Annual Financial Report

RNS Number : 7163U
Baronsmead Venture Trust PLC
06 December 2021
 

Baronsmead Venture Trust plc

 

Annual Report and Audited Financial Statements

for the year ended 30 September 2021

The Directors of Baronsmead Venture Trust plc are pleased to announce the Annual Financial Report for the year ended 30 September 2021. The Annual Report and Financial Statements can be obtained from the following website:  www.baronsmeadvcts.co.uk

 

Financial Highlights

· Net Asset Value ("NAV") per share increased 25.8 per cent to 85.4p in the 12 months to 30 September 2021, before deductions of dividends.

· NAV total return of 496.2p to Shareholders for every 100.0p invested at launch (April 1998).

· Annual tax free dividend yield of 9.6 per cent based on 6.5p dividends paid (including proposed final dividend of 3.5p) and opening NAV of 67.9p.

· £15.4million of investments made into ten new and five follow-on opportunities during the year.

 

 

Our investment objective

Baronsmead Venture Trust plc (the "Company") is a tax efficient listed company which aims to achieve long-term investment returns for private investors, including tax-free dividends.

 

Investment policy

· To invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on AIM.

· Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.

 

Dividend policy

· The Board will, wherever possible, seek to pay two dividends to shareholders in each calendar year, typically an interim in September and a final dividend following the Annual General Meeting in February/March:

· The Board will use, as a guide, when setting the dividends for a financial year, a sum representing 7 per cent of the opening net asset value of that financial year.

 

Key elements of the business model

 

Access to an attractive, diverse portfolio

The company gives shareholders access to a diverse portfolio of growth businesses.

 

The Company will make investments in growth businesses, whether unquoted or traded on AIM, which are substantially based in the UK in accordance with the prevailing VCT legislation. Investments are made selectively across a range of sectors.

 

The Manager's approach to investing

 

The Manager endeavours to select the best opportunities and applies a distinctive selection criteria based on:

 

· Primarily investing in parts of the economy which are experiencing long term structural growth

· Businesses that demonstrate, or have the potential for, market leadership in their niche

· Management teams that can develop and deliver profitable and sustainable growth

· Companies with the potential to become an attractive asset appealing to a range of buyers at the appropriate time to sell

 

In order to ensure a strong pipeline of opportunities, the Manager invests in building deep sector knowledge and networks and undertakes significant proactive marketing to target companies in preferred sectors. This approach generates a network of potentially suitable businesses with which the Manager maintains a relationship ahead of possible investment opportunities.

 

The Manager as an influential shareholder

The Manager is an engaged and supportive shareholder (on behalf of the Company) in both unquoted and significant quoted investments.

 

For unquoted investments, representatives of the Manager often join the investee board. The role of the Manager with investees is to ensure that strategy is clear, the business plan can be implemented and the management resources are in place to deliver profitable growth. The aim is to build on the business model and grow the company into an attractive target which can be sold or potentially floated in the medium term.

 

A more detailed explanation of how the investment policy and business model are applied is provided in the Other Matters section of the Strategic Report below. The full investment policy can be found in the full Annual Report.

 

 

STRATEGIC REPORT

 

CHAIRMAN'S STATEMENT

 

I am delighted to be able to report an increase of 25.8 per cent in the Company's NAV per share, before dividend payments, for the financial year.

 

Despite the significant volatility seen in public markets during 2020, we have seen excellent performance from our AIM-traded investments in the year to 30 September 2021. The unquoted portfolio has also performed well, led by a strong performance from investments in software and technology enabled services companies as well as a recovery in the value of the multi-site restaurant businesses.

 

Results

 

 

Pence per ordinary share

NAV as at 1 October 2020 (after final dividend)

67.9

Valuation increase (25.8 per cent)

17.5

NAV as at 30 September 2021 before dividends

85.4

Less:

Interim dividend paid on 10 September 2021

(3.0)

Proposed final dividend of 3.5p payable, after shareholder approval, on 4 March 2022

(3.5)

Illustrative NAV as at 30 September 2021 after proposed dividend

78.9

 

Portfolio review

At 30 September 2021, the Company's direct investment portfolio was valued at £129 million and comprised investments in a total of 84 companies of which 37 are unquoted and 47 are quoted. The unquoted portfolio has increased to 37 companies with 7 new investments and 2 realisations. The Company's investments in the LF Gresham House UK Micro Cap Fund, LF Gresham House UK Multi Cap Income Fund and now, since our investment in August 2021, in the LF Gresham House UK Smaller Companies Fund were valued at £55 million at 30 September 2021. These investments provide further diversity, giving investment exposure to an additional 98 AIM-traded and fully listed companies and thus spreading investment risk across 182 portfolio companies.

 

During the 12 months to 30 September 2021, the underlying value of the unquoted portfolio increased by 28 per cent, reflecting the continued strong performance of the majority of investments. The portfolio of directly held AIM investments increased by 53 per cent during the year, recovering significantly from the early impact of the COVID-19 pandemic on public markets.

 

The strong uplift in the value of the AIM traded holdings emphasises the benefits of having a portfolio with both private unquoted and publicly listed companies. Over the long-term, the returns profile of the quoted and unquoted portfolios has proved complementary, with both asset classes delivering robust performances.

 

Investments and divestments

The Board is pleased to report that the Company has continued to make new investments despite the disruption of COVID-19 and has invested a total of £15 million in 15 companies over the year. Further details of the new investments made are included in the Manager's review. The requirement to make new investments in earlier stage opportunities may result in greater volatility of returns over time. We have highlighted this in the past, and it remains true. In addition to the number of holdings, the portfolio is well diversified by sector, with a weighting towards technology, healthcare, and recurring revenue business models.

 

There have been several realisations from both the unquoted and quoted portfolio during the year, reflecting the Manager's continued focus on driving liquidity to create realised capital profits to fund current and future dividends for shareholders. For example, the sale of Pho, from the unquoted portfolio, delivered total proceeds of £4.8 million for a gross money multiple of 2.5x cost. The Manager also realised its investment in Wey Education, from the quoted portfolio, which delivered proceeds of £5.8 million for a total gross money multiple of 13.6x cost. The Manager has made a select number of profitable partial realisations in the quoted portfolio during the year, including Cerillion plc, resulting in the receipt of proceeds of £2.6 million at an aggregate of 5.6x cost. The Company's investment into Storyshare was also rolled into Evotix, a much larger business, in July 2021, to build critical mass and improve its future returns prospect, given that the investment is currently being held at 0.4x cost.

 

The Manager's acquisition of the Mobeus VCTs

In September 2021, the Company's Manager, Gresham House, acquired the VCT business of Mobeus Equity Partners LLP. This acquisition enhances Gresham House's position within the VCT market, increasing the funds under management across its VCT range to approximately £850 million as at 30 September. The existing Gresham House VCT team is now working alongside the newly acquired Mobeus VCT team in managing the Company's portfolio and the Board is pleased with the progress made thus far in relation to the integration of the two teams.

 

The Board is supportive of these developments as the acquisition enlarges the Gresham House VCT team significantly and the Board believes that the combined platform will enhance the Manager's ability to identify and manage attractive early-stage unquoted investments. The Board believes that this will benefit the Company through more consistent and increased rates of investment which will ultimately support the delivery of attractive long-term performance for the Company's shareholders.

 

Dividends

The Board is pleased to declare a final dividend of 3.5p per share for the year to 30 September 2021, payable on 4 March 2022. This is in addition to the 3.0p interim dividend paid in September and means that the total dividends for the year are 6.5p. This is a 9.6 per cent yield based on the opening NAV per share of 67.9p and is above the target policy of 7 per cent of the NAV per share at the start of the year.

 

The Company has good levels of realised reserves available to fund future dividends and the Manager continues to focus on consistently selling investments and generating realised profits across the portfolio which help to sustain the payment of dividends.

 

Environmental, Social and Governance ("ESG") matters

Environmental, social and governance analysis is embedded into the Company's investment processes by the Manager in order to build and protect long-term value for investors. A framework based on ten key ESG themes is used to analyse, monitor and report on ESG risks and opportunities across the lifecycle of investments . Further information in relation to the Manager's integration of ESG factors in the management of the Company's portfolio is set out in the strategic report below.

 

Fundraising

In August 2021, the Board announced its intention to raise new funds to enhance the Company's resources available for new and follow-on investments over the next two to three years. Consequently, in November 2021 the Company launched an offer for subscription to raise £25 million (before costs) with an additional £12.5 million over-allotment facility (before costs) available if required. As at the date of this statement investors had subscribed £19.0   million and the offer remains open until 29 March 2022 unless fully subscribed or closed earlier. We would like to thank those existing shareholders who have already subscribed to the Company's offer for their continued support and to welcome new shareholders.

 

Annual General Meeting ("AGM")

The Company's last AGM was held as a hybrid meeting on 16 February 2021, due to government restrictions on public gatherings at that time. This year, pending any future changes in restrictions, we look forward to holding an AGM in person at 12.00pm on 16 February 2022 at Saddlers' Hall, 40 Gutter Lane, London, EC2V 6BR.The Manager will deliver a presentation, followed by some light refreshments, after which I will present my own review of the year as usual at 1.30pm..

 

For any shareholders that do not wish to attend in person, we will be live streaming the AGM and Manager's presentation. Registration details for the live stream will be included in the Notice of AGM. Voting will not be available via the online streaming service and we encourage shareholders to exercise their votes by submitting their proxy electronically or by post. The Directors appreciate the engagement with shareholders that takes place at the AGM and encourage shareholders to submit any questions to the Board in advance of the meeting. Shareholders can submit questions up until noon on 15 February 2022 in the following ways:

· By email: send your questions to baronsmeadvcts@greshamhouse.com

· By telephone: contact Investor relations on 020 7382 0999

 

Succession planning

During the year, the Board began the processes of implementing its succession plan. We have welcomed two new directors to the Board this year, Michael Probin and Fiona Miller Smith. Michael has over 30 years of experience in the tax efficient investment industry, and Fiona brings over 25 years of experience in investing in and leading growth companies. We look forward to working with both Michael and Fiona. Following the end of the financial year, Valerie Marshall retired from the Board, effective 31 October 2021. Valerie served as a director of Baronsmead VCT plc from November 2009 and then continued as a director of Baronsmead Venture Trust plc after the merger in 2016. I would like to thank Valerie for her huge contribution and sound advice given to the Company over this time and we wish her all the best with her future endeavours. It is my intention, that I too will retire from the Board at an appropriate time during the course of the current financial year.

 

Outlook

Although the UK has been efficient in its vaccination program, the COVID-19 pandemic continues to impact us all. We continue to monitor developments and any potential impact on the portfolio but we are encouraged by the level of resilience already demonstrated by our management team, investee companies and our key service providers.

 

The disruption and market dislocation has also provided, and will keep on providing, investment opportunities and the Manager remains focused on investing in businesses with strong fundamental characteristics which should continue to grow consistently throughout the economic cycle.

 

Overall, the economy has rebounded strongly following the sharp decline in activity and fall in public markets immediately after the first national lockdown in March 2020. However, the ongoing recovery is likely to be uneven as the UK government's COVID-19 support packages continue to be withdrawn and inflationary and supply chain pressures flow through the economy. The Manager anticipates this will lead to increased public market volatility and, for those sectors reliant on physical goods, more uncertainty over the deliverability of short-term sales forecasts, while operating margin pressure will be felt due to wage inflation.

 

Despite the potential economic headwinds, the Board continues to believe it is a good time to be investing in earlier stage, innovative and high growth potential businesses, looking to take advantage of technology-driven changes in consumer behaviour and the disruption of traditional supply chains. The level of interesting investment opportunities being reviewed by the Manager continues to be strong. As the earlier stage portfolio continues to mature, there is also an increase in existing high potential portfolio companies looking for follow-on capital to support future growth.

 

 

Peter Lawrence

Chairman

6 December 2021

 

 

MANAGER'S REVIEW

This year has seen a strong overall performance from the investment portfolio despite continued uncertainty caused by COVID-19. The portfolio is well diversified, with exposure to 182 quoted and unquoted companies, and has delivered an increase in net asset value of 25.8 per cent over the year.

 

PORTFOLIO REVIEW

Overview

The net assets of £223 million were invested as follows:

Asset class

NAV

(£m)

% of

NAV*

Number of investees**

% return in the year

Unquoted

52

23

37

28

AIM-traded companies

77

35

47

53

LF Gresham House UK Micro Cap Fund

40

18

51

46

LF Gresham House UK Multi Cap Income Fund

7

3

47

32

LF Gresham House UK Smaller Companies Fund

8

4

49

1

Liquid assets

39

17

N/A

-

Totals

223

100

231

-

 

* By value as at 30 September 2021.

** Includes investee companies with holdings by more than one fund. Total number of individual companies held is 182.

*** Return includes interest received on unquoted realisations during the year.

Represents cash, OEICs net current assets.

 

The tables below show the breakdown of new investments and realisations over the course of the year and below is a commentary on the key highlights in both the unquoted and quoted portfolios.

Investment activity - unquoted and quoted

 

The Company's investment strategy is primarily focused on companies operating in parts of the economy that we believe are benefiting from long-term structural growth trends and in sectors where we have deep expertise and network. The amount of capital invested in each business is matched to the scale, maturity and underlying risk profile of the company seeking investment.

 

During the year, £15.4 million was invested in 15 companies including ten new additions to the portfolio and five follow on investments. Below are descriptions of some of the new investments made;

 

· Investments were made into eConsult Ltd (unquoted) and Metrion Biosciences Ltd (unquoted), both specialist healthcare providers. eConsult provides a clinically led online consultation service to digitally triage patients, reducing the number of face-to-face consultations required, while Metrion is a Contract Research Organisation focused on delivering a range of high-quality ion channel drug discovery services.

 

· Investments into RevLifter Ltd unquoted), Scurri Web Services Ltd (unquoted) and Patchworks Ltd (unquoted) follow our focus on companies supporting the shift to e-commerce. RevLifter has developed an Artificial Intelligence ("AI") platform using advanced behavioural analytics to deliver tailored promotions to consumers, Scurri provides a cloud-based logistics management platform, and Patchworks provides integration software to the multiple operational systems used by e-commerce businesses.

 

· Three new quoted investments were completed during the year. These companies also operate in our core investment focus areas of niche software and pharmaceutical outsourced service providers. Crimson Tide plc provides a field service management software platform and service; Crossword Cybersecurity plc sources and develops academic ideas into commercial cyber security products and services, and DeepVerge plc is a software tool that joins technology platforms with partners in AI, clinical research, medical devices, life science and environmental science.

 

The Company made additional investments into five existing portfolio companies, one quoted and four unquoted, across the year. This is consistent with the investment strategy of continuing to back our high potential assets with further capital to support future growth. We anticipate the level of follow-on investment will continue to grow as the earlier stage portfolio continues to mature.

