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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 0.95% | 53.00 | 51.50 | 54.50 | 53.00 | 52.50 | 52.50 | 3,828 | 16:01:57 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | -942k | -5.14M | -0.0147 | -36.05 | 185.35M |
From May 2019 to May 2024
TIDMBVT
RNS Number : 0364X
Baronsmead Venture Trust PLC
21 November 2017
Baronsmead Venture Trust plc
Annual Financial Report for the year ended 30 September 2017
Financial Headlines
-- Net asset value ("NAV") per share increased 9.0 per cent to 94.9p in the year to 30 September 2017, before deduction of dividends.
-- 396.5p - NAV total return to shareholders for every 100.0p invested at launch.
-- Dividends totalled 6.5p in the year to 30 September 2017, after the proposed final dividend of 3.5p to be paid on 2 March 2018.
-- GBP7.6m new investment made in the year - GBP4.5m unquoted investments and GBP3.1m quoted investments.
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 9.0 per cent (7.8p) increase in NAV per share for the year to 30 September 2017, before dividend payments. The Board seeks to maintain average annual dividends of 6.5p per share. Following the 3.0p per share interim dividend paid in March 2017; the Board recommends a 3.5p per share final dividend to be paid in March 2018 (subject to shareholders approval).
Results
In the year to 30 September 2017, the NAV grew by 7.8p per share (9.0 per cent) to 94.9p before the payment of dividends. This growth, together with reserves accumulated from successful realisations, has enabled us to recommend a final dividend of 3.5p making a total of 6.5p for the year.
Hot Features
Premium
Pence per
ordinary
share
---------------------------------------------- ----------
NAV as at 1 October 2016 87.1
---------------------------------------------- ----------
Valuation uplift (9.0 per cent) 7.8
---------------------------------------------- ----------
NAV as at 30 September 2017 before dividends 94.9
---------------------------------------------- ----------
Less:
Interim dividend paid on 31 March 2017 (3.0)
---------------------------------------------- ----------
Proposed final dividend of 3.5p payable,
after shareholder approval, on 2 March
2018 (3.5)
---------------------------------------------- ----------
Illustrative NAV as at 30 September 2017
after proposed dividend 88.4
---------------------------------------------- ----------
Over the past 10 years the Company has provided its shareholders with an annual average tax-free dividend of 8.6p per share. With a share price of 87.0p per share this is equivalent to a net tax free yield of 9.9 per cent representing what I consider to be an excellent return for the Company's loyal shareholders and one of which the Board is proud.
Portfolio Review
As at 30 September 2017, the portfolio comprised direct investments in 73 unquoted and AIM-traded companies providing shareholders with a diverse range of investments. In addition, some 44 companies comprise the Micro Cap Fund, so further spreading our investment risk. During the 12 months to 30 September 2017, the underlying value of the unquoted portfolio increased by 5.4 per cent reflecting the continued positive performance of most of the investments. The AIM-traded portfolio increased by 13.3 per cent and CF Livingbridge UK Micro Cap Fund has had a particularly strong year with a 26.9 per cent increase in value.
Investments and Divestments
Following a period of adjustment to the more restrictive VCT investment rules introduced in November 2015, the Company invested a total of GBP7.6m in 7 new and 2 follow on investments in the year to 30 September 2017. The Investment Manager has had to adapt its investment strategy to focus on the provision of development capital to younger companies. This may result in greater volatility in returns over time, albeit the existing portfolio of investments will continue to determine returns for a number of years to come.
Livingbridge has continued to invest in its programme of proactively approaching prospective investee companies in order to identify a supply of new and attractive investment opportunities. Its portfolio team provides ongoing support and expertise to portfolio companies following the initial investment.
Following an active period of divestments of the Company's more mature investments in 2015 and 2016, the pace of realisations slowed in 2017. The timing of divestments is inevitably somewhat unpredictable. That is why the Board historically has sought to smooth dividend payments from a period when there were more divestments to periods when there were fewer or none, although compliance with the VCT regulations limits the Board's room for manoeuvre in this area. A total of GBP6.7m was realised from the full and partial sale of investments and from loan note redemptions during the year.
Details of the Company's investments and divestments during the period are set out in the tables below and further commentary on portfolio companies is provided in the Managers Report below.
VCT Legislation and Policy Review
As reported at the interim stage, following on from the changes to the VCT regulations introduced in November 2015, earlier this year the Government announced that tax advantaged venture capital schemes (SEIS, EIS and VCTs) were to be included in the Patient Capital Review which aims "to ensure that high growth businesses can access the long-term capital that they need to fund productivity enhancing investment."
This resulted in the publication of the "Financing growth in innovative firms" consultation in August 2017, with the aim that any policy recommendations concerning VCTs and the other tax advantaged venture capital schemes would be presented to the Chancellor ahead of the Autumn Budget on 22 November 2017. Over the summer, the Manager, along with others in the VCT industry, including managers and industry representative bodies, have consulted HM Treasury ("HMT") and provided evidence to support the view that VCTs are meeting the Government's policy objectives of providing financial support to developing high growth businesses and does indeed represent value for money for taxpayers.
We await the outcome of the consultation and the proposals to be announced in the Autumn Budget and hope that any changes to the VCT scheme will not constrain this support and will enable VCTs to continue to invest money and expertise in small, entrepreneurial UK companies in line with the Government's policy objectives.
Fundraising
Following the realisations achieved in 2015 and 2016, the Company did not raise new funds in the 2016/17 year. In line with our intention to hold investments longer and an improvement in the rate on new investment, in August 2017, the Board announced its intention to raise new funds to enhance the Company's resources available for new and follow on investments over the next 2 to 3 years. Consequently, on 4 October 2017 the Company launched an offer for subscription to raise GBP21m (before costs) which became fully subscribed on 3 November 2017. The Board would like to thank the Company's existing shareholders who invested a further GBP15.0m and to thank and welcome the Company's new shareholders who invested GBP6.0m.
Annual General Meeting
I look forward to meeting as many new and longstanding shareholders as possible at the Annual General Meeting to be held at 11.00 am on 21 February 2018, at Saddlers' Hall, 40 Gutter Lane, London, EC2V 6BR. As well as my own review of the year, there will also be presentations from the Manager followed by lunch for all shareholders.
Outlook
Given the continued uncertainty over the timing and terms of the UK's exit from the European Union, the impact of Brexit on the UK economy remains unknown and largely unquantifiable. Although the UK economy has remained resilient to date, recent inflationary pressures and some softening in consumer confidence may serve to weaken that resilience over the short term. As we await the outcome of HMT's deliberations over the Patient Capital Review, it is hoped the Government has understood the industry's representations and will take full account of the benefits VCTs provide to the UK economy.
