Annual Financial Report

Baronsmead VCT 3 plc Annual report & accounts for the year ended 31 December 2013 Financial Headlines â— Net asset value ("NAV") per share increased 12.9 per cent. to 120.9p in the year ended 31 December 2013, before deduction of dividends. â— Dividend payments of 7.5p for the year to 31 December 2013. â— Net annual dividend yield was 7.1 per cent. and gross annual yield was 9.4 per cent. â— 245.4p - NAV total return to shareholders for every 100.0p invested at launch. Extract of the Strategic Report The Strategic Report included in the Annual Report and Accounts for the year to 31 December 2013 has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to inform the members of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006. The Company is registered in England as a Public Limited Company (Registration number 04115341). The Directors have managed, and intend to continue to manage, the Company's affairs in such a manner as to comply with Section 274 of the Income Tax Act 2007 which grants approval as a VCT. Investment Objective Baronsmead VCT 3 is a tax efficient listed company which aims to achieve long-term investment returns for private investors. Investment policy â—To invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on AIM. â—Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value. Further details on how this is achieved is contained in the "Other Matters" section of the Strategic Report below. Cash Returned to Shareholders The table and chart below shows the cash returned to shareholders dependent on their subscription cost, including their income tax reclaimed on subscription. Income cumulative Net Gross Subscription tax Net cash dividends annual equivalent price reclaim invested paid yield* yieldâ€ Year subscribed p p p p % % 2001 (January) 100.00 20.00 80.00 78.30 7.6% 10.1% 2005 (March) - C 100.00 40.00 60.00 45.54 8.6% 11.4% share 2010 (March) 103.09 30.93 72.16 30.00 11.0% 14.7% 2012 (December) 117.40 35.22 82.18 12.00 14.2% 18.9% The total return could be higher for those shareholders who were able to defer a capital gain on subscription and the net sum invested may be less. * Net annual yield represents the cumulative dividends paid expressed as a percentage of the net cash invested. â€ The gross equivalent yield if the dividends had been subject to the higher rate of tax on dividends (currently 32.5 per cent.). For those shareholders who earn over Â£150,000 per tax year and who would otherwise pay this additional rate of tax on dividends, the gross equivalent yield will be higher than the figures stated above. Dividends paid to C shareholders post conversion have been adjusted by the conversion ratio (0.85642528). Chairman's Statement This Chairman's Statement forms part of the Strategic Report. I am pleased to report that the Company had a good year and the Net Asset Value ("NAV") before payment of dividends increased by 13.78p a share (12.86 per cent.). The total dividend for the year was 7.5p, in the form of two interim dividends paid in September and December 2013. On 12 February 2014, the Company declared an interim dividend of 8.0p per share payable on 7 March 2014 to shareholders on the register as of 21 February 2014. RESULTS Analysis of change in NAV over the year Pence per ordinary share NAV as at 1 January 2013 (after deducting the final dividend of 4.5p for the year to 31 December 2012) 107.12 Valuation uplift (12.86 per cent.) 13.78 NAV as at 31 December 2013 before dividends 120.90 Interim dividend paid on 20 September 2013 (3.00) Second interim dividend paid on 20 December 2013 (4.50) NAV as at 31 December 2013 after paying dividends 113.40 Our portfolio is diverse and this has helped to smooth investor returns from year to year. The unquoted portfolio has seen several years of strong growth but last year the return was more modest, principally because many of the current investments are relatively new and therefore will take some time before they start delivering value growth. We remain focused primarily on unquoted investments and the Manager is now working to help these newer investments achieve their potential for growth in future years. This year's investment performance has been achieved mainly due to the 32.6 per cent. growth in the quoted portfolio. This performance was partly due to the rise in quoted values, resulting from a welcome return of investor appetite for smaller quoted companies, but is also a vindication of the distinctive approach to quoted investment strategy the Manager had developed over the past five years. Since 2008 it has taken larger stakes in selected AIM companies in order to become a more influential partner. This has enabled it to introduce some private equity experience and disciplines to these investments with a view to growing value and achieving satisfactory exits. In addition, during the downturn in the markets following the financial crisis, the Manager took a long term view and continued to invest in companies with strong fundamentals rather than overreact to market sentiment. As a result of an active year of new investment and realisations, the portfolio has increased to 71 investments. New and follow-on investments totalled Â£8.9 million across ten unquoted, one ISDX (ICAP Securities & Derivatives Exchange (formerly PLUS Markets Group plc.)) and fifteen AIM companies. Sales of investments realised capital proceeds of Â£16.5 million and delivered net gains of Â£8.1 million. The portfolio as a whole, remains in good health with 80 per cent. of investees reporting steady or improving performance against their business plans. LONG TERM PERFORMANCE The Company's investment objective remains focussed on companies with strong growth potential so as to produce consistently high returns for shareholders over the long-term. This year's strong performance has increased the NAV total return for each 100p invested in Baronsmead VCT 3 to 217.8p over ten years (245.4p since launch in 2001). Cumulative tax free dividends during that period have amounted to 69.0p per share (78.3p per share for founder shareholders at launch in 2001). SHAREHOLDER MATTERS Dividends The Company paid dividends totalling 7.5p per share for the financial year to 31 December 2013. Following several profitable realisations, in February 2014, the Directors declared an interim dividend of 8.0p per share payable on 7 March 2014. It is the Board's current expectation that this interim dividend will be in lieu of the dividend that would normally be declared following the half-yearly results for the six-months to 30 June 2014. This pays the dividend to the Company's existing shareholders who benefit from the returns realised in 2013 prior to new shares being allotted with respect to subscriptions to the Company's fundraising. Fundraising An offer for subscription to raise gross proceeds of up to Â£10 million was launched on 22 January 2014. Based on subscriptions to date, it is expected that the Company's offer will be fully subscribed shortly. Share price discount policy In November 2012 the Company announced that it would seek to narrow the mid share price discount to NAV from 10 per cent.to 5 per cent. I am pleased to report that during the twelve months to 31 December 2013 the targeted reduction has been largely achieved with the mid share price discount to NAV averaging 4.7 per cent. for the year. It is the Board's intention to try to maintain this discount to NAV, however, this policy will be kept under continuous review and may be subject to revision if necessary. Shares will be bought back depending on market conditions at the time and only where the Directors believe such a transaction to be in the best interests of all shareholders. VCT legislation In its Autumn Statement, issued on 5 December 2013, HM Treasury ("HMT")announced its intention to introduce legislation with effect from 6 April 2014 to prevent the use of "Enhanced Share Buy Backs" by VCTs. Since the Board has never used these arrangements, having preferred to create an orderly market for all shareholders through maintaining a narrow share price discount, this legislation will have no impact on the Company. HMT also indicated in the Autumn Statement that it wished to consult further on potential changes to VCT rules to address the potential misuse of reserves created from converted share premium accounts. They are concerned that in some circumstances this reserve may be used to return capital to shareholders prior to any profits being generated from investments. The Manager has participated in this consultation alongside other VCT Managers and the Association of Investment Companies ("AIC") with the aim of ensuring that any draft legislation process would not result in any unintended adverse consequences for the industry. The European Commission is currently undertaking a review of the state aid regulations including the risk capital guidelines under which VCTs are approved at the European level. The aim of the review is to set out a clear framework to allow member states to grant aid without the need for the European Commission to be involved. Our trade association, the AIC is engaged in the discussion and the