 percent). This
rolling twelve month yield is based on the 3.0p interim dividend payable in
September 2010 plus the 4.5p dividend paid in December 2009 divided by the mid
ordinary share price of 89.0p at 30 June 2010.
Performance Summary to 30 June 2010
1 year 3 years 5 Years Since launch
% % % %
Total return and share price*
Net Asset Value†6.4 (5.1) 23.6 66.1
Share Price†3.5 (3.9) 28.2 45.3
FTSE All-Share 21.1 (16.2) 18.7 15.5
* Source: ISIS EP LLP and AIC.
†These returns for Baronsmead VCT 3 ignore up front tax reliefs and the impact
of receiving dividends tax free.
Cash Returned to Shareholders
The table below shows the cash returned to shareholders dependent on their
subscription cost, including their income tax reclaimed on subscription.
Net Cumulative
Subscription Income tax cash dividends Net annual Gross
price reclaim invested paid* yield± yieldâ€
Year subscribed p p p p % %
2001 (January) 100.0 20.0 80.0 51.3 6.8 10.1
2005 (March) - C 100.0 40.0 60.0 22.4 7.0 10.4
Share
2010 (March) 103.1 30.9 72.2 3.0 - ^ - ^
Note - The total return could be higher for those shareholders who were able to
defer a capital gain on subscription and the net sum invested may be less.
* Includes proposed interim dividend of 3.0p to be paid on 15 September 2010.
± Net annual yield represents the cumulative dividends paid expressed as an
annualised percentage of the net cash invested.
†The gross equivalent yield if the dividends had been subject to higher rate
tax (32.5 per cent on dividend income at 30 June 2010). As from the tax year
2010/11, a new additional rate of tax on dividend income of 42.5 per cent came
into force for those who earned more than £150,000. For those Shareholders who
would otherwise pay this higher rate of tax on dividends, the future gross
equivalent yield will be higher than the figures shown.
Dividends paid to C shareholders post conversion have been adjusted by the
conversion ratio (0.85642528).
ˆ The table above excludes returns for shareholders who subscribed in the Joint
Offer with Baronsmead VCT 4 plc as those returns are not yet meaningful.
CHAIRMAN'S STATEMENT
I am very pleased to present my first report since becoming Chairman after the
9th Annual General Meeting held in May 2010 on the retirement of Mark Cannon
Brookes. On behalf of the Board and shareholders, I would like to pay public
tribute to Mark for his excellent work as Chairman from the formation of
Baronsmead VCT 3 in 2001.
The 3.8 per cent growth in Net Asset Value ("NAV") per share continues the
positive trend since the November 2008 low point and comes at a time when
operating profits for many of our portfolio companies are increasing. The 3p
interim dividend maintains the level paid at this stage for each of the last
three years.
Our joint offer with Baronsmead VCT 4 closed on 17 March 2010 fully subscribed,
raising £8m gross proceeds for Baronsmead VCT 3 from over 900 subscribers. We
are delighted to welcome circa 200 new shareholders.
RESULTS
In the six months to 30 June 2010, the NAV per share increased by 3.8 per cent
from 97.50p to 101.24p before payment (due on 15 September 2010) of a 3p per
share interim dividend. This dividend arises both from the capital profits
realised in the period and net revenues of 1.2p per share. The increase in NAV
per share is primarily due to the 9 per cent increase in the value of the
unquoted portfolio. In comparison the FTSE All-Share Index decreased 7.9 per
cent over the same period.
At the period end, over 70 per cent of the ordinary capital raised (net of
launch costs) prior to 31 December 2007 was invested in VCT qualifying
investments and the five other VCT qualifying tests had also all been met.
LONG TERM PERFORMANCE
The interim dividend will take the cumulative dividends paid (tax free for
qualifying shareholders) for founder shareholders in 2001 to 51.3p per share
and represents a very rewarding level of cash returned on their original £1
investment. This period included two major Stock Market downturns in 2003 and
2008.
Shareholders from the first two prospectus offers in 2001 and 2005/06 have to
date achieved positive absolute total returns. The comparable returns for the
FTSE All-Share Index over differing time periods are set out above. In addition,
comparable returns with other VCTs can be seen on the website of the
Association of Investment
Companies ("AIC") who publish monthly data, www.theaic.co.uk.
The benefit of VCT tax reliefs on the dividends noted above is set out in the
table titled `Cash returned to shareholders' in terms of annual net and gross
yields, including the assumptions made in these computations. Over the long term,
the benefit of the tax free dividends can be very significant: in order for a
higher rate tax payer since inception to receive the same income from taxable
dividends as from Baronsmead VCT 3, they would have needed to have received an
additional 25p per share in dividends before tax. In addition, this tax relief
will be of significantly increased value to those shareholders whose income exceeds
£150,000 p.a. from the 2010/11 tax year as there is a new dividend tax rate of
42.5 percent (up from 32.5 per cent).