Despite these macro-economic and regulatory uncertainties, I believe our large and diverse investment portfolio exhibits a strength that underpins returns to our shareholders. Our Investment Manager continues to invest in those systems and people that will help our portfolio companies to deliver profitable growth from which all our shareholders will benefit over the medium to long term.
Peter Lawrence
Chairman
21 November 2017
MANAGER'S REVIEW
The year has seen another strong performance from the investment portfolio. We have begun to increase the rate of investment following a period of adapting to the VCT legislation introduced in November 2015.
PORTFOLIO REVIEW
Overview
The net assets of GBP159m were invested as follows:
NAV % of Number of % return
(GBPm) NAV* investees in
Asset class the year**
---------------------- -------- ------ ----------- ------------
Unquoted 52 32 20 5
---------------------- -------- ------ ----------- ------------
AIM-traded companies 70 44 53 13
---------------------- -------- ------ ----------- ------------
CF Livingbridge UK
Microcap Fund 23 15 45 27
---------------------- -------- ------ ----------- ------------
Liquid assets 14 9 N/A -
---------------------- -------- ------ ----------- ------------
Totals 159 100 117 -
---------------------- -------- ------ ----------- ------------
* By value as at 30 September 2017.
** 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 overall health and trajectory of the portfolio can be monitored. At 30 September 2017, 76 per cent of the 73 companies directly held in the portfolio (excluding the investments held by Collective Investment Vehicles) were progressing steadily or better.
The tables below show the breakdown of new investments and realisations over the course of the year and below is commentary on some of the key highlights in both the unquoted and quoted portfolios.
Unquoted Portfolio
The unquoted portfolio performance has been positive, growing by around 5.4 per cent over the course of the year. The portfolio is valued by the Board using a consistent process every quarter. The majority of the value created by portfolio companies comes from trading and operational improvements including revenue and margin growth, rather than financial leverage.
Investment Activity
During the year, GBP7.6m was invested in 9 companies including 7 new additions to the portfolio and 2 follow on investments. The large investments were:
-- In the Style Fashion Ltd (unquoted) is a trend-led, fast growing purely online fashion retailer. Its popularity has been driven, in part by the business' royalty-based collaborations with celebrities and fashion influencers. Our investment will be used to support the business in scaling up its operations including upgrading IT and infrastructure, growing the team and moving into international markets.
-- Symphony Ventures Ltd (unquoted) is a leader in Robotic Process Automation ("RPA"). Symphony provides consulting, implementation and managed services to enterprise clients looking to automate operational processes that are manual, repetitive, complex and time consuming through RPA and Intelligent Automation solutions. Our investment will support new hires and extend Symphony's capabilities into new geographies.
-- FreeAgent Holdings plc (quoted) provides cloud-based accounting software solutions and mobile applications designed specifically for UK micro-SMEs. The company offers intuitive tools to complete tasks such as time tracking, invoicing, expense management and tax related workstreams. Our investment will be used for the growth and development of the business.
Unquoted Divestment Activity
Following a number of years of strong realisation activity this financial year has seen limited divestments from the portfolio. Yeo Bridge and Kalyke Investments were two acquisitions vehicles set up in 2015, these became non-qualifying during the year and are subsequently being dissolved. There are now no acquisition vehicles in the portfolio and no intention to set up any new ones.
There was also a partial loan note redemption from Create Health during the year.
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 shown strong overall performance over the year with an increase of 13 per cent Stand out performers were:
-- Bioventix, a developer of antibodies for use in clinical diagnostics, following strong financial results and upgraded forecasts;
-- Staffline Group, a blue collar staffing agency, which recovered strongly from Brexit related negative sentiment which had weighed on the shares until it reported strong 2016 full year results;
-- Wey Education, a provider of online education services, following the achievement of a maiden group profit.
These were partially offset by weaker share price performance from Tasty, a casual dining restaurant operator, which downgraded forecasts on the back of well publicised restaurant sector weakness; and TLA Worldwide, which announced that certain accounting misstatements would result in a worse than expected 2016 financial result.
Quoted Divestment Activity
Proceeds from the sale of Electric Word totalled GBP1.6m making a return of 1.2x cost. GBP0.4m of proceeds were also received in the year following the partial sale of Escher Group Holdings and Ubisense Group making a return of 1.0x cost and 1.2x costs respectively.
Collective Investment Vehicle
CF Livingbridge UK Micro Cap Fund ("Micro Cap") performed strongly over the year increasing by 27 per cent (2016: 5 per cent). At 30 September 2017, Baronsmead Venture Trust's cumulative GBP7.0m investment was valued at GBP23.3m. As at 30 September 2017, the Micro Cap Fund held investments in 44 AIM-traded and listed companies.
Liquid assets (cash and near cash)
Baronsmead Venture Trust had cash and near-cash resources of approximately GBP15.7m 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
Investee companies continue to perform well, providing good returns over the year and a firm foundation for future returns. Having had a lull in the rate of new investment in 2016, we continue to adapt our deal origination and sourcing activities which have resulted in the Company adding 4 unquoted and 3 AIM-traded companies to the portfolio and we look forward to making further additions over the coming year.
Livingbridge VC LLP
Investment Manager
21 November 2017
Investments in the year
Book
cost
Company Location Sector Activity GBP'000
----------------------- --------------- ------------- --------------------------- --------
Unquoted investments
New
----------------------- --------------- ------------- --------------------------- --------
In The Style Consumer Fast Online Fashion
Fashion Ltd Manchester Markets retailer 2,250
----------------------- --------------- ------------- --------------------------- --------
Robotic Process
Automation implementation
Symphony Ventures Business and consultancy
Ltd London Services business 1,574
----------------------- --------------- ------------- --------------------------- --------
Consumer Online fashion
SilkFred Ltd London Markets market place 450
----------------------- --------------- ------------- --------------------------- --------
Custom Materials Consumer Retailer of customisable
Ltd London Markets products 225
----------------------- --------------- ------------- --------------------------- --------
Total unquoted investments 4,499
------------------------------------------------------------------------------------ --------
AIM-traded investments
New
----------------------- --------------- ------------- --------------------------- --------
Free Agent Holdings Online accounting
plc Edinburgh TMT* software 788
----------------------- --------------- ------------- --------------------------- --------
Rosslyn Data
Technologies Data analytics
plc London TMT* software platform 431
----------------------- --------------- ------------- --------------------------- --------
Develops and
manufactures
Collagen Solutions Healthcare medical grade
plc London & Education collagen 337
----------------------- --------------- ------------- --------------------------- --------
Follow on
----------------------- --------------- ------------- --------------------------- --------
Plant Impact Business Crop enhancing
plc Hertfordshire Services products 900
----------------------- --------------- ------------- --------------------------- --------
CloudCall Group Cloud based telephony plc Leicestershire TMT* platform 599 ----------------------- --------------- ------------- --------------------------- -------- Total AIM-traded investments 3,055 ------------------------------------------------------------------------------------ -------- Total investments in the year 7,554 ------------------------------------------------------------------------------------ --------
* Technology, Media & Telecommunications ("TMT").