Manager has provided data and case studies to assist the construction of a suitable response. Management Arrangements The Board has considered the impact on your Company of the Alternative Investment Fund Managers Directive ("AIFMD"), an EU Directive that came into force in July 2013 to regulate the Managers of Alternative Investment Funds. The legislation provides for Investment Trusts and VCTs to opt to become self managed for the purposes of the Directive, which would result in the Company becoming the Alternative Investment Fund Manager ("AIFM"). The legislation also provides that AIFMs that manage assets under â‚¬500m can take advantage of a light touch regime and register as Small Registered Managers which only imposes some minimal additional reporting on the AIFM. To minimise the cost of compliance with this Directive the Board has decided that the Company will register as the AIFM. This development will not impact on the day to day investment activities other than the need to novate the Investment Management Agreement to a sister partnership of our current Manager, ISIS EP LLP, controlled and managed by the same individuals. Annual General Meeting I look forward to meeting as many shareholders as possible at our thirteenth Annual General Meeting to be held on Monday, 14 April 2014 at Plaisterers' Hall, One London Wall, London, EC2Y 5JU at 10.30 a.m. This will be followed by presentations from the Manager, a light lunch and a joint shareholder workshop with Baronsmead VCT 5's shareholders. OUTLOOK There is growing evidence that the long awaited recovery of the UK economy is now underway and there is a greater degree of optimism than there has been for many years. The investment environment has been challenging over the past five years but the Investment Manager has built a strong capability in its chosen sectors and a market leading origination team and this enabled it to continue to find good investments despite the downturn. The addition of six new unquoted companies during 2013 hopefully signals a sustainable increase in the number of good investment opportunities and we believe that the Manager is well placed to take advantage of this. The successful realisation of many unquoted companies has generated excellent returns but the remaining portfolio is now relatively immature. It remains widely diversified, well resourced and adequately funded and the Investment Manager has the skill and experience to support and help these investments in their development. We believe that the Company is well placed to take advantage of the recovery as it gathers momentum. We will continue to focus on delivering a consistent yield for shareholders while protecting the asset base. Anthony Townsend Chairman 17 February 2014 Manager's Review The year has seen very different performance contributions from the quoted and unquoted portfolios. Firstly strong upward performance has been delivered by the quoted portfolio which is a welcome reward for patience through an uncertain market over recent years. This has also enabled a level of net divestment from the quoted portfolio as profits have been crystallised into cash, although the significant value growth has still resulted in an increase in the quoted NAV during the period. The unquoted portfolio has seen a significant refreshment in assets. There was a high level of new unquoted investment with six new unquoted investee companies added to the portfolio and a further one added since the end of the financial year. This is the busiest period of investing for some years. In addition, there has been a high rate of divestment from the unquoted portfolio with some long held investments being realised. The unquoted portfolio has therefore not contributed much to NAV growth this period as a higher proportion of the portfolio is relatively new. PORTFOLIO REVIEW Overview The net assets of Â£74.9 million were invested as follows: Asset class NAV % of Number of Annual return (Â£m) NAV investees % Unquoted 28.3 38 26 0.6 Quoted 28.9 38 45 32.6 Wood Street Microcap 7.0 9 37 55.0 Cash and near cash 10.7 15 - - During the year there were; â€¢New investments of Â£7.4 million in 13 new companies and Â£1.5 million in 13 follow ons; â€¢ Divestment proceeds of Â£19.8 million from 8 full exits and 4 partial realisations. Each quarter the direction of general trading and profitability of all investee companies is recorded so that the Board can monitor the overall health and trajectory of the portfolio. At 31 December 2013, 80 per cent. of the 71 companies in the portfolio (excluding Wood Street Microcap) were progressing steadily or better. The level of quoted assets in the NAV is at a higher proportion than seen in recent periods. This is due to the combination of high growth in quoted values together with the high rate of unquoted divestments. The Manager continues to invest significantly more during each year in unquoted investments over new quoted investments. Unquoted Private Equity Portfolio After a strong year of growth last year of 8 per cent., the unquoted portfolio has stayed flat during 2013. The unquoted portion of the portfolio is valued using a consistent process every three months which the Board oversees and approves. Almost all of the value creation in unquoted investments comes from operational improvements (revenue and margin growth), rather than financial leverage. The reason the unquoted portfolio is flat this year is that a high proportion of investments are relatively young and have not yet started contributing to value growth. The year delivered a series of strong realisations, including the pleasing contribution of three of these being longstanding holdings made in 2005 and 2006. â€¢ Independent Living Services Limited, the care business based in Scotland, has been in the portfolio since 2005 and was sold to Mears Group plc generating a profit multiple of 2.5x cost. â€¢ MLS Limited, the school library software business, was an investment from 2006 that realised 2.8x cost on its sale to Capita plc. â€¢ Kafevend Holdings Limited is a leading UK vending provider added to the portfolio in 2005 that has been sold to trade buyer Eden Springs UK Ltd realising 2.5x cost. â€¢ CSC (World) Limited providing software for structural engineers was sold to US trade buyer Trimble Navigation Inc. generating 2.4x cost. â€¢ CableCom Networking Holdings Limited has been in the portfolio since 2007 and manages internet services to high density accommodation such as student accommodation. The business has been sold via a secondary management buy-out and the realisation has delivered 4.8x cost which is an excellent result. A Â£5 million investment (Â£1.25 million for Baronsmead VCT3) has been negotiated in the new transaction on the same terms as the lead private equity buyer as ISIS believes there is an opportunity for further growth. Overall this represents a strong and consistent realisation performance. This level of realisations represents a much higher proportion of the unquoted portfolio than would be seen in an average year. The level of realisations in the short term will be lower and the unquoted element of NAV should therefore grow in the next few years. Quoted Portfolio (AIM traded and other listed investments) There has been a significant uplift in the quoted portfolio of 33 per cent. reflecting a positive re-rating of the small cap sector in the year. This recovery has been welcome following recent years of headwinds from a challenging AIM market environment and weak share prices. The performance of the quoted portfolio also reflects the changes introduced by the ISIS Quoted Investment team since 2009. The Quoted team is now more likely to build progressive stakes. An investment in a new smaller company might start at an initial low level. As the team becomes more comfortable with performance and where it is possible within the constraints of VCT qualifying investing, the holding will be increased. Several more significant holdings of over 20 per cent. have now been built where the team has a closer, more influential relationship and can utilise some of the good practice from our Private Equity experience. In addition, during the weaker AIM market, the team endeavoured to focus on the fundamentals of the investees and demonstrated patient support when market sentiment depressed share prices of sound companies. The ISIS team believes the benefits of this work are now contributing to improved Quoted performance in addition to the recovery of the Quoted markets. Realisations during the year from the quoted portfolio totalled Â£3.4 million at an average multiple of 2.0x cost which is an excellent result. Notably within this is the full realisation due to a takeover of FFastFill plc (2.8x cost) and the partial sales in the market of IDOX plc (at 5.7x cost). A notable disappointment in the quoted portfolio was the failure of Zattikka plc resulting in the full loss of the Â£315k investment made in April 2012. Whilst it is expected that work in the Quoted arena will deliver future positive returns, the high annual growth achieved in this period should be considered as exceptional. Wood Street Wood Street Microcap Investment