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Baronsmead VCT 3 plc (BMD)

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Thursday 12 August, 2010

Baronsmead VCT 3 plc

Half-yearly Report

Baronsmead VCT 3 plc

Half Yearly Financial Report

30 June 2010

The Directors announce the unaudited half-yearly financial report for the six
months to 30 June 2010 as follows:-

Copies of the half yearly report can be obtained from the following website: .

Investment Objective

Baronsmead VCT 3 is a tax efficient listed company which aims to achieve
long-term investment returns for private investors.

Investment policy

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

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

Dividend policy

The Board of Baronsmead VCT 3 has the objective to maintain a minimum annual
dividend level of around 4.5p per ordinary share if possible, but this depends
primarily on the level of realisations achieved and cannot be guaranteed. 
There will be variations in the amount of dividends paid year on year. Since 
launch the average annual tax-free dividend paid to shareholders including the 
declared interim dividend of 3.0p ) has been 5.4p per ordinary share (equivalent
to a pre-tax return of 8.0p per ordinary share for a higher rate taxpayer). For 
shareholders who received up front tax reliefs, their returns would have been 
even higher.

Secondary market in the shares of Baronsmead VCT 3

The existing shares of the Company are listed on the London Stock Exchange and
can be bought and sold using a stockbroker in the same way as shares of any
other listed company.

Qualifying investors* who invest in the existing shares of the Company can
benefit from:

• Tax free dividends

• Realised gains not subject to capital gains tax (although any realised losses
are not allowable)

• No minimum holding period

• No need to include VCT dividends in annual tax returns

The UK tax treatment of VCTs is on a first in first out basis and therefore tax
advice should be obtained before shareholders dispose of their shares and also
if they deferred a capital gain in respect of new shares acquired prior to 6
April 2004.

* UK income tax payers, aged 18 or over, who acquire no more than £200,000
worth of VCT shares in a tax year.


● 3.0p - Interim dividend of 3.0p per share (unchanged from prior year) payable
on 15 September 2010 to shareholders on the register at 20 August 2010.

● +3.8% - NAV per share increased by 3.8 per cent over the six month period to
30 June 2010 from 97.50p to 101.24p before payment of the 3.0p interim dividend.

● + 166.1% - NAV total return to ordinary shareholders for every 100p invested
since launch.

● 8.4% - Dividend yield of 8.4 per cent tax free to qualifying shareholders
(gross equivalent yield for a higher rate taxpayer is 12.5 percent). This
rolling twelve month yield is based on the 3.0p interim dividend payable in
September 2010 plus the 4.5p dividend paid in December 2009 divided by the mid
ordinary share price of 89.0p at 30 June 2010.

Performance Summary to 30 June 2010

                                        1 year   3 years   5 Years Since launch
                                             %         %         %            %
Total return and share price*                                                  
Net Asset Value†                           6.4      (5.1)     23.6         66.1
Share Price†                               3.5      (3.9)     28.2         45.3
FTSE All-Share                            21.1     (16.2)     18.7         15.5

* Source: ISIS EP LLP and AIC.

† These returns for Baronsmead VCT 3 ignore up front tax reliefs and the impact
of receiving dividends tax free.

Cash Returned to Shareholders

The table below shows the cash returned to shareholders dependent on their
subscription cost, including their income tax reclaimed on subscription.

                                                Net Cumulative                  
                  Subscription Income tax      cash  dividends Net annual  Gross
                         price    reclaim  invested      paid*     yield± yield†
Year subscribed              p          p         p          p          %      %
2001 (January)           100.0       20.0      80.0       51.3        6.8   10.1
2005 (March) - C         100.0       40.0      60.0       22.4        7.0   10.4
2010 (March)             103.1       30.9      72.2        3.0        - ^    - ^

Note - The total return could be higher for those shareholders who were able to
defer a capital gain on subscription and the net sum invested may be less.

* Includes proposed interim dividend of 3.0p to be paid on 15 September 2010.

± Net annual yield represents the cumulative dividends paid expressed as an
annualised percentage of the net cash invested.

† The gross equivalent yield if the dividends had been subject to higher rate
tax (32.5 per cent on dividend income at 30 June 2010). As from the tax year
2010/11, a new additional rate of tax on dividend income of 42.5 per cent came
into force for those who earned more than £150,000. For those Shareholders who
would otherwise pay this higher rate of tax on dividends, the future gross
equivalent yield will be higher than the figures shown.

Dividends paid to C shareholders post conversion have been adjusted by the
conversion ratio (0.85642528).

ˆ The table above excludes returns for shareholders who subscribed in the Joint
Offer with Baronsmead VCT 4 plc as those returns are not yet meaningful.