PORTFOLIO REVIEW
Following new investment in five companies and the sale of four investments
plus one AIM write off, the total portfolio comprises sixty-four companies.
The portfolio by value was invested 47 per cent in unquoted companies,
19 per cent in AIM and Listed investees, 2 per cent in Wood Street Microcap
Investment Fund and the balance of 32 per cent remained in cash or government
securities. The largest unquoted investment, Nexus Vehicle Holdings Limited,
and the largest AIM investment, IDOX plc,represented 6.4 and 2.0 per cent of
Net Asset Value respectively.
Portfolio companies are reviewed quarterly in terms of their financial health
and in the last three quarters, the number of companies exhibiting steady or
better trading progress has improved to 94 per cent of the portfolio.
The Manager had anticipated the economic downturn and selects investments that
have less exposure to the business cycle and have distinctive growth strategies
that are intended to be less reliant on general economic conditions. These
selection criteria have shown early success as can be seen by the relatively
robust unquoted company valuations throughout the recessionary period and several
profitable exits. A number of AIM companies have also been acquired by trade buyers
from the portfolio signalling good value within their sectors.
The Manager is fully aware of the likelihood of public sector spending cuts and
associated risks. Some of the portfolio companies do have exposure to the public
sector; however, the portfolio as a whole has limited exposure to discretionary
public spending which may be the most vulnerable area.
UNQUOTED PORTFOLIO
On average, the value of the current portfolio of unquoted investments is 27
per cent higher than original cost. Seventeen companies are valued at or higher
than cost whilst three are valued below cost. These period end figures exclude
two unquoted company realisations, namely Active Assistance in March 2010 for
2.8 times cost and Occam DM Ltd at 1.5 times cost in May 2010.
The sale of Active Assistance was an excellent result after first investment in
March 2008. Based in Sevenoaks, the business provides a national live-in care
service for adults and children with spinalcord injuries and neurological
conditions. The sale involved a merger with another health care business, First
Call Care Services Limited, to create a national provider of both live-in and
live-out care to individuals with complex long term conditions.
Occam DM Ltd was the longest standing unquoted investment in the portfolio
since first investing in July 2004. Occam DM Ltd is a leading provider of
marketing management software and direct marketing solutions with a blue chip
client base in both the public and private sectors. Occam DM Ltd was sold to St
Ives Group in May 2010 realising 1.5 times cost. At 31 December 2009, it had
been valued at 25 per cent of cost, which illustrates both the caution applied
when valuing unquoted investments until proven and how the business was transformed.
The price earnings multiples used in calculating unquoted valuations have
changed little recently and so the increase in value has generally come from
good profit growth. Several have shown sales growth by taking market share
through innovation, particularly in establishing new and cost effective channels
to market and servicing customers.
For instance Mark Burchfield, Managing Director of Cablecom Networking Holdings
Limited in which the Baronsmead VCTs invested in May 2007 presented its story at
the ninth AGM held in May 2010. Cablecom's tag line is `Always Connected' as the
market leading provider of Student Accommodation Internet Services. Students have
benefitted from the widest range of student specific IT services, some of the fastest
UK broadband speeds and improvement in the `student experience'. Annual turnover
has almost doubled over the last three years.
AIM-TRADED PORTFOLIO AND WOODSTREET MICROCAP INVESTMENT FUND
These share portfolios were down 5.4 per cent and 2.2 per cent over the six
months under review as the UK quoted markets lost some of their earlier
recovery due to concerns about government deficits and economic growth.
Interest from trade buyers again highlighted value in the AIM portfolio
including a bid possibility for WIN plc where further investment had been made
in 2009. Realised profits totalled £168,000 from the AIM portfolio. The main
success came from disposing of some 50 per cent of the shares held in Advanced
Computer Software plc at 2.1 times cost at the time of flotation in July 2008.
Our holding in the Wood Street Microcap Investment Fund is now valued at £1
million across nineteen non-qualifying investments.
NEW INVESTMENT
Unquoted investment totalled £3.5 million in the six months under review
comprising investment in Surgi C Limited, Inspired Thinking Group Limited and
Getting Personal Limited plus two further round financings into Independent
Living Services Limited and Nexus Vehicle Holdings Limited.
• Surgi C Limited, the UK's leading independent distributor of spinal implants
is based in Birmingham. The business has grown strongly as a result of an
increasing product portfolio and the high levels of education and support it
provides to spinal surgeons. www.surgi-c.com
• Birmingham based Inspired Thinking Group Limited (ITG) provides services that
help large marketing departments operate more efficiently, including improved
procurement of artwork and print management. The new funding was used to acquire
Total Marketing Service, a provider of workflow management systems to marketing
departments.
• Getting Personal Limited is a leading online retailer, based in Manchester,
which sells personalised and unique gifts. The business was established in
November 2005 with just one product, a personalised calendar.
www.GettingPersonal.co.uk now sells over 4,000 items ranging from personalised
cards, notebooks, mugs and chocolate to non-personalised items for general
gifting.