Fund ("Wood Street") was established by ISIS in May 2009 to provide flexibility for the Baronsmead VCTs to invest in larger and more liquid non VCT qualifying AIM and Small Cap opportunities. It represents another innovation introduced by the ISIS Quoted team to seek performance improvement. At 31 December 2013, Baronsmead VCT 3 had invested Â£3.5 million through Wood Street into a portfolio of 37 companies, now valued at Â£7.0 million. Wood Street generated a positive return of 55 per cent. over the year. Liquid assets (cash and near cash) Baronsmead VCT 3 had cash and near cash resources of approximately Â£10.7 million 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. In addition, investments within the Wood Street fund are expected to be relatively more liquid than other investments as explained in the section above. This gives the Manager the possibility of realising cash from Wood Street should this ever be required to supplement liquid assets. Unquoted Investments During the year, Â£7.3 million was invested in 11 unquoted companies including 7 new additions to the unquoted portfolio, one of which utilised an existing acquisition vehicle. The new unquoted investments were; â€¢ Create Health is an internationally renowned fertility clinic which is the UK's leading specialist in natural and mild IVF techniques. Natural and mild IVF uses lower levels of drugs and is viewed as more ethical and healthier - it is used widely in advanced overseas fertility markets and is growing in popularity in the UK. The investment will fund the opening of a new flagship site in London. â€¢ Eque2 is a software business that was previously owned by Sage plc and known as Sage Construction. It provides enterprise wide software systems that cater for firms of all sizes in the construction industry, helping them to control and manage all types of construction projects. â€¢ Armstrong Craven is an HR consultancy and provider of specialist executive search services to many large global and national clients. It has offices in Manchester and London. The ISIS support helped the original founder and management team acquire the business from its parent plc in a Management Buy Out. â€¢ Luxury for Less is a fast growing online bathroom products retailer which operates the transactional website www.bathempire.com. ISIS will help the business expand its range and help fund new facilities to support growth. The investment was made by using an already established acquisition vehicle and therefore is not listed as a new investment in the tables below. â€¢ Key Travel is a leading travel management company dedicated to serving the travel requirements of the not-for-profit, academic and faith sectors from its bases in the UK, Europe and the US. Major clients include Oxfam, Save the Children and Cambridge University. Travel arranged for clients will break through the Â£100 million mark this year. The investment will help support the continued growth of the business. â€¢ Carousel Logistics Limited based in Kent, designs and manages bespoke supply chain management solutions for clients with time critical, challenging or high touch customer care needs. Carousel has a range of international clients for whom it delivers a complete integrated service including e-fulfilment, procurement, warehousing, distribution, reverse logistics and international in-night services. ISIS will support Carousel's continued business expansion within the UK and continental Europe. Top Ten Investments The average investment value of the top ten companies held by Baronsmead VCT 3 is Â£2.3 million per company. Because these investments are normally held by the other Baronsmead VCTs, the total managed by ISIS in each investee is significantly larger than this, which enables ISIS to dedicate significant resource to manage each investment and their progress. The top ten investees employ some 2,800 people, which is an increase of 16 per cent. over the last year. Their turnover has also grown by some 15 per cent. Each of the top ten companies is described in more detail below. Investment Management ISIS continues to invest in its skills and capacity with over 35 of its total team of 60 devoted to investment management activities across all its investing activities. Its focus is on generating strong investment returns from its portfolio through a mixture of intelligent investment selection and hands on portfolio management. Its ability to select good investments owes much to its sector research and to its strong origination team that help the team to generate proprietary deal flow. Its investments are supported from the outset by an experienced internal value enhancement team together with a panel of proven Operating Partners who work exclusively with ISIS to assist management teams to deliver both strategic development and operational efficiencies. Both have enabled ISIS to build a strong track record of producing consistent returns from its unquoted investments. ISIS has pursued a strategy of sector specialisation over many years and in that time its executives have developed in-depth knowledge of these sectors and valuable networks of contacts which have enabled it to capitalise on opportunities that have presented themselves in an ever changing environment. Its key sectors are: â€¢ Business Services â€¢ Financial Services â€¢ Consumer Markets â€¢ Healthcare & Education â€¢ Technology, Media and Telecommunications OUTLOOK Our portfolio companies and their management teams are now more experienced at handling economic uncertainties, including managing their growth and operations in a tougher environment than in previous decades. Low bank borrowings within the portfolio give them robust financial structures. ISIS is an active investment manager which partners with our investees to help them to grow revenue and earnings and build resilient, well invested businesses, able to maintain standards, whilst growing. Our intention is to seek out the best opportunities where growth is driven by innovation and gaining market share through differentiation rather than relying on favourable economic growth. ISIS EP LLP Investment Manager 17 February 2014 Other Matters Dividend policy The Board of Baronsmead VCT 3 has the objective to maintain a minimum annual dividend level of around 4.5p per ordinary share if possible, but this depends primarily on the level of realisations achieved and cannot be guaranteed. Since 2007, the average annual tax free dividend paid to shareholders has been 7.5p per share (equivalent to a pre-tax return of 10.0p per share for a higher rate taxpayer). For shareholders who received up front tax reliefs, their returns would have been higher. Share price discount policy The Company buys back its shares if, in the opinion of the Board, a repurchase would be in the best interests of the Company's shareholders as a whole. Shares are bought back through the market rather than directly from shareholders. This minimises the number of shares bought back by the Company while maximising the opportunity for investors to invest in the Company's existing shares. The Board's current policy is to seek to maintain a mid share price discount of approximately 5 per cent. to net asset value, depending on market conditions at the time. Strategy for achieving objectives Baronsmead VCT 3 is a tax efficient listed company which aims to achieve long-term investment returns for private investors, including tax free dividends. Investment policy The Company's investment policy is 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. Investment securities The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities and fixed interest bearing securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM-traded investments are primarily held in ordinary shares. Pending investment in VCT qualifying and non-VCT qualifying unquoted, AIM-traded and other quoted securities (which may be held directly or indirectly through collective investment vehicles), cash is primarily held in interest bearing accounts, money market open ended investment companies ("OEICs"), UK gilts and treasury bills. UK companies Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas. VCT regulation The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs. Amongst other conditions, the Company may not invest more than 15 per cent. By value of its investments calculated in accordance with section 278 of ITA 2007 (as amended) (VCT Value) in a single company or group of companies and must have at least 70 per cent. of its investments by VCT Value throughout the period in shares and securities comprised in qualifying holdings. At least 70 per cent. by VCT Value of qualifying holdings must be in "eligible shares", which are ordinary shares which have no preferential rights to assets on a winding up and no rights to be redeemed, but may have certain preferential rights to dividends. For funds raised before 6 April 2011, at least 30 per cent. by VCT Value of qualifying holdings must be in "eligible shares" which are ordinary shares which do not carry any rights to be redeemed or preferential rights to dividends or to assets on a winding up. At least 10 per cent. of each