Realisations in the year
First Overall
investment Proceeds++ multiple
Company date GBP'000 return*
------------------------------- ---------------- ------------- ------------- ----------
Unquoted realisations
------------------------------- ---------------- ------------- ------------- ----------
Yeo Bridge Ltd Dissolved** Apr 15 1,892 1.0
------------------------------- ---------------- ------------- ------------- ----------
Kalyke Investments Ltd Dissolved** Apr 15 1,890 1.0
------------------------------- ---------------- ------------- ------------- ----------
Create Health Ltd Loan repayment Mar 13 900 1.3
------------------------------- ---------------- ------------- ------------- ----------
CR7 Services Ltd Partial sale Aug 14 11 1.0
------------------------------- ---------------- ------------- ------------- ----------
Total unquoted realisations 4,693
---------------------------------------------------------------- ------------- ----------
AIM-traded realisations
------------------------------- ---------------- ------------- ------------- ----------
Electric Word plc Cash offer Mar 08 1,645 1.2
------------------------------- ---------------- ------------- ------------- ----------
Escher Group Holdings Partial market
plc sale Aug 11 327 1.0
------------------------------- ---------------- ------------- ------------- ----------
Partial market
Ubisense Group plc sale Jun 11 37 0.2
------------------------------- ---------------- ------------- ------------- ----------
Marwyn Management Partners
plc Write off Nov 09 0 0.0
------------------------------- ---------------- ------------- ------------- ----------
Total AIM-traded realisations 2,009
---------------------------------------------------------------- ------------- ----------
Total realisations in
the year 6,702
---------------------------------------------------------------- ------------- ----------
++ Proceeds at time of realisation including interest.
* Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.
** Acquisition vehicle dissolved during the year.
Deferred consideration of GBP60,000 was received in respect of Kingsbridge Risk Solutions and GBP7,000 in respect of Fisher Outdoor Leisure Holdings, both of which had been sold in a prior period.
Ten Largest Investments
The top ten investments by current value at 30 September 2017 illustrate the diversity of investee companies within the portfolio. For consistency across the top ten and based on guidance from the AIC, data extracted from the last set of published audited accounts is shown in the tables below. However, this may not always be representative of underlying financial performance for several reasons. Published accounts lodged at Companies House are out of date and the Manager works from up to date monthly management accounts and has access to draft but unpublished annual audited accounts. In addition, pre-tax profit in statutory financial accounts is often not a representative indicator of underlying profitability as it can be impacted by, for example, deductions of non-cash items such as amortisation that relates to investment structures rather than operating performance.
1. Staffline Group plc - Nottinghamshire
All funds managed by Livingbridge
First investment: July 2000
Total original cost: GBP174,000
Total equity held: 2.40%
Baronsmead Venture Trust only
Original cost: GBP174,000
Valuation: GBP7,813,000
Valuation basis: Last Traded Price
% of equity held: 2.40%
Year ended 31 December
2016 2015
GBP million GBP million
Sales: 882.4 702.2
Pre-tax profits 36.7* 28.3
Net Assets: 83.7 73.2
No. of Employees
: 2,793 3,768
(Source: Staffline Group plc, Annual Report 31 December 2016.)
* Excludes non-underlying results.
2. Crew Clothing Holdings Limited - London
All funds managed by Livingbridge
First investment: November 2006
Total original cost: GBP5,833,000
Total equity held: 31.00%
Baronsmead Venture Trust only
Original cost: GBP2,904,000
Valuation: GBP5,032,000
Valuation basis: Earnings Multiple
% of equity held: 15.10%
Year ended 30 October
2016* 2015**
GBP million GBP million
Sales: 58.3 55.0
Pre-tax profits (2.8) (2.6)
Net Assets: 0.3 3.3
No. of Employees: 427 411
(Source: Crew Clothing Holdings Limited, Report and Financial Statements 30 October 2016.)
* 53 week period ended 30 October 2016.
** Year ended 25 October 2015.
3. Netcall Plc - Hertfordshire
All funds managed by Livingbridge
First investment: July 2010
Total original cost: GBP4,354,000
Total equity held: 17.30%
Baronsmead Venture Trust only
Original cost: GBP1,738,000
Valuation: GBP4,754,000
Valuation basis: Bid Price
% of equity held: 6.90%
Year ended 30 June
2017 2016
GBP million GBP million
Sales: 16.2 16.6
Pre-tax profits 1.7 1.7
Net Assets: 21.0 22.6
No. of Employees: 169 156
(Source: Netcall plc, Annual Report and Accounts, 30 June 2017.)
4. Bioventix plc - Surrey
All funds managed by Livingbridge
First investment: June 2013
Total original cost: GBP1,008,000
Total equity held: 7.50%
Baronsmead Venture Trust only
Original cost: GBP454,000
Valuation: GBP4,673,000
Valuation basis: Bid Price
% of equity held: 3.40%
Year ended 30 June
2016 2015
GBP million GBP million
Sales: 5.5 4.3
Pre-tax profits 4.2 3.1
Net Assets: 8.2 6.6
No. of Employees: 14 13
(Source: Bioventix plc, Annual Report and Accounts, 30 June 2016.)
5. Pho Holdings Limited - 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: GBP4,204,000
Valuation basis: Earnings Multiple
% of equity held: 11.10%
Year ended 28 February
2016* 2015**
GBP million GBP million
Sales: 19.4 14.1
Pre-tax profits 0.0 0.0
Net Assets: 4.5 4.7
No. of Employees: 399 290
(Source: Pho 2012 Limited, Directors' Report and Financial Statements 28 February 2016.)
* 52 week period ended 28 February 2016.
** 53 week period ended 1 March 2015
.
6. IDOX Plc - Berkshire
All funds managed by Livingbridge
First investment: May 2002
Total original cost: GBP1,641,000
Total equity held: 4.20%
Baronsmead Venture Trust only
Original cost: GBP614,000
Valuation: GBP4,147,000
Valuation basis: Last Traded Price
% of equity held: 1.60%
Year ended 31 October
2016 2015
GBP million GBP million
Sales: 76.7 62.6
Pre-tax profits 13.0 9.8
Net Assets: 65.2 53.6
No. of Employees: 676 572
(Source: IDOX PLC Annual Report & Accounts 2016.)