I am very pleased to present my first report since becoming Chairman after the
9th Annual General Meeting held in May 2010 on the retirement of Mark Cannon
Brookes. On behalf of the Board and shareholders, I would like to pay public
tribute to Mark for his excellent work as Chairman from the formation of
Baronsmead VCT 3 in 2001.

The 3.8 per cent growth in Net Asset Value ("NAV") per share continues the
positive trend since the November 2008 low point and comes at a time when
operating profits for many of our portfolio companies are increasing. The 3p
interim dividend maintains the level paid at this stage for each of the last
three years.

Our joint offer with Baronsmead VCT 4 closed on 17 March 2010 fully subscribed,
raising £8m gross proceeds for Baronsmead VCT 3 from over 900 subscribers. We
are delighted to welcome circa 200 new shareholders.


In the six months to 30 June 2010, the NAV per share increased by 3.8 per cent
from 97.50p to 101.24p before payment (due on 15 September 2010) of a 3p per
share interim dividend. This dividend arises both from the capital profits
realised in the period and net revenues of 1.2p per share. The increase in NAV
per share is primarily due to the 9 per cent increase in the value of the
unquoted portfolio. In comparison the FTSE All-Share Index decreased 7.9 per
cent over the same period.

At the period end, over 70 per cent of the ordinary capital raised (net of
launch costs) prior to 31 December 2007 was invested in VCT qualifying
investments and the five other VCT qualifying tests had also all been met.


The interim dividend will take the cumulative dividends paid (tax free for
qualifying shareholders) for founder shareholders in 2001 to 51.3p per share 
and represents a very rewarding level of cash returned on their original £1 
investment. This period included two major Stock Market downturns in 2003 and 

Shareholders from the first two prospectus offers in 2001 and 2005/06 have to
date achieved positive absolute total returns. The comparable returns for the
FTSE All-Share Index over differing time periods are set out above. In addition,
comparable returns with other VCTs can be seen on the website of the
Association of Investment

Companies ("AIC") who publish monthly data,

The benefit of VCT tax reliefs on the dividends noted above is set out in the
table titled `Cash returned to shareholders' in terms of annual net and gross 
yields, including the assumptions made in these computations. Over the long term, 
the benefit of the tax free dividends can be very significant: in order for a 
higher rate tax payer since inception to receive the same income from taxable 
dividends as from Baronsmead VCT 3, they would have needed to have received an 
additional 25p per share in dividends before tax. In addition, this tax relief 
will be of significantly increased value to those shareholders whose income exceeds 
£150,000 p.a. from the 2010/11 tax year as there is a new dividend tax rate of 
42.5 percent (up from 32.5 per cent).


Following new investment in five companies and the sale of four investments
plus one AIM write off, the total portfolio comprises sixty-four companies. 
The portfolio by value was invested 47 per cent in unquoted companies, 
19 per cent in AIM and Listed investees, 2 per cent in Wood Street Microcap 
Investment Fund and the balance of 32 per cent remained in cash or government 
securities. The largest unquoted investment, Nexus Vehicle Holdings Limited, 
and the largest AIM investment, IDOX plc,represented 6.4 and 2.0 per cent of 
Net Asset Value respectively.

Portfolio companies are reviewed quarterly in terms of their financial health
and in the last three quarters, the number of companies exhibiting steady or 
better trading progress has improved to 94 per cent of the portfolio.

The Manager had anticipated the economic downturn and selects investments that
have less exposure to the business cycle and have distinctive growth strategies 
that are intended to be less reliant on general economic conditions. These 
selection criteria have shown early success as can be seen by the relatively 
robust unquoted company valuations throughout the recessionary period and several 
profitable exits. A number of AIM companies have also been acquired by trade buyers 
from the portfolio signalling good value within their sectors.

The Manager is fully aware of the likelihood of public sector spending cuts and
associated risks. Some of the portfolio companies do have exposure to the public 
sector; however, the portfolio as a whole has limited exposure to discretionary 
public spending which may be the most vulnerable area.


On average, the value of the current portfolio of unquoted investments is 27
per cent higher than original cost. Seventeen companies are valued at or higher
than cost whilst three are valued below cost. These period end figures exclude
two unquoted company realisations, namely Active Assistance in March 2010 for
2.8 times cost and Occam DM Ltd at 1.5 times cost in May 2010.

The sale of Active Assistance was an excellent result after first investment in
March 2008. Based in Sevenoaks, the business provides a national live-in care
service for adults and children with spinalcord injuries and neurological
conditions. The sale involved a merger with another health care business, First
Call Care Services Limited, to create a national provider of both live-in and
live-out care to individuals with complex long term conditions.