qualifying investment must be in "eligible shares". The companies in which investments are made must have no more than Â£15 million of gross assets at the time of investment to be classed as a VCT qualifying holding. Asset mix The Company aims to be at least 90 per cent. invested, directly or indirectly, in VCT qualifying and non-qualifying growth businesses subject always to the quality of investment opportunities and the timing of realisations. It is intended that at least 75 per cent. of any funds raised by the Company will be invested in VCT qualifying investments. Non-VCT qualifying investments held in unquoted, AIM-traded and other quoted companies may be held directly or indirectly through collective investment vehicles. Risk diversification and maximum exposures Risk is spread by investing in a number of different businesses within different qualifying industry sectors using a mixture of securities. Generally no more than Â£2.5 million, at cost, is invested in the same company. The maximum the Company will invest in a single company (including a collective investment vehicle) is 15 per cent. of its investments by 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. Investment style 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. Co-investment with other Baronsmead VCTs The Company aims to invest in larger more mature unquoted and AIM-traded companies and to achieve this it invests alongside the other Baronsmead VCTs. Management retention Certain members and employees of the Manager invest in unquoted investments alongside the Company. This scheme is in line with current practice of private equity houses and its objective is to attract, recruit, retain and incentivise the Manager's team and is made on terms which align the interests of shareholders and the Manager. Borrowing powers The Company's policy is to use borrowing for short term liquidity purposes only up to a maximum of 25 per cent. of the Company's gross assets, as permitted by the Company's articles. The Company currently has no borrowings. Management The Board has delegated the management of the investment portfolio to the Manager. The Manager also provides or procures the provision of company secretarial, accounting, administrative and custodian services to the Company. 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. Principal risks, risk management and regulatory environment The Board believes that the principal risks faced by the Company are: - Economic risk - events such as an economic recession and movement in interest rates could affect smaller companies' valuations. - Loss of approval as a Venture Capital Trust - the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from corporation tax on capital gains. Any breach of these rules may lead to the Company losing its approval as a VCT, qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains. - Investment and strategic - an inappropriate strategy, poor asset allocation or consistent weak stock selection might lead to under performance and poor returns to shareholders. Therefore the Company's investment strategy is periodically reviewed by the Board which considers at each meeting the performance of the investment portfolio. - Regulatory - the Company is required to comply with the Companies Act 2006, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. General changes in legislation, regulations or government policy could significantly influence the decisions of investors or impact upon the markets in which the Company invests. - Reputational - inadequate or failed controls might result in breaches of regulations or loss of shareholder trust. - Operational - failure of the Manager's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring. - Financial - the Board has identified the Company's principal financial risks which are set out in the Notes to the Accounts. Inadequate controls might lead to misappropriation of assets or fraud. Inappropriate accounting policies might lead to misreporting or breaches of regulations. - Market risk - investment in AIM-traded and unquoted companies, by its nature, involves a higher degree of risk than investment in companies traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock. - Liquidity risk - the Company's investments may be difficult to realise. The fact that a share is traded on AIM does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable. - Credit risk - Cash management risk may occur by placing cash deposits with high risk institutions or not spreading cash effectively. The cash management strategy is set by the Board and the Investment Committee of the Manager approves all liquid asset investments. Due diligence is undertaken on the sponsor or manager of any non-government instruments invested in and this is updated on a regular basis to minimise the risk. - Competitive risk - retention of key personnel of the Manager is vital to the success of the Company. Appropriate incentives are in place to ensure retention of such personnel. The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the Financial Reporting Council's ("FRC") "Internal Controls: Guidance to Directors". Details of the Company's internal controls are contained in the Corporate Governance section of this report. Performance and Key Performance Indicators ("KPIs") 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 primary KPIs highlighted previously. Performance Incentive A performance fee is payable to the Manager when the total return on net proceeds of the ordinary shares exceeds 8 per cent. per annum (simple). To the extent that the total return exceeds the threshold, a performance fee (plus VAT) will be paid to the Manager of an amount equal to 10 per cent. of the excess. The performance fee payable in any one year is capped at 5 per cent. of net assets. No performance fee was paid in 2012 and there is no performance fee payable for the year to 31 December 2013. Environmental, Human Rights, Employee, Social and Community Issues The Board recognises the requirement under Section 414 of the Act to detail information about environmental matters (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 effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply. Gender Diversity The Board of Directors of the Company comprises one female and three male Directors. The Manager has an equal opportunity policy and currently employs 35 men and 25 women. Shareholder Choice The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in Baronsmead VCT 3 in ways that best suit their personal investment and tax planning and in a way that treats all shareholders equally. â€¢ Fundraising: 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 issue costs. â€¢ 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 943,000 shares were bought in this way during the year to 31 December 2013. â€¢ 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 certain conditions, the Company seeks to maintain a mid share price discount of approximately 5 per cent. to net asset value. â€¢ 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. Investors bought approximately 428,000 shares of the Company's existing shares in the year to 31 December 2013. On behalf of the Board Anthony Townsend Chairman 17 February 2014 Summary Investment Portfolio Investment Classification at 31 December 2013 Sector by value Business Services 42% Consumer Markets 13% Financial Services 3% Healthcare & Education 16% Technology, Media & Telecommunications ("TMT") 26% Total Assets by value Unquoted - loan note 31% Unquoted - equity 7% AIM, listed, ISDX & collective investment vehicle 47% Listed interest bearing securities 5% Net current assets principally cash 10% Time Investments Held by value Less than 1 year 14% Between 1 and 3 years 26% Between 3 and 5 years 14% Greater than 5 years 46% Table of Investments and Realisations Investments in the year Book cost Company Location Sector Activity Â£'000 Unquoted investments New CableCom II Somerset TMT* Provider of network solutions 1,250 Networking Holdings Limited Create Health London Healthcare Provider of fertility 1,065 Limited & Education services Carousel Kent Business Provider of bespoke logistics 955 Logistics Services and supply chain solutions Limited Key Travel London Business Travel management company, 954 Limited Services focused on the non-profit sector Eque2 Limited Manchester TMT* Enterprise resource planning 877 (ERP) solutions provider to the construction industry Armstrong Manchester Business Provider of executive search 673 Craven Limited Services and business intelligence services Follow on Impetus London Business Automotive consultancy and 248 Holdings Services outsourced service provider Limited Playforce Melksham Business Design and installation of 163 Holdings Services playground equipment Limited Crew Clothing London Consumer Branded clothing retailer 109 Holdings Markets Limited Valldata Group Melksham Business Payment processing to charity 54 Limited Services sector Total unquoted investments 6,348â€ AIM-traded & ISDX investments New Everyman Media London Consumer Boutique independent cinema 391 Group plc Markets chain MartinCo plc Bournemouth Consumer UK letting