Half-yearly Report

Baronsmead VCT 3 plc Half Yearly Financial Report For the six months ended 30 June 2011 The Directors announce the unaudited half-yearly financial report for the six months to 30 June 2011 as follows:- Investment Objective Baronsmead VCT 3 is a tax efficient listed company which aims to achieve long-term investment returns for private investors. Investment policy • To invest primarily in a diverse portfolio of UK growth companies, whether unquoted or traded on AIM. • Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value. Dividend policy The Board of Baronsmead VCT 3 has the objective to maintain a minimum annual dividend level of around 4.5p per ordinary share if possible, but this depends primarily on the level of realisations achieved and cannot be guaranteed. There will be variations in the amount of dividends paid year on year. Since launch the average annual tax-free dividend paid to shareholders (including the declared interim dividend of 3.0p) has been 5.6p per ordinary share (equivalent to a pre-tax return of 7.4p per ordinary share for a higher rate taxpayer). For shareholders who received up front tax reliefs, their returns would have been even higher. Secondary market in the shares of Baronsmead VCT 3 The existing shares of the Company are listed on the London Stock Exchange and can be bought and sold using a stockbroker in the same way as shares of any other listed company. Qualifying investors* who invest in the existing shares of the Company can benefit from: • Tax free dividends • Realised gains not subject to capital gains tax (although any realised losses are not allowable) • No minimum holding period • No need to include VCT dividends in annual tax returns The UK tax treatment of VCTs is on a first in first out basis and therefore tax advice should be obtained before shareholders dispose of their shares and also if they deferred a capital gain in respect of new shares acquired prior to 6 April 2004. * UK income tax payers, aged 18 or over, who acquire no more than £200,000 worth of VCT shares in a tax year. FINANCIAL HEADLINES ● 9.1% - Increase in Net Asset Value ("NAV") per share during the period to 111.43p before deduction of the interim dividend. ● 3.0p - Interim dividend tax free payable on 29 September 2011 to shareholders on the register at 16 September 2011, for the six month period to 30 June 2011. ● 58.8p - Cumulative tax free dividends per share for founder shareholders since 2001, equivalent to an average annual dividend of 5.6p. ● +196.4p - NAV total return to shareholders for every 100p invested since launch. The share price total return over the same time period is 170.3p. If the tax reliefs available on initial investment were taken into account this return would be higher. ● 7.8% - Tax free return of 7.8 per cent has been received by qualifying shareholders, based on the 7.5p dividends paid and declared over the last 12 months and the mid share price of 96.25p at the period end. The gross equivalent annual yield for a higher rate tax payer is 10.4 per cent. Performance Summary to 30 June 2011 Total return and share 6 month 1 year 3 year 5 year Since price* launch % % % % % Net Asset Value† +9.0 +18.3 +22.5 +23.4 +96.4 Share Price† +7.1 +17.2 +17.6 +25.7 +70.3 FTSE All-Share +3.0 +25.6 +21.0 +24.6 +45.2 * Source: ISIS EP LLP and AIC. † These returns for Baronsmead VCT 3 ignore up front tax reliefs and the impact of receiving dividends tax free. Cash Returned to Shareholders The table below shows the cash returned to shareholders dependent on their subscription cost, including their income tax reclaimed on subscription. Net Cumulative Net Subscription Income tax cash dividends annual Gross price reclaim invested paid* yield± yield† Year subscribed p p p p % % 2001 (January) 100.0 20.0 80.0 58.8 7.1 9.4 2005 (March) - C 100.0 40.0 60.0 28.8 7.6 10.1 Shares** 2010 (March) 103.1 30.9 72.2 10.5 - ^ - ^ Note - The total return could be higher for those shareholders who were able to defer a capital gain on subscription and the net sum invested may be less. * Includes interim dividend of 3.0p to be paid on 29 September 2011. ± Net annual yield represents the cumulative dividends paid expressed as an annualised percentage of the net cash invested. † The