• Existing portfolio company Nexus Vehicle Holdings Limited, a leading provider
of vehicle rental, used further funding to acquire Adapted Vehicle Hire, which is
a niche rental business providing adapted vehicles for the disabled driver market.
• Two further small investments were made in portfolio company Independent
Living Services Limited, an acute domiciliary care provider based in Scotland,
firstly to fund a small acquisition and secondly to repurchase shares.
The volume of qualifying AIM opportunities also increased from the depressed
levels of 2009. Some £481k was invested in qualifying holdings and £460k in
non-qualifying shareholdings. Three investments in the latter category were
market purchases in support of the strategy to take more influential stakes by
the combined Baronsmead VCTs in a smaller number of AIM investments, where a
likely exit strategy to a trade buyer can be envisaged.
After the period end, £3.5 million was invested by the five Baronsmead VCTs in
Netcall plc of which Baronsmead VCT 3 provided £687,000. Netcall plc,
based in St Ives provides software and communication solutions into the call centre
market, mainly under the Queuebuster label. The fund-raising is primarily for
the acquisition of Telephonetics, which specialises in speech recognition
software.
INVESTMENT AND TAX PLANNING
On 18 January 2010 the Company issued a Joint Offer for Subscription with
Baronsmead VCT 4 to raise £16m in aggregate. This Offer became fully subscribed
and closed on 17 March 2010 with over 70 per cent of the funds raised having
been invested by the existing shareholders of the Baronsmead VCTs.
Having raised £7.56m net of costs under the Offer, the Company has sufficient
cash resources to fund all of its operations for at least the next 12 months.
As a result, the Directors do not intend, at this stage, to raise further funds
through issuing new shares in the current tax year. As many of the Company's
shareholders are also shareholders in the other Baronsmead VCTs they will be
informed of any offers that those VCTs may make available to either their existing
shareholders or more widely during the course of the current tax year.
The Company operates a share policy of buying shares in to Treasury in
accordance with the resolutions passed by the shareholders from time to time.
During the six months to 30 June 2010, 910,000 shares were bought back into
Treasury. As a result, as at 30 June 2010 the Company held 6,377,317 Treasury
shares which were bought back at an average discount of approximately 9.2 per
cent to NAV. Recent interest in the Company's existing shares may result in the
Company issuing shares out of Treasury in order to rectify imbalances in the
demand and supply of shares that occur from time to time. In accordance with
shareholders' authorities, when re-issued,Treasury shares may be sold at a
discount to NAV provided it is narrower than when they were acquired. Amongst
other things, depending on the number of shares available at the time, the
Company may re-issue Treasury shares to ensure there are sufficient shares
available for the Company's Dividend Reinvestment Plan.
ANNUAL REPORTING AND COMPANY SECRETARY
For the second time in three years, the 2009 Annual Report & Accounts for
Baronsmead VCT 3 won the AIC's best report for the VCT sector. `The Judges
found this report and accounts interesting and informative, with clear
objectives and a straightforward statement from the Chairman. Details of new
and underlying holdings were viewed positively as was the addition of investor
case studies.'
Following the split in 2005 from its former parent F&C Asset Management plc,
ISIS EP LLP later assumed responsibility for the provision of Company Secretarial
services. With effect from 1 March 2010 ISIS has engaged Capita Sinclair Henderson
Limited ("CSH") to provide this service on its behalf, although ISIS continues to
remain legally responsible and is the named Company Secretary. CSH has a long
history of providing such services to investment companies both under the current
owners Capita Group plc and previously as Sinclair Henderson Limited.
RECENT HM REVENUE & CUSTOMS/HM TREASURY ANNOUNCEMENTS
The Manager, in conjunction with our trade association, the AIC and other VCT
Managers, has worked hard over many years to inform HMRC and HM Treasury of the
positive economic impact from unquoted private equity backed companies.
The resulting AIC report "Supporting enterprise and growth: the role of Venture
Capital Trusts" published in March 2010 is based on evidence submitted by
fifteen VCT Managers and has helped the Government understand the economic
return to the state, generated from the investment made in VCTs through
providing tax relief. Most notably, it states "of the 303 investee companies who
provided data, the net employment impact since VCT investment has been a 48 per cent
increase in the total workforce to over 25,402 employees." The percentage
increase in employment was slightly higher for the twenty-four companies from
within the Baronsmead portfolios that were included in the survey.
The changes in VCT legislation commented on in the 22 June 2010 Budget had in
fact been announced a year earlier but will only probably be enacted for the fiscal
year starting on 6 April 2011.
OUTLOOK
The unquoted portfolio is demonstrating good resilience during the current
period of economic uncertainty that will take time to dissipate as the overhang
of government debt is digested and hopefully suitably reduced.
Entrepreneurial companies such as those backed by Baronsmead VCT 3 are seen by
most commentators to be an important way to assist the process of economic rejuvenation.
These companies have a good record of creating jobs often through considerable innovation
and `doing it differently'.