agency franchise 343 Markets network Bioventix plc Farnham, Healthcare Develops sheep monoclonal Surrey & Education antibodies 227 Daily Internet Stockport TMT* SME Domain registration & 225 plc hosting Ideagen plc Matlock TMT* Compliance software solutions 225 Pinnacle Stirlingshire TMT* B2B telecoms and IT reseller 169 Technology Group plc One Media iP Buckinghamshire TMT* Content acquisition and 56 Group plc distribution Follow on Sanderson Coventry TMT* Retail and manufacturing IT 225 Group plc Plastics London Business Specialist plastic products 189 Capital plc Services buy and build Tasty plc London Consumer Restaurant chain 125 Markets TLA Worldwide London Business Baseball sports management 113 plc Services and marketing EG Solutions Staffordshire TMT* Back office optimisation 78 plc software Green Worcester Business Small business compliance 50 Compliance plc Services Paragon London Consumer Visitor attractions 45 Entertainment Markets Limited Accumuli plc Salford TMT* Managed IT security 40 Tangent London Business Digital marketing and 40 Communications Services online print services plc Total AIM-traded & ISDX 2,541 investments Total investments in the year 8,889 *Technology, Media and Telecommunications ("TMT"). â€ In addition, Consumer Investment Partners, an existing portfolio company established in 2012 to seek investments in the Consumer Markets sector, invested Â£0.96 million in Luxury For Less, an online bathroom products retailing business. Realisations in the year 31 December First 2012 Proceeds Overall Investment valuation â•ª multiple Company date Â£'000 Â£'000 return Unquoted realisations CableCom Networking Full trade Holdings Limited sale May 07 4,328 5,748 4.8* Independent Living Full trade Services Limited sale Sep 05 3,322 3,426 2.5* Full trade CSC (World) Limited sale Jan 08 2,410 3,115 2.4* Full trade Kafevend Holdings Limited sale Oct 05 2,956 2,430 2.5* Full trade MLS Limited sale Jul 06 956 984 2.8* Loan Valldata Group Limited repayment Jan 11 450 540 1.5* Kidsunlimited Group Loan Limited repayment Jun 01 113 176 4.9*â€ Consumer Investment Loan Partners Limited repayment Apr 12 45 45 1.0 Total unquoted realisations 14,580 16,464 AIM-traded realisations IDOX plc Market sale Jan 09 1,724 1,752 5.7 Full trade Jun 07 612 874 2.8 FFastFill plc sale Full market PROACTIS Holdings plc sale May 06 426 621 1.1* Full trade Active Risk Group plc sale May 10 54 126 0.8 Zattikka plc Write off Apr 12 136 - N/A Total AIM-traded realisations 2,952 3,373 Total realisations in the year 17,532 19,837 â€¡ Proceeds at time of realisation including redemption premium and interest. * Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods. â€ Kidsunlimited Group Limited was realised in April 2008. As part of the consideration, Baronsmead VCT 3 received Â£113,000 in loan stock, which was redeemed in April 2013. The overall multiple return for the investment in Kidsunlimited was 4.9 times original cost. Ten Largest Investments The top ten investments by current value at 31 December 2013 illustrate the diversity and size of investee companies within the portfolio. This financial information is taken from publicly available information published at Companies House, which has been audited by the auditors of the investee companies. 1. NEXUS VEHICLE HOLDINGS LIMITED - Leeds All ISIS EP LLP managed funds First investment: February 2008 Total cost: Â£9,500,000 Total equity held: 56.00% Baronsmead VCT 3 only Cost: Â£2,368,000 Valuation: Â£4,621,000 Valuation basis: Earnings Multiple % of equity held: 12.32% Year ended 30 September 2012 2011 Â£ million Â£ million Sales: 36.5 38.3 EBITA: 3.3 4.3 Net Assets: 1.8 1.7 No. of Employees: 113 90 (Source: Nexus Vehicle Holdings Limited, Report & Financial Statements 30 September 2012). 2. NETCALL PLC - Hertfordshire All ISIS EP LLP managed funds First investment: July 2010 Total cost: Â£4,354,000 Total equity held: 20.00% Baronsmead VCT 3 only Cost: Â£869,000 Valuation: Â£2,847,000 Valuation basis: Bid Price % of equity held: 4.01% Year ended 30 June 2013 2012 Â£ million Â£ million Sales: 16.1 14.6 EBITA: 3.4 3.1 Net Assets: 16.9 15.5 No. of Employees: 141 123 (Source: Netcall plc, Annual Report and Accounts 30 June 2013) 3. CREW CLOTHING HOLDINGS LIMITED - London All ISIS EP LLP managed funds First investment: November 2006 Total cost: Â£5,833,000 Total equity held: 25.51% Baronsmead VCT 3 only Cost: Â£1,453,000 Valuation: Â£2,336,000 Valuation basis: Earnings Multiple % of equity held: 6.09% Year ended 28 October 2012 2011 Â£ million Â£ million Revenue: 48.5 40.7 EBITA: 3.5 3.3 Net Assets: 6.0 5.7 No. of Employees: 363 311 (Source: Crew Clothing Holdings Limited, Report and Financial Statements 28 October 2012) 4. VECTURA GROUP PLC - Wiltshire All ISIS EP LLP managed funds First investment: April 2001 Total cost: Â£2,175,000 Total equity held: 1.28% Baronsmead VCT 3 only Cost: Â£771,000 Valuation: Â£2,239,000 Valuation basis: Last Traded Price % of equity held: 0.47% Year ended 31 March 2013 2012 Â£ million Â£ million Revenue: 30.5 33.0 EBITA: (5.3) (6.4) Net Assets: 135.1 139.5 No. of Employees: 216 209 (SourceVectura Group Plc, Annual Report and Accounts 2012/2013) 5. IDOX PLC - London All ISIS EP LLP managed funds First investment: May 2002 Total cost: Â£1,641,000 Total equity held: 4.98% Baronsmead VCT 3 only Cost: Â£614,000 Valuation: Â£2,081,000 Valuation basis: Last Traded Price % of equity held: 1.83% Year ended 31 October 2012 2011 Â£ million Â£ million Revenue: 57.9 38.6 EBITA: 12.8 9.5 Net Assets: 38.9 34.4 No. of Employees: 467 363 (Source: IDOX Plc, Annual Report and Accounts 31 October 2012) 6. INSPIRED THINKING GROUP LIMITED - Birmingham All ISIS EP LLP managed funds First investment: May 2010 Total cost: Â£3,200,000 Total equity held: 22.50% Baronsmead VCT 3 only Cost: Â£796,000 Valuation: Â£2,056,000 Valuation basis: Earnings Multiple % of equity held: 4.95% Year ended 31 August 2013 2012 Â£ million Â£ million Revenue: 43.3 32.7 EBITA: 1.6 1.6 Net Assets: 0.8 0.8 No. of Employees: 218 158 (Source: Inspired Thinking Group Holdings Limited, Report and Financial Statements 31 August 2013) 7. VALLDATA GROUP LIMITED - Melksham All ISIS EP LLP managed funds First investment: January 2011 Total cost: Â£4,921,000 Total equity held: 58.90% Baronsmead VCT 3 only Cost: Â£1,220,000 Valuation: Â£1,701,000 Valuation basis: Earnings Multiple % of equity held: 13.88% Year ended 31 March 2013 2012 Â£ million Â£ million Revenue: 7.5 8.8 EBITA: 1.6 1.2 Net Assets: 9.7 9.5 No. of Employees: 232 272 (Source: Valldata Group Limited, Directors Report and Financial Statements 31 March 2013). 8. TASTY PLC - London All ISIS EP LLP managed funds First investment: September 2006 Total cost: Â£3,223,000 Total equity held: 14.52% Baronsmead VCT 3 only Cost: Â£594,000 Valuation: Â£1,634,000 Valuation basis: Bid Price % of equity held: 2.53% Year ended 31 December 2012 2011 Â£ million Â£ million Revenue: 19.3 14.6 EBITA: 1.6 1.1 Net Assets: 12.3 11.0 No. of Employees: 453 325 (Source: Tasty Plc, Report and Financial Statements 31 December 2012) 9. INDEPENDENT COMMUNITY CARE MANAGEMENT LIMITED - Kettering All ISIS EP LLP managed funds First investment: October 2011 Total cost: Â£6,010,000 Total equity held: 55.00% Baronsmead VCT 3 only Cost: Â£1,346,000 Valuation: Â£1,583,000 Valuation basis: Earnings Multiple % of equity held: 10.89% Year ended 31 March 2013 2012 Â£ million Â£ million Revenue: 8.4 7.5 EBITA: 0.2 0.4 Net Assets: 0.5 0.4 No. of Employees: 390 348 (Source: ICCM Ltd, Directors' Report and Financial Statements) 10. MURGITROYD GROUP PLC - Glasgow All ISIS EP LLP managed funds First investment: November 2001 Total cost: Â£638,000 Total equity held: 5.92% Baronsmead VCT 3 only Cost: Â£319,000 Valuation: Â£1,502,000 Valuation basis: Bid Price % of equity held: 2.96% Year ended 31 May 2013 2012 Â£ million Â£ million Revenue: 36.0 35.7 EBITA: 4.7 4.5 Net Assets: 24.3 21.3 No. of Employees: 240 235 Source: Murgitroyd Group Plc, Directors' Report and Financial Statements 31 May 2013) Extract from the Report of the Directors Results and Dividends The Directors present the thirteenth Annual report and audited financial statements of the Company for the year ended 31 December 2013. Ordinary shares Â£'000 Profit on ordinary shares after taxation 9,108 Final dividend of 4.5p per ordinary share paid on (3,006) 15 April 2013 First interim dividend of 3.0p per ordinary share paid (1,981) on 20 September 2013 Second interim dividend of 4.5p per ordinary share (2,972) paid on 20 December 2013 Total dividends paid during the year (7,959) Issue and Buy-back of Shares During the period the Company bought back 770,000 ordinary shares with a nominal value of 10p to be held in treasury representing 1.0 per cent. of the issued share capital at a cost of Â£813,175. No shares were sold from treasury during the period. Shares will not be sold at a discount wider than the discount prevailing at the time the shares were initially bought back by the Company. The Company holds 9,699,214 ordinary shares in treasury, being the maximum number of ordinary shares held in treasury during the year, representing 12.8 per cent. of the issued share