gross equivalent yield if the dividends had been subject to higher rate tax (32.5 per cent on dividend income). The new additional rate of tax on dividend income of 42.5 per cent which came into force from the 2010/11 tax year for those shareholders who earned more than £150,000 has not been included. For those Shareholders who would otherwise pay this additional rate of tax on dividends, the future gross equivalent yield will be higher than the figures shown. ** Dividends paid to C shareholders post conversion have been adjusted by the conversion ratio (0.85642528). ˆ The table above excludes returns for shareholders who subscribed in the Joint Offer with Baronsmead VCT 4 plc as those returns are not yet meaningful. CHAIRMAN'S STATEMENT I am pleased to report that over the six months to 30 June 2011, the Net Asset Value ("NAV") per share increased by 9.1 per cent from 102.1p to 111.4p before payment of a 3.0p per share interim dividend. This growth is due to a series of valuation increases across the portfolio and compares favourably with the FTSE All-Share Index which increased by 3.0 per cent. The share price total return for Baronsmead VCT 3 over the same period was 7.1 per cent. Since inception the Net Asset Value Total Return at 30 June 2011 is 196.4p for each 100.0p invested before taking account of any VCT tax reliefs. Value growth occurred across the investment portfolio with the unquoted portfolio increasing in value by 12.3 per cent, the AIM-traded and listed portfolio by 12.8 per cent and Wood Street Microcap Investment Fund increasing by 11.2 per cent. A 3.0p interim dividend has been declared and is being paid largely from recently realised capital profits and revenue. Reed & Mackay was successfully sold during the period at 4.8 times the original cost and the realised capital profits of £3.8 million add significantly to reserves available for future dividend payments. All of the VCT qualifying tests have been met throughout the six months to 30 June 2011. Portfolio Review The portfolio is well-diversified in several aspects: by the number of investee companies, by the sector of the economy in which they operate and by whether they are unquoted or quoted (which includes AIM-traded and other quoted securities). The trading of the sixty-four portfolio companies remained consistent over the six months with the performance of 81 per cent of investee companies now being classified as steady or growing. At 30 June 2011, 47 per cent of the portfolio by value was invested in unquoted companies, 24 per cent in AIM-traded companies, 5 per cent in Wood Street Microcap Investment Fund and the balance of 24 per cent remained in cash, interest bearing securities or government securities. All areas of the portfolio increased in value over the six month period. The main value gains within the unquoted portfolio came from Nexus Vehicle Holdings (the largest unquoted investment at 8.0 per cent of NAV) and Quantix both of whom continue to show strong profits growth. The AIM-traded portfolio increased by 12.8 per cent including a significant increase in value of IDOX plc (the largest quoted investment at 3.9 per cent of NAV), which provides software and IT services typically to the public sector. The unquoted portfolio companies provide monthly management accounts and so it is possible to track trading trends. Sales growth is being maintained and generally there has been an increase in profit margins leading to higher operating profits. Two investments were sold during the period, Reed & Mackay (4.8 times cost) and Craneware (4.2 times cost). After the end of the period on 7 July 2011, the unquoted investment in Getting Personal was also successfully sold to Card Factory. Wood Street Microcap Investment Fund continues to make good progress and its value increased in the six months by 11.2 per cent to £3.1 million, spread across thirty investments. This fund was established by ISIS Equity Partners in May 2009 to provide flexibility for the Baronsmead VCTs to invest in mainly larger and more liquid non-VCT qualifying AIM-traded and Small Cap quoted opportunities. The investments are intended to generate improved quoted investment returns for the Company and also be more readily realisable than smaller