7. Happy Days Consultancy Limited - 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: GBP4,114,000
Valuation basis: Earnings Multiple
% of equity held: 25.70%
Year ended 31 December
2016 2015
GBP million GBP million
Sales: 7.0 6.2
Pre-tax profits (1.8) (1.6)
Net Assets: (4.2) (2.5)
No. of Employees: 309 258
(Source: H. Days Holdings Limited Annual Report and Financial Statements 31 December 2016.)
8. Ideagen plc - Nottinghamshire
All funds managed by Livingbridge
First investment: January 2013
Total original cost: GBP3,000,000
Total equity held: 5.60%
Baronsmead Venture Trust only
Original cost: GBP1,350,000
Valuation: GBP4,012,000
Valuation basis: Bid Price
% of equity held: 2.50%
Year ended 30 April
2017 2016
GBP million GBP million
Sales: 27.1 21.9
Pre-tax profits 1.0 1.0
Net Assets: 46.4 33.7
No. of Employees: 305 248
(Source: Ideagen plc, Annual Report & Accounts, 30 April 2017.)
9. Carousel Logistics Limited - Sittingbourne
All funds managed by Livingbridge
First investment: October 2013
Total original cost: GBP5,595,000
Total equity held: 40.00%
Baronsmead Venture Trust only
Original cost: GBP1,910,000
Valuation: GBP3,823,000
Valuation basis: Earnings Multiple
% of equity held: 12.00%
Year ended 31 December
2016 2015
GBP million GBP million
Sales: 21.4 16.8
Pre-tax profits 2.0 1.7
Net Assets: 4.1 2.4
No. of Employees: 92 71
(Source: Carousel Logistics Limited Financial Statement 31 December 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: 9.20%
Baronsmead Venture Trust only
Original cost: GBP2,500,000
Valuation: GBP3,779,000
Valuation basis: Earnings Multiple
% of equity held: 4.00%
Year ended 31 October
2016 2015
GBP million GBP million
Sales: 27.6 17.5
Pre-tax profits (7.0) (6.6)
Net Assets: (24.5)* (17.5)*
No. of Employees: 188 104
(Source: Cablecom Bidco Limited Report and Financial Statements 31 October 2016.)
* 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 HMT and
that are considered regulations and industry
to be risky and to comply with EU potentially an representative bodies
therefore have limited State Aid rules inability to demonstrate
funding options. could result in to maintain either its the cost benefit of
In return the state a cessation of the buy back or dividend VCTs to
provides these tax reliefs for policies. the economy in terms
investors VCT investors or of employment
with tax reliefs changes to the reliefs generation and
which fall under that make them less taxation revenue.
the definition of attractive to In addition, the
state aid. investors. 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 buy protection against
together with the pandemics backs and may limit shocks as the impact
increase in can adversely affect its on individual
globalisation, the trading ability to pay sectors can vary
means that economic environment 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. In difficult economic
addition conditions.
the potential impact The Company always
of leaving the maintains
European healthy cash balances
Union remains so that
uncertain. it can support
portfolio companies
with further
investment should
the investment case
support
it. The Board reviews
the make
up and progress of
the portfolio
each quarter to
ensure that
it remains
appropriately
diversified
and funded.
--------------- ------------------------ ------------------------ ------------------------ -----------------------
Regulatory 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, in particular controls of any shareholdings, committee who, along
the Investment of the Company's incorrect marketing with the
Manager, advisers leading literature, external auditors,
to provide it with to an inability non compliance with review the
the necessary services to service shareholder listing internal control
such as registrar, needs adequately, rules, loss of assets, ("ISAE3402")
sponsor, custodian, to provide accurate breach of legal duties and/or internal audit
receiving agent, reporting and and inability to reports
lawyers and tax accounting provide from all significant
advisers. 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 can be found in the full Annual Report and Financial Statements, is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs.
Investing in the Right Companies
Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas. Investments are selected in the expectation that the application of private equity disciplines, including an active management style for unquoted companies, will enhance value and enable profits to be realised from planned exits.
The Board has delegated the management of the investment portfolio to Livingbridge 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 PricewaterhouseCoopers ("PwC") as VCT Tax Status Advisers to advise it on compliance with VCT requirements. PwC reviews new investment opportunities, as appropriate, and regularly reviews the investment portfolio of the Company. PwC works closely with the Manager but reports directly to the Board.
Environmental, Human Rights, Employee, Social and Community Issues
The Company seeks to conduct its affairs responsibly and the Manager is encouraged to consider environmental, human rights, social and community issues, where appropriate, with regard to investment decisions.
The Company is required, by company law, to provide details of environmental (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and the effectiveness of these policies. The Company does not have any employees and as a result does not maintain specific policies in relation to these matters.
Livingbridge has an Environmental, Social and Governance ("ESG") policy. As a responsible investor, Livingbridge fully incorporates ESG factors into its investment programme. The ESG policy focuses on environmental, social and corporate governance factors, including risks and opportunities, affecting both the Company and/or specific portfolio companies.
Livingbridge undertakes an in-house risk assessment questionnaire pre-investment to highlight any significant or material ESG issues. Should any such issues be identified, these are then addressed via specific due diligence pre-investment.
Upon completion of an investment the completed in-house questionnaires are assessed by an external consultant to corroborate risks identified, advise the company how to address any ESG issues and also to identify any potential upside opportunities (e.g. energy savings). Relevant ESG matters are then included in the portfolio company board meetings as appropriate and also in the standard Livingbridge portfolio progress reports allowing Livingbridge to assess the impact of any interventions or recommendations.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio.
Gender Diversity
The Board of Directors of the Company comprises two female and two male Directors. The Manager has an equal opportunity policy and currently employs 47 men and 38 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") highlighted above.
The management agreement
Under the management agreement, the Manager receives a fee of 2.0 per cent per annum of the net assets of the Company. In addition, the Manager is responsible for providing all secretarial, administrative and accounting services to the Company. The Manager has appointed Link Alternative Fund Administrators Ltd to provide these services to the Company on its behalf. The Company is responsible for paying the fee charged by Link Alternative Fund Administrators Ltd to the Manager in relation to the performance of these services.
Annual running costs are capped at 3.5 per cent of the net assets of the Company (excluding any performance fee payable to the Manager and irrecoverable VAT), any excess being refunded by the Manager by way of an adjustment to its management fee. The running cost as at 30 September 2017 was 2.3 per cent.
The management agreement may be terminated at any date by either party giving twelve months' notice of termination and, if terminated, the Manager is only entitled to the management fees paid to it and any interest due on unpaid fees.
Performance fees
A performance fee will not be payable to the Manager until the total return on shareholders' funds exceeds an annual threshold of the higher of 4 per cent or base rate plus 2 per cent calculated on a compound basis. To the extent that the total return exceeds the threshold over the relevant period then a performance fee of 10 per cent of the excess will be paid to the Manager. The amount of any performance fee which is paid in an accounting period shall be capped at 5 per cent of shareholders' funds for that period.