capital as at 17 February 2014. Management ISIS EP LLP manages the investments for the Company. The liquid assets within the portfolio (being cash, gilts and other assets, which are not categorised as venture capital investments for the purpose of the FCA's rules) have been managed by FPPE LLP. This is a limited liability partnership, which is authorised and regulated by the FCA and which has the same controlling members as the Manager. The Manager has continued to act as the Manager of the Company and as the investment manager of the Company's illiquid assets (being all AIM-traded and other venture capital investments). The Manager also provides or procures the provision of accounting, secretarial, administrative and custodian services to the Company. The management agreement may be terminated at any date by either party giving twelve months' notice of termination. Under the management agreement, the Manager receives a fee of 2.5 per cent. per annum of the net assets of the Company. If the management agreement is terminated, the Manager is only entitled to the management fees paid to it and any interest due on unpaid fees. In addition, the Manager receives an annual secretarial and accounting fee that was initially fixed at Â£33,816 in 2006 and is revised annually to reflect the movement in RPI, plus a variable fee of 0.125 per cent. of the net assets of the Company which exceed Â£5 million. The annual fee was initially capped at Â£ 102,212 per annum and is also revised annually to reflect the movement in RPI. 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 31 December 2013 was 3.0 per cent. During the year the Management Engagement and Remuneration Committee met to discuss and consider the continuing appointment of the Manager. The Committee reviewed and considered the agreements between the Company and the Manager and the Manager's performance and after careful consideration the Committee recommended to the Board that ISIS EP LLP should continue as Manager of the Company. It is the Board's opinion that the continuing appointment of ISIS EP LLP on the terms agreed is in the best interests of shareholders as a whole. The Board believes that the knowledge and experience accumulated by the Manager in the period since the launch of the first Baronsmead VCT in 1995 is reflected in processes which are designed to find, manage and realise good quality growth businesses. Co-investment Scheme The Co-investment Scheme was introduced in November 2004. Members of the Manager's investment team invest their own capital into a proportion of the ordinary shares of each and every unquoted investment made by the Baronsmead VCTs. 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. In addition, 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 Board is keen to ensure that the Manager continues to have one of the best investment teams in the VCT and private equity market place and 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 since executives have to invest their own capital in every unquoted transaction and cannot decide selectively in which investments to participate. In addition the Co-investment only delivers a return after each VCT has realised a priority return built into the structure. The executives participating in the Co-investment Scheme subscribe jointly for a proportion (currently 12 per cent.) of the ordinary shares available to the Baronsmead VCTs in each unquoted investment. The level of participation was increased from 5 per cent. in 2007 when the Manager's performance fee was reduced from 20 per cent. to its current level of 10 per cent. Since the formation of the Scheme in 2004, 52 executives have invested a total of Â£1.2 million in 39 companies. At 31 December 2013 14 of these investments have been realised generating proceeds of Â£148 million for the Baronsmead VCTs and Â£8 million for the Co-investment Scheme. For Baronsmead VCT 3 the average money multiple on these nine realisations was 2.6 times cost. Had the co-investment shares been held instead by the Baronsmead VCTs that money multiple would have been 2.7 times cost. Over the period of eight years (based upon the current number of shares in issue) this equates to approximately 3.09p a share. ISIS Equity Partners - Advisory Fees During the year to 31 December 2013, ISIS EP LLP received net income of Â£174,000 (2012: Â£96,550) in connection with advisory fees and incurred abort fees of Â£Nil (2012: Â£59,382) with respect to investments attributable to Baronsmead VCT 3 plc. Directors' fees of Â£211,000 were received in relation to companies in the investment portfolio during the year. VCT Status Adviser The Company has retained PricewaterhouseCoopers LLP ('PwC') as its VCT Tax Status Advisers to advise it on compliance with VCT requirements. PwC reviews new investment opportunities, as appropriate, and reviews regularly the investment portfolio of the Company. PwC works closely with the Manager but reports directly to the Board. Environment The Company seeks to conduct its affairs responsibly and environmental factors are, where appropriate, taken into consideration with regard to investment decisions. 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 Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio. Substantial Interests in Share Capital At 31 December 2013 and since 31 December 2013 to the date of this report, the Company was not aware of any beneficial interest exceeding 3 per cent. of ordinary share capital in circulation. Going Concern 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 31 December 2013 the Company held cash balances and investments in interest bearing securities and Money Market Funds with a combined value of Â£11,062,000. 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 buy-back programme and dividend policy. The Company has no external loan finance in place and therefore is not exposed to any gearing covenants. Statement of Directors' Responsibilities 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. The financial statements are required by law to 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: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgments and estimates that are reasonable and prudent; â€¢ state whether applicable UK Accounting Standards ("UK GAAP") have been followed, subject to any material departures disclosed and explained in the financial statements; and â€¢ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that 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 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 Directors' Report (including Business Review), Directors' Remuneration Report and Corporate Governance Statement that comply 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, www.baronsmeadvct3.co.uk. Visitors to the website should be aware that 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: â€¢ 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 of the Company; â€¢ the Report of Directors includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces; and â€¢ the report and accounts, taken as a whole, are fair, balanced, and understandable and provide the necessary information for shareholders to assess the Company's performance, business model and strategy. On behalf of the Board Anthony Townsend Chairman 17 February 2014 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2013 and 31 December 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 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.baronsmeadvct3.co.uk Income Statement For the year ended 31 December 2013 2013 2012 Revenue Capital Total Revenue Capital Total Notes Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Unrealised gains on 2.3 - 8,624 8,624 - 9,373 9,373 movements in fair value of investments Realised (losses)/gains 2.3 - (1,069) (1,069) - 426 426 on disposal of investments Income 2.5 3,763 - 3,763 1,187 - 1,187 Investment management fee 2.6 (443) (1,329) (1,772) (409) (1,228) (1,637) Other expenses 2.6 (438) - (438) (390) - (390) Profit on ordinary 2,882 6,226 9,108 388 8,571 8,959 activities before taxation Taxation on ordinary 2.9 (560) 560 - (25) 25 - activities Profit on ordinary 2,322 6,786 9,108 363 8,596 8,959 activities after taxation Return per ordinary share Basic 2.2 3.50p 10.23p 13.73p 0.58p 13.67p 14.25p 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. Reconciliation of Movements in Shareholders' Funds For the year ended 31 December 2013 2013 2012 Notes Â£'000 Â£'000 Opening shareholders' funds 74,562 60,095 Profit on ordinary activities after taxation 9,108 8,959 Net proceeds of share issues & buybacks 3.2 (817) 7,401 Other costs charged to capital 3.2 (15) - Dividends paid 2.4 (7,959) (1,893) Closing shareholders' funds 4,879 74,562 Balance Sheet As at 31 December 2013 2013 2012 Notes Â£'000 Â£'000 Fixed assets Investments 2.3 67,727 66,740 Current assets Debtors 2.7 178 5,261 Cash at bank and on deposit 7,564 3,238 7,742 8,499 Creditors (amounts falling due within one year) 2.8 (590) (677) Net current assets 7,152 7,822 Net assets 74,879 74,562 Capital and reserves Called-up share capital 3.1 7,573 7,573 Share premium 3.2 - 22,866 Capital redemption reserve 3.2 - 10,862 