 

Unquoted portfolio

 

Performance

The unquoted portfolio performed well during the year, increasing in value by 28 per cent. There has been ongoing disruption due to COVID-19, particularly affecting our multi-site nursery chain, travel businesses and casual dining restaurants, driven by the national lockdowns and social distancing requirements, However revenues have bounced back strongly since the economy reopened. In aggregate, we have seen consistently robust performance in our technology, healthcare and services companies within the portfolio, especially those with recurring or contracted revenue business models with good visibility over future revenues and cashflows.

 

As Manager we remain highly engaged with the management teams within the portfolio, sharing insight and best practice to help them both manage risk and spot opportunities in a quickly changing environment. We have continued to invest in our in-house talent and technology functions to support our portfolio companies, which alongside our extensive network of earlier stage, high growth company experts, ensure we are well positioned to help our portfolio companies develop and scale.

Divestments

The Company successfully realised its investment in Pho in August 2021, delivering £4.8 million in proceeds and an initial investment return of 2.5x1. The deal includes an earn-out structure that could increase the total deal return to an estimated 3.0x1 original invested cost. Pho is a casual dining restaurant chain serving Vietnamese street food, and although it was significantly affected by the government restrictions during the COVID-19 pandemic, its differentiated consumer proposition and rapidly growing sales in the home delivery channel resulted in a strong trading recovery. The Company also successfully realised its investment in Ten10 in October 2020, delivering proceeds of £5.9 million and an overall investment return of 3.7x1.

 

During the year the Company also rolled its investment in Storyshare Holdings Limited into Evotix Limited. The Storyshare product integrates well with the Evotix offering and we believe that customer synergies and the larger scale of the SHE business will enhance investment return prospects for the Company's shareholders, as this investment is currently being held at 0.4x1 cost.

 

1 All multiples are quoted gross

Quoted portfolio (AIM-traded investments)

Performance

The quoted portfolio has performed exceptionally well, increasing 53 per cent over the course of the year. This was driven by the larger and more established AIM holdings, with particular emphasis on those in resilient parts of the market where their businesses benefited from trends such as digital transformation that have been accelerated by the pandemic. Significant positive contributions came from: Cerillion, driven by robust results and forecast upgrades during the year underpinned by new business; Netcall, as revenue growth accelerated and earnings quality improved due to an increasing proportion of contracted recurring income; and Ideagen, which re-rated positively due to strong resilient earnings and increased scale in its recurring revenue base.

 

Detractors from performance were: LoopUp, due to earnings underperforming market expectations; Cloudcall Group, a telephony software provider to the recruitment sector which was significantly impacted by COVID-19; and Rosslyn Data Technologies which underperformed market expectations although we remain positive about the long term opportunity as it evolves its management team and go-to-market strategy with support from the Manager.

 

We closely monitor our AIM portfolio with a rolling programme of independent reviews of the most significant AIM holdings and continue to be positive on the long-term investment prospects of these companies. Many of the larger quoted investments have been long-term holdings. These companies are typically profitable, cash generative businesses with low levels of financial gearing and continue to have attractive long-term growth prospects.

 

Divestments

Proceeds totalled £9.0 million during the year following two full and one partial realisation. Collagen Solutions was fully realised following a takeover by Rosen's Diversified, returning 1.3x cost in November 2020. The Company's investment in Wey Education was also fully realised following a takeover by Inspired Education Holdings, a private equity backed trade buyer, returning 13.6x cost, the highest money multiple return in the history of the Company, and delivering proceeds of £5.8m. The opportunity to crystallise some profits was taken for Cerillion plc; over the course of the year proceeds of £2.6m were realised at 5.6x cost.

 

Collective Investment Vehicles

The Manager believes that the Company's investments in the LF Gresham House UK Micro Cap Fund ("Micro Cap"), LF Gresham House UK Multi Cap Income Fund ("Multi Cap"), and, newly, in the LF Gresham House UK Smaller Companies Fund ("Small Cap") are a core component of the Company's portfolio construction. These investments provide shareholders with additional diversification through exposure to an additional 98 underlying companies, as well as access to the potential returns available from a larger and more established group of companies that fall within the Manager's core area of expertise.

 

Over the year, Micro Cap delivered a 46 per cent return and Multi Cap delivered 32 per cent. The Company's investment into Small Cap, made in August 2021, has also increased by 0.5 per cent.

 

Micro Cap and Multi Cap are both highly rated by independent ratings agencies. Each fund has performed well on an absolute basis during the year, although has slightly lagged its respective peer group. Micro Cap's long term cumulative performance has been consistently top quartile within the IA UK Smaller Companies sector and is the sixth best performing fund over the past 10 years. Multi Cap has been the top performing fund within the IA UK Equity Income sector over three years and since launch in June 2017. Small Cap has also achieved top quartile cumulative performance since launch in 2019, and once it has a three-year track record it will be marketed externally.

 

Liquid assets (cash and near cash)

The Company had cash and liquidity OEICs of approximately £42.6 million at the year-end. This asset class is conservatively managed to take minimal or no capital risk.

 

ESG highlights

The Manager has continued to invest in its sustainable investment team, with the addition of two new members during the year. The first ESG survey of our unquoted portfolio companies was completed during the year. The survey identified common challenges across the portfolio as well as establishing benchmark metrics for future development and reporting. Further details on our ESG approach and policies can be found in the strategic report.

 

Outlook

Despite the economic and social challenges over the past twelve months, the opportunity to invest and support growth in entrepreneurial earlier-stage UK businesses remains strong. Our focus on investing in parts of the economy which are experiencing structural growth and in sectors where we have extensive talent networks and domain expertise continues to identify attractive investment opportunities. Many of our management teams are innovating to accelerate growth and take advantage of the changes and disruption across the market. We expect the rate of follow-on investment to increase across the portfolio as these companies scale and require additional capital to realise their growth plans.

 

As expected, several parts of the portfolio have faced trading headwinds. Demand within our consumer travel and several other service-based businesses remain impacted by the shift in consumer and corporate spending driven by COVID-19. In certain sectors, we expect more variability in company trading and a general increase in wage inflation and supply chain disruption going forward. However, the portfolio continues to be highly diversified and overall is defensively positioned. Following the integration of the Mobeus VCT team during October 2021, the deal team consists of over 20 investment professionals. Significant investment has also been made to strengthen our in-house talent and technology capability to help convert new deal opportunities and to add value to our portfolio companies post investment.

 

We remain extremely positive in the ability of more agile, fast moving earlier stage companies to outperform in an uncertain economic environment and in our ability to invest capital and deliver attractive long-term returns for the Company.

 

Gresham House Asset Management Ltd

Investment Manager

6 December 2021

 

Investments in the year

 

Company

Location

Sector

Activity

Book cost
£'000

Unquoted investments

New

eConsult Ltd

Surrey

Healthcare & Education

Online consultation provider used by GP practices and hospitals

2,400

Scurrri Web Services Ltd

London

Technology

Cloud-based delivery management platform

2,033

Patchworks Ltd

Nottingham

Technology

Leading integration platform for fast-growing retail and ecommerce businesses

1,583

Airfinity Ltd

London

Healthcare & Education

Provides real time life science intelligence as a subscription service

1,439

Metrion Biosciences Ltd

Cambridge

Healthcare & Education

Ion channel drug discovery and safety assessment services provider

1,057

Counting Ltd

London

Business Services

Banking and accounting software for small businesses

940

RevLifter Ltd

London

Technology

AI platform using advanced behavioural analytics to deliver tailored promotions to users

719

Follow-on

Glisser Ltd

London

Business Services

Audience engagement software

705

TravelLocal Ltd

London

Consumer Markets

Online travel agent specialising in

tailor-made holidays

 

470

Equipsme (Holdings) Ltd

London

Business Services

SME health insurance plans provider

329

Munnypot Ltd

West Sussex

Technology

Automated online investment platform

13

Total unquoted investments

11,688

AIM-traded investments

New

Deepverge PLC

York

Healthcare & Education

Environmental and life sciences group

1,410

Crossword Cybersecurity plc

London

Technology

Commercialisation of university

research-based cyber security software

and consulting

 

1,184

Crimson Tide plc

Kent

Technology

Mobile business solutions

592

Follow-on

CloudCall Group plc

Leicester

Technology

Provides cloud software and integrated communications services

495

 Total AIM-traded investments

3,681

 Total investments in the year

15,369

 

Realisations in the year

 Company

 

First Investment date

Original

book cost*

£'000

Proceeds‡

£'000

Overall multiple return

Unquoted realisations

 

 

 

 

 

Ten10 Group Ltd

Full Trade Sale

Feb 15

1,908

5,933

3.7†

Pho Holdings Ltd

Full Trade Sale

Jul 12

1,982

4,829

2.5†

 Total unquoted realisations

3,890

10,762

2.8†

 AIM-traded realisations

 

 

 

 

 

Wey Education plc

Takeover

Dec 15

428

5,802

13.6

Cerillion plc

Market Sale

Nov 15

462

2,568

5.6

Collagen Solutions plc

Takeover

Mar 17

450

586

1.3

Total AIM-traded realisations

1,340

8,956

 6.7

Total realisations in the year

5,230

19,718

3.8

       

 

*Residual book cost at realisation date.

‡ Proceeds at time of realisation including interest.

† Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.

 

 

Ten largest investments

The top ten investments by current value at 30 September 2021 illustrate the diversity of investee companies within the portfolio. For consistency across the top ten and based on guidance from the AIC, data extracted from the last set of published audited accounts is shown in the tables below. However, this may not always be representative of underlying financial performance for several reasons. Published accounts lodged at Companies House may be out of date and the Manager works from up-to-date monthly management accounts and has access to draft but unpublished annual audited accounts. In addition, pre-tax profit in statutory accounts is often not a representative indicator of underlying profitability as it can be impacted by, for example, deductions of non-cash items such as amortisation that relate to investment structures rather than operating performance.

 

1. Cerillion Plc - London

Quoted

www.cerillion.com  

All funds managed by Gresham House

First investment: July 2015

Total original cost: £2,974,000

Total equity held: 13.3%

 

Baronsmead Venture Trust only

Original cost: £1,338,000

Valuation: £13,559,000

Valuation basis: Bid Price

Income recognised in the year: £110,000

% of equity held: 6.0%

Voting rights: 6.0%

 

Year ended 30 September

 

2020

2019

 

£ million

£ million

Sales:

20.8

18.8

Pre-tax profits

2.6

2.4

Net Assets:

16.0

15.5

No. of Employees:

235

203

 

Source: Cerillion plc, Final results announcement 30 September 2020

 

 

2. Carousel Logistics Ltd - Sittingbourne

Unquoted

www.carousel.eu

All funds managed by Gresham House

First investment: October 2013

Total original cost: £4,246,000

Total equity held: 26.7%

 

Baronsmead Venture Trust only

Original cost: £1,910,000

Valuation: £8,753,000

Valuation basis: Earnings Multiple

Income recognised in the year: £172,000

% of equity held: 12.0%

Voting rights: 12.0%

 

Year ended 31 December

 

2020

2019

 

£ million

£ million

Sales:

51.3

51.6

Pre-tax profits

(0.3)

(2.3)

Net Assets:

(5.6)

(6.4)

No. of Employees:

225

283

 

Source: Carousel Logistics Holdings Limited, Annual Report and Financial Statements 31 December 2020.

 

3. Netcall Plc - Hertfordshire

Quoted

www.netcall.com 

 

All funds managed by Gresham House

First investment: July 2010

Total original cost: £4,354,000

Total equity held: 23.9%

 

Baronsmead Venture Trust only

Original cost: £1,738,000

Valuation: £8,616,000

Valuation basis: Bid Price

Income recognised in the year: £25,000

% of equity held: 6.6%

Voting rights: 6.6%

 

Year ended 30 June

 

2021

20120

 

£ million

£ million

Sales:

27.2

25.1

Pre-tax profits

1.0

0.5

Net Assets:

24.6

22.9

No. of Employees:

235

234

 

Source: Netcall plc, Annual Report and Accounts, 30 June 2021

 Includes Baronsmead VCTs only

 

 

4. Ideagen Plc - Nottinghamshire

Quoted

www.ideagen.com 

 

All funds managed by Gresham House

First investment: January 2013

Total original cost: £1,309,000

Total equity held: 1.9%

 

Baronsmead Venture Trust only

Original cost: £589,000

Valuation: £6,891,000

Valuation basis: Bid Price

Income recognised in the year: £7,000

% of equity held: 0.9%

Voting rights: 0.9%

 

Year ended 30 April

 

2021

2020

 

£ million

£ million

Sales:

65.6

56.6

Pre-tax profits

0.8

(0.1)

Net Assets:

125.6

76.9

No. of Employees:

612

537

 

Source: Ideagen plc, Annual Report and Accounts, 30 April 2021

 

 

5. IWP Holdings Ltd - Jersey

Unquoted

www.idwpuk.co.uk

 

All funds managed by Gresham House

First investment: July 2019

Total original cost: £3,000,000

Total equity held: 9.0%

 

Baronsmead Venture Trust only

Original cost: £1,407,000

Valuation: £5,036,000

Valuation basis: Earnings Multiple

Income recognised in the year: £nil

% of equity held: 3.7%

Voting rights: 3.7%

 

Year ended 31 March

 

A full set of accounts is not publicly available as the company is registered in Jersey.

 

IWP has a network of 24 IFA businesses and has a turnover of c. £24 million (year ended 31 March 2021).