VCT qualifying AIM-traded shares. Since its formation, the unit price of Wood Street Microcap has increased by 38.1 per cent in value. New Investment A total of £2.64 million was invested in the six months to 30 June 2011 in three new investments (one unquoted and two AIM-traded companies) and five small further funding rounds in existing AIM portfolio investments. The Baronsmead VCTs collectively invested a total of £6.5 million in Valldata Group in January 2011, with Baronsmead VCT 3 investing £1.62 million. Valldata Group, based in Wiltshire, is the UK's leading provider of outsourced donation processing and fulfilment services for the UK not-for-profit market, servicing over fifty of the largest UK charities. The two new AIM-traded investments were Music Festivals, an operator of live music events, in which Baronsmead VCT 3 invested £0.5 million and Ubisense Group, a provider of radio frequency tracking solutions for the high value manufacturing sector, in which £0.13 million was invested. Shareholder Matters On 1 August 2011 an amendment to the EU Prospectus Directive was introduced by HM Government enabling companies to raise up to €5.0 million over a twelve month period without the need to publish a prospectus (increased from the previous limit of €2.5 million). Dependent upon the Company's requirement for additional resources to fund new investments in the current tax year, the Board is currently planning to raise the sterling equivalent of up to €5.0 million in the early part of 2012. If confirmed, I will write to shareholders when the quarterly fact sheet for the three month period to 30 September 2011 is published in November 2011 to give further details. Outlook The proposals set out in the 2011 Budget recognise that entrepreneurial companies, like those backed by Baronsmead VCT 3, are critical to creating the UK economic growth, jobs, and wealth that are so essential for Britain's future prosperity. We have the capability to make further investments in these ambitious entrepreneurial businesses and there is a solid platform within our existing portfolio for future growth. The outlook for the UK economy remains uncertain with many commentators anticipating low growth due to public sector cuts, tax rises and continuing high levels of unemployment. However, the Baronsmead VCT 3 portfolio is showing resilience and an ability to withstand these pressures assisted by the active management, disciplines and encouragement from ISIS. We therefore hope to sustain our performance and to continue generating tangible returns for our shareholders. Anthony Townsend Chairman 18 August 2011 Table of Investments and Realisations Investments in the six months to 30 June 2011 Company Location Sector Activity Book cost £'000 Unquoted investments New Valldata Group Limited Melksham Business Payment processing for 1,616 Services not-for-profit sector Music Festivals plc London Consumer Owner and operator of 400 (Loan note) Markets live music festivals and events Total Unquoted investments 2,016 AIM-traded & listed investments New Ubisense Group plc Cambridge IT & Media Technology & services 130 offering real time location system solutions Music Festivals plc London Consumer Owner and operate of live 100 Markets music festivals and events Follow on Active Risk Group plc Maidenhead IT & Media Risk management software 124 Green Compliance plc Cirencester Business Small business compliance 101 Services Netcall plc St Ives IT & Media Communications software 80 Driver Group plc Rossendale Business Dispute resolution 65 Services STM Group plc Gibraltar Financial Offshore trust and 22 Services company administration services Total AIM-traded and listed 622 investments Collective investment vehicle Follow on Wood Street Microcap 700 Investment Fund Total collective investment vehicle 700 Total investments in the period 3,338 Realisations in the six months to 30 June 2011 Realised 31 profit December (loss) First 2010 this Overall Investment Valuation period multiple Company date £'000 £'000 return* Unquoted realisations Reed & Mackay Limited Trade sale Nov 05 4,779 229 4.8 MLS Limited Loan repayment Jul 06 63 - 1.0 Total Unquoted 4,842 229 realisations AIM-traded & listed realisations Craneware plc Full market sale Sep 