Occam DM Ltd was the longest standing unquoted investment in the portfolio
since first investing in July 2004. Occam DM Ltd is a leading provider of
marketing management software and direct marketing solutions with a blue chip
client base in both the public and private sectors. Occam DM Ltd was sold to St
Ives Group in May 2010 realising 1.5 times cost. At 31 December 2009, it had 
been valued at 25 per cent of cost, which illustrates both the caution applied 
when valuing unquoted investments until proven and how the business was transformed.

The price earnings multiples used in calculating unquoted valuations have
changed little recently and so the increase in value has generally come from 
good profit growth. Several have shown sales growth by taking market share 
through innovation, particularly in establishing new and cost effective channels 
to market and servicing customers.

For instance Mark Burchfield, Managing Director of Cablecom Networking Holdings
Limited in which the Baronsmead VCTs invested in May 2007 presented its story at 
the ninth AGM held in May 2010. Cablecom's tag line is `Always Connected' as the 
market leading provider of Student Accommodation Internet Services. Students have 
benefitted from the widest range of student specific IT services, some of the fastest 
UK broadband speeds and improvement in the `student experience'. Annual turnover
has almost doubled over the last three years.


These share portfolios were down 5.4 per cent and 2.2 per cent over the six
months under review as the UK quoted markets lost some of their earlier
recovery due to concerns about government deficits and economic growth.

Interest from trade buyers again highlighted value in the AIM portfolio
including a bid possibility for WIN plc where further investment had been made
in 2009. Realised profits totalled £168,000 from the AIM portfolio. The main
success came from disposing of some 50 per cent of the shares held in Advanced
Computer Software plc at 2.1 times cost at the time of flotation in July 2008.

Our holding in the Wood Street Microcap Investment Fund is now valued at £1
million across nineteen non-qualifying investments.


Unquoted investment totalled £3.5 million in the six months under review
comprising investment in Surgi C Limited, Inspired Thinking Group Limited and
Getting Personal Limited plus two further round financings into Independent
Living Services Limited and Nexus Vehicle Holdings Limited.

• Surgi C Limited, the UK's leading independent distributor of spinal implants
is based in Birmingham. The business has grown strongly as a result of an
increasing product portfolio and the high levels of education and support it
provides to spinal surgeons.

• Birmingham based Inspired Thinking Group Limited (ITG) provides services that
help large marketing departments operate more efficiently, including improved 
procurement of artwork and print management. The new funding was used to acquire 
Total Marketing Service, a provider of workflow management systems to marketing 

• Getting Personal Limited is a leading online retailer, based in Manchester,
which sells personalised and unique gifts. The business was established in
November 2005 with just one product, a personalised calendar. now sells over 4,000 items ranging from personalised
cards, notebooks, mugs and chocolate to non-personalised items for general

• Existing portfolio company Nexus Vehicle Holdings Limited, a leading provider
of vehicle rental, used further funding to acquire Adapted Vehicle Hire, which is 
a niche rental business providing adapted vehicles for the disabled driver market.

• Two further small investments were made in portfolio company Independent
Living Services Limited, an acute domiciliary care provider based in Scotland,
firstly to fund a small acquisition and secondly to repurchase shares.

The volume of qualifying AIM opportunities also increased from the depressed
levels of 2009. Some £481k was invested in qualifying holdings and £460k in
non-qualifying shareholdings. Three investments in the latter category were
market purchases in support of the strategy to take more influential stakes by
the combined Baronsmead VCTs in a smaller number of AIM investments, where a
likely exit strategy to a trade buyer can be envisaged.

After the period end, £3.5 million was invested by the five Baronsmead VCTs in
Netcall plc of which Baronsmead VCT 3 provided £687,000. Netcall plc, 
based in St Ives provides software and communication solutions into the call centre
market, mainly under the Queuebuster label. The fund-raising is primarily for
the acquisition of Telephonetics, which specialises in speech recognition


On 18 January 2010 the Company issued a Joint Offer for Subscription with
Baronsmead VCT 4 to raise £16m in aggregate. This Offer became fully subscribed
and closed on 17 March 2010 with over 70 per cent of the funds raised having
been invested by the existing shareholders of the Baronsmead VCTs.

Having raised £7.56m net of costs under the Offer, the Company has sufficient
cash resources to fund all of its operations for at least the next 12 months. 
As a result, the Directors do not intend, at this stage, to raise further funds 
through issuing new shares in the current tax year. As many of the Company's 
shareholders are also shareholders in the other Baronsmead VCTs they will be 
informed of any offers that those VCTs may make available to either their existing 
shareholders or more widely during the course of the current tax year.