 

 

6. IDOX plc - Reading

Quoted

www.idoxgroup.com

 

All funds managed by Gresham House

First investment: May 2002

Total original cost: £1,642,000

Total equity held: 4.9%

 

Baronsmead Venture Trust only

Original cost: £614,000

Valuation: £4,502,000

Valuation basis: Traded Price

Income recognised in the year: £19,000

% of equity held: 1.4%

Voting rights: 1.4%

 

Year ended 31 October

 

2020

2019

 

£ million

£ million

Sales:

68.0

65.5

Pre-tax profits

2.7

(0.0)

Net Assets:

47.0

44.6

No. of Employees:

637

671

 

Source: IDOX plc, Annual Report and Accounts, 31 October 2020

 

Includes Baronsmead VCTs only

 

7. Bioventix plc - Surrey

Quoted

www.bioventix.com

 

All funds managed by Gresham House

First investment: June 2013

Total original cost: £562,000

Total equity held: 4.9%

 

Baronsmead Venture Trust only

Original cost: £253,000

Valuation: £3,758,000

Valuation basis: Bid Price

Income recognised in the year: £143,000

% of equity held: 1.9%

Voting rights: 1.9%

 

Year ended 30 June

 

2021

2020

 

£ million

£ million

Sales:

10.9

10.3

Pre-tax profits

8.1

8.2

Net Assets:

11.8

12.5

No. of Employees:

17

16

 

Source: Bioventix plc, Annual Report and Financial Statements 30 June 2021

only includes Baronsmead VCTs

 

8. Inpired Energy plc - Lancashire

Quoted

www.inspiredplc.co.uk 

 

All funds managed by Gresham House

First investment: November 2011

Total original cost: £1,435,000

Total equity held: 19.8%

 

Baronsmead Venture Trust only

Original cost: £574,000

Valuation: £3,2478,000

Valuation basis: Bid Price

Income recognised in the year: £40,000

% of equity held: 1.9%

Voting rights: 1.9%

 

Year ended 31 December

 

2020

2019

 

 

£ million

£ million

 

Sales:

46.1

43.7

 

Pre-tax profits

(4.5)

3.1

 

Net Assets:

66.3

59.3

 

No. of Employees:

521

423

 

 

Source: Inspired Energy plc Annual Report and Account 2020

includes Baronsmead VCTs only

 

9. eConsult Ltd - Surrey

Unquoted

www.econsult.net 

 

All funds managed by Gresham House

First investment: October 2020

Total original cost: £5,000,000

Total equity held: 11.4%

 

Baronsmead Venture Trust only

Original cost: £2,400,000

Valuation: £3,223,000

Valuation basis: Earnings Multiple

Income recognised in the year: £nil

% of equity held: 4.8%

Voting Rights 5.9%

 

Year ended 31 March

 

2021

2020

 

 

£ million

£ million

 

Sales:

6.3

3.1

 

Pre-tax profits

1.0

(0.1)

 

Net Assets:

7.6

(0.0)

 

No. of Employees:

58

42

 

 

Source: Econsult Health limited Directors Report and Financial Statements 31 March 2021

 

10. Happy Days Ltd - Cornwall

Unquoted

www.happydaysnurseries.com  

 

All funds managed by Gresham House

First investment: April 2012

Total original cost: £7,600,000

Total equity held: 64.9%

 

Baronsmead Venture Trust only

Original cost: £3,420,000

Valuation: £2,872,000

Valuation basis: Earning Multiple

Income recognised in the year: £nil

% of equity held: 29.2%

Voting rights: 25.2%

 

Year ended 31 December

 

2020

2019

 

£ million

£ million

Sales:

8.9

11.1

Pre-tax profits

(3.0)

(1.3)

Net Assets

(12.7)

(9.7)

No. of employees:

386

393

 

Source: H. Days Holdings Limited Annual Report and Financial Statements 31 December 2020

 

 

PRINCIPAL RISKS & UNCERTAINTIES

 

The Board has carried out a robust assessment of the principal and emerging risks and uncertainties facing the Company and has assessed the appropriate measures to be taken in order to mitigate these risks as far as practicable. There is an ongoing process for identifying, evaluating and managing these risks which is part of the governance framework detailed further in the Corporate Governance section of this report.

 

Principal Risk

Context

Specific risks we face

Possible impact

Mitigation

Loss of approval as a Venture Capital Trust

The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns.

Breach of any of the rules enabling the Company to hold its VCT status could result in the loss of that status.

 

The loss of VCT status would result in shareholders who have not held their shares for the designated holding period having to repay the income tax relief they had already obtained and future dividends and gains would be subject to income tax and capital gains tax.

The Board maintains a safety margin on all VCT tests to ensure that breaches are unlikely to be caused by unforeseen events or shocks. The Manager monitors all of the VCT tests on an ongoing basis and the Board reviews the status of these tests on a quarterly basis. Specialist advisors review the tests on a bi-annual basis and report to the Audit Committee on their findings.

Legislative

VCTs were established in 1995 to encourage private individuals to invest in early stage companies that are considered to be risky and therefore have limited funding options. In return the state provides these investors with tax reliefs which fall under the definition of state aid.

A change in government policy regarding the funding of small companies or changes made to VCT regulations could result in a cessation of the tax reliefs for VCT investors or changes to the reliefs that would make them less attractive to investors.

The Company might not be able to maintain its asset base leading to its gradual decline and potentially an inability to maintain either its buy back or dividend policies.

The Board and the Manager engage on a regular basis with HMT and industry representative bodies to demonstrate the cost benefit of VCTs to the economy in terms of employment generation and taxation revenue. In addition, the Board and the Manager have considered the options available to the Company in the event of the loss of tax reliefs to ensure that it can continue to provide a strong investment proposition for its shareholders despite the loss of tax reliefs.

Investment performance

The Company invests in small, mainly UK-based companies, both unquoted and quoted. 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 and hence tend to be riskier than larger businesses.

The COVID-19 pandemic continues to have a  significant impact on the performance of the consumer markets sector in particular, with an uneven recovery across all other sectors.

Investment in poor quality companies with the resultant risk of a high level of failure in the portfolio.

Reduction in both the capital value of investors' shareholdings and in the level of income distributed.

The Company has a diverse portfolio where the cost of any one investment is typically less than 5 per cent of NAV thereby limiting the impact of any one failed investment. The Investment Management team has a strong and consistent track record over a long period. The Manager undertakes extensive due diligence procedures on every new investment and reviews the portfolio composition maintaining a wide spread of holdings in terms of financing stage and industry sector.

In light of the COVID-19 pandemic, the Manager has undertaken a thorough risk review of the portfolio companies which has been reviewed by the Board. This has highlighted the uneven recovery across different sectors, with many businesses facing inflationary and supply chain pressures. The Manager has engaged with management teams to develop plans to mitigate the impact of these pressures.

 

Economic, political and other external factors

Whilst the Company invests in predominantly UK businesses, the UK economy relies heavily on Europe as one of its largest trading partners. This, together with the increase in globalisation, means that economic unrest and shocks in other jurisdictions, as well as in the UK, can impact on UK companies, particularly smaller ones that are more vulnerable to changes in trading conditions. In addition the impact of leaving the European Union remains uncertain.

The risks posed by the ongoing COVID-19 pandemic impact on all the economic, political and other external factors the Company faces.

Events such as fiscal policy changes, Brexit, economic recession, movement in interest or currency rates, civil unrest, war or political uncertainty or pandemics can adversely affect the trading environment for underlying investments and impact on their results and valuations.

Reduction in the value of the Company's assets with a corresponding impact on its share price may result in the loss of investors through buy backs and may limit its ability to pay dividends.

The Company invests in a diversified portfolio of companies across a number of industry sectors, which provides protection against shocks as the impact on individual sectors can vary depending upon the circumstances. In addition, the Manager uses a limited amount of bank gearing in its investments which enables its investments to continue trading through difficult economic conditions. The Board monitors and reviews the position of the Company, ensuring that adequate cash balances exist to allow flexibility. The Board reviews the make up and progress of the portfolio each quarter to ensure that it remains appropriately diversified and funded.

Regulatory and Compliance

The Company is authorised as a self managed Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD") and is also subject to the Prospectus and Transparency Directives. It is required to comply with the Companies Act 2006 and the FCA Listing Rules.

Failure of the Company to comply with any of its regulatory or legal obligations could result in the suspension of its listing by the FCA and/or financial penalties and sanction by the regulator or a qualified audit report.

The Company's performance could be impacted severely by financial penalties and a loss of reputation resulting in the alienation of shareholders, a significant demand to buy back shares and an inability to attract future investment. The suspension of its shares would result in the loss of its VCT taxation status and most likely the ultimate liquidation of the Company.

The Board and the Manager employ the services of leading regulatory lawyers, sponsors, auditors and other advisers to ensure the Company complies with all of its regulatory obligations. The Board has strong systems in place to ensure that the Company complies with all of its regulatory responsibilities. The Manager has a strong compliance culture and employs dedicated compliance specialists within its team who support the Board in ensuring that the Company is compliant.

The Company Secretary provides a regulatory update at each Board meeting.

Operational

The Company relies on a number of third parties, in particular the Manager, to provide it with the necessary services such as registrar, sponsor, custodian, receiving agent, lawyers and tax advisers.

The risk of failure of the systems and controls of any of the Company's advisers, including a cyber attack, leading to an inability to service shareholder needs adequately, to provide accurate reporting and accounting and to ensure adherence to all VCT legislation rules.

Errors in shareholders' records or shareholdings, incorrect marketing literature, non compliance with listing rules, loss of assets, breach of legal duties and inability to provide accurate reporting and accounting all leading to reputational risk and the potential for litigation. A cyber attack or data breach could lead to loss of sensitive shareholder data resulting in a breach and liability under the General Data Protection Regulation.

The Board has appointed an audit committee which reviews the internal control ("ISAE3402") and/or internal audit reports from all significant third party service providers, including the Manager, on a bi-annual basis to ensure that they have strong systems and controls in place including Business Continuity Plans and matters relating to cyber security. The Board regularly reviews the performance of its service providers to ensure that they continue to have the necessary expertise and resources to provide a high class service and always where there have been any changes in key personnel or ownership.

The operational requirements of the Company, including from its service providers, have been subject to rigorous testing (including remote working and virtual meetings) as to their application during the COVID-19 pandemic, where increased use of out-of-office working and online communication continues to be required. To date the operational arrangements have proven robust.

The financial risks faced by the Company are covered within the Notes below

 

The Company is facing the key emerging risks of climate change and ESG, given the regulatory, operational and potentially reputational implications if not appropriately addressed. In order to address these emerging risks, when looking to make a new investment, the Manager uses an ESG Decision Tool to identify any material ESG risks that need to be managed and mitigated. For further detail, see the full Annual Report.

The Board considers the COVID-19 pandemic and Brexit to be factors which exacerbate existing risks, rather than new emerging risks. Their impact is considered within the relevant risks above.

 

Extract of the Strategic Report

 

Sustainable investing

 

The Company is required, by company law, to provide details of environmental (including the impact of the Company's business on the environment), employee, human rights, social and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. Since the Company does not have any employees and it has no direct impact on the community or the environment due to its status as a VCT, the Company does not maintain specific policies in relation to these matters.

However, the Board is conscious of the potential impact of its investments on the environment as well as its social and corporate governance responsibilities. The Board and the Manager believe that sustainable investment involves the integration of ESG factors within the investment process and that these factors should be considered alongside financial and strategic issues. The Company therefore complies indirectly with ESG requirements through its monitoring of the ESG impact of its investee companies.

 

Environmental, Social and Governance update from the Manager

The Manager is committed to sustainable investment as an integral part of its business strategy. During 2021, the Manager has taken further steps to formalise its approach to sustainability and has put in place several policies and processes to ensure environmental, social and governance ("ESG") factors and stewardship responsibilities are built into asset management across all funds and strategies, including venture capital trusts.

 

The Manager published its inaugural Sustainable Investment Report in 2021, that along with existing asset specific policies, including the Public Equity Policy and the Private Equity Policy, can be found on the Gresham House website. These reports and policies cover the Manager's sustainable investment commitments, how the investment processes meet these commitments and the application of the sustainable investment framework. The Gresham House Board and Management Committee assess adherence to the commitments in the Sustainable Investment Policies on an annual basis.

 

Sustainable Investing Committee

The Manager formed a Sustainable Investing Committee (SIC) at the start of 2020. It meets monthly and drives sustainability related deliverables, whilst providing a forum to share best practice, ideas and education. The Committee is chaired by the Director of Sustainable Investment and has representation from the Gresham House Management Committee, each asset division, sales and marketing.

 

Embedding ESG analysis

A framework based on 10 key ESG themes is used to structure analysis, monitor and report on ESG risks and opportunities across the lifecycle of

investments.

 

The 10 themes are the basis of the ESG Decision Tool which supports the investment team in implementing the commitments made in the sustainable investment policies. The ESG Decision Tool is completed as part of the due diligence process prior to investment for all VCT investments.

 

The Tool will not tell the Manager whether to invest or not, instead it aims to provide a rational and replicable assessment of key ESG risks which should be considered prior to investment, and to help rank the significance of each risk. It is up to the Manager to decide whether it is sufficiently comfortable with these risks to proceed with an investment.

 

The Manager believes the "G" (Governance) of ESG is the most important factor in its investment processes for public and private equity. Board composition, governance, control, company culture, alignment of interests, shareholder ownership structure, remuneration policy etc. are important elements that will feed into the Manager's analysis and the company valuation.

 

The "E" and "S" (Environmental and Social) are assessed as risk factors during due diligence to eliminate companies that face environmental and social risks that cannot be mitigated through engagement and governance changes.

 

Where material ESG risks are identified, these are reviewed by the Manager and a decision on how to proceed is documented. The Manager will then proactively follow up with the investee company management team and ensure appropriate corrective and preventative action is taken and any material issues or incidents are recorded by the Manager.

 

Sustainable investing - Baseline ESG survey

The Manager has been working over the last year to better understand how well portfolio companies understand relevant ESG risks and how they are addressing them as part of their operations.

 

Earlier in 2021, the Manager conducted an ESG survey on the unquoted investments to identify a baseline understanding of how portfolio companies think about ESG, and which ESG data is already being reported and monitored.

 

The results were analysed by the Manager's Sustainable Investment team and overlayed with a well-known sustainability materiality assessment to understand if companies were aware of the most significant ESG risks to their business types.

 

This is the first time the Manager has issued the ESG survey. The findings have been extremely insightful and will inform the actions the Manager takes to better manage ESG risks and opportunities across the portfolio over the next year. The Manager will then issue the survey again in 2022 to assess improvements in disclosure, understanding and action across the portfolio.

 

Results

Some of the core findings, how they compare with the Sustainable Investment Team's best practice recommendations, and consequently the actions the investment teams will take to address any material areas of divergence are set out in the full Annual Report.

 

Stewardship Responsibilities

As an active investor, the Manager acts as a long-term steward of the assets in which it invests. Active ownership responsibilities include engagement and voting, which are used to protect and create value. The Manager will almost always take a board seat or become a board observer, which ensures sufficiently frequent levels of communication with the management team.

 

The Manager has published its Engagement and Voting Policy on its website, which sets out the Manager's approach and explains how integrated these activities are to its business practices and investment processes.

 

Engagement

The Manager's investment philosophy means that it is an actively engaged shareholder. The Manager's assessments of management, board and governance form a critical part of the investment case, which necessitates that it works with companies on strategy, M&A, remuneration and related matters, from the outset of the holding period onwards. The Manager encourages an open and honest dialogue with the companies as this is an essential part of effective stewardship.

 

The Manager will meet face-to-face with the management team of a publicly listed company at least twice a year, and more frequently when it owns a material stake in a company. The Manager will generally work more closely with the management teams of private equity investments and meet on a more frequent basis. These meetings form the basis for the ongoing monitoring of a company's strategy, financial performance and ESG considerations.

 

Defining engagement objectives

The Manager will usually identify and agree strategic milestones that it expects a company to deliver on over the holding period. The Manager will typically identify three or four key strategic milestones that are bespoke to the organisation and its business development, aiming to keep the directors focused and ensure continued progress.