We have the funds to invest in such situations. There is also a solid platform
within our portfolio companies for further growth and so there are more grounds for optimism
than there have been over the last few years.
Anthony Townsend
Chairman
12 August 2010
Table of Investments and Realisations
Investments in the six months to 30 June 2010
Number Company Location Nature of Activity Investment
Business cost (£
'000)
Unquoted
investments
New
1 Getting personal Manchester Consumer On-line retail of 988
Limited Markets personalised
gifts
2 Inspired Thinking Birmingham Business Marketing 796
Group Limited Services services & work
flow systems
3 Surgi C Limited Birmingham Healthcare Distribution of 1,102
& Education spinal implants
Follow on
1 Independent Living Alloa Healthcare Care at home 122
Services Limited & Education services
2 Nexus Vehicle Pudsey Business Vehicle rental 500
Holdings Limited Services provider to
corporates
Paper
consideration
1 Crew Clothing London Consumer Branded clothing 51
Company Limited* Markets retailer
2 Independent Living Alloa Healthcare Care at home 150
Services Limited* & Education services
Total Unquoted investments 3,709
AIM-traded & listed investments
New
1 Bglobal plc Darwen Business Smart Metering 176
Services
2 Strategic Thought Maidenhead IT & Media Risk management 35
Group plc software
Follow on
1 Electric Word plc London IT & Media Business to 31
business
publisher
2 Green Compliance Cirencester Business Blue collar 156
plc Services compliance
3 Jelf Group plc Bristol Financial Financial 210
Services solutions
consultancy
4 Proactis Holdings Wetherby IT & Media Procurement 219
plc Software
5 Tasty plc London Consumer Restaurant 114
Markets Operator
Total AIM-traded and listed 941
investments
Collective investment vehicles
Follow on
1 Wood Street 500
Microcap
Investment Fund
Total Collective investment 500
vehicles
Total investments in the 5,150
period
* Paper consideration from rolled up interest reinvested.
Realisations in the six months to 30 June 2010
31 Decem Realised
ber
First 2009 profit/ Overall
(loss)
investment valuation this multiple
period
Number Company date £'000 £'000 return *
Unquoted
realisations
1 Active Assistance Trade sale Mar 08 1,155 414 2.8
2 Occam DM Ltd Trade sale Jul 04 121 340 1.5
Total Unquoted real 1,276 754
isations
AIM traded & listed
realisations
1 Character Group plc Trade sale Feb 08 88 44 0.9
2 INVU plc Trade sale May 07 1 0 0.0
3 Inverness Medical Part sale Aug 09 28 0 1.3
Inc.
4 Advanced Computer Part Sale Jul 08 540 13 2.1
Software plc
657 57
Written off
1 Payzone plc May 03 1 (1) -
1 (1)
Total AIM-traded & listed 658 56â€
realisations
Total realisations in the period 1,934 810
*Includes interest / dividends received, loan note redemptions and partial
realisations accounted for in prior periods.
†Proceeds of £5,000 were also received in respect of an investment, Interactive
Prospect Targeting plc, written off in a prior period. In addition, a loss of
£9,000 was realised during the period on the redemption on 7 June 2010 of a UK
Treasury Gilt which had paid a rate of interest of 4.75 per cent.
Investment Portfolio
31 30 June % of
December Equity
2009 2010 held by % of
Equity
Book valuation valuation % of Baronsmead held
cost by
Company Nature of £'000 £'000 ╪ £'000 Net VCT 3 plc all
business assets funds*
Unquoted
Nexus Vehicle Business 2,367 2,511 3,975 6.4 12.6 57.4
Holdings Services
Reed & Mackay Business 1,211 3,145 3,697 6.0 9.5 40.0
Limited Services
Crew Clothing Consumer 984 1,300 1,962 3.2 5.7 24.1
Company Limited markets
Quantix Limited IT & Media 1,194 1,862 1,886 3.0 11.4 48.0
CableCom IT & Media 1,381 1,848 1,854 3.0 10.6 48.0
Networking
Holdings
Fisher Outdoor Consumer 1,423 1,777 1,777 2.9 10.5 44.0
Leisure Holdings Markets
Limited
CSC (World) IT & Media 1,606 1,250 1,687 2.7 8.8 40.0
Limited
Carnell Business 1,499 2,639 1,663 2.7 8.3 37.5
Contractors Services
Independent Healthcare & 1,073 1,566 1,637 2.6 16.2 68.1
Living Services Education
Kafevend Holdings Consumer 1,252 1,445 1,583 2.5 15.8 66.5
Limited Markets
