Final Results

Baronsmead VCT 3 PLC 12 February 2003 Baronsmead VCT 3 plc To: Company Announcements From: Baronsmead VCT 3 plc Date: 12 February 2003 Audited Results - Year Ended 31 December 2002 Highlights • Net asset value increased to 94.85 pence per share • Net asset value total return of 5.4 per cent since launch • Portfolio grown to 21 companies • Total dividends of 2.80 pence for the year Results During the year to 31 December 2002, the NAV per share increased by 1.1 per cent to 94.9p. While not directly comparable, the FTSE All-Share Index fell 25.0 per cent over the same period. The Board recommends a final dividend of 1.4p per share which, together with the interim dividend of 1.4 pence per share, makes a total dividend for the year of 2.8p resulting in a total return for the year of 4.1 per cent. The Board anticipate dividend levels will fall as the remaining cash is invested. A similar picture emerges for the longer period since launch on 29 January 2001. Total return for Baronsmead VCT 3 has been 5.4 per cent assuming the inclusion of all dividends recommended and paid to date. The FTSE All-Share Index total return dropped 34.2 per cent over the same period. The positive difference of some 39.6 per cent excludes any benefits that shareholders may have received from the available VCT tax reliefs. Investment Rate I The VCT legislation requires at least 70 per cent of net proceeds raised to be invested in qualifying investments within three years. This means that Baronsmead VCT 3 needs to invest approximately another £12 million by 31 December 2003. In seeking to achieve this challenging rate of investment, however the Manager, rightly, is unwilling to sacrifice quality. The Board is also considering other options to ensure the 70 per cent test is achieved by the end of this financial year. In recent months, the flow of good opportunities has started to accelerate and the Manager believes that this upturn should enable the Company to meet the 70 per cent test. However to enhance the overall flow of opportunities, the Manager opened an office in Manchester during December 2002, expanded its investment team in London and is planning to extend its geographical reach with a local presence in Reading. Additionally, the Board has agreed that, where applicable during the course of 2003, a larger share of unquoted investments participated in by the family of VCTs will be apportioned to the Company. Such a collective investment approach allows Baronsmead VCT 3 and other clients of the Manager to benefit from access to larger transactions (typically with an investment requirement of between £3 million and £6 million overall). Investment Policy I The objective is to build a diverse portfolio by sector, stage, investment type and asset class. Investments will be made in unquoted companies but also in AiM-traded businesses. The sector-focused approach differentiates the Manager's investment approach from other generalist VCTs. These sectors are constantly reviewed to identify niches where companies are better placed to establish pricing power and have flexible business costs. The policy for biotech/healthcare investing has been extended during the year to include a larger number of smaller unit-sized investments to create greater diversity. The Manager will co-invest with a number of the leading investors in these sectors with whom they have developed a close working relationship. Portfolio Performance I The portfolio has grown to 21 investees by 31 December 2002 and the plan is to increase this to between 30-35 by the end of the current year. The Board values the unquoted investments in accordance with BVCA guidelines, which state that investments should be held at cost throughout the first year of investment unless there is evidence of a permanent diminution in value. After the initial twelve month period, investments which have progressed well are valued using a discounted price earnings ratio. Thomas Sanderson has shown strong growth in profits and sales. The valuation has been arrived at by applying a discounted price earnings ratio to its profits in calendar 2002. Its value has moved sharply ahead and is the main reason for the uplift in value of the portfolio for the year to 31 December 2002. The value of the AiM portfolio fell by 6.6 per cent in the year and at 31 December 2002 stood at 4.9 per cent below cost. The FTSE AIM Index fell 32.9 per cent in 2002. Meeting Shareholder Needs I During the year 559,855 new shares were issued to existing shareholders and in addition 296,149 new shares were issued under the dividend re-investment scheme. The Company bought back 170,000 shares during the year at an average 10 per cent discount to NAV. The Board has decided that presently it will not be making a top up offer to shareholders. Outlook I The Company's plan remains unchanged. It is the Board's intention to build a portfolio of over 30 businesses, spread across diverse sectors including a proportion that are technology-enabled. The level of investment required to