Other reserve 3.2 33,718 - Capital reserve 3.2 19,906 18,928 Revaluation reserve 3.2 12,992 13,649 Revenue reserve 3.2 690 684 Equity shareholders' funds 2.1 74,879 74,562 Net asset value per share - Basic 2.1 113.40p 111.62p - Treasury 2.1 112.48p 110.88p The financial statements were approved by the Board of Directors on 17 February 2014 and were signed on its behalf by: ANTHONY TOWNSEND (Chairman) Cash Flow Statement For the year ended 31 December 2013 2013 2012 Â£'000 Â£'000 Operating activities Investment income received 3,931 1,337 Deposit interest received 18 7 Investment management fees paid (1,744) (1,572) Other cash payments (410) (378) Net cash inflow/(outflow) from operating activities 1,795 (606) Financial investment Purchases of investments (36,380) (63,220) Disposals of investments 42,948 65,620 Net cash inflow from financial investment 6,568 2,400 Equity dividends paid (7,959) (1,893) Net cash inflow/(outflow) before financing 404 (99) Financing Net proceeds of share issues & buybacks 3,930 2,654 Other costs charged to capital (8) - Net cash inflow from financing 3,922 2,654 Increase in cash 4,326 2,555 Reconciliation of net cash flow to movement in net cash Increase in cash 4,326 2,555 Opening cash position 3,238 683 7,564 3,238 Closing cash at bank and on deposit Reconciliation of profit on ordinary activities before taxation to net cash inflow/(outflow) from operating activities Profit on ordinary activities before taxation 9,108 8,959 Gains on investments (7,555) (9,799) Decrease in debtors 197 187 Increase in creditors 45 76 Income reinvested - (29) Net cash inflow/(outflow) from operating activities 1,795 (606) Notes to the Accounts In preparing the 2013 financial statements, Baronsmead VCT 3 has made a number of changes in structure, layout and wording in order to make the financial statements less complex and more relevant for shareholders and other users. We have grouped notes into sections under three key categories: 1. Basis of preparation 2. Investments, performance and shareholder returns 3. Other required disclosures 1. Basis of Preparation 1.1 Basis of accounting These financial statements have been prepared under UK Generally Accepted Accounting Practice ("UK GAAP") 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 January 2009 and on the assumption that the Company maintains VCT status. 2. Investments, performance and shareholder returns 2.1 Net asset value per share Net asset value Net asset per value Number of ordinary shares share attributable attributable 2013 2012 2013 2012 2013 2012 number number pence pence Â£'000 Â£'000 Ordinary shares (basic) 66,032,705 66,802,705 113.40 111.62 74,879 74,562 Ordinary shares 75,731,919 75,731,919 112.48 110.88 85,184 83,971 (including treasury) The treasury net asset value per share as at 31 December 2013 included ordinary shares held in treasury valued at the mid share price of 106.25p at 31 December 2013 (2012: 105.38p). 2.2 Return per share Weighted average number of Return per Net profit on ordinary ordinary shares ordinary share activities after taxation 2013 2012 2013 2012 2013 2012 number number pence pence Â£'000 Â£'000 Revenue 66,308,458 62,863,845 3.50 0.58 2,322 363 Capital 66,308,458 62,863,845 10.23 13.67 6,786 8,596 Total 13.73 14.25 9,108 8,959 2.3 Investments Purchases or sales of investments are recognised at the date of transaction. Investments are measured at fair value. For AIM-traded, ISDX and listed securities this is either bid price or the last traded price, depending on the convention of the exchange on which the investment is traded. In respect of unquoted investments, these are valued at fair value by the Directors using methodology which is consistent with the International Private Equity and Venture Capital Valuation guidelines ("IPEV"). This means investments are valued using an earnings multiple, which has a discount or premium applied which adjusts for points of difference to appropriate stock market or comparable transaction multiples. Alternative methods of valuation will include application of an arm's length third party valuation, a provision on cost or a net asset value basis. Gains and losses arising from changes in the fair value of the investments are included in the Income Statement for the period 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 methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation. â€¢ Level 1 - Fair value is measured based on quoted prices in an active market. â€¢ Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices. â€¢ Level 3 - Fair value is measured using a valuation technique that is not based on data from an observable market. 2013 2012 Â£'000 Â£'000 Level 1 Listed interest bearing securities 3,498 2,490 Investments traded on AIM 25,722 20,833 Investments listed on ISDX 346 - Investments listed on LSE 2,850 1,808 32,416 25,131 Level 2 Collective investment vehicle (Wood Street Microcap Investment 7,012 4,525 Fund) Level 3 Unquoted investments 28,299 7,084 67,727 66,740 Level 1 Level 2 Level 3 Listed interest Collective bearing Traded Traded Listed investment securities on AIM on on LSE vehicle Unquoted Total ISDX Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Opening book cost 2,490 16,867 - 1,729 3,525 28,480 53,091 Opening unrealised - 3,966 - 79 1,000 8,604 13,649 appreciation Opening valuation 2,490 20,833 - 1,808 4,525 37,084 66,740 Movements in the year: Purchases at cost 27,491 2,314 227 - - 6,348 36,380 Sales - proceeds (26,483) (3,373) - - - (13,092) (42,948) - realised - 419 - - - (1,069) gains/(losses) on (1,488) sales Unrealised gains - 1,240 - - - 8,041 9,281 realised during the year Increase/(decrease) in unrealised appreciation - 4,289 119 1,042 2,487 (8,594) (657) Closing valuation 3,498 25,722 346 2,850 7,012 28,299 67,727 Closing book cost 3,498 17,467 227 1,729 3,525 28,289 54,735 Closing unrealised - 8,255 119 1,121 3,487 10 12,992 appreciation Closing valuation 3,498 25,722 346 2,850 7,012 28,299 67,727 Equity shares - 25,722 346 2,850 7,012 5,383 41,313 Loan notes - - - - - 22,916 22,916 Fixed income 3,498 - - - - - 3,498 securities Closing valuation 3,498 25,722 346 2,850 7,012 28,299 67,727 The gains and losses included in the above table have all been recognised in the Income Statement above. For Level 3 unquoted investments, the effect on fair value of changing one or more assumptions to reasonably possible alternatives has been considered. The portfolio has been reviewed and both downside and upside reasonable possible alternatives have been identified and applied to the valuation of each of the investments. The inputs flexed in determining the reasonably possible alternative assumptions include the earnings stream and marketability discount. Applying the downside alternatives the value of the unquoted investments would be Â£2.8 million or 9.3 per cent. lower. Using the upside alternatives the value would be increased by Â£2.6 million or 10.1 per cent. 2.4 Dividends 2013 2012 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Amounts recognised as distributions to equity holders in the year: For the year ended 31 December 2013 - First interim dividend of 3.0p 991 990 1,981 - - - per ordinary share paid on 20 September 2013 - Second interim dividend of 4.5p 991 1,981 2,972 per ordinary share paid on 20 December 2013 - - - For the year ended 31 December 2012 - Interim dividend of 3.0p per - - - - 1,893 1,893 ordinary share paid on 21 September 2012 - Final dividend of 4.5p per 334 2,672 3,006 ordinary share paid on 15 April 2013 - - - 2,316 5,643 7,959 - 1,893 1,893 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. 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. 2013 2012 Quoted Unquoted Quoted Unquoted securities securities securities securities Total Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Income from investmentsâ€ UK franked 472 - 472 285 - 285 UK unfranked 8 2,351 2,359 13 807 820 UK unfranked - - - - - 29 29 reinvested Redemption - 913 913 - 45 45 premium 480 3,264 3,744 298 881 1,179 Other incomeâ•ª Deposit Interest 19 8 Total income 3,763 1,187 Total income comprises: Dividends 472 285 Interest 3,291 902 3,763 1,187 â€ All investments have been designated at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss. â€¡ Other income on financial assets not designated fair value through profit or loss. 2.6. Investment management fee and other expenses All expenses are recorded on an accruals basis. 2013 2012 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management fee 443 1,329 1,772 409 1,228 1,637 Performance fee - - - - - - 443 1,329 1,772 409 1,228 1,637 Management fees are allocated 25 per cent. income: 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, ISIS EP LLP, receives a fee of 2.5 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 when the total return on net proceeds of the ordinary shares exceeds 8 per cent. per annum (on a simple 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 the shareholders' funds at the end of the calculation period. No performance fee is payable for the year ended 31 December 2013 (2012: Â£nil). Other expenses 2013 2012 Â£'000 Â£'000 Directors' fees 82 80 Secretarial and accounting fees paid to the Manager 130 121 Remuneration of the auditors and their associates: - audit 22 21 - other services supplied pursuant to legislation (interim review) 5 5 - other services supplied relating to taxation 6 7 - other services supplied relating to financial statements' 5 - reorganisation Other 188 156 438 390 Information on directors' remuneration is given in the directors' remuneration table in the full Annual report and accounts. Charges for other services provided by the auditors in the year ended 31 December 2013 were in relation to the interim reviews, tax compliance work (including iXBRL) and financial statements' reorganisation. 