During the financial year the threshold was exceeded and a GBP704,000 performance fee is payable (2016: GBPnil).
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 eligible 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 eligible 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, 72 executives have invested a total of GBP896k in 49 companies. At 30 September 2017, 33 of these investments have been realised generating proceeds of GBP267m for the Baronsmead VCTs and GBP14m for the co-investment scheme. For Baronsmead Venture Trust the average money multiple on these 33 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 3.9p a share (based on the current number of shares in issue). The Board considers this small cost to retain quality people to be in the best interests of shareholders.
Advisory and Directors' fees
During the year the Manager and an affiliate received GBP39,000 (2016: GBPnil) advisory fees, GBP367,000 (2016: GBP309,000) directors' fees for services provided to companies in the investment portfolio and incurred abort costs of GBP11,000 (2016: GBP12,000) with respect to investments attributable to BVT.
Alternative Investment Fund Manager's Directive ("AIFMD")
The AIFMD regulates the management of alternative investment funds, including VCTs. On 22 July 2014 the Company was registered as a Small UK registered AIFM under the AIFMD.
Viability Statement
In accordance with principle 21 of the AIC Code of Corporate Governance ("AIC Code"), the Directors have assessed the prospects of the Company over the three year period to 30 September 2020. 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 above. The Board concentrated its efforts on the major factors which affect the economic, regulatory and political environment. The Board also paid particular attention to the importance of its close working relationship with the Manager, Livingbridge.
The Directors have also considered the Company's income and expenditure projections and find these to be realistic and sensible.
Based on the Company's processes for monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model, asset allocation and the portfolio risk profile, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 30 September 2020.
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 7.5p per ordinary share.
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 November 2017, the Company's offer for subscription to raise GBP21m (GBP20.4m 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 638,000 shares were bought in this way during the year to 30 September 2017.
-- 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 3,767,000 shares were bought by investors in the Company's existing shares in the year to 30 September 2017.
On behalf of the Board
Peter Lawrence
Chairman
21 November 2017
Extract of the Directors' Report
Shares and shareholders
Share capital
During the year the Company bought back a total of 1,100,000 ordinary shares to be held in Treasury, representing 0.6 per cent of the issued share capital as at 30 September 2017, with an aggregate nominal value of GBP110,000. The total amount paid for these shares was GBP949,000. The Company's remaining authority to buy back shares from the AGM held in 2017 is 24,925,767. During the year the Company also sold 1,250,000 ordinary shares from Treasury. These shares were sold for a total amount of GBP1,033,000.
Since the year end on 26 October 2017 the Company allotted 19,228,312 new ordinary shares pursuant to the offer for subscription set out in the prospectus published on 4 October 2017. These new shares were allotted at a price of 94.80 pence per share, representing 9.5 per cent of the issued share capital following the allotment with an aggregate nominal value of GBP1,922,831.20, raising a further GBP18.2m of new funds (before expenses).
A second allotment of shares pursuant to the prospectus published on 4 October 2017 was completed on 14 November 2017. The Company allotted 2,932,226 new ordinary shares at a price of 94.50 pence per share, representing 1.4 per cent of the issued share capital following the allotment, with a nominal value of GBP293,222.60, raising a further GBP2.8m of new funds (before expenses).
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 206,285,223 100.00 GBP20,628,522.30
================== ============ ========= =================
Held in treasury 11,103,819 5.38 GBP1,110,381.90
================== ============ ========= =================
In circulation 195,181,404 94.62 GBP19,518,140.40
================== ============ ========= =================
The maximum number of shares held in Treasury during the year was 11,103,819. Shares will not be sold out of Treasury at a discount wider than the discount at which the shares were initially bought back by the Company.
Shareholders
Each 10p ordinary share entitles the holder to attend and vote at general meetings of the Company, to participate in the profits of the Company, to receive a copy of the Annual Report & Financial Statements and to participate in a final distribution upon the winding up of the Company.
There are no restrictions on voting rights, no securities carry special rights and the Company is not aware of any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights. There are no agreements to which the Company is party that may affect its control following a takeover bid.
In addition to the powers provided to the Directors under UK Company Law and the Company's Articles of Association, at each AGM the shareholders are asked to authorise certain powers in relation to the issuing and purchasing of the Company's own shares. Details of the powers granted at the AGM held in 2017, all of which remain valid, can be found in the last notice of AGM.
The Board is not, and has not been throughout the year, aware of any beneficial interests exceeding 3 per cent of the total voting rights.
Tax free dividends
The Company paid or declared the following dividends for the year ended 30 September 2017:
Dividends GBP'000 ============================ ======= Interim dividend of 3.0p per ordinary share paid on 31 March 2017 5,209 ============================ ======= Final dividend of 3.5p per ordinary share to be paid on 2 March 2018 6,831 ============================ ======= Total dividends paid for the year 12,040 ============================ =======
Subject to shareholder approval at the AGM, a final dividend of 3.5p per share will be paid on 2 March 2018 to shareholder on the register at 2 February 2018.
Annual General Meeting
The notice of the AGM of the Company to be held at 11.00am on 21 February 2018 at Saddlers' Hall, 40 Gutter Lane, London EC2V 6BR has been sent to shareholders and is available on the Company's website.
Directors
Appointments
The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association and the Companies Act 2006. Further details in relation to the appointed Directors and the governance arrangements of the Board can be found in the full Annual Report and Financial Statements.
Directors are entitled to a payment in lieu of three month notice by the Company for loss of office in the event of a takeover bid.
Directors' Indemnity
Directors' and Officers' liability insurance cover is in place in respect of the Directors. The Company's Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as Directors, in which they are acquitted or judgement is given in their favour by the Court.
Save for such indemnity provisions in the Company's Articles of Association and in the Directors' letters of appointment, there are no qualifying third party indemnity provisions in force.
Conflicts of Interest
The Directors have declared any conflicts or potential conflicts of interest to the Board of Directors which has the authority to approve such situations. The Company Secretary maintains the Register of Directors' Conflicts of Interests which is reviewed quarterly by the Board. Directors advise the Company Secretary and the Board as soon as they become aware of any conflicts of interest and do not take part in discussions which relate to any of their conflicts.
Responsibility for accounts and going concern
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
After making enquires, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion the Directors have considered the liquidity of the Company and its ability to meet obligations as they fall due for a period of at least twelve months from the date that these financial statements were approved. As at 30 September 2017, the Company held cash balances and investments in readily realisable securities with a value of GBP15,739,000. 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
21 November 2017
Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reason able and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-- assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
-- use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company taken as a whole; and
-- the strategic report/Directors' report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position and performance, business model and strategy.