meet the 70 per cent test is challenging but the Board has taken the view that caution needs to be exercised currently so that we can build a stronger portfolio for the long term. Enquiries David Thorp, ISIS Equity Partners plc: 0207 506 1609 Rhonda Nicoll, ISIS Asset Management plc: 0131 465 1074 Audited Statement of Total Return (Incorporating the revenue account) of the Company Year to 31 December 2002 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 698 698 Income 1,825 - 1,825 Investment management fee (186) (559) (745) Other expenses (290) - (290) ---------- ----------- ----------- Return on ordinary activities before taxation 1,349 139 1,488 Taxation on ordinary activities (396) 181 (215) ---------- ----------- ----------- Return attributable to equity shareholders 953 320 1,273 Dividend paid/payable (941) - (941) ----------- ----------- ----------- Transfer to reserves 12 320 332 ---------- ---------- ----------- Return per ordinary share 2.85p 0.96p 3.81p ______ ______ _____ Audited Statement of Total Return (Incorporating the revenue account) of the Company Period from 22 November 2000 to 31 December 2001 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (74) (74) Income 1,504 - 1,504 Investment management fee (159) (477) (636) Other expenses (248) - (248) ---------- ----------- ----------- Return on ordinary activities before taxation 1,097 (551) 546 Taxation on ordinary activities (322) 155 (167) ---------- ----------- ----------- Return attributable to equity shareholders 775 (396) 379 Dividend paid (760) - (760) ----------- ----------- ----------- Transfer to/ (from) reserves 15 (396) (381) ---------- ---------- ----------- Return per ordinary share 2.52p (1.29)p 1.23p ______ ______ _____ Audited Balance Sheet As at As at 31 December 31 December 2002 2001 £'000 £'000 Fixed Assets 3,539 2,116 Quoted on the Alternative Investment Market Unquoted investments 8,125 2,512 UK government securities 16,426 8,584 Corporate 501 17,677 _______ ________ 28,591 30,889 Net current assets 3,459 180 ______ _______ Total assets less current liabilities 32,050 31,069 ______ ______ Financed by: Shareholders' funds 32,050 31,069 ______ ______ Net asset value per share: 94.85p 93.85p Ordinary shares in issue 33,792,157 33,106,153 Summarised Audited Statement of Cash Flows Period from 22 November 2000 Year to 31 December to 31 December 2002 2001 £'000 £'000 Net cash inflow from operating activities 1,228 251 Taxation paid (167) - Capital expenditure and financial investment 3,367 (30,963) Equity dividends paid (898) (330) ----------- ----------- Net cash inflow/(outflow) before financing 3,530 (31,042) Financing 649 31,450 ----------- ----------- Increase in cash 4,179 408 ----------- ----------- Reconciliation of net cash flow to movement in net cash Increase in cash 4,179 408 Opening net cash 408 - ----------- ----------- Net cash at 31 December 2002 4,587 408 ----------- ----------- Reconciliation of net revenue before taxation to net cash inflow from operating activities Net revenue before taxation 1,349 1,097 Investment management fee charged to capital (559) (477) Decrease/(increase) in debtors 427 (616) Increase in creditors 11 247 ----------- ----------- Net cash inflow from operating activities 1,228 251 ----------- ----------- Notes 1. The audited results which cover the year to 31 December 2002 have been drawn up in accordance with applicable accounting standards and adopting the Statement of Recommended Practice for Financial Statements of Investment Trust Companies and on the assumption that the Company maintains VCT status. 2. There were 33,792,157 Ordinary Shares in issue at 31 December 2002 (2001: 33,106,153). 856,004 Ordinary Shares were issued during the year. The Company bought back 170,000 Ordinary Shares for cancellation during the year. 3. Revenue and capital returns for the year to 31 December 2002 are based on a weighted average of 33,446,891 (2001: 30,748,766) Ordinary Shares in issue during the year. 4. Income for the year to 31 December is derived from: 2002 2001 £'000 £'000 Dividend Income 16 - Fixed Interest Investment 1,728 833 Deposit Interest 80 671 Underwriting Commission 1 - 1,825 1,504 5. The final proposed dividend of 1.4 pence per Ordinary Share will be paid on 4 April 2003 to shareholders on the register on 21 February 2003. 6. These are not full accounts in terms of Section 240 of the Companies Act 1985. Full audited accounts for the period to 31 December 2001 have been lodged with the Registrar of Companies. The annual report for the year to 31 December 2002 will be sent to shareholders shortly and will then be available for inspection at 100 Wood Street, London, the registered office of the Company. Both the audited accounts for the period to 31 December 2001 and the year to 31 December 2002 contain unqualified audit reports. 7. The Annual General Meeting will be held on 28 March 2003. This information is provided by RNS The company news service from the London Stock Exchange

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