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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Baronsmead Venture Trust Plc | LSE:BVT | London | Ordinary Share | GB0002631934 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 52.50 | 51.00 | 54.00 | 52.50 | 52.50 | 52.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | -942k | -5.14M | -0.0147 | -35.71 | 183.61M |
From Apr 2019 to Apr 2024
TIDMBVT
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.
Hot Features
Premium
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 GBP4.5m 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 GBP15.5m 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 GBP9.7m net of expenses in February 2016 and realised GBP15.5m 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 GBP150.6 million were invested as follows:
NAV % of Number of % return
Asset class (GBPm) NAV* investees 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, GBP4.5m 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 GBP13.6m 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 GBP1.9m 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 GBP7.0m investment was valued at GBP18.4m, 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 GBP22m 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
Book
cost
Company Location Sector Activity GBP'000
----------------------------- ----------------- -------------- ------------------------------------- ---------
Unquoted investments
Follow on
----------------------------- ----------------- -------------- ------------------------------------- ---------
Happy Days Consultancy Healthcare Provider of nursery based childcare
Ltd Cornwall & Education in the South West of England 658
----------------------------- ----------------- -------------- ------------------------------------- ---------
Total unquoted investments 658
------------------------------------------------------------------------------------------------------- ---------
AIM-traded investments
New
----------------------------- ----------------- -------------- ------------------------------------- ---------
CRM and billing software to
Cerillion plc London TMT* telecoms companies 900
----------------------------- ----------------- -------------- ------------------------------------- ---------
Business Developer of biological fungicides
Eden Research plc Gloucestershire Services and bio equivalents 900
----------------------------- ----------------- -------------- ------------------------------------- ---------
LoopUp Group plc London TMT* Audio conferencing solutions 504
----------------------------- ----------------- -------------- ------------------------------------- ---------
Healthcare Online independent UK secondary
Wey Education plc London & Education school 214
----------------------------- ----------------- -------------- ------------------------------------- ---------
Consumer A vertically integrated sports
Science in Sport plc London Markets nutrition provider 143
----------------------------- ----------------- -------------- ------------------------------------- ---------
Follow on
----------------------------- ----------------- -------------- ------------------------------------- ---------
SysGroup plc (formerly
Daily Internet plc Liverpool TMT* IT managed services and hosting 612
----------------------------- ----------------- -------------- ------------------------------------- ---------
Clinical research organisation
Venn Life Sciences Holdings Healthcare providing consulting and clinical
plc London & Education trial services 387
----------------------------- ----------------- -------------- ------------------------------------- ---------
Consumer UK based letting agency franchise
Belvoir Lettings plc Lincolnshire Markets 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 GBP62,819,000) 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
First Overall
investment Proceeds++ multiple
Company date GBP'000 return*
--------------------------------------- ------------- ------------- ------------- ----------
Unquoted realisations
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Nexus Vehicle Holdings Ltd sale Feb 08 5,873 4.5
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Kingsbridge Risk Solutions Ltd sale Jan 14 5,196 3.2
--------------------------------------- ------------- ------------- ------------- ----------
Fisher Outdoor Leisure Holdings Full trade
Ltd sale Jun 06 2,013 0.8
--------------------------------------- ------------- ------------- ------------- ----------
Independent Community Care Management Full trade
Ltd sale Oct 11 548 0.5
--------------------------------------- ------------- ------------- ------------- ----------
Full trade
Valldata Group Ltd sale Jan 11 0 0.5
--------------------------------------- ------------- ------------- ------------- ----------
Total unquoted realisations 13,630
--------------------------------------------------------------------- ------------- ----------
AIM-traded realisations
--------------------------------------- ------------- ------------- ------------- ----------
Recommended
Jelf Group plc offer Oct 04 1,364 2.5
--------------------------------------- ------------- ------------- ------------- ----------
Full market
Tangent Communications plc 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 GBP4,000 was received in respect of Bglobal plc which had been written off in a prior period. Deferred consideration of GBP100,000 was received in respect of Playforce Holdings and GBP56,000 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 GBP686,000.