On behalf of the Board
Peter Lawrence
Chairman
21 November 2017
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2016 and 2017 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies, and those for 2017 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 2017
Year ended Year ended
30 September 2017 30 September 2016
------------------------------------- -------------------------------------
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 - 15,108 15,108 - 3,190 3,190
Realised gains on disposal
of investments 2.3 - 134 134 - 2,931 2,931
Income 2.5 2,569 - 2,569 2,115 - 2,115
Investment management fee
and performance fee 2.6 (750) (2,955) (3,705) (650) (1,949) (2,599)
Other expenses 2.6 (501) - (501) (990) - (990)
------------------------------- ------- --------------- --------- --------- ---------------- --------- --------
Profit before taxation 1,318 12,287 13,605 475 4,172 4,647
Taxation 2.9 - - - - - -
------------------------------- ------- --------------- --------- --------- ---------------- --------- --------
Profit for the year, being
total comprehensive income
for the year 1,318 12,287 13,605 475 4,172 4,647
------------------------------- ------- --------------- --------- --------- ---------------- --------- --------
Return per ordinary share:
Basic and Diluted 2.2 0.76p 7.08p 7.84p 0.34p 2.98p 3.32p
------------------------------- ------- --------------- --------- --------- ---------------- --------- --------
All items in the above statement derive from continuing operations.
There are no recognised gains and losses other than those disclosed in the Income Statement.
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.
The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 and updated in January 2017 by the Association of Investment Companies ("AIC SORP").
Statement of Changes in Equity
For the year ended 30 September 2017
Non-distributable reserves Distributable
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 2016 18,412 96,515 25,238 10,089 304 150,558
Cancellation of share
premium - (96,515) - 96,515 - -
Share premium cancellation
costs - - - (31) - (31) Profit/(loss) after taxation - - 16,114 (3,827) 1,318 13,605 Net proceeds of share buybacks & sale of shares from treasury - - 79 - 79 Dividends paid 2.4 - - - (4,862) (347) (5,209) --------------------------- ----- ------------ ---------- ------------- -------- ------------ -------- At 30 September 2017 18,412 - 41,352 97,963 1,275 159,002 ---------------------------------- ------------ ---------- ------------- -------- ------------ --------
For the year ended 30 September 2016
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 2015 9,497 16,561 28,820 34,152 102 85,132
Profit 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
------------------------ ----- -------------- -------- ----------- ----------- ----------- ---------
Balance Sheet
As at 30 September 2017
As at As at
30 September 30 September
2017 2016
Notes GBP'000 GBP'000
--------------------------------------- ------ -------------- --------------
Fixed assets
Investments 2.3 160,130 128,261
Current assets
Debtors 2.7 175 1,770
Cash at bank and on deposit 409 21,591
--------------------------------------- ------ -------------- --------------
584 23,361
Creditors (amounts falling due within
one year) 2.8 (1,712) (1,064)
--------------------------------------- ------ -------------- --------------
Net current (liabilities) / assets (1,128) 22,297
--------------------------------------- ------ -------------- --------------
Net assets 159,002 150,558
--------------------------------------- ------ -------------- --------------
Capital and reserves
Called-up share capital 3.1 18,412 18,412
Share premium 3.2 - 96,515
Capital reserve 3.2 97,963 10,089
Revaluation reserve 3.2 41,352 25,238
Revenue reserve 3.2 1,275 304
--------------------------------------- ------ -------------- --------------
Equity shareholders' funds 159,002 150,558
--------------------------------------- ------ -------------- --------------
Net asset value per share
- Basic 2.1 91.90p 87.09p
- Treasury 2.1 19.60p 86.80p
--------------------------------------- ------ -------------- --------------
The financial statements were approved by the Board of Directors on 21 November 2017 and were signed on its behalf by:
Peter Lawrence
Chairman
Statement of Cash Flows
For the year ended 30 September 2017
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Investment income received 2,587 2,225
Deposit interest received 7 73
Investment management fees paid (2,955) (3,006)
Other cash payments (493) (564)
Merger costs paid (136) (246)
Net cash outflow from operating activities (990) (1,518)
---------------------------------------------------- ------------- -------------
Cash flows from investing activities
Purchases of investments (32,014) (33,957)
Disposals of investments 15,387 49,955
Net cash inflow from investing activities (16,627) 15,998
---------------------------------------------------- ------------- -------------
Equity dividends paid (5,209) (28,512)
---------------------------------------------------- ------------- -------------
Net cash outflow before financing activities (22,826) (14,032)
Cash flows from financing activities -
Net proceeds of share issues, share buybacks & sale
of shares from treasury 1,648 8,554
Net proceeds received from merger - 16,362
Share premium cancellation costs (4) -
Net cash inflow from financing activities 1,644 24,916
---------------------------------------------------- ------------- -------------
(Decrease) / Increase in cash (21,182) 10,884
Reconciliation of net cash flow to movement in net
cash
(Decrease) / Increase in cash (21,182) 10,884
Opening cash position 21,591 10,707
Closing cash at bank and on deposit 409 21,591
---------------------------------------------------- ------------- -------------
Reconciliation of profit on ordinary activities
before taxation to net cash outflow from operating
activities
Profit before taxation 13,605 4,647
Gains on investments (15,242) (6,121)
Decrease in debtors 28 37
Increase / (decrease) in creditors 619 (72)
Written off expenses from merger - (9)
Net cash outflow from operating activities (990) (1,518)
==================================================== ============= =============
Notes to the Financial Statements
We have grouped notes into sections under three key categories:
1. Basis of preparation
2. Investments, performance and shareholder returns
3. Other required disclosures
The key accounting policies have been incorporated throughout the Notes to the Financial Statements adjacent to the disclosure to which they relate. All accounting policies are included within an outlined box. -------------------------------------------------------------------------------------- 1. Basis of Preparation
1.1 Basis of accounting
These Financial Statements have been prepared under FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and in accordance with
the Statement of Recommended Practice ("SORP") for investment trust companies
and venture capital trusts issued by the Association of Investment Companies
("AIC") in November 2014 and updated in January 2017 and on the assumptions
that the Company maintains VCT status.
The application of the Company's accounting policies requires judgement, estimation
and assumptions about the carrying amount of assets and liabilities. These estimates
and associated assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from these estimates.
The key source of estimation uncertainty relates to the assumptions made in
the determination of the fair value of the unquoted investments as set out in
note 2.3.
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
2017 2016 2017 2016 2017 2016
number number pence pence GBP'000 GBP'000
=========================== ============ ============ ============ ============ ============ ============
Ordinary shares (basic) 173,020,866 172,870,866 91.90 87.09 159,002 150,558
Ordinary shares (including
treasury) 184,124,685 184,124,685 91.60 86.80 168,663 159,828
=========================== ============ ============ ============ ============ ============ ============
The treasury net asset value per share as at 30 September 2017 included ordinary shares held in treasury valued at the mid share price of 87.00p at 30 September 2017 (2016: 82.38p).