 

Objectives may change over time depending on several factors, including business priorities, market forces and stakeholder considerations. Example of engagement objectives include:

 

· Board composition

· Improvements to governance arrangements

· Product or geographic expansion or variance, including due to ESG related market forces

· Staff retention and reduction of absence rates

· Implementing compliance programmes with forthcoming ESG legislation

· Improvements to reporting, including ESG factors

 

The identified objectives provide a framework which forms the basis of the Manager's discussions with companies during regularly scheduled engagements.

Voting
Voting is an important part of the Manager's investment strategy and Gresham House is a signatory to the UK Stewardship Code and the Principles of Responsible Investment ('PRI').

The Manager's voting decisions are based on the Manager's view of the course of action which will be in the best interests of the investee company and are informed by various sources including: procedures, research, engagement with the company, discussions with other stakeholders and advisers, internal discussions and consultations, and other relevant information.

For the 12 months to 30 September 2021, the Manager was subject to votes on 2,211 issues. Of these, the Manager voted for 91.1% of resolutions, against 3.3%, abstained on 0.4% and did not vote on 5.2%.

 

In Q3 2021, The Manager voted on all 521 resolutions, voting for on 93.9% of occasions, against on 4.6% and abstaining on 1.5%. Of the 24 votes against, nine were because the resolutions conflicted with the Manager's house policy, notably to vote against political donations, while the others were on M&A and liquidation issues that went against the investment teams' philosophy.

 

Voting decisions
The Manager does not have a set policy defining how voting decisions should be made on specific items, but has set the following guidelines:

1.  Authority to allot shares - policy to vote against anything over 33 per cent.

2.  Disapplication of pre-emption rights - policy to vote against anything over 10 per cent.

3.  Authorise company to purchase own shares - policy to vote against anything over 10 per cent.

4.  Political donations - policy to vote against all political donations.

 

Proxy voting providers
The Manager does not use any proxy voting advisory services, but will usually use proxy voting services to deliver voting decisions to the companies it invests in.

 

Voting against management

If the Manager plans to vote against the company decision, it will engage with the company in advance, explain the reasons for voting against management and look for ways to avoid that if possible. If a satisfactory outcome is not reached through this active dialogue with the company, the Manager will typically tell the company in advance of its intention to abstain or vote against management and clarify the reasons grounding such intention.

 

Applying the Business Model

This section of the Strategic Report sets out the practical steps that the Board has taken in order to apply the business model, achieve the investment objective, and adhere to the investment policy. The investment policy, which is set out below, is designed to ensure that the Company continues to qualify and is approved, as a VCT by HM Revenue and Customs.

 

Investing in the Right Companies

Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas. Investments are selected in the expectation that the application of private equity disciplines, including an active management style for unquoted companies, will enhance value and enable profits to be realised from planned exits.

 

The Board has delegated the management of the investment portfolio to Gresham House. The Manager has adopted a 'top-down, macro economic and sector-driven' approach to identifying and evaluating potential investment opportunities, by assessing a forward view of firstly the broader 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 Company's policy is not to invest in any of the following areas: human cloning; arms/munitions; or adult content.

 

The Manager's Review above provides a review of the investment portfolio and of market conditions during the year, including the main trends and factors likely to affect the future development, performance and position of the business.

 

Risk is spread by investing in a number of different businesses within different qualifying industry sectors using a mixture of securities. The maximum the Company will invest in a single company (including a collective investment vehicle) is 15 per cent of its investments by value of its investments calculated in accordance with Section 278 of the Income Tax Act 2007 (as amended) ("VCT Value"). The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

 

The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities and permitted non qualifying investments as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks or preference shares, while AIM-traded investments are primarily held in ordinary shares. Pending investment in VCT qualifying investments, the Company's cash and liquid funds are held in permitted non-qualifying investments.

 

VCT Status

Compliance with the required VCT rules and regulations is considered when all investment decisions are made. Internally, this is monitored on a continuous basis and it is also reviewed by PricewaterhouseCooper LLP (PwC) every six months to ensure ongoing compliance. PwC have been appointed by the Company to advise on compliance with VCT requirements, including evaluation of investment opportunities as well as appropriate and regular review of the portfolio. Although PwC works closely with the Investment Manager, it reports directly to the Board.

 

The principal tests are summarised below. Throughout the year ended 30 September 2021, and at the date of this report, the Company continued to meet these tests.

 

VCT status tests

 

1)  To ensure that the VCT's income in the period has been derived wholly or mainly (70 per cent plus) from shares or securities;

2)  To ensure that the VCT has not retained more than 15 per cent of its income from shares and securities;

3)  To ensure that the VCT has not made a prohibited payment to shareholders derived from an issue of shares since 6 April 2014;

4)  To ensure that at least 80 per cent by value of the VCT's investments has been represented throughout the period by shares or securities comprised in qualifying holdings of the VCT;

5)  To ensure that at least 70 per cent by value of the VCT's qualifying holdings has been represented throughout the period by holdings of eligible shares;

6)  To ensure that no investment in any company has represented more than 15 per cent by value of the VCT's investments at the time of investment;

7)  To ensure that the VCT's ordinary capital has throughout the period been listed on a regulated European market;

8)  To ensure that the VCT has not made an investment in a company which causes it to receive more than the permitted investment from State Aid sources;

9)  To ensure that since 17 November 2015, the VCT has not made an investment in a company which exceeds the maximum permitted age requirement;

10)  To ensure that since 17 November 2015, funds invested by the VCT in another company have not been used to make a prohibited acquisition; and

11)  To ensure that since 6 April 2016, the VCT has not made a prohibited non-qualifying investment.

 

Appointment of the Manager

 

The Board expects the Manager to deliver a performance which meets the objective of achieving long-term investment returns, including tax free dividends. A review of the Company's performance during the financial year, the position of the Company at the year end and the outlook for the coming year is contained within the Chairman's Statement above. The Board assesses the performance of the Manager in meeting the Company's objective against the KPIs highlighted in the full annual report and accounts.

 

Continuing Appointment of the Manager

The Board keeps the performance of the Investment Manager under continual review. The Management Engagement and Remuneration Committee, comprising all Directors, conducts an annual review of the Manager's performance and makes a recommendation to the Board about its continuing appointment.

 

It is considered that the Manager has executed the Company's investment strategy according to the Board's expectations. Accordingly, the Directors believe that the continuing appointment of Gresham House Asset Management Limited as the Manager of the Company, on the terms agreed, is in the best interests of the Company and its shareholders as a whole.

 

The management agreement

Under the management agreement, the Manager receives a fee of 2.0 per cent per annum of the net assets of the Company. In addition, the Manager is responsible for providing all secretarial, administrative and accounting services to the Company for an additional fee. The Manager has appointed Link Alternative Fund Administrators Ltd to provide these services to the Company on its behalf. The Company is responsible for paying the fee charged by Link Alternative Fund Administrators Ltd to the Manager in relation to the performance of these services.

 

Annual running costs are capped at 3.5 per cent of the net assets of the Company (excluding any performance fee payable to the Manager and irrecoverable VAT), any excess being refunded by the Manager by way of an adjustment to its management fee. The running cost as at 30 September 2021 was 2.2 per cent.

 

The management agreement may be terminated at any date by either party giving 12 months' notice of termination and, if terminated, the Manager is only entitled to the management fees paid to it and any interest due on unpaid fees.

 

Performance fees

A performance fee will be payable to the Manager once the total return on shareholders' funds exceeds an annual threshold of the higher of 4 per cent or base rate plus 2 per cent calculated on a compound basis. To the extent that the total return exceeds the threshold over the relevant period then a performance fee of 10 per cent of the excess will be paid to the Manager. The amount of any performance fee which is paid in an accounting period shall be capped at 5 per cent of shareholders' funds for that period.

 

A performance fee of £1.9m is payable for the year to 30 September 2021 (2020: £nil).

 

Management retention

The Board is keen to ensure that the Manager continues to have one of the best investment teams in the VCT and private equity sector. A VCT incentive scheme was introduced in November 2004 under which members of the Manager's investment team invest their own money into a proportion of the ordinary shares of each eligible unquoted investment made by the Baronsmead VCTs. The Board regularly monitors the VCT incentive scheme arrangements but considers the scheme to be essential in order to attract, retain and incentivise the best talent. The scheme is in line with current market practice in the private equity industry and the Board believes that it aligns the interests of the Manager with those of the Baronsmead VCTs.

 

Executives have to invest their own capital in every eligible unquoted transaction and cannot decide selectively which investments to participate in. In addition, the VCT incentive scheme only delivers a return after each VCT has realised a priority return built into the structure. The shares held by the members of the VCT incentive scheme in any portfolio company can only be sold at the same time as the investment held by the Baronsmead VCTs is sold. Any prior ranking financial instruments, such as loan stock, held by the Baronsmead VCTs have to be repaid in full together with the agreed priority annual return before any gain accrues to the ordinary shares. This ensures that the Baronsmead VCTs achieve a good priority return before profits accrue to the VCT incentive scheme.

 

Prior to January 2017, executives participating in the VCT incentive scheme subscribed jointly for a proportion (12 per cent) of the ordinary shares (but not the prior ranking financial instruments) available to the Baronsmead VCTs in each eligible unquoted investment. The level of participation was increased from 5 per cent in 2007 when the Manager's performance fee was reduced from 20 per cent to its current level of 10 per cent. With effect from January 2017, an additional limb was added to the VCT incentive scheme to accommodate the increasing number of "permanent equity" investments being made by the Baronsmead VCTs. "Permanent equity" investments are those in which the Baronsmead VCTs hold a relatively lower proportion of prior ranking instruments (if any at all) and a higher proportion of permanent equity or ordinary shares. This means that there are fewer prior ranking instruments yielding a priority return for the Baronsmead VCTs before any gain accrues to the ordinary shares, hence this additional limb to create a hurdle described below. The cut off to define a "permanent equity" investment is one where permanent equity is greater than 25 per cent of the total or where permanent equity is greater than £250,000.

 

Under the terms of the amended VCT incentive scheme, in circumstances where the Baronsmead VCTs hold a sufficient number of prior ranking financial instruments (a "Traditional Structure"), the terms are identical to those set out above. However, in circumstances where the Baronsmead VCTs make a "permanent equity" investment, the executives participating in the incentive scheme are required to coinvest pari passu alongside the Baronsmead VCTs for a proportion (currently 0.75 per cent) of all instruments available to the Baronsmead VCTs and they also receive an option over a further proportion (currently 12 per cent) of the ordinary shares available to the Baronsmead VCTs. The ordinary shares can only be sold and the option can only be exercised by the scheme participants when the investment held by the Baronsmead VCTs is sold. The option exercise price has a built in hurdle rate to ensure that the options are only "in the money" if the Baronsmead VCTs achieve a good return (equivalent to the priority return they would have to achieve prior to any value accruing to the ordinary shares in a Traditional Structure).

 

Since the formation of the scheme in 2004, 94 executives have invested a total of £1.1 million in 79 companies. At 30 September 2021, 48 of these investments have been realised generating proceeds of £375 million for the Baronsmead VCTs and £20 million for the VCT incentive scheme. For Baronsmead Venture Trust the average money multiple on these 48 realisations was 1.8x times cost. Had the VCT incentive scheme shares been held instead by the Baronsmead VCTs, the extra return to shareholders would have been the equivalent of 3.5p a share over 17 years (based on the current number of shares in issue). The Board considers this small cost to retain quality people to be in the best interests of shareholders.

 

Advisory and Directors' fees

During the year, Gresham House Asset Management Ltd received £212,000 (2020: £182,000) advisory fees, £321,000 (2020: £310,000) directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £8,000 (2020: £10,000) with respect to investments attributable to the Company.

 

Alternative Investment Fund Managers Directive ("AIFMD")

The AIFMD regulates the management of alternative investment funds, including VCTs. On 22 July 2014, the Company was registered as a Small UK registered AIFM under the AIFMD.

 

Viability statement

In accordance with principle 21 of the Association of Investment Companies Code of Corporate Governance ("AIC Code"), the Directors have assessed the prospects of the Company over the three-year period to 30 September 2024.


This period is used by the Board during the strategic planning process and is considered reasonable for a business of our nature and size. The three-year period is considered the most appropriate given the forecasts that the Board require from the Manager and the estimated timeline for finding, assessing and completing investments.
 

In making this three-year assessment, the Board has taken the following factors into consideration:

 

· The nature of the Company's portfolio

· The Company's investment strategy

· The potential impact of the principal risks and uncertainties

· Share buy-backs

· The liquidity of the Company's portfolio

· Market falls and gains, with particular reference to the COVID-19 pandemic

· Maintaining VCT approval status

 

The Board has carried out a robust assessment of the above factors, as they have the potential to threaten the Company's business model, future performance, solvency, or liquidity. This review has considered the principal risks as outlined above.
 

The Board also paid particular attention to the impact of the COVID-19 pandemic on the economic, regulatory, and political environment as well as its direct impact upon the Company. The Board has also evaluated the ability of third party suppliers to continue to deliver services to the Company. The Board has considered the ability of the Company to raise finance and deploy capital. The Board's assessment took account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact of the underlying risks, and the large listed portfolio that could be liquidated if necessary.
 

The Company's portfolio currently includes a large position in cash or liquid money market funds. Over the last five years, cash and liquid money market funds have averaged c.19 per cent of the NAV and reflected 19 per cent of the 30 September 2021 NAV. Cash balances can fluctuate over time due to changes in market conditions, but positive cash levels are expected to be maintained over the period.

 

The Company has no debt, and it is expected that the Company will remain ungeared for the foreseeable future.

 

The Directors have also considered the Company's income and expenditure projections and find these to be realistic and sensible. The Directors have assessed the Company's ability to cover its annual running costs under several liquidity scenarios in which the value of liquid assets (including AIM-traded investments and OEICs) has been subject to sensitivity analysis. The Directors noted that under none of these scenarios was the Company unable to cover its costs.
 

Based on the Company's processes for monitoring costs, share price discount, the Manager's compliance with the investment objective, policies and business model, asset allocation and the portfolio risk profile, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 30 September 2024.


Returns to Investors

 

Dividend policy
The Board will decide the annual dividends each year and the level of the dividends will depend on investment performance, the level of realised returns and available liquidity. The dividend policy guidelines below are not binding and the Board retains the ability to pay higher or lower dividends relevant to prevailing circumstances and actual realisations. However, the Board confirms the following two guidelines that shape its dividend policy:

· The Board will, wherever possible, seek to pay two dividends to Shareholders in each calendar year, typically an interim in September and a final dividend following the AGM in February/March; and

 

· The Board will use, as a guide, when setting the dividends for a financial year, a sum representing 7 per cent of the opening NAV of that financial year.