Credit Solutions Financial 1,032 1,127 1,128 1.8 8.9 35.0
Limited Services
MLS Limited IT & Media 781 1,138 1,126 1.8 5.3 22.5
Surgi C Limited Health Care 1,102 - 1,102 1.8 9.8 42.5
& Education
Playforce Business 1,033 1,106 1,039 1.7 9.7 44.0
Holdings Limited Services
Getting Personal Consumer 988 - 988 1.6 8.3 37.5
Limited Markets
Inspired Thinking Business 796 - 796 1.3 5.0 22.5
Group Limited Services
Empire World Business 1,297 658 707 1.1 †â€
Trade Limited Services
TVC Group Limited IT & Media 1,233 341 601 1.0 13.0 59.3
Xention Discovery Healthcare & 893 183 160 0.2 3.3 5.6
Education
Kidsunlimited Business 113 113 113 0.2 0.0 0.0
Group Limited Services
Total Unquoted 23,258 24,009 29,481 47.5
AIM
IDOX plc IT & Media 1,038 1,136 1,220 2.0 3.3 9.7
Green Compliance Business 406 500 750 1.2 2.6 14.4
plc Services
Murgitroyd plc Business 319 712 659 1.1 3.1 6.2
Services
WIN plc IT & Media 413 374 608 1.0 4.3 19.0
Advanced Computer IT & Media 263 1,081 564 0.9 0.4 2.2
Software plc
Brulines Holdings Business 646 715 564 0.9 1.8 9.6
plc Services
Proactis Holdings IT & Media 619 307 478 0.8 5.4 26.5
plc
Jelf Group plc Financial 761 235 463 0.7 1.4 6.3
Services
Begbies Traynor Financial 231 607 328 0.5 0.6 2.5
Group plc Services
Interquest Group Business 310 259 304 0.5 1.8 7.2
plc Services
Mount Engineering Business 385 275 302 0.5 2.3 13.4
plc Services
Electric Word plc IT & Media 267 247 293 0.5 3.1 22.3
Tasty plc Consumer 470 161 291 0.5 2.5 17.1
Markets
Kiotech Healthcare & 275 298 275 0.4 2.2 15.8
International plc Education
Ffastfill plc IT & Media 251 297 260 0.4 0.9 6.5
Vero Software plc IT & Media 300 181 237 0.4 3.7 14.3
Craneware plc IT & Media 71 184 223 0.3 0.2 1.1
Dods (Group) plc IT & Media 541 158 216 0.3 1.4 4.4
IS Pharma plc Healthcare & 246 239 198 0.3 1.0 5.9
Education
Adventis Group Business 361 267 193 0.3 3.1 20.7
plc Services
Stagecoach Consumer 419 194 189 0.3 4.5 9.1
Theatre Arts plc Markets
EG Solutions plc IT & Media 375 101 172 0.3 3.1 14.2
Sanderson Group IT & Media 387 132 170 0.3 1.8 6.9
plc
Quadnetics Group Business 296 162 161 0.3 0.6 2.1
plc Services
Bglobal plc Business 176 - 158 0.3 0.5 2.7
Services
Driver Group plc Business 438 294 156 0.2 2.3 10.4
Services
Praesepe plc Consumer 525 185 155 0.2 0.7 3.8
Markets
Plastics Capital Business 473 184 142 0.2 1.8 10.0
plc Services
Autoclenz Business 400 122 122 0.2 3.1 12.3
Holdings plc Services
Cohort plc Business 179 138 118 0.2 0.3 1.4
Services
Real Good Food Consumer 540 17 114 0.2 0.6 2.3
Company (The) plc Markets
Prologic plc IT & Media 310 124 103 0.2 4.1 15.0
Brainjuicer Group IT & Media 50 59 73 0.1 0.4 1.9
plc
Colliers CRE plc Financial 470 78 61 0.1 0.3 0.8
Services
Marwyn Value Financial 64 62 60 0.1 1.5 6.9
Investors plc Services
STM Group plc Financial 140 58 49 0.1 0.5 3.8
Services
Clarity Commerce IT & Media 50 40 46 0.1 0.3 6.2
Solutions plc
Tangent Business 180 73 45 0.1 0.8 4.7
Communications Services
plc
Strategic Thought IT & Media 35 - 35 0.1 0.4 2.1
Group plc
Zoo Digital Group IT & Media 584 15 30 0.0 0.3 0.9
plc
Mission Marketing IT & Media 190 35 14 0.0 0.2 0.7
Group (The) plc
Total AIM 14,454 10,306 10,599 17.1
Listed
Vectura Group plc Healthcare & 771 1,208 720 1.2 0.5 1.3
Education
Chime IT & Media 369 372 302 0.5 0.2 1.5
Communications
plc
Total Listed 1,140 1,580 1,022 1.7
New York Stock Ex
change
Inverness Medical Healthcare & 157 224 136 0.2 0.0 0.1
Inc. Education
Total New York 157 224 136 0.2
Stock Exchange
Interest bearing
securities
UK T-Bill 06/09/ 5,995 - 5,995 9.7
10
UK T-Bill 05/07/ 4,498 - 4,498 7.3
10
BlackRock Cash 5,700 5,700 5,700 9.2
Market OEIC
JP Morgan Cash 1,200 - 1,200 1.9
Market OEIC
Total interest 17,393 5,700 17,393 28.1
bearing
securities
Collective
investment
vehicles
Wood Street 1,025 526 1,005 1.6
Microcap
Investment Fund
Total collective 1,025 526 1,005 1.6
investment
vehicles
Total investments 57,427 42,345 59,636 96.2
Net current as 2,365 3.8
sets
Net assets 62,001 100.0
╪ The total investment valuation at 31 December 2009 per the table above does
not agree to the audited accounts due to purchases and sales since that date.