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: GBP174,000
Total equity held: 2.40%
Baronsmead Venture Trust only
Original cost: GBP174,000
Valuation: GBP5,801,000
Valuation basis: Last Traded Price
% of equity held: 2.40%
Year ended 31 December
2015 2014
----------------- ------------ ------------
GBP million GBP 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: GBP4,354,000
Total equity held: 17.83%
Baronsmead Venture Trust only
Original cost: GBP1,738,000
Valuation: GBP5,249,000
Valuation basis: Bid Price
% of equity held: 7.15%
Year ended 30 June
2016 2015
------------------ ------------ ------------
GBP million GBP 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: GBP5,833,000
Total equity held: 28.10%
Baronsmead Venture Trust only
Original cost: GBP2,904,000
Valuation: GBP5,023,000
Valuation basis: Earnings Multiple
% of equity held: 13.40%
Year ended 25 October
2015 2014
----------------- ------------ ------------
GBP million GBP 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: GBP4,235,000
Total equity held: 29.00%
Baronsmead Venture Trust only
Original cost: GBP1,906,000
Valuation: GBP4,800,000
Valuation basis: Earnings Multiple
% of equity held: 11.48%
Year ended 31 March
2015 2014
------------------ ------------ ------------
GBP million GBP 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: GBP1,641,000
Total equity held: 4.90%
Baronsmead Venture Trust only
Original cost: GBP614,000
Valuation: GBP4,387,000
Valuation basis: Last Traded Price
% of equity held: 1.83%
Year ended 31 October
2015 2014
----------------- ------------ ------------
GBP million GBP 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: GBP3,223,000
Total equity held: 14.40%
Baronsmead Venture Trust only
Original cost: GBP1,188,000
Valuation: GBP4,045,000
Valuation basis: Bid Price
% of equity held: 5.00%
Year ended 27 December
2015 2014
------------------ ------------ ------------
GBP million GBP 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: GBP7,617,000
Total equity held: 65.00%
Baronsmead Venture Trust only
Original cost: GBP3,420,000
Valuation: GBP4,005,000
Valuation basis: Earnings Multiple
% of equity held: 25.74%
Year ended 31 December
2015 2014
------------------ ------------ ------------
GBP million GBP 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: GBP4,415,000
Total equity held: 28.00%
Baronsmead Venture Trust only
Original cost: GBP1,982,000
Valuation: GBP3,851,000
Valuation basis: Earnings Multiple
% of equity held: 11.08%
Year ended 1 March
2015* 2014
------------------ ------------ ------------
GBP million GBP 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: GBP5,289,000
Total equity held: 20.12%
Baronsmead Venture Trust only
Original cost: GBP2,022,000
Valuation: GBP3,678,000
Valuation basis: Bid Price
% of equity held: 8.02%
Year ended 31 March
2016 2015
------------------ ------------ ------------
GBP million GBP 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: GBP5,000,000
Total equity held: 10.54%
Baronsmead Venture Trust only
Original cost: GBP2,500,000
Valuation: GBP3,187,000
Valuation basis: Earnings Multiple
% of equity held: 4.92%
Year ended 31 October
2015 2014
------------------ ------------ ------------
GBP million GBP 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 Context Specific risks we Possible impact Mitigation
Risk face
--------------- ------------------------ ------------------------ ------------------------ -----------------------
Loss of The Company must Breach of any of The loss of VCT status The Board maintains a
approval comply with section the rules enabling would result in safety
as a Venture 274 of the Income the Company to hold shareholders margin on all VCT
Capital Tax Act 2007 which VCT status could who have not held tests to ensure
Trust enables its investors result in the loss their that breaches are
to take advantage of that status. shares for the very unlikely
of tax relief on This risk is designated to be caused by
their investment particularly holding period having unforeseen events
and on future returns. affected by recent to repay the income or shocks. The
legislation and tax Investment Manager
EU State Aid. relief they had monitors all of the
already VCT tests
obtained and future on an ongoing basis
dividends and the
and gains would be Board reviews the
subject status of
to income tax and these tests on a
capital quarterly basis.
gains tax. Specialist advisors
audit the
tests on a bi-annual
basis and
report to the audit
committee
on their findings.