07 335 (37) 2.7 Total AIM-traded & listed realisations 335 (37) Total realisations in the period 5,177 192† *Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods. †Proceeds of £19,000 were also received in respect of an investment, Country Artists Limited, which had been written off in a prior period. Investment Classification at 30 June 2011 By Sector % Business Services 31 Consumer Markets 21 Financial Services 2 Healthcare & Education 10 IT & Media 36 100 Total Assets % Unquoted - loan stock 31 Unquoted - ordinary and preference 16 shares AIM, listed, NYSE & collective 29 investment vehicle Interest bearing securities 23 Net current assets 1 100 Time Investment Held % Less than 1 year 9 Between 1 and 3 years 14 Between 3 and 5 years 47 Greater than 5 years 30 100 Investment Portfolio 31 % of % of December 30 June equity equity Book 2010 2011 % held by held cost valuation valuation of net Baronsmead by Company Sector £'000 £'000╪ £'000 assets VCT 3 plc funds* Unquoted Nexus Vehicle Business 2,368 4,182 5,342 8.0 12.6 57.4 Holdings Services Quantix Limited IT & Media 1,194 2,025 2,757 4.1 11.4 48.0 CableCom IT & Media 1,381 2,490 2,719 4.1 10.6 48.0 Networking Holdings Limited Crew Clothing Consumer 984 2,569 2,493 3.7 5.4 22.8 Company Limited Markets CSC (World) IT & Media 1,606 1,687 2,079 3.1 8.8 40.0 Limited Kafevend Consumer 1,252 2,032 2,073 3.1 15.8 66.5 Holdings Limited Markets Getting Personal Consumer 988 1,013 1,811 2.7 8.3 37.5 Limited○ Markets Fisher Outdoor Consumer 1,423 1,777 1,777 2.7 10.5 44.0 Leisure Holdings Markets Limited Valldata Group Business 1,616 - 1,616 2.4 8.9 40.6 Limited Services Independent Healthcare & 1,161 1,849 1,513 2.3 16.2 68.1 Living Services Education Limited MLS Limited IT & Media 718 1,161 1,116 1.7 5.3 22.5 Empire World Business 1,297 869 1,099 1.6 ‡ ‡ Trade Limited Services Inspired Business 796 976 1,037 1.6 5.0 22.5 Thinking Group Services Limited Surgi C Limited Healthcare & 1,102 919 939 1.4 9.8 44.7 Education TVC Group IT & Media 1,233 774 789 1.2 13.0 59.3 Limited Playforce Business 1,033 1,023 767 1.1 9.7 44.0 Holdings Limited Services Carnell Business 1,499 337 675 1.0 8.3 37.5 Contractors Services Limited Music Festivals Consumer 400 - 400 0.6 N/A N/A plc (Loan note) Markets Kidsunlimited Business 113 113 113 0.2 N/A N/A Group Limited Services Xention Healthcare & 893 104 0 0.0 2.2 3.0 Discovery Education Limited Provesica Healthcare & 0 56 0 0.0 1.0 1.6 Limited Education Total unquoted 23,057 25,956 31,115 46.6 AIM IDOX plc IT & Media 1,038 1,525 2,633 3.9 3.2 9.7 Green Compliance Business 882 938 906 1.4 4.0 19.8 plc Services Murgitroyd Group Business 319 751 830 1.2 3.1 6.2 plc Services Netcall plc IT & Media 869 508 817 1.2 4.1 20.2 Jelf Group plc Financial 761 670 780 1.2 1.4 6.3 Services Electric Word IT & Media 616 702 663 1.0 5.2 28.8 plc Tasty plc Consumer 469 316 595 0.9 2.5 17.1 Markets Brulines Group Business 646 544 528 0.8 1.8 9.6 plc Services Sinclair IS Healthcare & 524 - 508 0.8 0.5 2.5 Pharma plc^ Education PROACTIS IT & Media 619 614 478 0.7 5.4 26.2 Holdings plc Accumuli plc IT & Media 333 409 473 0.7 3.6 20.7 FFastFill plc IT & Media 251 316 446 0.7 0.9 6.2 Plastics Capital Business 473 307 416 0.6 1.7 9.8 plc Services InterQuest Group Business 310 360 394 0.6 1.8 7.0 plc Services Kiotech Healthcare & 275 339 335 0.5 2.2 16.0 International Education plc EG Solutions plc IT & Media 375 357 300 0.4 3.1 14.2 Real Good Food Consumer 540 92 276 0.4 0.6 2.3 Company (The) Markets plc Begbies Traynor Financial 231 347 250 0.4 0.6 2.5 Group plc Services Driver Group plc Business 503 138 249 0.4 3.5 16.2 Services Quadnetics Group Business 296 192 220 0.3 0.6 2.1 plc Services Sanderson Group IT & Media 387 209 217 0.3 1.8 6.9 plc Brady plc IT & Media 176 199 208 0.3 0.5 3.1 Tangent Business 268 158 202 0.3 2.0 10.3 Communications Services plc Stagecoach Consumer 419 180 194 0.3 4.5 9.1 Theatre Arts plc Markets Tristel plc Healthcare & 217 232 175 0.3 1.0 5.4 Education Active Risk IT & Media 159 44 172 0.3 1.1 5.6 Group plc Dods Group plc IT & Media 541 142 163 0.2 1.4 4.4 Ubisense Group IT & Media 130 - 155 0.2 0.3 1.7 plc Prologic plc IT & Media 310 186 132 0.2 4.1 15.0 Praesepe plc Consumer 525 167 131 0.2 0.5 2.7 Markets Autoclenz