* All funds managed by the same investment manager, ISIS EP LLP, including
Baronsmead VCT 3.
†Following a restructuring, the effective ownership percentage is dependent on
final exit proceeds.
AIM, Listed and NYSE Portfolio Concentration Analysis as at 30 June 2010
% of
Investment ranking Book cost Valuation Quoted
by valuation £'000 £'000 Portfolio
Top Ten 5,467 6,354 54.0
11-20 3,239 2,703 23.0
21-30 3,696 1,694 14.4
30+ 3,349 1,006 8.6
Total 15,751 11,757 100.0
Independent Review Report to Baronsmead VCT 3 plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2010 which comprises the Income Statement, Reconciliation of Movement
in Shareholders' Funds, Balance Sheet and Statement of Cash Flows and the
related explanatory notes. We have read the other information contained in
the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules (``the DTR'') of the UK's Financial Services Authority
(``the UK FSA''). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with UK Accounting Standards and applicable law
(UK Generally Accepted Accounting Practice). The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with the Statement Half-Yearly Financial Reports as
issued by the UK Accounting Standards Board.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2010 is not prepared,
in all material respects, in accordance with the Statement Half-Yearly Financial
Reports as issued by the UK Accounting Standards Board and the DTR of the UK FSA.
Simon Pashby
for and on behalf of
KPMG Audit Plc
Chartered Accountants
Edinburgh
12 August 2010
Responsibility statement of the Directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with the Statement `Half-yearly Financial reports' issued by the UK Accounting
Standards Board;
• the Chairman's Statement (constituting the interim management report)
includes a fair review of the information required by DTR 4.2.7R of the
Disclosure and Transparency Rules, being an indication of important events that
have occurred during the first six months of the financial year and their impact
on the condensed set of financial statements;
• the Statement of Principal Risks and Uncertainties below is a fair review of
the information required by DTR 4.2.7R being a description of the principal
risks and uncertainties for the remaining six months of the year; and
• the financial statements include a fair review of the information required by
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related party
transactions described in the last annual report that could do so.
By Order of the Board,
Anthony Townsend
Chairman
12 August 2010
Unaudited Income Statement
For the six months to 30 June 2010
Six months to 30 June Six months to 30 June Year to 31 December
2010 2009 2009*
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Unrealised gains on - 1,019 1,019 - 2,438 2,438 - 2,434 2,434
investments
Realised gains/ - 806 806 - (15) (15) - 1,350 1,350
(losses) on
investments
Income 1,287 - 1,287 678 - 678 1,513 - 1,513
VAT - - - (2) (6) (8) (2) (6) (8)
Investment (182) (547) (729) (170) (510) (680) (339) (1,016) (1,355)
management fee
Other expenses (181) - (181) (166) - (166) (347) - (347)
Profit on ordinary 924 1,278 2,202 340 1,907 2,247 825 2,762 3,587
activities before
taxation
Taxation on ordinary (224) 224 - (54) 54 - (167) 167 -
activities
Profit on ordinary 700 1,502 2,202 286 1,961 2,247 658 2,929 3,587
activities after tax
ation
Return per ordinary 1.19p 2.55p 3.74p 0.53p 3.65p 4.18p 1.22p 5.41p 6.63p
share: Basic
* These figures are audited.
Unaudited Reconciliation of Movement in Shareholders' Funds
For the six months to 30 June 2010
Six Six
months to months to Year to
30 June 30 June 31 December
2010 2009 2009
£'000 £'000 £'000*
Opening shareholders' funds 52,878 55,136 55,136
Profit for the period 2,202 2,247 3,587
Increase in share capital in issue 8,165 1,524 1,524
Purchase of shares for treasury (801) (816) (821)
Dividends paid - (2,415)+ (6,483)^
Expenses of share issue (443) (80) (65)
Closing shareholders' funds 62,001 55,596 52,878
* These figures are audited.
+ Includes payment of 2008 final dividend.
^ Includes payment of 2008 final dividend and 2009 first and second interim
dividends.
Notes
1. The unaudited interim results which cover the six months to 30 June 2010
have been prepared in accordance with applicable accounting standards and
adopting the accounting policies set out in the statutory accounts of the
Company for the period to 31 December 2009.
2. Return per share is based on a weighted average of 58,829,168 ordinary
shares in issue (30 June 2009 - 53,697,653, 31 December 2009 - 54,121,721).
3. Earnings for the first six months to 30 June 2010 should not be taken as a
guide to the results of the full financial year.