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 2013 2012 Â£'000 Â£'000 Prepayments and accrued income 178 375 Amounts due from fundraising - 4,886 178 5,261 2.8 Creditors (amounts falling due within one year) 2013 2012 Â£'000 Â£'000 Management, performance, secretarial and accounting fees due to the 471 474 Manager Share premium and capital redemption reserve cancellation costs 7 - Fundraising costs - 139 Other creditors 112 64 590 677 2.9 Tax UK corporation tax payable is provided on taxable profits at the current rate. Provision is made for deferred taxation on all timing differences calculated at the current rate of tax relevant to the benefit or liability. The tax charge for the year is lower than the standard rate of corporation tax in the UK for a company. The differences are explained below: 2013 2012 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Profit on ordinary 2,882 6,226 9,108 activities before taxation 388 8,571 8,959 Corporation tax at 23.25 670 1,448 2,118 95 2,100 2,195 per cent. 2012: 24.5 per cent.) Effect of: Non-taxable gains - (1,757) (1,757) - (2,401) (2,401) Non-taxable dividend (110) - (110) (70) - (70) income Losses carried forward - (251) (251) - 276 276 Tax charge/(credit) for the 560 (560) - 25 (25) - year At 31 December 2013 the Company had surplus management expenses of Â£1,964,000 (2012: Â£3,045,000) 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 Â£'000 75,731,919 ordinary shares of 10p each listed at 31 December 2012 7,573 75,731,919 ordinary shares of 10p each listed at 31 December 2013 7,573 8,929,214 ordinary shares of 10p each held in treasury at 31 December (893) 2012 770,000 ordinary shares of 10p each repurchased during the year and held (77) in treasury 9,699,214 ordinary shares of 10p each held in treasury at 31 December (970) 2013 66,032,705 ordinary shares of 10p each in circulation* at 31 December 6,603 2013 * Carrying one vote each. During the year the Company bought into treasury 770,000 ordinary shares representing 1.0 per cent. of the ordinary shares in issue at the beginning of the financial year. There were no changes in share capital between the year end and when the financial statements were approved. Treasury shares When the Company reacquires its own shares, they are held as treasury shares and not cancelled. Shareholders have authorised the Board to re-issue 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 funds raised are greater than â‚¬5m; 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 redemption Capital Revenue Share Other Revaluation reserve reserve Total premium reserve reserve reserve* Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 18,928 684 19,612 22,866 10,862 - 13,649 47,377 2013 Cancellation - - - (22,866) (10,862) 33,728 - - of share premium and capital redemption reserve Share - - - - - (10) - (10) premium and capital redemption reserve cancellation costs Purchase of (813) - (813) - - - - - shares for treasury Expenses of - - - share issue and buybacks (4) - (4) - - Other costs - - charged to capital (5) - (5) - - - Reallocation - - of prior year unrealised gains 9,281 - 9,281 - (9,281) (9,281) Realised - - loss on disposal of investments# (1,069) - (1,069) - - - Net increase - - in value of investments# - - - - 8,624 8,624 Management - - fee capitalised# (1,329) - (1,329) - - - Taxation - - relief from capital expenses# 560 - 560 - - - Revenue - - return on ordinary activities after taxation# - 2,322 2,322 - - - Dividends paid in the year (5,643) (2,316) (7,959) - - - - - At 31 December 2013 19,906 690 20,596 - - 33,718 12,992 46,710 # The total of these items is Â£9,108,000, which agrees to the total profit on ordinary activities. * Changes in fair value of investments are dealt with in this reserve. Share premium is recognised net of issue costs. The Company does not have any externally imposed capital requirements. On 18 December 2013 the court granted orders allowing the Company to cancel its share premium account and capital redemption reserve. The amounts of Â£22,866,000 (share premium) and Â£10,862,000 (capital redemption reserve) will become distributable during 2014 once all creditors at the date of cancellation have been discharged. 3.3 Financial instruments risks The Company's financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in a diverse portfolio of UK growth businesses. The Company's investing activities expose it to a range of financial risks. These key risks and the associated risk management policies to mitigate these risks are described below. Market risk Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities. Price risk The investment portfolio is managed in accordance with the policies and procedures described in the Strategic Report. Investments in unquoted stocks, AIM & ISDX quoted 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. 2013 2012 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 % of total net assets net assets % of total net assets net assets investment and profit and profit investment and profit and profit Â£'000 Â£'000 Â£'000 Â£'000 LSE, AIM, ISDX & 53 1,797 (1,797) 41 1,358 (1,358) CIV Unquoted 42 1,415 (1,415) 56 1,854 (1,854) 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: 2013 2012 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 Â£'000 % days Â£'000 % days Fixed rate loan note 22,916 7.89 # 25,226 9.38 # securities Fixed interest 3,498 0.26 48 2,000 0.12 21 instruments Floating rate instrument - - - 490 - - ("OEIC") Cash at bank & on deposit 7,564 - - 3,238 - - 33,978 30,954 # Due to the complexity of the instruments and uncertainty surrounding timing of realisation the weighted average time for which the rate is fixed has not been calculated. Credit risk Credit risk refers to the risk that counterparty will default on its obligation resulting to a financial loss to the Company. The Investment Manager monitors credit risk on an ongoing basis. At the reporting date, the Company's financial assets exposed to credit risk amounted to the following: 2013 2012 Â£'000 Â£'000 Investments in fixed rate instruments 3,498 2,000 Investments in floating rate instruments - 490 Cash at bank & on deposit 7,564 3,238 Interest, dividends and other receivables 178 5,261 11,240 10,989 Credit risk arising on fixed interest instruments is mitigated by investing in UK Government Stock. 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 this report. The cash held by the Company is held by JPM and Lloyds. 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 31 December 2013 or 31 December 2012. No individual investment exceeded 6.2 per cent. of the net assets attributable to the Company's shareholders at 31 December 2013 (2012: 6.9 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 and ISDX 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 in accordance with policies and procedures in place as described in the Extract from the Report of the Directors above. 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 31 December 2013 these investments were valued at Â£11,062,000 (2012: Â£5,728,000). 3.4 Related parties Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager, ISIS EP 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 Extract from the Report of the Directors, whereby employees of the Manager are entitled to participate in all unquoted investments alongside the Company. An offer for subscription to raise gross proceeds of up to Â£10m was launched on 22 January 2014. The Fundraising Offer costs are capped at 3 per cent. of the gross proceeds of the Offer and the Manager agreed to underwrite any costs and expenses in excess of this amount. If there are surplus funds the Manager expects most or all of the money received in respect of the underwriting of the costs of the Offer to be fully utilised in the payment of future trail commission for which it is responsible. 3.5 Post balance sheet events A new investment of Â£952,000 was made in Kingsbridge Risk Solutions Ltd on 10 January 2013. An offer for subscription to raise gross proceeds of up to Â£10 million was launched on 22 January 2014. Based on subscriptions to date, it is expected that the Company's offer will be fully subscribed during February 2014. 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 Annual General Meeting The Company's Annual General Meeting will be held on 14 April 2014 at 10:30 am at Plaisterers' Hall, One London Wall, London, EC2Y 5JU. 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.

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