The Company operates a share policy of buying shares in to Treasury in
accordance with the resolutions passed by the shareholders from time to time.
During the six months to 30 June 2010, 910,000 shares were bought back into
Treasury. As a result, as at 30 June 2010 the Company held 6,377,317 Treasury
shares which were bought back at an average discount of approximately 9.2 per
cent to NAV. Recent interest in the Company's existing shares may result in the
Company issuing shares out of Treasury in order to rectify imbalances in the
demand and supply of shares that occur from time to time. In accordance with
shareholders' authorities, when re-issued,Treasury shares may be sold at a 
discount to NAV provided it is narrower than when they were acquired. Amongst 
other things, depending on the number of shares available at the time, the 
Company may re-issue Treasury shares to ensure there are sufficient shares 
available for the Company's Dividend Reinvestment Plan.


For the second time in three years, the 2009 Annual Report & Accounts for
Baronsmead VCT 3 won the AIC's best report for the VCT sector. `The Judges
found this report and accounts interesting and informative, with clear
objectives and a straightforward statement from the Chairman. Details of new
and underlying holdings were viewed positively as was the addition of investor
case studies.'

Following the split in 2005 from its former parent F&C Asset Management plc,
ISIS EP LLP later assumed responsibility for the provision of Company Secretarial 
services. With effect from 1 March 2010 ISIS has engaged Capita Sinclair Henderson 
Limited ("CSH") to provide this service on its behalf, although ISIS continues to 
remain legally responsible and is the named Company Secretary. CSH has a long 
history of providing such services to investment companies both under the current 
owners Capita Group plc and previously as Sinclair Henderson Limited.


The Manager, in conjunction with our trade association, the AIC and other VCT
Managers, has worked hard over many years to inform HMRC and HM Treasury of the
positive economic impact from unquoted private equity backed companies.

The resulting AIC report "Supporting enterprise and growth: the role of Venture
Capital Trusts" published in March 2010 is based on evidence submitted by
fifteen VCT Managers and has helped the Government understand the economic
return to the state, generated from the investment made in VCTs through
providing tax relief. Most notably, it states "of the 303 investee companies who 
provided data, the net employment impact since VCT investment has been a 48 per cent 
increase in the total workforce to over 25,402 employees." The percentage
increase in employment was slightly higher for the twenty-four companies from
within the Baronsmead portfolios that were included in the survey.

The changes in VCT legislation commented on in the 22 June 2010 Budget had in
fact been announced a year earlier but will only probably be enacted for the fiscal 
year starting on 6 April 2011.


The unquoted portfolio is demonstrating good resilience during the current
period of economic uncertainty that will take time to dissipate as the overhang
of government debt is digested and hopefully suitably reduced.

Entrepreneurial companies such as those backed by Baronsmead VCT 3 are seen by
most commentators to be an important way to assist the process of economic rejuvenation. 
These companies have a good record of creating jobs often through considerable innovation 
and `doing it differently'.

We have the funds to invest in such situations. There is also a solid platform
within our portfolio companies for further growth and so there are more grounds for optimism 
than there have been over the last few years.

Anthony Townsend


12 August 2010

Table of Investments and Realisations

Investments in the six months to 30 June 2010

Number Company            Location    Nature of            Activity  Investment
                                      Business                          cost (£
1      Getting personal   Manchester  Consumer    On-line retail of         988
       Limited                        Markets     personalised                 
2      Inspired Thinking  Birmingham  Business    Marketing                 796
       Group Limited                  Services    services & work              
                                                  flow systems                 
3      Surgi C Limited    Birmingham  Healthcare  Distribution of         1,102
                                      & Education spinal implants              
       Follow on                                                               
1      Independent Living Alloa       Healthcare  Care at home              122
       Services Limited               & Education services                     
2      Nexus Vehicle      Pudsey      Business    Vehicle rental            500
       Holdings Limited               Services    provider to                  
1      Crew Clothing      London      Consumer    Branded clothing           51
       Company Limited*               Markets     retailer                     
2      Independent Living Alloa       Healthcare  Care at home              150
       Services Limited*              & Education services                     
       Total Unquoted investments                                         3,709
       AIM-traded & listed investments                                         
1      Bglobal plc        Darwen      Business    Smart Metering            176
2      Strategic Thought  Maidenhead  IT & Media  Risk management            35
       Group plc                                  software                     
       Follow on                                                               
1      Electric Word plc  London      IT & Media  Business to                31
2      Green Compliance   Cirencester Business    Blue collar               156
       plc                            Services    compliance                   
3      Jelf Group plc     Bristol     Financial   Financial                 210
                                      Services    solutions                    
4      Proactis Holdings  Wetherby    IT & Media  Procurement               219
       plc                                        Software                     
5      Tasty plc          London      Consumer    Restaurant                114
                                      Markets     Operator                     
       Total AIM-traded and listed                                          941
       Collective investment vehicles                                          
       Follow on                                                               
1      Wood Street                                                          500
       Investment Fund                                                         
       Total Collective investment                                          500
       Total investments in the                                           5,150

* Paper consideration from rolled up interest reinvested.