Business 400 115 125 0.2 3.1 12.3 Holdings plc Services Cohort plc Business 179 84 104 0.2 0.3 1.4 Services Music Festivals Consumer 100 - 100 0.1 1.0 5.2 plc Markets STM Group plc Financial 162 47 71 0.1 0.8 4.9 Services Bglobal plc Business 176 172 56 0.1 0.5 2.7 Services Colliers Financial 470 76 41 0.1 0.3 0.8 International UK Services plc Adventis Group IT & Media 361 89 37 0.1 3.1 20.7 plc Zoo Digital IT & Media 584 36 35 0.1 0.3 0.9 Group plc Hangar8 plc Business 44 44 34 0.0 0.5 2.6 Services Clarity Commerce IT & Media 50 43 23 0.0 0.3 6.0 Solutions plc Total AIM 15,988 11,648 14,472 21.7 Listed Vectura Group Healthcare & 771 1,120 1,275 1.9 0.5 1.3 plc Education Chime IT & Media 369 386 475 0.7 0.2 1.3 Communications plc Marwyn Value Financial 64 55 49 0.1 1.3 6.0 Investors plc Services Total Listed 1,204 1,561 1,799 2.7 New York Stock Exchange Alere Inc Healthcare & 157 179 175 0.3 0.0 0.0 Education Total New York 157 179 175 0.3 Stock Exchange Interest bearing securities UK T-Bill 5,798 - 5,798 8.7 11/07/11 UK T-Bill 2,996 - 2,996 4.5 12/09/11 BlackRock Cash 5,700 5,700 5,700 8.5 Market OEIC JP Morgan Cash 1,200 1,200 1,200 1.8 Market OEIC Total interest 15,694 6,900 15,694 23.5 bearing securities Collective investment vehicle Wood Street 2,525 2,123 3,140 4.7 Microcap Investment Fund Total collective 2,525 2,123 3,140 4.7 investment vehicle Total 58,625 48,367 66,395 99.5 investments Net current 307 0.5 assets Net assets 66,702 100.0 ○ Getting Personal Limited was sold after the period end. ˆ Sinclair IS Pharma plc shares received in exchange for IS Pharma plc shares following a merger of the two companies in May 2011. ‡ Following a restructuring, the effective ownership percentage is dependent on final exit proceeds. † The total investment valuation at 31 December 2010 per the table above does not agree to the audited accounts due to purchases and sales since that date. * All funds managed by the same investment manager, ISIS EP LLP, including Baronsmead VCT 3. AIM, Listed and NYSE Portfolio Concentration Analysis as at 30 June 2011 % of Investment ranking Book cost Valuation quoted by valuation £'000 £'000 portfolio Top Ten 6,895 9,535 58.0 11-20 3,776 3,843 23.4 21-30 3,123 1,975 12.0 30+ 3,555 1,093 6.6 Total 17,349 16,446 100.0 Independent Review Report to Baronsmead VCT 3 plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the Income Statement, Reconciliation of Movement in Shareholders' Funds, Balance Sheet and Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (``the DTR'') of the UK's Financial Services Authority (``the UK FSA''). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with the Statement Half-Yearly Financial Reports as issued by the UK Accounting Standards Board and the DTR of the UK FSA. Simon Pashby for and on behalf of KPMG Audit Plc Chartered Accountants Edinburgh 18 August 2011 Responsibility statement of the Directors in respect of the half-yearly financial report We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared in accordance with the Statement `Half-yearly financial reports' issued by the UK Accounting Standards Board; • the Chairman's Statement (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; • the Statement of Principal Risks and Uncertainties below is a fair review of the information required by DTR 4.2.7R being a description of the principal risks and uncertainties for the remaining six months of the year; and • the financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so. By Order of the Board, Anthony Townsend Chairman 18 August 2011 Unaudited Income Statement For the six months to 30 June 2011 Six months to Six months to Year to 30 June 2011 30 June 2010 31 December 2010* Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unrealised gains on - 5,418 5,418 - 1,019 1,019 - 4,951 4,951 investments Realised gains on - 211 211 - 806 806 - 1,757 1,757 investments Income 876 - 876 1,287 - 1,287 2,407 - 2,407 Investment management (198) (594) (792) (182) (547) (729) (380) (1,140) (1,520) fee Other expenses (185) - (185) (181) - (181) (360) - (360) Profit on ordinary 493 5,035 5,528 924 1,278 2,202 1,667 5,568 7,235 activities before taxation Taxation on ordinary (88) 88 - (224) 224 - (412) 412 - activities Profit on ordinary 