 

Shareholder choice

The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in the Company in ways that best suit their personal investment and tax planning in a way that treats all shareholders equally.

 

· Fund raising | From time to time the Company seeks to raise additional funds by issuing new shares at a premium to the latest published net asset value to account for costs. The Company currently has an Offer open to raise up to £25 million, with an additional £12.5 million over allotment facility available as required.

 

· 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 1,902,000 shares were bought in this way during the year to 30 September 2021.

 

· Buy back of shares | From time to time the Company buys its own shares through the market in accordance with its share price discount policy. Subject to the likely impact on shareholders, the funding requirements of the Company and market conditions at the time, the Company seeks to maintain a mid share price discount of approximately 5 per cent to net asset value where possible. However, shareholders should note this discount may widen during periods of market volatility.

 

· Secondary market | The Company's shares are listed on the London Stock Exchange and can be bought using a stockbroker or authorised share dealing service in the same way as shares of any other listed company. Approximately 1,146,000 shares were bought by investors in the Company's existing shares in the year to 30 September 2021.

 

Directors' Duties

 

Overview

 

Section 172 of the Companies Act 2006 (the "Act") requires the Directors to act in good faith and in a way that is most likely to promote the success of the Company for the benefit of its shareholders.

 

Directors must consider the long-term consequences of any decision they make. They must also consider the interests of the various stakeholders of the Company, the impact the Company has on the environment and community, and operate in a manner which maintains their reputation for having high standards of business conduct and fair treatment between shareholders.

 

Fulfilling this duty naturally supports the Company in its investment objective of achieving long-term investment returns for private investors and helps ensure that all decisions are made in a responsible and sustainable way. In accordance with the requirements of the Companies (Miscellaneous Reporting) Regulations 2018, and the AIC Code, the information below explains how the Directors have individually and collectively discharged their duties under section 172.

 

To ensure they are aware of and understand their duties, Directors are provided with a detailed induction outlining their legal and regulatory duties as a Director of a UK public limited company upon appointment. They also receive regular regulatory updates and training as appropriate. A Company Secretarial report is included within the papers of every Board meeting, which reminds the Directors of their duties and emphasises the importance of stakeholder consideration during decision making. Directors also receive technical updates from the Company's advisers and from the Manager on a regular basis.

 

The Directors have access to the advice and services of the Company Secretary, and a range of other reputable service providers and, when deemed necessary, the Directors may seek independent professional advice in the furtherance of their duties, at the Company's expense.

 

The Company has a Schedule of Matters Reserved for the Board which describe the Board's duties and responsibilities. Terms of Reference of the Board's Committees are in place, which outline the duties of those Committees that are delegated from the Board, including their statutory and regulatory responsibilities. Both the Schedule of Matters Reserved for the Board and the Committees' Terms of Reference are reviewed at least on an annual basis.

 

The Audit Committee has responsibility for the ongoing review of the Company's risk management and internal controls. To the extent that they are applicable, risks related to the matters set out in Section 172 are included within the Company's Risk Register and are subject to regular review and monitoring.

 

Decision making

 

The importance of stakeholder considerations, in the context of decision making, is taken into account at every Board meeting. All discussions involve careful consideration of the longer-term consequences of any decisions and their implications for stakeholders. Further information on the role of the Board in safeguarding stakeholder interests and monitoring ongoing investment activity can be found below.

 

Stakeholder engagement

 

Following a comprehensive review by the Board, which regularly keeps stakeholder engagement mechanisms under review, it was agreed that, as the Company is an externally managed Venture Capital Trust and does not have any employees or customers, the Company's key stakeholders are:

 

· The Company's shareholders

· The Manager

· The portfolio of investee companies, and the wider communities in which they operate

· HMRC and the Company's governing bodies including the FCA

· The Association of Investment Companies ("AIC")

· A range of reputable external service providers

 

 

Details of how the Board seeks to understand the needs and priorities of these stakeholders and how these are taken into consideration during its discussions as part of its decision making, are described in the table below:

 

Stakeholder Group

Importance

Board Engagement

Shareholders

Continued shareholder support is critical to the sustainability of the Company and delivery of the long-term strategy of the business.

The Board is committed to maintaining open channels of communication with shareholders and during the year has developed various meaningful ways of engaging with shareholders to understand their views. These include:

 

· Annual General Meeting ("AGM") - The Company welcomes and encourages attendance and participation from shareholders at the AGM and values any feedback and questions it may receive. The Company successfully held its first virtual AGM on 16 February 2021. The AGM was held virtually due to government restrictions on public gatherings imposed at that time. Shareholders were invited to raise questions in advance of, during and after the AGM and the Company was delighted to answer those questions received. The Chairman presented on the Company's performance during the financial year and its outlook for 2021 and a joint investment management presentation to shareholders of the Company and Baronsmead Second Venture Trust Plc was held on the same day.

 

The Company's forthcoming AGM will take place on 16 February 2022. The Company intends to hold this AGM in  person, with shareholders who are unable to attend in person given the option to watch the AGM live. It must be noted that those who participate virtually will not be able to vote during the course of the AGM and are asked to submit their votes by proxy in advance of the AGM.

 

Further information regarding the 2022 AGM can be found in the Chairman's Statement above and within the Notice of AGM which is being sent to shareholders separately from this Annual Report.

 

· Publications - The Company's Annual and Half-Yearly Reports are made available on the Company's website (www.baronsmeadvcts.co.uk) and sent to shareholders when requested. These publications provide shareholders with information regarding the Company's business model, strategy and investment portfolio and provide a clear understanding of the Company's financial position. This is supplemented by the monthly publication of the NAV on the Company's website and quarterly factsheets. Feedback and questions received by the Company from shareholders enables the Company to improve its reporting, which in turn helps to deliver transparent and understandable updates.

 

· Shareholder communication and shareholder concerns - The Manager communicates with shareholders periodically and shareholders are welcome to raise any comments, issues or concerns with the Board at any time. Shareholders are invited to do so by writing to the Chairman at the registered office. Fiona Miller Smith, as Senior Independent Director, is also available to shareholders if they have concerns that contact through the normal channel of the Chairman has failed to resolve or for which such contact is inappropriate.

The Manager

The Manager's performance is critical for the Company to successfully deliver its investment strategy and meet its objective to achieve long-term investment returns for private investors, including tax-free dividends.

The Board invites the Manager to attend Valuation Forums, Board meetings and Committee meetings to update Directors on the performance of the portfolio and execution of the investment strategy. The Board holds detailed discussions with the Manager on all key strategic and operational topics on an ongoing basis. In addition, the Chairman regularly meets with the Manager to ensure a close dialogue is maintained. In line with the Company's culture, the Board recognises the importance of working together with the Manager in such a way that:

 

· encourages open, honest, and collaborative discussions at all levels, allowing time and space for original and innovative thinking;

· draws on Board members' individual experience and knowledge to support and challenge the Manager in its monitoring of and engagement with portfolio investee companies;

· ensures that the impact on the Manager is fully considered and understood before any business decision is made; and

· ensures that any potential conflicts of interest are avoided or managed effectively.

The portfolio of investee companies

The Company invests in growth businesses, whether unquoted or traded on AIM, which are primarily based in the UK. Investments are made selectively across a range of sectors to meet the Company's investment objectives and in accordance with VCT legislation.

Day-to-day engagement with the portfolio of investee companies is undertaken by the Manager, so a transparent and objective relationship between the Board and the Manager is vital. For unquoted and larger AIM holdings, the Manager is an influential and engaged shareholder (on behalf of the Company) and Manager representatives often join the boards of these companies.

 

At each scheduled Valuation Forum, the Board receives detailed updates from the Manager covering the portfolio construction and performance, progress and trading within the underlying portfolio companies and valuation recommendations. The Board is also provided with investment pipeline reports, covering both new deals and potential follow-on investments at Board meetings.

External service providers

To function as a VCT with a premium listing on the London Stock Exchange, the Company relies on a diverse range of highly regarded advisors for support in meeting all relevant obligations.

The Board maintains regular contact with its external providers and receives reports from them at Board and Committee meetings, as well as outside of the regular meeting cycle. Their advice, as well as their needs and views are routinely considered. During the period, the Management Engagement and Remuneration Committee formally assessed the external service providers' performance, fees and continuing appointment to ensure that they continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service. The Audit Committee reviews and evaluates the control environments in place at each service provider as appropriate. In particular, during the COVID-19 lockdown environment, the Manager and Audit Committee received confirmation that all service providers had effectively implemented their Business Continuity Plans and were able to work remotely, with no impact to the services provided to the Company or to the internal controls in place at the providers.

HMRC and governing bodies

The Company must comply with HMRC VCT rules and must comply or explain its adherence to the AIC Code. HMRC and the AIC have a legitimate interest in how the Company operates in the market and treats its shareholders.

The Board regularly considers how it meets regulatory and statutory obligations and follows voluntary and best-practice guidance, including how any governance decisions it makes impacts the Company's stakeholders, both in the shorter and in the longer-term. In particular, the Audit Committee receives confirmation from its VCT status adviser regarding compliance with HMRC's VCT rules and at every board meeting the Board is presented with a Company Secretarial Report outlining the latest governance updates to keep the Board abreast of any relevant regulatory changes. The Company Secretary reviews the Company's ongoing compliance with the AIC Code, on at least an annual basis, which informs the Company's corporate governance disclosures in the Annual Report. In addition, the Board receives reports from the Manager and Auditor on their respective regulatory compliance and any inspections or reviews that are commissioned by regulatory bodies.

 

 

The mechanisms for engaging with stakeholders are kept under review by the Directors and discussed at Board meetings to ensure they remain effective. Examples of the Board's principal decisions during the year, and how the Board fulfilled its duties under Section 172, and the related engagement activities, are set out below.

 

Principal Decision

Long-Term Impact

Stakeholders and Engagement

Consideration of the Company's culture, purpose and values

Establishing and maintaining a healthy corporate culture within the Company will aid delivery of its long-term strategy.

During the reporting period, the Board considered the Company's culture, purpose and values.

 

The Company seeks to invest in innovative, high growth quoted and unquoted companies, providing capital and expertise at a critical stage of their development. The Company believes that the successful development of these companies will be crucial to the advancement of the UK economy. The Manager has an extensive entrepreneurial network and specialist skills which are utilised both to source new investment opportunities as well as in supporting our portfolio company management teams to deliver their growth plans. The investment strategy is based on backing the highest potential companies operating in sectors and markets which are benefiting from long-term structural growth trends, whilst recognising the risk management benefits of diversification in portfolio construction.

 

The Company has several policies in place to maintain a culture of good governance including those relating to Directors' conflicts of interest and Directors' dealings in the Company's shares. The Board assesses and monitors compliance with these policies as well as the general culture of the Board during the annual Board evaluation process which is undertaken by each Director. This is a formal internal process coordinated by the Chairman, given the small size of the Board.

Continued focus on the Manager's ESG impact

The Board recognises that sound ESG policies, when embedded with appropriate governance and responsible business practices, help generate long-term financial performance and contribute to the wider community.

The Board has continued its focus on responsible business practices and the impact of ESG matters. The Board notes that the Manager has added to resources in this area and has significantly developed its ESG policy, its ESG investment tool and processes in the past 12 months. The Board has received a detailed presentation from the Manager's sustainable investment director on its responsible business practices and the methods used to evaluate ESG risks as part of its investment processes.

 

The Board acknowledges and supports the increased focus by the Manager on ensuring new and existing investee companies are adopting sound ESG policies and will continue to monitor the Manager's progress.

Board succession Planning

Effective succession planning, leading to the refreshment of the Board and its diversity is necessary for the long-term success of the Company.

The Board has approved and adopted a Tenure and Reappointment Policy, noting that the Board will seek to recruit a new Director on average every 3-4 years so as to regularly bring the challenge of fresh thinking into the Board's discussions.

 

Succession planning was a significant focus for the Board during the year ended 30 September 2021 and further detail regarding changes to the Board can be found in the Nomination Committee report in the Annual Report.

 

Details of the composition of the Board can also be found in the corporate governance statement in the Annual Report.

Approval of fundraising

Providing shareholders and potential new investors the opportunity to subscribe for shares in BVT, which in turn provides opportunities for Company growth and increased investor engagement.

In deciding to launch a fundraising during the reporting period, the Board considered:

 

· the ability to adhere to the Company's dividend policy;

· the effect on the NAV and the ability of the Company to be able to meet HMRC's VCT investment rules and timelines;

· the new investment pipeline;

· the costs involved in issuing a prospectus and of fundraising; and

· the advantages and disadvantages of a joint prospectus across the two Baronsmead VCTs which Gresham House advises.

 

 

The Strategic Report has been approved by the Board of Directors.

 

On behalf of the Board

Peter Lawrence

Chairman

6 December 2021

 

 

 

Extracts of the Directors' Report

Shares and shareholders

 

Share capital

Pursuant to the prospectus published by the Company on 17 September 2020 in conjunction with Baronsmead Second Venture Trust plc in relation to an offer for subscription to each raise up to £20 million (before costs) with an over-allotment facility to each raise up to a further £17.5 million, the Company issued a total of 42,321,229 ordinary shares during the year ended 30 September 2021 by way of five allotments, raising approximately £32.5 million (before costs). Details of these allotments are as set out below:

 

 

· On 10 November 2020, the Company issued 17,488,428 ordinary shares under the first allotment at an issue price of 75.20p per share. The shares were admitted to trading on 16 November 2020.

 

· On 17 December 2020, the Company issued 5,472,719 ordinary shares under the second allotment at an issue price of 78.00p per share. The shares were admitted to trading on 22 December 2020.

 

· On 29 January 2021, the Company issued 11,131,503 ordinary shares under the third allotment at an issue price of 81.30p per share. The shares were admitted to trading on 4 February 2021.

 

· On 26 February 2021, the Company issued 5,751,377 ordinary shares under the fourth allotment at an issue price of 78.80p per share. The shares were admitted to trading on 4 March 2021.

 

· On 18 March 2021, the Company issued 2,477,202 ordinary shares under the fifth allotment at an issue price of 80.90p per share. The shares were admitted to trading on 23 March 2021.

 

At the AGM held on 16 February 2021, the Company was granted authority to purchase up to 14.99 per cent of the Company's ordinary share capital in issue at that date on which the Notice of AGM was published, amounting to 37,980,559 ordinary shares. During the year, the Company bought back a total of 3,529,899 ordinary shares to be held in Treasury, representing 1.4 per cent of the issued share capital as at 30 September 2020, with an aggregate nominal value of £352,989. The total amount paid for these shares was £2,687,929. Since 30 September 2021 no shares have been bought back by the Company. The Company has remaining authority to buy back 35,796,970 shares under the resolution approved at the AGM in 2021.

 

During the year, the Company sold 650,000 ordinary shares from Treasury. The total amount received by the Company for these shares was £490,398. Shares will not be sold out of Treasury at a discount wider than the discount at which the shares were initially bought back by the Company.