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
2017 2016 2017 2016 2017 2016
number number pence pence GBP'000 GBP'000
Revenue 173,485,578 139,821,872 0.76 0.34 1,318 475
Capital 173,485,578 139,821,872 7.08 2.98 12,287 4,172
Total 7.84 3.32 13,605 4,647
======== ============ ============ ============ ============ ============= =============
2.3 Investments
The Company has fully adopted sections 11 and 12 of FRS 102.
Purchases or sales of investments are recognised at the date of transaction.
Investments are measured at fair value. For AIM-traded securities this is either
bid price or the last traded price, depending on the convention of the exchange
on which the investment is traded.
In respect of collective investment vehicles, which consists of investments
in open ended investment companies authorised in the UK, this is the closing
price.
In respect of unquoted investments, these are valued at fair value by the Directors
using methodology which is consistent with the International Private Equity
and Venture Capital Valuation guidelines ("IPEV"). 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
2017 2016
GBP'000 GBP'000
=============================== ===================== ============
Level 1
Investments traded on AIM 68,720 60,575
Level 2
Collective investment vehicles 38,675 18,400
Level 3
Unquoted investments 51,644 49,286
Investments traded on AIM* 1,091 -
------------------------------- --------------------- ------------
160,130 128,261
------------------------------- --------------------- ------------
* TLA Worldwide plc has been changed to a level 3 investment due to a suspension of trading during the year.
Level 1 Level 2 Level 3
==================
Collective
Traded investment Traded
on AIM vehicles on AIM Unquoted Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 50,409 12,451 - 40,163 103,023
Opening unrealised appreciation 10,166 5,949 - 9,123 25,238
--------------------------------------- -------- ----------- -------- -------- --------
Opening valuation 60,575 18,400 - 49,286 128,261
--------------------------------------- -------- ----------- -------- -------- --------
Movements in the year:
Transfer between levels (2,315) - 2,315 - -
Purchases at cost 3,055 24,460 - 4,499 32,014
Sale - proceeds (2,009) (9,130) - (4,248) (15,387)
- realised gains / (losses)
on sales 620 - - (486) 134
Unrealised losses realised
during the year (1,005) - - (1) (1,006)
Increase / (decrease)
in unrealised appreciation
/ (depreciation) 9,799 4,945 (1,224) 2,594 16,114
--------------------------------------- -------- ----------- -------- -------- --------
Closing valuation 68,720 38,675 1,091 51,644 160,130
--------------------------------------- -------- ----------- -------- -------- --------
Closing book cost 48,755 27,781 2,315 39,927 118,778
Closing unrealised appreciation
/ (depreciation) 19,965 10,894 (1,224) 11,717 41,352
--------------------------------------- -------- ----------- -------- -------- --------
Closing valuation 68,720 38,675 1,091 51,644 160,130
--------------------------------------- -------- ----------- -------- -------- --------
Equity shares 68,720 - 1,091 17,291 87,102
Loan notes - - - 34,353 34,353
Collective investment
vehicles - 38,675 - - 38,675
Closing valuation 68,720 38,675 1,091 51,644 160,130
--------------------------------------- -------- ----------- -------- -------- --------
The gains and losses included in the above table have all been recognised in the Income Statement above.
TLA Worldwide plc has been changed to a level 3 investment due to a suspension of trading during the year.
2.4 Dividends
Year ended Year ended
30 September 2017 30 September 2016
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
2017
-Interim dividend of 3.0p
per ordinary share paid on
31 March 2017 347 4,862 5,209 - - -
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
347 4,862 5,209 273 28,239 28,512
--------------------------------------------------------- -------- ------------- ---------- ------- ------- -------
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
2017.
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 2017 30 September 2016
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
Dividend income 1,200 - 1,200 1,465 - 1,465
Interest Income 14 1,350 1,364 20 558 591
1,214 1,350 2,564 1,485 558 2,043
------------------------ ----------- ----------- -------- --------------- -------------- ----------
Other income++
Deposit interest 5 60
Other income - 12
------------------------ ----------- ----------- -------- --------------- -------------- ----------
Total income 2,569 2,115
------------------------ ----------- ----------- -------- --------------- -------------- ----------
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
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fee 750 2,251 3,001 650 1,949 2,599
Performance fee - 704 704 - - -
---------------------- --------- -------- -------- --------- -------- --------
750 2,955 3,705 650 1,949 2,599
---------------------- --------- -------- -------- --------- -------- --------
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
2017 2016
GBP'000 GBP'000
Directors' fees 99 123
Secretarial and accounting fees paid to the Manager 143 147
Remuneration of the auditors and their associates:
- audit 31 31
- other services supplied pursuant to legislation
(interim review) 6 6
Merger costs* (33) 415
Other 255 268
501 990
==================================================== ============ ============
* The negative merger costs reflected in the year ended 30 September 2017 relate to an over provision in the year ended 30 September 2016 which has been written off.
Information on directors' remuneration is given in the directors' emoluments table in the Annual Report and Financial Statements.
Charges for other services provided by the auditors in the year ended 30 September 2017 were in relation to the interim review.
The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. The Directors consider that the auditors were best placed to provide such services.
2.7 Debtors
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
---------------------------------------------- ------------ ------------
Prepayments and accrued income 175 203
Amounts due from sale of shares from treasury - 1,567
============================================== ============ ============
175 1,770
============================================== ============ ============
2.8 Creditors (amounts falling due within one year)
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
Management, secretarial and accounting fees due
to the Manager 1,542 792
Merger costs - 169
Share premium cancellation costs 27 -
Other creditors 143 103
------------------------------------------------ ------------ ------------
1,712 1,064
================================================ ============ ============
2.9 Tax
UK corporation tax payable is provided on taxable profits at the current rate. Provision is made for deferred taxation on the liability method, without discounting, on all timing differences calculated at the current rate of tax relevant to the benefit or liability. ---------------------------------------------------------------------------------------
The tax charge for the year is lower than the standard rate of corporation tax in the UK for a company. The differences are explained below:
Year ended Year ended
30 September 2017 30 September 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- -------- -------- --------
Profit before taxation 1,318 12,287 13,605 475 4,172 4,647
----------------------------- -------- -------- -------- -------- -------- --------
Corporation tax at 19.5
per cent
(2016: 20.0 per cent)* 257 2,396 2,653 95 834 929
Effect of:
Non-taxable gains - (2,972) (2,972) - (1,224) (1,224)
Non-taxable dividend income (234) - (234) (293) - (293)
Non-deductible expenses (7) - (7) - - -
Losses carried forward (16) 576 560 198 390 588
============================= ======== ======== ======== ======== ======== ========
Tax charge/(credit) for
the year - - - - - -
============================= ======== ======== ======== ======== ======== ========
* The corporation tax rate applied is based on the average tax rates for the financial years ended 30 September 2017 and 2016. The actual rates were 20 per cent until 31 March 2017 and 19 per cent from 1 April 2017.