--------------- ======================== ======================== ======================== =======================
Legislative VCTs were established A change in government The Company might not The Board and the
in 1995 to encourage policy regarding be able to maintain Investment
private individuals the funding of small its Manager engage on a
to invest in early companies or changes asset base leading to regular
stage companies made to VCT its gradual decline basis with HM
that are considered regulations and Treasury ("HMT")
to be risky and to comply with EU potentially an and industry
therefore have limited State Aid rules inability representative
funding options. could result in to maintain either its bodies to demonstrate
In return the state a cessation of the buy back or dividend the cost
provides these tax reliefs for policies. benefit of VCTs to
investors VCT investors or the economy
with tax reliefs changes to the reliefs in terms of
which fall under that make them less employment generation
the definition of attractive to and taxation revenue.
state aid. investors. 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 The Company invests Investment in poor Reduction in both the The Company has a
performance in small, mainly quality companies capital value of diverse portfolio
UK based companies, with the resultant investors where the cost of any
both unquoted and risk of a high level shareholdings and in one investment
quoted. Smaller of failure in the the is typically less
companies often portfolio. level of income than 5 per
have limited product distributed. cent of NAV thereby
lines, markets or limiting
financial resources the impact of any one
and may be dependent failed
for their management investment. The Board
on a smaller number has appointed
of key individuals an Investment Manager
and hence tend to that has
be riskier than a strong and
larger businesses. 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, Whilst the Company Events such as Reduction in the value The Company invests
political invests in economic of the Company's in a diversified
and other predominantly recession, movement assets portfolio of
external UK businesses, it in interest or with a corresponding companies across
factors relies heavily on currency impact a number of industry
Europe as one of rates, civil unrest, on its share price may sectors
its largest trading war or political result in the loss of which provides
partners. This, uncertainty or investors through protection against
together with the pandemics buybacks shocks as the impact
increase in can adversely affect and may limit its on individual
globalisation, the trading ability sectors can vary
means that economic environment to pay dividends. depending upon
unrest and shocks for underlying the circumstances. In
in other investments addition,
jurisdictions, and impact on their the Manager uses a
as well as in the results and limited amount
UK, can impact on valuations. of bank gearing in
UK companies, its investments
particularly which enables its
smaller ones that investments
are more vulnerable to continue trading
to changes in trading through
conditions. 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 The Company is Failure of the Company The Company's The Board and the
& Compliance authorised to comply with any performance Investment
as a self managed of its regulatory could be impacted Manager employ the
Alternative Investment or legal obligations severely services
Fund Manager ("AIFM") could result in by financial penalties of leading regulatory
under the Alternative the suspension of and a loss of lawyers,
Investment Fund its listing by the reputation sponsors, auditors
Managers Directive UKLA and/or financial resulting in the and other
("AIFMD") and is penalties and sanction alienation advisers to ensure
also subject to by the regulator of shareholders, a the Company
the Prospectus and or a qualified audit significant complies with all of
Transparency report. demand to buy back its regulatory
Directives. shares obligations. The
It is required to and an inability to Board has strong
comply with the attract systems in place to
Companies Act 2006, future investment. The ensure that
the UKLA Listing suspension of its the Company complies
Rules. shares with all
would result in the of its regulatory
loss responsibilities.
of its VCT taxation The Investment
status Manager has a
and most likely the strong compliance
ultimate culture and
liquidation of the employs dedicated
Company. compliance
specialists within
its team
who support the Board
in ensuring
that the Company is
compliant.
--------------- ======================== ======================== ======================== =======================
Operational The Company relies The risk of failure Errors in shareholders The Board has
on a number of third of the systems and records or appointed an audit
parties including controls of any shareholdings, committee who, along
the Investment Manager of the Company's incorrect marketing with the
to provide it with advisers leading literature, external auditors,
the necessary services to an inability non-compliance with review the
such as registrar, to service shareholder listing internal control
sponsor, custodian, needs adequately, rules, loss of assets, ("ISAE3402")
receiving agent, to provide accurate breach of legal duties and/or internal audit
lawyers and tax reporting and and inability to reports
advisers. accounting provide from all significant
and to ensure accurate reporting and third party
adherence accounting all leading service providers,
to all VCT legislation to reputational risk including
rules. and the Investment
the potential for Manager, on a
litigation. 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: GBP588,000).
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 GBP895k in 47 companies. At 30 September 2016, 30 of these investments have been realised generating proceeds of GBP259m for the Baronsmead VCTs and GBP13.4m 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 GBPnil (2015: BVCT GBP152,000 & BVCT2 GBP152,000) in connection with advisory fees and incurred abort fees of GBP12,000 (2015: BVCT GBP9,000 & BVCT2 GBP9,000), with respect to investments attributable to Baronsmead Venture Trust.