 

As at the date of this report the Company's issued share capital was as follows:

 

 

Share

Total

% of
Shares in issue

Nominal Value

In issue

295,007,034

100

£29,500,703.40

Held in treasury

24,548,754

8.32

£2,454,875.40

In circulation

270,458,280

91.68

£27,045,828

 

The total voting rights as at 30 September 2021 were 270,458,280 and there have been no changes to this figure between 30 September 2021 and the date of the Annual Report.

 

Shareholders

Each 10p ordinary share entitles the holder to attend and vote at general meetings of the Company, to participate in the profits of the Company, to receive a copy of the Annual Report and Financial Statements and to participate in a final distribution upon the winding up of the Company.

 

There are no restrictions on voting rights, no securities carry special rights and the Company is not aware of any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights. There are no agreements to which the Company is party that may affect its control following a takeover bid.

 

In addition to the powers provided to the Directors under UK company law and the Company's Articles of Association, at each AGM the shareholders are asked to authorise certain powers in relation to the issuing and purchasing of the Company's own shares. Details of the powers granted at the AGM held in 2021, all of which remain valid, can be found in the last notice of AGM.

 

The Company is not, and has not been throughout the year, aware of any beneficial interests exceeding 3 per cent of the total voting rights.

 

Tax free dividends

The Company has paid or declared the following dividends for the year ended 30 September 2021:

 

Dividends

£'000

Interim dividend of 3 .0p per ordinary share paid on 10 September 2021

8,118

Final dividend of 3.5p per ordinary share to be paid on 4 March 2022

9,466

Total dividends paid for the year

17,584

* Calculated on shares in circulation as at 30 September 2021

 

Subject to shareholder approval at the AGM, a final dividend of 3.5p per share will be paid on 4 March 2022 to shareholders on the register at 4 February 2022. The ex-dividend date will be 3 February 2022.

 

Annual General Meeting

The AGM will be held on 16 February 2022. A separate Notice convening the AGM will be posted to shareholders and will be separate to the Annual Report. The Notice will include an explanation of the items to be considered at the AGM and will be uploaded to the Company's website in due course.

 

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. The going concern assumption assumes that the Company will maintain its VCT status with HMRC.

 

The Directors acknowledge that the COVID-19 outbreak has had a significant adverse impact globally and that this has caused substantial volatility in financial markets. The Board nevertheless considers the Company to be well placed to continue to operate for at least 12 months from the date of this report, as the Company has sufficient liquidity to pay its liabilities as and when they fall due and also to invest in new opportunities as they arise.

 

The Directors have considered the liquidity of the Company and its ability meet obligations as they fall due for a period of at least 12 months from the date that these financial statements are approved. As at 30 September 2021, the Company held cash balances and investments in readily realisable securities with a value of £42.6 million, representing 19.1 per cent of the Company's NAV.

 

The Company has no debt, and it is expected that the Company will remain ungeared for the foreseeable future.

 

The Directors have assessed the Company's ability to cover its annual running costs under several liquidity scenarios in which the value of liquid assets (including AIM-traded investments and OEICs) has been subject to sensitivity analysis. The Directors noted that under none of these scenarios was the Company unable to cover its costs.

 

The Company's forecasts and cash flow projections, taking into account the current economic environment and other potential changes in performance, 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.

 

 

Statement of Directors' Responsibilities in respect of the 2021 Annual Report and the Financial Statements

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

 

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

 

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

 

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

 

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole; and

· the Annual Report 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.

 

We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position and performance, business model and strategy.

 

On behalf of the Board:

Peter Lawrence

Chairman

6 December 2021

 

 

NON-STATUTORY ACCOUNTS

 

The financial information set out below does not constitute the Company's statutory accounts for the years ended 30 September 2020 and 2021 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at www.baronsmeadvcts.co.uk  

 

Income Statement

For the year ended 30 September 2021

 

 

 

Year ended

30 September 2021

Year ended

30 September 2020

 

 

Notes

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Gains on investments

2.3

-

49,591

49,591

-

5,865

5,865

Income

2.5

3,058

-

3,058

3,679

-

3,679

Investment management fee and performance fee

2.6

(1,009)

(4,969)

(5,978)

(750)

(2,251)

(3,001)

Other expenses

2.6

(618)

-

(618)

(599)

-

(599)

Profit before taxation

 

1,431

44,622

46,053

2,330

3,614

5,944

Taxation

2.9

(104)

104

-

(333)

333

-

Profit for the year, being total comprehensive income for the year

 

1,327

44,726

46,053

1,997

3,947

5,944

Return per ordinary share:

 

 

 

 

 

 

 

Basic and diluted

2.2

0.51p

17.08p

17.59p

0.90p

1.77p

2.67p

 

All items in the above statement derive from continuing operations.

 

There are no recognised gains and losses other than those disclosed in the Income statement.

 

The revenue column of the Income statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.

 

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards FRS 102. The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").

 

The notes below form part of these financial statements.

 

 

Statement of changes in equity

 

For the year ended 30 September 2021

 

 

 

Notes

Non-distributable reserves

Distributable

Reserves

Total

£'000

Called-up share

capital

£'000

Share

premium

£'000

Revaluation

Reserve

£'000

Capital

reserve

£'000

Revenue

reserve

£'000

At 1 October 2020

 

25,268

49,397

29,590

58,399

2,180

164,834

Profit after taxation

 

-

-

39,173

5,553

1,327

46,053

Net proceeds of share issues, share buybacks & sale of shares from treasury

 

4,233

27,314

-

(2,221)

-

29,326

Dividends paid

2.4

-

-

-

(15,483)

(1,867)

(17,350)

At 30 September 2021

29,501

76,711

68,763

46,248

1,640

222,863

 

 

 

For the year ended 30 September 2020

 

 

Notes

Non-distributable reserves

Distributable Reserves

 

Called-up

share capital

£'000

Share

premium

£'000

Revaluation

reserve

£'000

Capital

reserve

£'000

Revenue

reserve

£'000

 

Total

£'000

At 1 October 2019

 

22,053

28,397

26,909

72,401

1,309

151,069

Profit after taxation

 

-

-

2,681

1,266

1,997

5,944

Net proceeds of share issues, share buybacks & sale of shares from treasury

 

3,215

21,000

-

(1,715)

-

22,500

Dividends paid

2.4

-

-

-

(13,553)

(1,126)

(14,679)

At 30 September 2020

 

25,268

49,397

29,590

58,399

2,180

164,834

The notes below form part of these financial statements.


Balance sheet
As at 30 September 2021

Company Number: 03504214

 

Notes

As at

30 September

2021

£'000

As at

30 September

2020

£'000

Fixed assets

 

 

 

Investments

2.3

208,816

154,292

 

 

 

 

Current assets

 

 

 

Debtors

2.7

91

469

Cash at bank and on deposit

 

17,453

11,042

 

 

17,544

11,511

Creditors (amounts falling due within one year)

2.8

(3,497)

(969)

Net current assets/(liabilities)

 

14,047

10,542

Net assets

 

222,863

164,834

Capital and reserves

 

 

 

Called-up share capital

3.1

29,501

25,268

Share premium

3.2

76,711

49,397

Capital reserve

3.2

46,248

58,399

Revaluation reserve

3.2

68,763

29,590

Revenue reserve

3.2

1,640

2,180

Equity shareholders' funds

 

222,863

164,834

Net asset value per share

 

 

 

- Basic and diluted

2.1

82.40p

71.35p


The notes below form part of these financial statements.

The financial statements were approved by the Board of Directors of Baronsmead Venture Trust plc on 6 December 2021 and were signed on its behalf by:

Peter Lawrence

Chairman

Statement of cash flows

For the year ended 30 September 2021

 

Year ended

30 September

2021

£'000

Year ended

30 September

2020

£'000

Cash flows from operating activities

 

 

Investment income received

3,311

3,348

Investment management fees paid

(3,736)

(2,932)

Other cash payments

(632)

(595)

Net cash outflow from operating activities

(1,057)

Cash flows from investing activities

 

 

Purchases of investments

(46,299)

(36,649)

Disposals of investments

41,497

30,221

Net cash outflow from investing activities

(4,802)

Financing activities

 

 

Gross proceeds of share issues

33,007

24,900

Gross proceeds from sale of shares from treasury

490

492

Gross cost of share buybacks

(2,403)

(2,160)

Cost of share issues

(1,460)

(685)

Costs of share buybacks

(14)

(11)

Equity dividends paid

(17,350)

(14,679)

Net cash outflow before financing activities

12,270

7,857

Increase in cash

6,411

1,250

 

 

 

Reconciliation of net cash flow to movement in net cash

 

 

Increase in cash

6,411

1,250

Opening cash position

11,042

9,792

Closing cash at bank and on deposit

17,453

 

 

 

Reconciliation of profit before taxation to net cash outflow from operating activities

 

 

Profit before taxation

46,053

5,944

Gains on investments

(49,591)

(5,865)

Income reinvested

(131)

-

Decrease/(increase) in debtors

378

(329)

Increase in creditors

2,234

71

Net cash outflow from operating activities

(1,057)

(179)

 

The notes below form part of these financial statements.

 

Notes to the financial statements

For the year ended 30 September 2021

 

We have grouped notes into sections under three key categories:

1. Basis of preparation

2. Investments, performance and shareholder returns

3. Other required disclosures

 

The key accounting policies have been incorporated throughout the notes to the financial statements adjacent to the disclosure to which they relate. All accounting policies are included within an outlined box.

 

1.  Basis of preparation

1.1  Basis of accounting

 

These Financial Statements have been prepared under FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and in accordance with the Statement of Recommended Practice ("SORP") for investment trust companies and venture capital trusts issued by the Association of Investment Companies ("AIC") in November 2014 and updated in January 2017, February 2018 and October 2019 and April 2021 and on the assumption that the Company maintains VCT status with HMRC.

The application of the Company's accounting policies requires judgement, estimation and assumption about the carrying amount of assets and liabilities. These estimates and associated assumption are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

After making the necessary enquiries, including those made during the preparation of the viability statement in the Strategic Report, the Directors believe that it is reasonable to expect that the Company will continue to be able to meet its liabilities as and when they fall due for a period of at least 12 months, therefore it is appropriate to apply the going concern basis in preparing the financial statements.

The Directors acknowledge the significant adverse effect that the COVID-19 outbreak has had globally, however the Directors consider the Company to be well placed to continue to operate through the crisis and for at least twelve months from the date of this report. The Company has no debt and has sufficient liquidity to meet both its contracted expenditure and its discretionary cash outflows, including to invest in new opportunities as they arise. The Directors note that the Company's third-party suppliers are not experiencing significant operational difficulties affecting their respective services to the Company. The Directors have also assessed the Company's ability to cover its annual running costs under several liquidity scenarios in which the value of liquid assets (including AIM-traded investments and OEICs) has been subject to sensitivity analysis, taking into account the current economic environment and other, plausibly possible changes in performance. It is therefore appropriate to apply the going concern basis in preparing the financial statements.

 

 

2.  Investments, performance and shareholder returns

2.1 Net asset value per share

 

 

Number

of ordinary shares

Net asset value per
share attributable

Net asset value

attributable

 

30 September

 2021

number

30 September 2020

number

30 September 2021

pence

30 September 2020

pence

30 September 2021

£'000

30 September 2020

£'000

Ordinary shares (basic)

270,458,280

231,016,950

82.40

71.35

222,863

164,834

 

 

2.2  Return per share

 

 

Weighted average number of ordinary shares

Return per

ordinary share

Net profit

after taxation

 

30 September 2021

number

30

September 2020

number

30 September 2021

pence

30 September 2020

Pence

30 September 2021

£'000

30 September 2020

£'000

Revenue

261,866,661

222,939,528

0.51

0.90

1,327

1,997

Capital

261,864,661

222,939,528

17.08

1.77

44,726

3,947

Total

 

 

17.59

2.67

46,053

5,944

 

2.3  Investments

 

The Company has fully adopted sections 11 and 12 of FRS 102.

 

Purchases or sales of investments are recognised at the date of transaction at present value.

 

Investments are subsequently measured at fair value through profit and loss. For AIM-traded securities this is either bid price or the last traded price, depending on the convention of the exchange on which the investment is traded.

 

In respect of collective investment vehicles, which consists of investments in open-ended investment companies authorised in the UK, this is the closing price.

 

In respect of unquoted investments, these are valued at fair value by the Directors using methodology which is consistent with the International Private Equity and Venture Capital Valuation guidelines ("IPEV Guidelines").

 

Judgements

The key judgements in the fair valuation process are:

i)  The Manager's determination of the appropriate application of the IPEV to each unquoted investment;

ii)  The Directors' consideration of whether each fair value is appropriate following detailed review and challenge. The judgement applied in the selection of the methodology used for determining the fair value of each unquoted investment can have a significant impact upon the valuation.

 

Estimates

The key estimate in the financial statements is the determination of the fair value of the unquoted investments. This estimate is key as it significantly impacts the valuation of the unlisted investments at the balance sheet date. The fair valuation process involves estimates using inputs that are unobservable (for which market data is unavailable). Fair value estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimate. As the valuation outcomes may differ from the fair value estimates a price sensitivity analysis is provided in Other Price Risk Sensitivity in note 3.3 below.  The risk of an over or underestimation of fair values is greater when methodologies are applied using more subjective inputs.

 

Assumptions

The determination of fair value for unquoted investments involves key assumptions dependent upon the valuation methodology used. The primary methodologies applied are:

 

i)  Cost of recent investments

ii)  Earnings Multiple

iii)  Offer less 10 per cent

 

The Earnings Multiple approach involves more subjective inputs than Cost of recent investment and Offer approaches and therefore presents a greater risk of over or under estimation. The Cost of recent investment approach involves holding the investment at the price set in the latest available funding round.

 

The key assumption for the Multiples approach are that the selection of comparable companies on which to determine earnings multiple (chosen on the basis of their business characteristics and growth patterns) and using either historic or forecast revenues (as considered most appropriate) provide a reasonable basis for identifying relationships between enterprise value and growth to apply in the determination of fair value. Other assumptions include the appropriateness of the discount magnitude applied for reduced liquidity and other qualitative factors. The assumption of offer less 10 per cent is in line with our internal valuation methodology.

 

Gains and losses arising from changes in the fair value of the investments are included in the Income Statement for the year as a capital item. Transaction costs on acquisition are included within the initial recognition and the profit or loss on disposal is calculated net of transaction costs on disposal.

 

The nature of the unquoted portfolio currently will influence the valuation technique applied. The valuation approach recognises that as stated in the IPEV Guidelines, the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis is used where appropriate to incorporate the operational progress of the investee company into the valuation. Additionally, the background to the transaction must be considered. As a result, various multiples based techniques are employed to assess the valuations particularly in those companies with established revenues. All valuations are cross-checked for reasonableness by employing relevant alternative techniques.