405 5,123 5,528 700 1,502 2,202 1,255 5,980 7,235 activities after taxation Return per ordinary share: Basic 0.67p 8.48p 9.15p 1.19p 2.55p 3.74p 2.09p 9.98p 12.07p * These figures are audited. Unaudited Reconciliation of Movement in Shareholders' Funds For the six months to 30 June 2011 Six Six months to months to Year to 30 June 30 June 31 December 2011 2010 2010 £'000 £'000 £'000* Opening shareholders' funds 64,643 52,878 52,878 Profit for the period 5,528 2,202 7,235 Purchase of shares for treasury (736) (803) (1,357) Gross proceeds of share issues - 8,165 8,165 Expenses of share issue and buybacks (4) (441) (441) Dividends paid (2,729) - (1,837) Closing shareholders' funds 66,702 62,001 64,643 * These figures are audited. Notes 1. The unaudited interim results which cover the six months to 30 June 2011 have been prepared in accordance with applicable accounting standards and adopting the accounting policies set out in the statutory accounts of the Company for the year to 31 December 2010. 2. Return per share is based on a weighted average of 60,393,473 ordinary shares in issue (30 June 2010 - 58,829,168, 31 December 2010 - 59,933,988). 3. Earnings for the first six months to 30 June 2011 should not be taken as a guide to the results of the full financial year. 4. During the six months to 30 June 2011 the Company purchased 780,000 ordinary shares to be held in treasury at a cost of £736,000. At 30 June 2011 the Company holds 7,757,317 ordinary shares in treasury. Excluding treasury shares, there were 59,862,534 ordinary shares in issue at 30 June 2011 (30 June 2010 - 61,242,534, 31 December 2010 - 60,642,534). 5. The interim dividend of 3.0 pence per ordinary share (0.65 pence revenue and 2.35 pence capital) will be paid on 29 September 2011 to shareholders on the register on 16 September 2011. The ex-dividend date is 14 September 2011. 6. The financial information contained in this Half-yearly Financial Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The information for the year to 31 December 2010 has been extracted from the latest published audited financial statements. The audited financial statements for the year to 31 December 2010 have been filed with the Registrar of Companies. The auditor's report thereon 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. No statutory accounts in respect of any period after 31 December 2010 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 7. Copies of the Half-yearly Financial Report have been mailed to shareholders and are available from the Registered Office of the Company at 100 Wood Street, London EC2V 7AN. Unaudited Balance Sheet As at 30 June 2011 As at As at As at 30 June 30 June 31 December 2011 2010 2010 £'000 £'000 £'000* Fixed assets Unquoted investments 31,115 29,481 30,735 Traded on AIM 14,472 10,599 12,522 Listed on LSE 1,799 1,022 1,561 Traded on NYSE 175 136 179 Collective investment vehicle 3,140 1,005 2,123 Interest bearing securities 15,694 17,393 16,287 66,395 59,636 63,407 Current assets Debtors 632 254 461 Cash at bank and on deposit 179 2,613 1,268 811 2,867 1,729 Creditors (amounts falling due within (504) (502) (493) one year) Net current assets 307 2,365 1,236 Net assets 66,702 62,001 64,643 Capital and reserves Called-up share capital 6,762 6,762 6,762 Share premium account 15,012 15,012 15,012 Capital redemption reserve 10,862 10,862 10,862 Capital reserve 25,553 26,154 24,941 Revaluation reserve 7,770 2,209 6,182 Revenue reserve 743 1,002 884 Equity shareholders' funds 66,702 62,001 64,643 * These figures are audited. As at As at As at 30 June 30 June 31 December 2011 2010 2010 £'000 £'000 £'000* Net asset value per share 111.43p 101.24p 106.60p Number of ordinary shares in 59,862,534 61,242,534 60,642,534 circulation Treasury net asset value per share 109.68p 100.08p 105.32p Number of ordinary shares in 59,862,534 61,242,534 60,642,534 circulation Number of ordinary shares held in 7,757,317 6,377,317 6,977,317 treasury Number of listed ordinary shares in 67,619,851 67,619,851 67,619,851 issue * These figures are audited. Unaudited Statement of Cash Flows For six months to 30 June 2011 Six months Six months Year to to to 30 June 30 June 31 December 2011 2010 2010 £'000 £'000 £'000* Net cash (outflow) / inflow from