Directors' fees of GBP309,000 (2015: BVCT GBP206,000 & BVCT2 GBP206,000) 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
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.
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 GBP10m (GBP9.7m after costs) was fully subscribed.
-- Dividend Reinvestment Plan | The Company offers a Dividend Reinvestment Plan which enables shareholders to purchase additional shares through the market in lieu of cash dividends. Approximately 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 whole, the funding requirements of the Company and market conditions at the time, the Company seeks to maintain a mid-share price discount of approximately 5 per cent to net asset value.
-- Secondary market | The Company's shares are listed on the London Stock Exchange and can be bought using a stockbroker or authorised share dealing service in the same way as shares of any other listed company. Approximately 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 GBP204,000. The total amount paid for these shares was GBP1,912,675. 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 GBP2,344,187.50.
As at the date of this report the Company's issued share capital was as follows:
% of
Shares
Share Total in issue Nominal Value
================== ============ ========= ==============
In issue 184,124,685 100.0 GBP18,412,469
================== ============ ========= ==============
Held in treasury 11,253,819 6.11 GBP1,125,382
================== ============ ========= ==============
In circulation 172,870,866 93.89 GBP17,287,087
================== ============ ========= ==============
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 GBP'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 GBP21,591,000. 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 Year ended
30 September 2016 30 September 2015
------------------------------------- ---------------------------------------
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Distributable
Non-distributable reserves Reserves
------------------------------ ----- --------------------------------------- ---------------------- --------
Called-up
share Share Revaluation Capital Revenue
capital premium Reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Non-distributable reserves Distributable Reserves
-------------------------- ----- ------------------------------------- ------------------------ ---------
Called-up Share Revaluation Capital Revenue
share capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
As at As at
30 September 30 September
2016 2015
Notes GBP'000 GBP'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 Year ended
30 September 30 September
2016 2015
GBP'000 GBP'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 Net asset value Net asset value
of ordinary shares per share attributable attributable
=========================== ========================== ========================== ==========================
30 September 30 September 30 September 30 September 30 September 30 September
2016 2015 2016 2015 2016 2015
number number pence pence GBP'000 GBP'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 Return per Net profit on ordinary
of ordinary shares ordinary share activities after taxation
======== ========================== ========================== ============================
30 September 30 September 30 September 30 September 30 September 30 September
2016 2015 2016 2015 2016 2015
number number pence pence GBP'000 GBP'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 30 September
2016 2015
GBP'000 GBP'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 Collective
bearing Traded investment
securities on AIM vehicle Unquoted Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP3.5 million or 7.1 per cent lower. Using the upside alternatives the value would be increased by GBP3.0 million or 6.0 per cent.
2.4 Dividends
Year ended Year ended
30 September 2016 30 September 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Year ended
30 September 2016 30 September 2015
Quoted Unquoted Quoted Unquoted
securities securities Total securities securities Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Year ended 30th September
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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 Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP7,583,134 (2015: GBP4,648,934) 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 GBP'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 Revenue Share Revaluation
reserve reserve Total premium reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP4,647,000, 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
5% increase 5% decrease 5% increase 5% decrease
in share in share in share in share
price price price price
effect on effect on effect on effect on
net assets net assets net assets net assets
% of total and profit and profit % of total and profit and profit
investment GBP'000 GBP'000 investment GBP'000 GBP'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
Weighted Weighted
Weighted average Weighted average
average time for average time for
Total interest which rate Total interest which rate
investment rate is fixed investment rate is fixed
GBP'000 % days GBP'000 % 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
GBP'000 GBP'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 GBP21,591,000 (2015: GBP15,205,000).
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 GBPnil (2015: BVCT GBP152,000 & BVCT2 GBP152,000) in connection with advisory fees and incurred abort fees of GBP12,000 (2015: BVCT GBP9,000 & BVCT2 GBP9,000), with respect to investments attributable to Baronsmead Venture Trust.
Directors' fees of GBP309,000 (2015: BVCT GBP206,000 & BVCT2 GBP206,000) 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.
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
(END) Dow Jones Newswires
November 17, 2016 02:01 ET (07:01 GMT)
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