At 30 September 2017 the Company had surplus management expenses of GBP10,024,604 (2016: GBP7,583,134) 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 ================================================================== ======= 184,124,685 ordinary shares of 10p each listed at 30 September 2016 18,412 184,124,685 ordinary shares of 10p each listed at 30 September 2017 18,412 ================================================================== ======= 11,253,819 ordinary shares of 10p each held in treasury at 30 September 2016 (1,125) 1,100,000 ordinary shares of 10p each repurchased during the year and held in treasury (110) 1,250,000 ordinary shares of 10p each sold from treasury during the year 125 ------------------------------------------------------------------ ------- 11,103,819 ordinary shares of 10p each held in treasury at 30 September 2017 (1,110) ------------------------------------------------------------------ ------- 173,020,866 ordinary shares of 10p each in circulation* at 30 September 2017 17,302 ------------------------------------------------------------------ -------
* Carrying one vote each.
During the year the Company bought back 1,100,000 ordinary shares and sold from treasury 1,250,000 ordinary shares, representing (0.08) per cent of the ordinary shares in issue at the beginning of the financial year.
In October 2017, the Company allotted 19,228,312 new ordinary shares and a further 2,932,226 new ordinary shares in November 2017. See above for further details.
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 2016 10,089 304 10,393 96,515 25,238 121,753
Cancellation of share premium 96,515 - 96,515 (96,515) - -
Share premium cancellation
costs (31) - (31) - - -
Purchase of shares for treasury (949) - (949) - - -
Sale of Shares from treasury 1,033 - 1,033 - - -
Expenses of share issue
and buybacks (5) - (5) - - -
Reallocation of prior year
unrealised losses (1,006) - (1,006) - 1,006 1,006
Realised gain on disposal
of investment(#) 134 - 134 - - -
Net increase in value of
investments(#) - - - - 15,108 15,108
Management fee capitalised(#) (2,955) - (2,955) - - -
Profit after taxation(#) - 1,318 1,318 - - -
Dividends paid in the year (4,862) (347) (5,209) - - -
================================ ========== ================ ========= =========== =============== =========
At 30 September 2017 97,963 1,275 99,238 - 41,352 41,352
================================ ========== ================ ========= =========== =============== =========
(#) The total of these items is GBP13,605,000, which agrees to the total profit for the year.
* 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.
On 20 September 2017, the share premium account was cancelled by an Order of Court following the passing of a Special Resolution. The credit arising of GBP96,515,000 has been applied in creating a special reserve, within the capital reserve, which shall be able to be applied in any manner in which the Company's profits available for distribution (as determined in accordance with section 649 of the Companies Act 2006) are able to be applied.
3.3 Financial instruments risks
The Company's financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in a diverse portfolio of UK growth businesses.
The Company's investing activities expose it to a range of financial risks. These key risks and the associated risk management policies to mitigate these risks are described below.
Market risk
Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities.
Price Risk
The investment portfolio is managed in accordance with the policies and procedures described above.
Investments in unquoted stocks & AIM-traded companies involve a higher degree of risk than investments in the main market. The Company aims to reduce this risk by diversifying the portfolio across business sectors and asset classes.
Management performs continuing analysis on the fair value of investments and the Company's overall market positions are monitored by the Board on a quarterly basis. Management are comfortable that a 5 per cent movement in share price is a reasonable estimate of the upside and downside alternatives.
As at 30 September 2017 As at 30 September 2016
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 68 5,424 (5,424) 62 3,949 (3,949)
Unquoted 32 2,582 (2,582) 38 2,464 (2,464)
========== =========== =========== =========== =========== =========== ===========
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 2017 As at 30 September 2016
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 34,353 9.28 2.34 37,022 8.95 2.08
Floating rate sterling
liquidity funds 15,330 - - - - -
Cash at bank and on deposit 409 - - 21,591 - -
================================ =========== ========= =========== ============= ========== ===========
50,092 58,613
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
2017 2016
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Cash at bank and on deposit 409 21,591
Interest, dividends & other receivables 175 1,770
584 23,361
======================================== ============ ============
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 of the Annual Report and Financial Statements.
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 2017 or 30 September 2016. No individual investment exceeded 4.9 per cent of the net assets attributable to the Company's shareholders at 30 September 2017 (2016: 3.9 per cent).
Liquidity risk
The Company's financial instruments include investments in unquoted companies which are not traded in an organised public market, as well as AIM traded equity investments, all of which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed on an ongoing basis by the Investment Manager. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 30 September 2017 these investments were valued at GBP15,739,000 (2016: GBP21,591,000)
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 of the Strategic Report above, whereby members and staff of the Manager are entitled to participate in all unquoted investments alongside the Company.
During the year the Manager and an affiliate received GBP39,000 (2016: GBPnil) advisory fees, GBP367,000 (2016: GBP309,000) was received in connection with directors' fees for services provided to companies in the investment portfolio and incurred abort costs of GBP11,000 (2016: GBP12,000) with respect to investments attributable to BVT.
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.
3.6 Post balance sheet events
Realisations
Following the balance sheet date the Company realised its investment in IP Solutions Limited at the trading company level with funds being retained at the group level at present, this realisation is expected to return proceeds to the Company totalling GBP0.8m and making a return of 0.4x cost.
Following the balance sheet date the Company realised its investment in Eque2 Limited returning proceeds totalling GBP4.2m and making a return of 3.0x cost.
Fundraising
Since the year end on the 26 October 2017 the Company allotted 19,228,312 new ordinary shares pursuant to the offer for subscription set out in the prospectus published on 4 October 2017. These new shares were allotted at a price of 94.80 pence per share, representing 9.4 per cent of the issued share capital following the allotment with an aggregate nominal value of GBP1.9m raising a further GBP18.2m of new funds (before expenses).
Following the first allotment of shares on 26 October 2017 a further 2,932,226 new ordinary shares were allotted on 10 November 2017 pursuant to the offer for subscription set out in the prospectus published on 4 October 2017. These new shares were allotted at a price of 94.50 pence per share, representing 1.4 per cent of the issued share capital following the allotment with an aggregate nominal value of GBP0.3m raising a further GBP2.8m of new funds (before expenses).
TLA Worldwide plc
The suspension for trading on AIM was lifted on 16 November 2017.
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 URVRRBUAAUUA
(END) Dow Jones Newswires
November 21, 2017 02:01 ET (07:01 GMT)
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