Realisations in the six months to 30 June 2010

                                                      31 Decem Realised         
                                               First      2009  profit/  Overall
                                          investment valuation  this     multiple
Number Company                                  date     £'000    £'000  return *
1      Active Assistance   Trade sale         Mar 08     1,155      414      2.8
2      Occam DM Ltd        Trade sale         Jul 04       121      340      1.5
       Total Unquoted real                               1,276      754         
       AIM traded & listed                                                      
1      Character Group plc Trade sale         Feb 08        88       44      0.9
2      INVU plc            Trade sale         May 07         1        0      0.0
3      Inverness Medical   Part sale          Aug 09        28        0      1.3
4      Advanced Computer   Part Sale          Jul 08       540       13      2.1
       Software plc                                                             
                                                           657       57         
       Written off                                                              
1      Payzone plc                            May 03         1      (1)        -
                                                             1      (1)         
       Total AIM-traded & listed                           658      56†         
       Total realisations in the period                  1,934      810         

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

†Proceeds of £5,000 were also received in respect of an investment, Interactive
Prospect Targeting plc, written off in a prior period. In addition, a loss of 
£9,000 was realised during the period on the redemption on 7 June 2010 of a UK
Treasury Gilt which had paid a rate of interest of 4.75 per cent.

Investment Portfolio

                                             31   30 June              % of       
                                       December                      Equity       
                                           2009      2010           held by   % of
                                 Book valuation valuation   % of Baronsmead   held
                                 cost                                           by
Company           Nature of     £'000   £'000 ╪     £'000    Net  VCT 3 plc    all
                  business                                assets            funds*
Nexus Vehicle     Business      2,367     2,511     3,975    6.4       12.6   57.4
Holdings          Services                                                        
Reed & Mackay     Business      1,211     3,145     3,697    6.0        9.5   40.0
Limited           Services                                                        
Crew Clothing     Consumer        984     1,300     1,962    3.2        5.7   24.1
Company Limited   markets                                                         
Quantix Limited   IT & Media    1,194     1,862     1,886    3.0       11.4   48.0
CableCom          IT & Media    1,381     1,848     1,854    3.0       10.6   48.0
Fisher Outdoor    Consumer      1,423     1,777     1,777    2.9       10.5   44.0
Leisure Holdings  Markets                                                         
CSC (World)       IT & Media    1,606     1,250     1,687    2.7        8.8   40.0
Carnell           Business      1,499     2,639     1,663    2.7        8.3   37.5
Contractors       Services                                                        
Independent       Healthcare &  1,073     1,566     1,637    2.6       16.2   68.1
Living Services   Education                                                       
Kafevend Holdings Consumer      1,252     1,445     1,583    2.5       15.8   66.5
Limited           Markets                                                         
Credit Solutions  Financial     1,032     1,127     1,128    1.8        8.9   35.0
Limited           Services                                                        
MLS Limited       IT & Media      781     1,138     1,126    1.8        5.3   22.5
Surgi C Limited   Health Care   1,102         -     1,102    1.8        9.8   42.5
                  & Education                                                     
Playforce         Business      1,033     1,106     1,039    1.7        9.7   44.0
Holdings Limited  Services                                                        
Getting Personal  Consumer        988         -       988    1.6        8.3   37.5
Limited           Markets                                                         
Inspired Thinking Business        796         -       796    1.3        5.0   22.5
Group Limited     Services                                                        
Empire World      Business      1,297       658       707    1.1          †      †
Trade Limited     Services                                                        
TVC Group Limited IT & Media    1,233       341       601    1.0       13.0   59.3
Xention Discovery Healthcare &    893       183       160    0.2        3.3    5.6
Kidsunlimited     Business        113       113       113    0.2        0.0    0.0
Group Limited     Services                                                        
Total Unquoted                 23,258    24,009    29,481   47.5                  
IDOX plc          IT & Media    1,038     1,136     1,220    2.0        3.3    9.7
Green Compliance  Business        406       500       750    1.2        2.6   14.4
plc               Services                                                        
Murgitroyd plc    Business        319       712       659    1.1        3.1    6.2
WIN plc           IT & Media      413       374       608    1.0        4.3   19.0
Advanced Computer IT & Media      263     1,081       564    0.9        0.4    2.2
Software plc                                                                      
Brulines Holdings Business        646       715       564    0.9        1.8    9.6
plc               Services                                                        
Proactis Holdings IT & Media      619       307       478    0.8        5.4   26.5