 

 

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income statement. The details of which are set out in the box above.

 

The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.

 

· Level 1 - Fair value is measured based on quoted prices in an active market.

· Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

· Level 3 - Fair value is measured using a valuation technique that is not based on data from an observable market.

 

 

As at

30 September

2021

£'000

 

As at

30 September 2020

£'000

 

Level 1

 

 

Investments traded on AIM

77,380

53,820

Level 2

 

 

Investments listed on LSE

24

29

Investments traded on AIM

-

1,866

Collective investment vehicles

79,400

59,390

Level 3

 

 

Unquoted investments

52,012

39,187

 

 

 

 

208,816

154,292

 

 

For the year ended 30 September 2021

 

 

Level 1 

Level 2

Level 3

 

 

Traded

on AIM

£'000

Listed  

LSE  

£'000 

Traded

on AIM

£'000

Collective 

investment 

vehicles 

£'000 

Unquoted

£'000

Total

£'000

Opening book cost

40,287

2,315

4,481

44,412

33,207

124,702

Opening unrealised appreciation/(depreciation)

13,533

(2,286)

(2,615)

14,978

5,980

29,590

Opening fair value

53,820

29

1,866

53,390

39,187

154,292

Transfer between levels

4,481

-

(4,481)

-

-

-

Purchases at cost

3,681

-

-

31,061

11,688

46,430

Sale - proceeds

(8,956)

-

-

(24,362)

(8,179)

(41,497)

 Sale - realised gains/(losses) on sales

6,076

-

-

-

(3,575)

2,501

Unrealised gains realised during the year

1,510

-

-

-

6,407

7,917

Increase/(decrease) in unrealised appreciation

16,768

(5)

2,615

13,311

6,484

39,173

Closing fair value

77,380

24

-

79,400

52,012

208,816

Closing book cost

47,079

2,315

-

51,111

39,548

140,053

Closing unrealised appreciation/(depreciation)

30,301

(2,291)

-

28,289

12,464

68,763

Closing fair value

77,380

24

-

79,400

52,012

208,816

Equity shares

77,380

24

-

-

32,774

110,178

Preference shares

-

-

-

-

8,949

8,949

Loan notes

-

-

-

-

10,289

10,289

Collective investment vehicles

-

-

-

79,400

-

79,400

Closing fair value

77,380

24

-

79,400

52,012

208,816

 

 

For the year ended 30 September 2020

 

 

Level 1 

Level 2

Level 3

 

 

Traded

on AIM

£'000

Listed  

LSE  

£'000 

Traded

on AIM

£'000

Collective 

investment 

vehicles 

£'000 

Unquoted

£'000

Total

£'000

Opening book cost

45,024

-

6,520

33,091

31,171

115,806

Opening unrealised appreciation/(depreciation)

3,347

-

(650)

13,702

10,510

26,909

Opening fair value

48,371

-

5,870

46,793

41,681

142,715

Transfer between levels

(1,010)

2,315

(2,039)

-

734

-

Purchases at cost

2,330

-

-

27,300

6,303

35,933

Sale - proceeds

(10,601)

-

-

(15,979)

(3,641)

(30,221)

 Sale - realised gains/(losses) on sales

1,229

-

-

-

(1,451)

222

Unrealised gains realised during the year

3,315

-

-

-

91

3,406

Increase/(decrease) in unrealised appreciation

10,186

(2,286)

(1,965)

1,276

(4,530)

2,681

Closing fair value

53,820

29

1,866

59,390

39,187

154,292

Closing book cost

40,287

2,315

4,481

44,412

33,207

124,702

Closing unrealised appreciation/(depreciation)

13,533

(2,286)

(2,615)

14,978

5,980

29,590

Closing fair value

53,820

29

1,866

59,390

39,187

154,292

Equity shares

53,820

29

1,866

-

23,319

79,034

Preference shares

-

-

-

-

2,757

2,757

Loan notes

-

-

-

-

13,111

13,111

Collective investment vehicles

-

-

-

59,390

-

59,390

Closing fair value

53,820

29

1,866

59,390

39,187

154,292

 

The AIM-traded investments held in Level 2 as at 30 September 2020 have been transferred to Level 1 after recent trading activity in the period.

 

The gains and losses included in the above table have all been recognised in the Income statement above.

 

The Company received £17.1 million (2020: £16.8 million) from investments sold in the year, excluding liability funds redeemed of £24.4. million (2020: £16.0 million). The book cost of these investments when they were purchased was £6.7 million (2020: £9.4 million). These investments have been revalued over time and until they were sold any unrealised gains or losses were included in the fair value of the investments.

 

2.4  Dividends

In accordance with FRS 102, dividends are recognised as a liability in the period in which they are declared.

 

 

Year ended

30 September 2021

Year ended

30 September 2020

Revenue

Capital

Total

Revenue

Capital

Total

£'000

£'000

£'000

£'000

£'000

£'000

Amounts recognised in the year:

 

 

 

 

 

 

For the year ended 30 September 2021

 

 

 

 

 

 

Interim dividend of 3.0p per ordinary share paid on 10 September 2021

812

7,306

8,118

-

-

-

For the year ended 30 September 2020

 

 

 

 

 

 

Final dividend of 3.5p per ordinary share paid on 4 March 2021

1,055

8,177

9,232

-

-

-

Interim dividend of 3.0p per ordinary share paid on 11 September 2020

-

-

-

461

6,453

6,914

For the year ended 30 September 2019

 

 

 

 

 

 

Final dividend of 3.5p per ordinary share paid on 3 March 2020

-

-

-

665

7,100

7,765

 

1,867

15,483

17,350

1,126

13,553

14,679

 

2.5  Income

 

Interest income on loan notes and dividends on preference shares are accrued on a daily basis. Provision is made against this income where recovery is doubtful.

 

Where the terms of unquoted loan notes only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income once redemption is reasonably certain. Until such date interest is accrued daily and included within the valuation of the investment. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return the redemption premium should be recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. A redemption premium of £nil (2020:£nil) was received for the year ended 30 September 2021.

 

Income from fixed interest securities and deposit interest is included on an effective interest rate basis.

 

Dividends on quoted shares are recognised as income when the related investments are marked ex-dividend and where no dividend date is quoted, when the Company's right to receive payment is established.

 

 

Year ended

30 September 2021

 Year ended

30 September 2020

 

Quoted

securities

£'000

Unquoted

securities

£'000

Total

£'000

Quoted

securities

£'000

Unquoted

securities

£'000

Total

£'000

Income from investments

 

 

 

 

 

 

Dividend income

724

158

882

506

72

578

Interest Income

1

2,175

2,176

67

3,034

3,101

Total income

725

2,333

3,058

573

3,106

3,679

 

† All investments have been included at fair value through profit or loss on initial recognition, therefore all investment income arises on investments at fair value through profit or loss.

 

2.6  Investment management fee and other expenses

 

All expenses are recorded on an accruals basis.

 

Management fees are allocated 25 per cent income and 75 per cent capital derived in accordance with the Board's expected split between long term income and capital returns. Performance fees are allocated 100 per cent capital.

 

 

Year ended 30 September 2021

Year ended 30 September 2020

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Investment management fee

1,009

3,028

4,037

750

2,251

3,001

Performance fee

-

1,941

1,941

-

-

-

 

1,009

4,969

5,978

750

2,251

3,001

 

The management agreement may be terminated by either party giving 12 months' notice of termination.

 

The Manager, Gresham House Asset Management Ltd, receives a fee of 2 per cent per annum of the net assets of the Company, calculated and payable on a quarterly basis. The collective investment vehicles, UK Micro Cap, Multi Cap and Small Cap, are also managed by Gresham House. Arrangements are in place to avoid the double charging of fees.

 

The Manager is entitled to a performance fee if at the end of any calculation period, the total return on shareholders' funds exceeds the threshold of the higher of 4 per cent or base rate plus 2 per cent on shareholders' funds (calculated on a compound basis). The Manager is entitled to 10 per cent of the excess. The amount of any performance fee which is paid in respect of a calculation period shall be capped at 5 per cent of shareholders' funds at the end of the period.

 

Amounts payable to the Manager at the year end are disclosed in note 2.8.

 

Other expenses

 

Year ended

30 September

2021

£'000

Year ended

30 September

2020

£'000

Directors' fees

122

111

Secretarial and accounting fees paid to the Manager

126

154

Remuneration of the auditors and their associates:

 

 

 - current auditors

48

-

 - previous auditors

30

58

Other

292

276

 

618

599

 

Information on directors' remuneration is given in the directors' emoluments table within the Annual Report.  During the year there was no remuneration due to the auditors for non-audit services (2020:£nil)

 

 

2.7  Debtors

 

As at

30 September

2021

£'000

As at

30 September

2020

£'000

Prepayments and accrued income

91

469

 

91

469

 

2.8  Creditors (amounts falling due within one year)

 

 

As at

30 September

2021

£'000

As at

30 September

2020

£'000

Management, secretarial and accounting fees due to the Manager

3,102

865

Amount due to brokers

294

-

Other creditors

101

104

 

3,497

969

 

2.9  Tax

 

UK corporation tax payable is provided on taxable profits at the current rate.

 

Provision is made for deferred taxation, without discounting, on all timing differences and is calculated using substantively enacted tax rates.

 

This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted.

 

 

A reconciliation of the tax (credit)/charge to the profit before taxation is shown below:

 

Year ended

Year ended

 

30 September 2021

30 September 2020

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Profit before taxation

1,431

44,622

46,053

2,330

3,614

5,944

Corporation tax at 19.0 per cent

(2020: 19.0 per cent)

272

8,478

8,750

443

687

1,130

Effect of:

 

 

 

 

 

 

  Non-taxable gains

-

(9,422)

(9,422)

-

(1,114)

(1,114)

  Non-taxable dividend income

(168)

-

(168)

(110)

-

(110)

  Losses carried forward

-

840

840

-

94

94

Tax charge/(credit) for the year

104

(104)

-

333

(333)

-

 

At 30 September 2021 the Company had unrealised losses of £17,163,683 (2020: £12,752,410). A deferred tax asset of £3,261,100 (2020: £2,422,958) not been recognised because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period. 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:

For the year ended 30 September 2021

 

 

£'000

252,685,805 ordinary shares of 10p each listed at 30 September 2020

25,268

42,321,229 ordinary shares of 10p each issued during the year

4,233

295,007,034 ordinary shares of 10p each listed at 30 September 2021

29,501

21,668,855 ordinary shares of 10p each held in treasury at 30 September 2020

(2,166)

3,529,899 ordinary shares of 10p each repurchased during the year and held in treasury

(354)

650,000 ordinary shares of 10p each sold from treasury during the year

65

24,548,754 ordinary shares of 10p each held in treasury at 30 September 2021

270,458,280 ordinary shares of 10p each in circulation* at 30 September 2021

27,046

 

 

For the year ended 30 September 2020

 

 

£'000

220,533,675 ordinary shares of 10p each listed at 30 September 2019

22,053

32,152,130 ordinary shares of 10p each issued during the year

3,215

252,685,805 ordinary shares of 10p each listed at 30 September 2020

25,268

19,247,982 ordinary shares of 10p each held in treasury at 30 September 2019

(1,924)

3,090,873 ordinary shares of 10p each repurchased during the year and held in treasury

(309)

670,000 ordinary shares of 10p each sold from treasury during the year

67

21,668,855 ordinary shares of 10p each held in treasury at 30 September 2020

231,016,950 ordinary shares of 10p each in circulation* at 30 September 2020

23,102

 

* Carrying one vote each.

 

The 42,321,299 (2020: 32,152,130) ordinary shares were issued at an average price of 77.991p (2020: 76.675p).

 

During the year, the Company bought back 3,529,899 (2020: 3,090,873) ordinary shares and sold from treasury 650,000 (2020: 670,000) shares, representing 1.3 (2020: 1.4) per cent of the ordinary shares in circulation at the beginning of the financial year.

 

Treasury shares

When the Company reacquires its own shares, they are held as treasury shares and not cancelled.

Shareholders have authorised the Board to sell treasury shares at a discount to the prevailing NAV subject to the following conditions:

 

-  It is in the best interests of the Company;

-  Demand for the Company's shares exceeds the shares available in the market;

-  A full prospectus must be produced if required; and

-  HMRC will not consider these 'new shares' for the purpose 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. When shares are reissued from treasury the original cost is allocated to the capital reserve with any gains allocated to share premium. 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.

 

 

 

For the year ended 30 September 2021

 

 

Distributable reserves

Non-distributable reserves

Capital

reserve

£'000

Revenue

reserve

£'000

Total

£'000

Share

premium

£'000

Revaluation

reserve*

£'000

Total

£'000

At 1 October 2020

58,399

2,180

60,579

49,397

29,590

78,987

Gross proceeds of share issues

-

-

-

28,774

-

28,774

Purchase of shares for treasury

(2,697)

-

(2,697)

-

-

-

Sale of shares from treasury

490

-

490

-

-

-

Expenses of share issue and buybacks

(14)

-

(14)

(1,460)

-

(1,460)

Reallocation of prior year unrealised gains/losses

7,917

-

7,917

-

(7,917)

(7,917)

Realised loss on disposal of investments#

2,501

-

2,501

-

-

-

Net increase in value of investments#

-

-

-

-

47,090

47,090

Management fee charged to capital#

(4,969)

-

(4,969)

--

-

-

Taxation relief from capital expenses#

104

-

104

-

-

-

Profit after taxation#

-

1,327

1,327

-

-

-

Dividends paid in the year

(15,483)

(1,867)

(17,350)

-

-

-

At 30 September 2021

46,248

1,640

47,888

76,711

68,763

145,474

 

For the year ended 30 September 2020

 

 

 

Distributable reserves

Non-distributable reserves

Capital

reserve

£'000

Revenue

reserve

£'000

Total

£'000

Share

premium

£'000

Revaluation

reserve*

£'000

Total

£'000

At 1 October 2019

72,401

1,309

73,710

28,397

26,909

55,306

Gross proceeds of share issues

-

-

-

21,685

-

21,685

Purchase of shares for treasury

(2,160)

-

(2,160)

-

-

-

Sale of shares from treasury

456

-

456

-

-

-

Expenses of share issue and buybacks

(11)

-

(11)

(685)

-

(685)

Reallocation of prior year unrealised gains/losses#

(3,406)

-

(3,406)

-

(3,406)

(3,406)

Realised loss on disposal of investments#

(222)

-

(222)

-

-

-

Net increase in value of investments#

-

-

-

-

6,087

6,087

Management fee charged to capital#

(2,251)

-

(2,251)

-

-

-

Taxation relief from capital expenses#

333

-

333

-

-

-

Profit after taxation#

-

1,997

1,997

-

-

-

Dividends paid in the year

(13,553)

(1,126)

(14,679)

-

-

-

At 30 September 2020

58,399

2,180

60,579

49,397

29,590

78,987

 

# The total of these items is £46,053k (2020: 5,944k), which agrees to the total profit for the year.

* Changes in fair value of investments are dealt with in this reserve.