operating (260) 499 232 activities Capital expenditure and financial 2,640 (6,846) (5,533) investment Equity dividends paid (2,729) - (1,837) Net cash outflow before financing (349) (6,347) (7,138) Net cash (outflow)/inflow from financing (740) 6,927 6,373 (Decrease)/increase in cash (1,089) 580 (765) Reconciliation of net cash(outflow)/ inflow to movement in net cash (Decrease)/increase in cash (1,089) 580 (765) Opening net cash 1,268 2,033 2,033 Net cash at end of period 179 2,613 1,268 Reconciliation of operating profit before taxation to net cash flow from operating activities Profit on ordinary activities before 5,528 2,202 7,235 taxation Gains on investments (5,629) (1,825) (6,708) Changes in working capital and other (159) 122 (295) non-cash items Net cash (outflow) / inflow from operating (260) 499 232 activities * These figures are audited. Principal Risks and Uncertainties The Company's assets consist of equity and fixed interest investments, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a Venture Capital Trust, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal risks, risk management and regulatory environment within the Business Review and Notes in the Company's Annual Report and Accounts for the year to 31 December 2010. The Company's principal risks and uncertainties have not changed materially since the date of that report. Related Parties ISIS EP LLP (`the Manager') manages the investments of the Company. The Manager also provides or procures the provision of secretarial, accounting, administrative and custodian services to the Company. Under the management agreement, the Manager receives a fee of 2.5 per cent per annum of the net assets of the Company. This is described in more detail under the heading Management within the Report of the Directors in the Company's Annual Report and Accounts for the year to 31 December 2010. During the period the Company has incurred management fees of £792,000 and secretarial and accounting fees of £58,000 payable to the Manager. Going Concern After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion the Directors have considered the liquidity of the Company and its ability to meet obligations as they fall due for a period of at least twelve months from the date that these financial statements were approved. As at 30 June 2011 the Company held cash balances, investments in UK Gilts and Money Market Funds with a combined value of £15,873,000. Cash flow projections have been reviewed and show that the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the share buyback programme and dividend policy. The Company has no external loan finance in place and is therefore not exposed to any gearing covenants. Shareholder Information and Contact Details Shareholder Communication Baronsmead Baronsmead VCT 3's website is www.baronsmeadvct3.co.uk. The Board has a policy of regular and open communication with shareholders based around quarterly reporting. ISIS/Equity Partners The Manager for Baronsmead VCT 3 plc is ISIS EP LLP. For information on asset allocations, dividend policies, investment process, DRIP mechanism, share price movements, the share price discount and selling shares please contact: By email: michael.probin@isisep.com ; margaret.barff@isisep.com By telephone: Michael Probin 020 7506 5796; Margaret Barff 020 7506 5630. Internet: www.isisep.com For comparative performance data of Baronsmead VCT 3 and other generalist VCTs please visit the AIC performance statistics page at: www.theaic.co.uk/statistics-publications Computershare The Registrar for Baronsmead VCT 3 is Computershare Investors Services PLC. To change the details held by Computershare in respect of your shareholding, including change of address, bank account details and joining the DRIP, please contact them as follows: Baronsmead shareholder helpline: 0870 703 0137 (calls charged at geographical and national rates) The Baronsmead shareholder helpline is available on UK business days between Monday and Friday, 8.30a.m. to 5.00p.m. If you wish to speak to someone please press `0'. The automated self-service system is available 24 hours a day, 7 days a week. You will need your Shareholder Reference Number ("SRN"), which for security reasons you should always keep confidential