Jelf Group plc    Financial       761       235       463    0.7        1.4    6.3
Begbies Traynor   Financial       231       607       328    0.5        0.6    2.5
Group plc         Services                                                        
Interquest Group  Business        310       259       304    0.5        1.8    7.2
plc               Services                                                        
Mount Engineering Business        385       275       302    0.5        2.3   13.4
plc               Services                                                        
Electric Word plc IT & Media      267       247       293    0.5        3.1   22.3
Tasty plc         Consumer        470       161       291    0.5        2.5   17.1
Kiotech           Healthcare &    275       298       275    0.4        2.2   15.8
International plc Education                                                       
Ffastfill plc     IT & Media      251       297       260    0.4        0.9    6.5
Vero Software plc IT & Media      300       181       237    0.4        3.7   14.3
Craneware plc     IT & Media       71       184       223    0.3        0.2    1.1
Dods (Group) plc  IT & Media      541       158       216    0.3        1.4    4.4
IS Pharma plc     Healthcare &    246       239       198    0.3        1.0    5.9
Adventis Group    Business        361       267       193    0.3        3.1   20.7
plc               Services                                                        
Stagecoach        Consumer        419       194       189    0.3        4.5    9.1
Theatre Arts plc  Markets                                                         
EG Solutions plc  IT & Media      375       101       172    0.3        3.1   14.2
Sanderson Group   IT & Media      387       132       170    0.3        1.8    6.9
Quadnetics Group  Business        296       162       161    0.3        0.6    2.1
plc               Services                                                        
Bglobal plc       Business        176         -       158    0.3        0.5    2.7
Driver Group plc  Business        438       294       156    0.2        2.3   10.4
Praesepe plc      Consumer        525       185       155    0.2        0.7    3.8
Plastics Capital  Business        473       184       142    0.2        1.8   10.0
plc               Services                                                        
Autoclenz         Business        400       122       122    0.2        3.1   12.3
Holdings plc      Services                                                        
Cohort plc        Business        179       138       118    0.2        0.3    1.4
Real Good Food    Consumer        540        17       114    0.2        0.6    2.3
Company (The) plc Markets                                                         
Prologic plc      IT & Media      310       124       103    0.2        4.1   15.0
Brainjuicer Group IT & Media       50        59        73    0.1        0.4    1.9
Colliers CRE plc  Financial       470        78        61    0.1        0.3    0.8
Marwyn Value      Financial        64        62        60    0.1        1.5    6.9
Investors plc     Services                                                        
STM Group plc     Financial       140        58        49    0.1        0.5    3.8
Clarity Commerce  IT & Media       50        40        46    0.1        0.3    6.2
Solutions plc                                                                     
Tangent           Business        180        73        45    0.1        0.8    4.7
Communications    Services                                                        
Strategic Thought IT & Media       35         -        35    0.1        0.4    2.1
Group plc                                                                         
Zoo Digital Group IT & Media      584        15        30    0.0        0.3    0.9
Mission Marketing IT & Media      190        35        14    0.0        0.2    0.7
Group (The) plc                                                                   
Total AIM                      14,454    10,306    10,599   17.1                  
Vectura Group plc Healthcare &    771     1,208       720    1.2        0.5    1.3
Chime             IT & Media      369       372       302    0.5        0.2    1.5
Total Listed                    1,140     1,580     1,022    1.7                  
New York Stock Ex                                                                 
Inverness Medical Healthcare &    157       224       136    0.2        0.0    0.1
Inc.              Education                                                       
Total New York                    157       224       136    0.2                  
Stock Exchange                                                                    
Interest bearing                                                                  
UK T-Bill 06/09/                5,995         -     5,995    9.7                  
UK T-Bill 05/07/                4,498         -     4,498    7.3                  
BlackRock Cash                  5,700     5,700     5,700    9.2                  
Market OEIC                                                                       
JP Morgan Cash                  1,200         -     1,200    1.9                  
Market OEIC                                                                       
Total interest                 17,393     5,700    17,393   28.1                  
Wood Street                     1,025       526     1,005    1.6                  
Investment Fund                                                                   
Total collective                1,025       526     1,005    1.6                  
Total investments              57,427    42,345    59,636   96.2                  
Net current as                                      2,365    3.8                  
Net assets                                         62,001  100.0                  

╪ The total investment valuation at 31 December 2009 per the table above does
not agree to the audited accounts due to purchases and sales since that date.

* All funds managed by the same investment manager, ISIS EP LLP, including
Baronsmead VCT 3.

† Following a restructuring, the effective ownership percentage is dependent on
final exit proceeds.