 

Distributable reserves may also include any net unrealised gains on investments whose prices are quoted in an active market and deemed readily realisable in cash.

 

Share premium is recognised net of issue costs.

 

The Company does not have any externally imposed capital requirements.

 

3.3  Financial instruments risks

 

The Company's financial instruments comprise equity and fixed interest investments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in a diverse portfolio of UK growth businesses.

 

The Company's investing activities expose it to a range of financial risks. These key risks and the associated risk management policies to mitigate these risks are described below.

 

Market risk

Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities.

 

Price risk

The investment portfolio is managed in accordance with the policies and procedures described in the full Audited Annual Report and Financial Statements of the Strategic Report.

 

Investments in companies listed on the AIM market usually involve a higher risk than investments in larger companies quoted on a recognised stock exchange. The spread between the buying and selling price of such shares may be wide and the price used for valuation may be limited and many may not be achievable. The valuation of the portfolios and opportunities for realisation of AIM-traded investments within the portfolios may also depend on stock market conditions.

 

The Company aims to reduce these risks by diversifying the portfolio across business sectors and asset classes. The Board monitors the portfolio on a quarterly basis.

 

Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange. The fair valuation of these unquoted investments is influenced by the estimates, assumptions and judgements made in the fair valuation process (see 2.3 above).

 

Price risk sensitivity

As at 30 September 2021, each unquoted company has been classified as having a higher, medium or lower level of estimation uncertainty by considering a range of factors including the availability and extent of cash resources, and the potential disruption to business activities caused by the COVID-19 pandemic and associated government intervention. In addition, the impact of COVID-19 on the relevant industry, liquidity concerns for the specific company, and operational impacts on the business were also considered in arriving at the level of estimation uncertainty. For example, we have classified investments in the casual dining and travel sectors as higher risk as the impact of COVID-19 on these industries has been particularly severe. There is higher uncertainty around the estimated sustainable earnings of these businesses, and the extent of their cash resources, and therefore there are a larger range of possible outcomes from the valuation of these investments.

 

A greater sensitivity factor has been applied to those investments assessed as having a higher level of estimation uncertainty. The sensitivities applied illustrate the impact of varying the key inputs by the levels specified, however it is possible that by applying reasonable alternative assumptions to individual investments, the fair value may vary to a greater extent than that illustrated. A higher sensitivity of 30 per cent has been applied to the companies considered to have the highest level of estimation uncertainty, to reflect that their valuation is much more uncertain and challenging to predict than for the medium and lower risk companies, where a sensitivity of between 20 per cent and 5 per cent has been applied.

 

The table below has split out each risk category and applied both upside and downside sensitivities to the key variable inputs. The sensitivities give an indication of the effect of changing one or more of the inputs to these valuations, and the impact of increased volatility depending on exposure to the future and current effects of COVID-19. The valuation has then been recalculated using this adjusted key variable input, in order to determine the impact on the fair value of the Company's investment. The structure of the investment will vary between investee companies, and therefore the impact on the investment's fair value will vary. For example, the Company hold a preferred, or priority position, in many of the investee companies and therefore in these cases may be more protected from severe downside scenarios.

 

As at 30 September 2021

 

 

 

 

 

 

P ositive Impact

Negative Impact

Security

Valuation basis

Key variable inputs

Risk Level  

Sensitivity    
%
 

Fair Value

£'000s

£0'000s

% of net
assets
£0'000

   
£0'000

% of net 

assets 

Unquoted

Earnings Multiple

Estimated sustainable earnings

 

 

 

 

 

 

 

Selection of comparable companies

High  

+/-30

4,174

1,875

0.8

(1,967)  

(0.9)  

Application of illiquidity discount

Medium  

+/-20
 

23,734

5,580

2.5  

 (6,044)

(2.7)

Probability estimation of Liquidation event

Low  
 

+/-10
 

17,792

1,265

0.6  

(1,228)

(0.6)

Price of recent investment

L atest funding round price

Medium

+/- 10

1,338

134

0.1  

(134)

(0.1)

 

Low  

+/-5
 

4,699

319

0.1  

(403)  

(0.2)  

O ther

 

Low 

+/-5

273

14

0.0  

(14)

(0.0)

 

A sensitivity has also been performed for quoted AIM investments, which are valued at the latest share price set by the market. A sensitivity of +/-20 per cent has been applied to the fair value of £77.4 million, reflecting the level of volatility in financial markets in 2021 and 2020. A movement of +/-20 per cent would cause an increase or decrease of £15.5 million to the fair value of the quoted AIM investments (2020: £11.1 million).

 

A sensitivity has also been performed for the Company's investments into the Micro Cap, Multi Cap and Small Cap funds, which are valued at the latest share price set by the market. A sensitivity of +/- 20 per cent has been applied to the fair value of £54.2 million (2020: £29.9 million), reflecting the level of volatility in financial markets in 2021 and 2020. A movement of +/- 20 per cent would cause an increase or decrease of £10.8 million to the fair value of these investments (2020: £6.0 million).

 

As at 30 September 2020

 

 

 

 

 

 

 

P ositive Impact

Negative Impact

Security

Valuation basis

Key variable inputs

 

Risk Level  

Sensitivity  
%
 

Fair Value

£'000s

£0'000s


% of net
assets
£0'000

 
£0'000

% of net

Assets

Unquoted

 

Earnings Multiple

Estimated sustainable earnings

 

 

 

 

 

 

 

Selection of comparable companies

High  

+/-30

7,582

1,957

1.2

(3,872)

(2.3)

Application of illiquidity discount

Medium  

+/-20

14,250

5,467

3.3  

(3,463)

(2.1)

Probability estimation of Liquidation event

 Low  
 

+/-10
 

4,698
 

560
 

0.3  
 

(361)
 

(0.2)
 

 

Price of recent investment

L atest funding round price

 Low  

+/-5

6,895

3,774

2.3  

(384)

(0.2)

 

O ther

 

Low  

+/-5

5,762

288

0.2  

(288)

(0.2)

 

*Latest share price is set by the market.

 

Key variable inputs/valuation bases

The key variable inputs applicable to each valuation basis will vary dependent on the particular circumstances of each unquoted company valuation. Where there has been a recent transaction, such as an initial investment being made into the company, or where there has been a subsequent external funding round, the key variable input will be the last funding round price. Where this is not the case, the valuation has been based on a multiple of estimated sustainable earnings. An explanation of each of the key variable inputs is provided below and includes an indication of the range in value for each input, where relevant.

 

Latest funding round price

The latest funding round price is the key variable input in the valuation of a company when there has been a recent investment either by the Company or by another investor. This transaction provides evidence of the price an independent third party would be willing to pay for the investment. There is lower estimation uncertainty where this third party is an external investor, and higher estimation uncertainty where this is an internal investor (i.e. where the investor already has an investment in the company).

 

Estimated sustainable earnings

The selection of sustainable revenue or earnings will depend upon whether the company is sustainably profitable or not, and where it is not then revenues will be used in the valuation. The valuation approach may use prior year actuals, the last 12 months, or a forecast of earnings where deemed appropriate. The valuation approach will typically assess companies based on the prior year actuals or last 12 months, or a forecast of earnings where deemed appropriate. The valuation approach will typically assess companies based on the prior year actuals or last 12 months of revenue or earnings, as this represents the most recently available trading information and therefore is viewed as the most reliable. Where the company has a history of accurate forecasting, or where there is a change in circumstance at the business which will impact earnings going forward, then a forecast or budget will be deemed most appropriate.

 

Selection of comparable companies

The selection of comparable companies is assessed individually for each investment at the point of investment, and at each valuation thereafter. The key criteria in selecting appropriate comparable companies are the industry sector, the business model, and the respective revenue and earnings growth rates of the company. Typically up to 15 comparable companies will be selected for each investment to derive the adopted revenue or earnings multiple.

 

The earnings multiples can be derived from either listed companies with similar characteristics or recent comparable transactions. The value of the unquoted element of the portfolio may therefore also indirectly be

affected by price movements on the listed exchanges.

 

Application of illiquidity discount

An illiquidity discount is applied to the majority of unquoted investments, reflecting that the Company usually holds a minority stake and that the realisation of the investment may require cooperation on the timing and sale price from other stakeholders. The illiquidity discount applied can range from 10 per cent to 30 per cent, depending upon the ownership percentage the Company holds in the investment and the Company's alignment with other institutional investors.

 

Probability estimation of Liquidation event

A liquidation event is typically a company sale or an Initial Public Offering (IPO). The probability of a company sale versus an IPO is typically estimated from the outset to be 50:50 if there has been no indication by the company of pursuing either of these routes. This weighting is then adjusted as either scenario becomes more or less likely to occur.

 

Interest rate risk

The Company has the following investments in fixed and floating rate financial assets:

 

 

As at 30 September 2021

As at 30 September 2020

 

Total

investment

£'000

Weighted

average

interest

rate

%

Weighted

average

time for

which rate

is fixed Years

Total

investment

£'000

Weighted

average

interest

rate

%

Weighted

average

time for

which rate

is fixed

Years

Fixed rate loan note securities

10,289

7.60

3.28

13,111

7.82

2.02

Floating rate sterling liquidity funds

25,180

-

-

29,462

-

-

Cash at bank and on deposit

17,453

-

-

11,042

-

-

 

52,922

 

 

53,615

 

 

The fixed rate loan notes are not subject to interest rate risk and would therefore not impact the net assets.

Movements in interest rates would not significantly affect net assets attributable to the Company's shareholders and total profits, due to interest rate income received from floating rate notes being wholly immaterial.

 

Credit risk

Credit risk refers to the risk that a counterparty will default on its obligation resulting in a financial loss to the Company. The Investment Manager monitors credit risk on an ongoing basis.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

 

As at

30 September

2021

£'000

As at

30 September

2020

£'000

Cash at bank and on deposit

17,453

11,042

Interest, dividends & other receivables

91

469

 

17,544

11,511

 

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 majority of cash held by the Company is held by JPM. The Board monitors the Company's risk by reviewing regularly the internal control reports. Should the credit quality or the financial position of the bank deteriorate significantly the Manager will seek to move the cash holdings to another bank.

 

There were no significant concentrations of credit risk to counterparties at 30 September 2021 or 30 September 2020. No individual investment exceeded 6.1 per cent of the net assets attributable to the Company's shareholders at 30 September 2021 (2020: 4.4 per cent).

 

Liquidity risk

The Company's financial instruments include investments in unquoted companies which are not traded in an organised public market, all of which generally may be illiquid. AIM traded equity investments also carry a degree of liquidity risk. 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 Manager. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company is a closed-end fund, assets do not need to be liquidated to meet redemptions, and sufficient liquidity is maintained to meet obligations as they fall due.

 

At the year end the Company had financial liabilities of £3,497,000 (2020: £969,000). All financial liabilities were due within three months and were undiscounted (2020: same).

 

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 30 September 2021 these investments were valued at £42.6 million (2020: £40.5 million).

 

3.4 Investment in associates

 

The Company has chosen not to rebut the presumption that the following holdings are investments in associates, owing to the proportion of equity held and representation on the Board representing significant influence over the operations of the company. The investments held are held as part of an investment portfolio, and are therefore measured at fair value through profit and loss, as detailed in note 2.3, rather than using the equity method, as permitted by section 14 of FRS 102:

 

 

 

Name

Location

Class of Shares held

% of Equity

Profit (£m)

Net Assets (£m)

Results for year ended

Happy Days Consultancy

UK

A Ordinary

29.2%

(3.0)

(12.7)

31 December 2020

 

3.5  Related parties

 

Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager, Gresham House Asset Management Ltd, as disclosed in notes 2.6 and 2.8, and fees paid to the Directors along with their shareholdings as disclosed in the Directors' Remuneration Report. In addition, the Manager operates a VCT Incentive Scheme, detailed in the Management retention section of the Strategic Report above, whereby members and staff of the Manager are entitled to participate in all eligible unquoted investments alongside the Company.

During the year, Gresham House Asset Management Ltd received £212,000 (2020: £182,000) of advisory fees, £321,000 (2020: £310,000) of directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £8,000 (2020: £10,000) with respect to investments attributable to BVT.

A related party relationship exists between Baronsmead Venture Trust and Happy Days Consultancy, owing to the significant influence held over the operations of the company. As at 30 September 2021, the loan from the VCT to the company stood at £2,872,000 including £918,000 of capitalised interest.

The Company also holds an investment in Gresham House plc, as part of its quoted portfolio. This investment was made in November 2014, prior to the change of Manager. For further details on this please refer to the Full Investment Portfolio in the Appendices of the Annual Report.

3.6 Segmental reporting

The Company has one reportable segment being investing in primarily a portfolio of UK growth businesses, whether unquoted or traded on AIM.

3.7 Commitments

As at 30 September 2021, the Company has commitments to invest up to £1 million. The full £1 million has been drawn as at the date of this report.

3.8 Post balance sheet events

 

The following events occurred between the balance sheet date and the signing of these financial statements:

 

· One follow-on investment, into Airfinity, completed totalling £1.0 million

 

· Partial realisations in Cerillion plc were made in November, realising proceeds of £0.8 million and making a return of 11.4x cost.

 

Corporate information

 

Directors

Peter Lawrence (Chairman)

Les Gabb*

Susannah Nicklin†

Michael Probin

Fiona Miller Smith Δ

 

Secretary

Gresham House Asset Management Ltd

 

Registered Office

5 New Street Square

London EC4A 3TW

 

Investment Manager

Gresham House Asset Management Ltd

5 New Street Square

London EC41 3TW

 

Registered Number

03504214

 

Registrars and Transfer Office

Computershare Investor Services plc

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

Tel: 0800 923 1533

 

Brokers

Panmure Gordon & Co

One New Change

London EC4M 9AF

Tel: 020 7886 2500

 

Auditors

BDO LLP

55 Baker Street

London W1U 7EU

 

Solicitors

Dickson Minto W.S.

Broadgate Tower

20 Primrose Street

London EC2A 2EW

 

VCT Status Adviser

PricewaterhouseCoopers LLP

1 Embankment Place

London WC2N 6RH

 

Website

www.baronsmeadvcts.co.uk

 

*Chairman of the Audit Committee

Chairman of the Nomination Committee

Chairman of the Management Engagement and Remuneration Committee

Δ Senior Independent Director

 

 

National Storage Mechanism

A copy of the Annual Report and Financial Statements and the separate circular containing the AGM notice will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

 

LEI: 213800VQ1PQHOJXDDQ88

 

END

N either 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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