4. During the six months to 30 June 2010 the Company issued, pursuant to the
offer for subscription, 5,601,586 ordinary shares at an offer price of 102.5p
per share and 2,318,712 ordinary shares at an offer price of 104.5p which
raised £8,165,000, before costs. During this period the Company purchased
910,000 ordinary shares to be held in Treasury at a cost of £801,000. At 30
June 2010 the Company holds 6,377,317 ordinary shares in Treasury. Excluding
Treasury shares, there were 61,242,534 ordinary shares in issue at 30 June 2010
(30 June 2009 - 54,232,236, 31 December 2009 - 54,232,236).
5. The interim dividend of 3.0 pence per ordinary share (1.1 pence revenue and
1.9 pence capital) will be paid on 15 September 2010 to shareholders on the
register on 20 August 2010. The ex-dividend date is 18 August 2010.
6. The financial information contained in this Half-yearly Financial Report
does not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The information for the year to 31 December 2009 has been
extracted from the latest published audited financial statements. The audited
financial statements for the year to 31 December 2009, which were unqualified,
have been filed with the Registrar of Companies. No statutory accounts in
respect of any period after 31 December 2009 have been reported on by the
Company's auditors or delivered to the Registrar of Companies.
7. Copies of the Half-yearly Financial Report have been mailed to shareholders
and are available from the Registered Office of the Company at 100 Wood Street,
London EC2V 7AN.
Unaudited Balance Sheet
As at 30 June 2010
As at As at As at
30 June 30 June 31 December
2010 2009 2009
£'000 £'000 £'000*
Fixed Assets
Unquoted investments 29,481 28,021 25,285
Traded on AIM 10,599 10,866 10,394
Listed on FTSE Small Cap 1,022 1,087 1,580
Traded on NYSE 136 - 224
Collective Investment Vehicle 1,005 516 526
Interest bearing securities 17,393 12,864 12,956
59,636 53,354 50,965
Current assets
Debtors 254 236 349
Cash at bank and on deposit 2,613 2,490 2,033
2,867 2,726 2,382
Creditors (amounts falling due within (502) (484) (439)
one year)
Net current assets 2,365 2,242 1,943
Total assets less current liabilities 62,001 55,596 52,908
Creditors (amounts falling due after - - (30)
one year)
Net assets 62,001 55,596 52,878
Capital and reserves
Called-up share capital 6,762 5,970 5,970
Share premium account 15,010 8,065 8,080
Capital redemption reserve 10,862 10,862 10,862
Revaluation reserve 2,209 1,630 1,393
Capital reserve 26,156 28,800 26,271
Revenue reserve 1,002 269 302
Equity shareholders' funds 62,001 55,596 52,878
As at As at As at
30 June 30 June 31 December
2010 2009 2009*
Net asset value per share 101.24p 102.51p 97.50p
Number of ordinary shares in issue 61,242,534 54,232,236 54,232,236
Treasury net asset value per share 100.08p 101.49p 96.47p
Number of ordinary shares in issue 61,242,534 54,232,236 54,232,236
Number of ordinary shares held in 6,377,317 5,467,317 5,467,317
Treasury
Number of listed ordinary shares 67,619,851 59,699,553 59,699,553
*These figures are audited.
Unaudited Statement of Cash Flows
For six months to 30 June 2010
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
£'000 £'000 £'000*
Net cash inflow from operating activities 499 1,123 955
Capital expenditure and financial (6,846) 1,423 5,195
investment
Equity dividends paid - (2,415) (6,483)
Net cash (outflow) / inflow before (6,347) 131 (333)
financing
Net cash inflow from financing 6,927 627 634
Increase in cash 580 758 301
Reconciliation of net cash flow to
movement in net cash
Increase in cash 580 758 301
Opening net cash 2,033 1,732 1,732
Net cash at end of period 2,613 2,490 2,033
Reconciliation of operating profit before taxation to net cash flow from
operating activities
Profit on ordinary activities before 2,202 2,247 3,587
taxation
Unrealised gains on investments (1,019) (2,438) (2,434)
Realised (gains)/losses on investments (806) 15 (1,350)
Changes in working capital and other 122 1,299 1,152
non-cash items
Net cash inflow from operating activities 499 1,123 955
*These figures are audited.
Principal Risks and Uncertainties
The Company's assets consist of equity and fixed interest investments, cash and
liquid resources. Its principal risks are therefore market risk, credit risk
and liquidity risk. Other risks faced by the Company include economic, loss of
approval as a Venture Capital Trust, investment and strategic, regulatory,
reputational, operational and financial risks. These risks, and the way in which
they are managed, are described in more detail under the heading Principal risks,
risk management and regulatory environment within the Business Review and Notes
in the Company's Annual Report and Accounts for the year to 31 December 2009.
The Company's principal risks and uncertainties have not changed materially since
the date of that report.