AIM, Listed and NYSE Portfolio Concentration Analysis as at 30 June 2010       
                                                                           % of
Investment ranking           Book cost           Valuation               Quoted
by valuation                     £'000               £'000            Portfolio
Top Ten                          5,467               6,354                 54.0
11-20                            3,239               2,703                 23.0
21-30                            3,696               1,694                 14.4
30+                              3,349               1,006                  8.6
Total                           15,751              11,757                100.0

Independent Review Report to Baronsmead VCT 3 plc


We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 
June 2010 which comprises the Income Statement, Reconciliation of Movement 
in Shareholders' Funds, Balance Sheet and Statement of Cash Flows and the 
related explanatory notes. We have read the other information contained in 
the half-yearly financial report and considered whether it contains any 
apparent misstatements or material inconsistencies with the information in 
the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules (``the DTR'') of the UK's Financial Services Authority
(``the UK FSA''). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with UK Accounting Standards and applicable law 
(UK Generally Accepted Accounting Practice). The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with the Statement Half-Yearly Financial Reports as 
issued by the UK Accounting Standards Board.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing 
Practices Board for use in the UK. A review of interim financial information 
consists of making enquiries, primarily of persons responsible for financial 
and accounting matters, and applying analytical and other review procedures. 
A review is substantially less in scope than an audit conducted in accordance 
with International Standards on Auditing (UK and Ireland) and consequently 
does not enable us to obtain assurance that we would become aware of all 
significant matters that might be identified in an audit. Accordingly, we do 
not express an audit opinion.


Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly 
financial report for the six months ended 30 June 2010 is not prepared, 
in all material respects, in accordance with the Statement Half-Yearly Financial 
Reports as issued by the UK Accounting Standards Board and the DTR of the UK FSA.

Simon Pashby

for and on behalf of

KPMG Audit Plc

Chartered Accountants


12 August 2010

Responsibility statement of the Directors in respect of the half-yearly 
financial report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance
with the Statement `Half-yearly Financial reports' issued by the UK Accounting 
Standards Board;

• the Chairman's Statement (constituting the interim management report)
includes a fair review of the information required by DTR 4.2.7R of the 
Disclosure and Transparency Rules, being an indication of important events that 
have occurred during the first six months of the financial year and their impact 
on the condensed set of financial statements;

• the Statement of Principal Risks and Uncertainties below is a fair review of
the information required by DTR 4.2.7R being a description of the principal
risks and uncertainties for the remaining six months of the year; and

• the financial statements include a fair review of the information required by
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party 
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related party 
transactions described in the last annual report that could do so.

By Order of the Board,

Anthony Townsend


12 August 2010

Unaudited Income Statement

For the six months to 30 June 2010

                     Six months to 30 June Six months to 30 June   Year to 31 December  
                             2010                  2009                   2009*         
                     Revenue Capital Total Revenue Capital Total Revenue Capital   Total
                       £'000  £'000  £'000   £'000   £'000 £'000   £'000   £'000   £'000 
Unrealised gains on        -  1,019  1,019       -   2,438 2,438       -   2,434   2,434
Realised gains/            -    806    806       -     (15)  (15)      -   1,350   1,350
(losses) on                                                                             
Income                 1,287      -  1,287     678       -   678   1,513       -   1,513
VAT                        -      -      -      (2)     (6)   (8)     (2)     (6)     (8)
Investment              (182)  (547)  (729)   (170)   (510) (680)   (339) (1,016) (1,355)
management fee                                                                          
Other expenses          (181)     -   (181)   (166)      -  (166)   (347)      -    (347)
Profit on ordinary       924  1,278   2,202    340   1,907  2,247    825   2,762   3,587
activities before                                                                       
Taxation on ordinary    (224)   224       -    (54)     54     -    (167)    167      -
Profit on ordinary       700  1,502   2,202    286   1,961  2,247    658   2,929   3,587
activities after tax                                                                    
Return per ordinary    1.19p  2.55p   3.74p   0.53p  3.65p  4.18p   1.22p  5.41p   6.63p
share: Basic                                                                            

* These figures are audited.

Unaudited Reconciliation of Movement in Shareholders' Funds

For the six months to 30 June 2010

                                                   Six        Six              
                                             months to  months to       Year to
                                               30 June    30 June   31 December
                                                  2010       2009          2009
                                                 £'000      £'000        £'000*
Opening shareholders' funds                     52,878     55,136        55,136
Profit for the period                            2,202      2,247         3,587
Increase in share capital in issue               8,165      1,524         1,524
Purchase of shares for treasury                   (801)      (816)         (821)
Dividends paid                                        -    (2,415)+      (6,483)^
Expenses of share issue                           (443)       (80)          (65)
Closing shareholders' funds                     62,001     55,596        52,878

* These figures are audited.