and is available on your share certificate and dividend tax voucher, in order to: • confirm the latest share price • confirm your current share holding balance • confirm payment history • order a Change of Address, Dividend Bank Mandate or Stock Transfer Form Managing online your own shareholding via the Investor Centre: www.investorcentre.co.uk Computershare's secure website, Investor Centre, enables shareholders to manage their shareholding online. Using your SRN you will be able to do the following: • Holding Enquiry - view balances, values, history, payments and reinvestments • Payments Enquiry - view your dividends and other payment types • Address Change - change your registered address • Bank Details Update - choose to receive your dividend payments directly into your bank account instead of by cheque • e-Comms sign-up - choose to receive email notification when your shareholder communications become available instead of paper communications • Outstanding Payments - reissue payments using our online replacement service • Downloadable Forms - including dividend mandates, stock transfer, dividend reinvestment and change of address forms • By email - web.queries@computershare.co.uk Share Price The Company's shares are listed on the London Stock Exchange. The mid-price of the Company's shares is given daily in the Financial Times in the Investment Companies section of the London Share Service. Share price information can also be obtained from many financial websites. Trading Shares The Company's shares can be bought and sold in the same way as any other quoted company on the London Stock Exchange via a stockbroker. As buying and selling existing shares in VCTs is complex, Shareholders should seek to trade shares on a "best execution" basis if appropriate. The marketmakers in the shares of Baronsmead VCT 3 plc are: Matrix Corporate Capital 020 3206 7000 (the Company's broker) LLP Singer Capital Markets 020 3205 7500 Limited Winterflood Securities 020 3400 0251 Limited Financial Calendar November 2011 Quarterly Fact Sheet to 30 September 2011 February 2012 Results for the year to 31 December 2011 announced and annual report and accounts sent to shareholders April 2012 Eleventh Annual General Meeting Additional Information The information provided in this report has been produced in order for shareholders to be informed of the activities of the Company during the period it covers. ISIS EP LLP does not give investment advice and the naming of companies in this report is not a recommendation to deal in them. Baronsmead VCT 3 plc is managed by ISIS EP LLP which is authorised and regulated by the FSA. Past performance is not necessarily a guide to future performance. Stockmarkets and currency movements may cause the value of investments and the income from them to fall as well as rise and investors may not get back the amount they originally invested. Where investments are made in unquoted securities and smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investment. Corporate Information Directors Registrar and Transfer Office Anthony Townsend (Chairman)‡ Computershare Investor Services PLC Andrew Karney† PO Box 82 Gillian Nott OBE* The Pavilions Ian Orrock Bridgwater Road Bristol BS99 6ZZ Secretary Tel: 0870 703 0137 ISIS EP LLP Brokers Registered Office Matrix Corporate Capital LLP 100 Wood Street One Vine Street London EC2V 7AN London W1J 0AH Investment Manager Auditors ISIS EP LLP KPMG Audit Plc 100 Wood Street Saltire Court London EC2V 7AN 20 Castle Terrace Edinburgh EH1 2EG Investor Relations Michael Probin Solicitors 020 7506 5796 Norton Rose 3 More London Riverside Registered Number London SE1 2AQ 04115341 VCT Status Adviser PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH ‡ Chairman of the Nomination Committee and Remuneration and Management Engagement Committee † Senior Independent Director Website * Chairman of the Audit and Risk www.baronsmeadvct3.co.uk Committee Copies of the half yearly report can be obtained from the following website: www.baronsmeadvct3.co.uk. National Storage Mechanism A copy of the Half-Yearly Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do . 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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