Related Parties
ISIS EP LLP (`the Manager') manages the investments of the Company. The Manager
also provides or procures the provision of secretarial, accounting,
administrative and custodian services to the Company. Under the management agreement,
the Manager receives a fee of 2.5 per cent per annum of the net assets of the Company.
This is described in more detail under the heading Management within the Report of the
Directors in the Company's Annual Report and Accounts for the year to 31 December 2009.
During the period the Company has incurred management fees of £729,000 and secretarial
and accounting fees of £53,000 payable to the Manager.
Going Concern
After making enquiries, 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 June 2010 the Company held
cash balances, investments in UK Gilts and Money Market Funds with a combined value of
£20,006,000. 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 is therefore not exposed to any gearing covenants.
Shareholder Information and Contact Details
Enquiries
Shareholders should contact the following regarding queries:
Basic contact details, ie change of address, joining the DRIP, queries re:
share and tax certificates and bank mandate forms: Computershare
(Company Registrar)
www-uk.computershare.com/investor
Investors who hold ordinary shares in their own name can check their holdings
on our Registrar's website
www-uk.computershare.com. Please note that to access this facility investors
will need to quote the reference number shown on their share certificate.
Alternatively, by registering for the Investors' Centre facility on
Computershare's website, investors can view details of all their holdings for
which Computershare is Registrar, as well as access additional facilities and
documentation. Please see www.investorcentre.co.uk for further information.
Shareholder Helpline
Tel: 0870 703 0137 (Calls charged at national rate).
The Shareholder Helpline is available on UK business days between Monday and
Friday, 8.30 am to 5 pm. The helpline contains automated self-service
functionality which is available 24 hours a day, 7 days a week. Using your
Shareholder Reference Number which is available on your share certificate or
dividend tax voucher, our self service functionality will enable you achieve the
following things:
Automated Functions
- confirm the latest share price
- confirm your current share holding balance
- confirm payment history
- order a Change of Address, Dividend Bank Mandate or Stock Transfer Form
e-mail: web.queries@computershare.co.uk
For information on asset allocations, dividend policies, investment process,
DRIP mechanism, share price movements, the share price discount and selling shares:
ISIS EP LLP (the Investment Manager) at www.isisep.com
e-mail: michael.probin@isisep.com; margaret.barff@isisep.com
Tel: Michael Probin 020 7506 5796; Margaret Barff 020 7506 5630.
The Baronsmead website (www.baronsmeadvcts.co.uk) links to helpful sites,
contains details of the team and some case studies of investments.
Share Price
The Company's shares are listed on the London Stock Exchange. The mid-price of
the Company's shares is given daily in the Financial Times in the Investment
Companies section of the London Share Service. Share price information can also be
obtained from many financial websites.
Trading Shares
The Company's shares can be bought and sold in the same way as any other quoted
company on the London Stock Exchange via a stockbroker.
The market makers in the shares of Baronsmead VCT 3 plc are:
Matrix Corporate Capital (the Company's broker) 020 3206 7000
Singer Capital Markets 020 3205 7500
Winterflood 020 3100 0251
Financial Calendar
November 2010 Quarterly fact sheet to 30 September 2010
February 2011 Results for the year to 31 December 2011 announced and
annual report and accounts sent to shareholders
May 2011 Annual General Meeting
Corporate Information
Directors Registrar and Transfer Office
Anthony Townsend (Chairman)± Computershare Investor Services PLC
Andrew Karney†PO Box 82
Gillian Nott OBE* The Pavilions
Robert Owen Bridgwater Road
Bristol BS99 6ZZ
Secretary Tel: 0870 703 0137
ISIS EP LLP
Brokers
Registered Office Matrix Corporate Capital LLP
100 Wood Street One Vine Street
London EC2V 7AN London W1J 0AH
Investment Manager Auditors
ISIS EP LLP KPMG Audit Plc
100 Wood Street Saltire Court
London EC2V 7AN 20 Castle Terrace
Edinburgh EH1 2EG
Investor Relations
Michael Probin Solicitors
020 7506 5796 Norton Rose
3 More London Riverside
Registered Number London SE1 2AQ
04115341
VCT Status Adviser
PricewaterhouseCoopers LLP
* Chairman of the Audit Committee 1 Embankment Place
†Senior Independent Director London WC2N 6RH
± Chairman of the Nomination Committee
and
Remuneration and Management Engagement
Committee.
Website
www.baronsmeadvct3.co.uk
Additional Information
The information provided in this report has been produced in order for
shareholders to be informed of the activities of the Company during the period
it covers. ISIS EP LLP does not give investment advice and the naming of
companies in this report is not a recommendation to deal in them.
Baronsmead VCT 3 plc is managed by ISIS EP LLP which is Authorised and
regulated by the FSA. Past performance is not necessarily a guide to future
performance. Stock markets and currency movements may cause the value of
investments and the income from them to fall as well as rise and investors
may not get back the amount they originally invested. Where investments are
made in unquoted securities and smaller companies, their potential volatility
may increase the risk to the value of, and the income from, the investment.
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