+ Includes payment of 2008 final dividend.

^ Includes payment of 2008 final dividend and 2009 first and second interim


1. The unaudited interim results which cover the six months to 30 June 2010
have been prepared in accordance with applicable accounting standards and
adopting the accounting policies set out in the statutory accounts of the 
Company for the period to 31 December 2009.

2. Return per share is based on a weighted average of 58,829,168 ordinary
shares in issue (30 June 2009 - 53,697,653, 31 December 2009 - 54,121,721).

3. Earnings for the first six months to 30 June 2010 should not be taken as a
guide to the results of the full financial year.

4. During the six months to 30 June 2010 the Company issued, pursuant to the
offer for subscription, 5,601,586 ordinary shares at an offer price of 102.5p
per share and 2,318,712 ordinary shares at an offer price of 104.5p which
raised £8,165,000, before costs. During this period the Company purchased
910,000 ordinary shares to be held in Treasury at a cost of £801,000. At 30
June 2010 the Company holds 6,377,317 ordinary shares in Treasury. Excluding
Treasury shares, there were 61,242,534 ordinary shares in issue at 30 June 2010
(30 June 2009 - 54,232,236, 31 December 2009 - 54,232,236).

5. The interim dividend of 3.0 pence per ordinary share (1.1 pence revenue and
1.9 pence capital) will be paid on 15 September 2010 to shareholders on the
register on 20 August 2010. The ex-dividend date is 18 August 2010.

6. The financial information contained in this Half-yearly Financial Report
does not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The information for the year to 31 December 2009 has been
extracted from the latest published audited financial statements. The audited
financial statements for the year to 31 December 2009, which were unqualified,
have been filed with the Registrar of Companies. No statutory accounts in
respect of any period after 31 December 2009 have been reported on by the
Company's auditors or delivered to the Registrar of Companies.

7. Copies of the Half-yearly Financial Report have been mailed to shareholders
and are available from the Registered Office of the Company at 100 Wood Street,
London EC2V 7AN.

Unaudited Balance Sheet

As at 30 June 2010

                                                As at       As at         As at
                                              30 June     30 June   31 December
                                                 2010        2009          2009
                                               £'000       £'000         £'000*
Fixed Assets                                                                   
Unquoted investments                           29,481      28,021        25,285
Traded on AIM                                  10,599      10,866        10,394
Listed on FTSE Small Cap                        1,022       1,087         1,580
Traded on NYSE                                    136          -            224
Collective Investment Vehicle                   1,005         516           526
Interest bearing securities                    17,393      12,864        12,956
                                               59,636      53,354        50,965
Current assets                                                                 
Debtors                                           254         236           349
Cash at bank and on deposit                     2,613       2,490         2,033
                                                2,867       2,726         2,382
Creditors (amounts falling due within           (502)       (484)          (439)
one year)                                                                      
Net current assets                              2,365       2,242         1,943
Total assets less current liabilities          62,001      55,596        52,908
Creditors (amounts falling due after                -           -           (30)
one year)                                                                      
Net assets                                     62,001      55,596        52,878
Capital and reserves                                                           
Called-up share capital                         6,762       5,970         5,970
Share premium account                          15,010       8,065         8,080
Capital redemption reserve                     10,862      10,862        10,862
Revaluation reserve                             2,209       1,630         1,393
Capital reserve                                26,156      28,800        26,271
Revenue reserve                                 1,002         269           302
Equity shareholders' funds                     62,001      55,596        52,878
                                                As at       As at         As at
                                              30 June     30 June   31 December
                                                 2010        2009         2009*
Net asset value per share                     101.24p     102.51p        97.50p
Number of ordinary shares in issue         61,242,534  54,232,236    54,232,236
Treasury net asset value per share            100.08p     101.49p        96.47p
Number of ordinary shares in issue         61,242,534  54,232,236    54,232,236
Number of ordinary shares held in           6,377,317   5,467,317     5,467,317
Number of listed ordinary shares           67,619,851  59,699,553    59,699,553

*These figures are audited.

Unaudited Statement of Cash Flows

For six months to 30 June 2010

                                           Six months   Six months         Year
                                                   to           to           to
                                              30 June      30 June  31 December
                                                 2010         2009         2009
                                                £'000        £'000       £'000*
Net cash inflow from operating activities         499        1,123          955
Capital expenditure and financial              (6,846)       1,423        5,195
Equity dividends paid                               -       (2,415)      (6,483)
Net cash (outflow) / inflow before             (6,347)         131         (333)
Net cash inflow from financing                  6,927          627          634
Increase in cash                                  580          758          301
Reconciliation of net cash flow to                                             
movement in net cash                                                           
Increase in cash                                  580          758          301
Opening net cash                                2,033        1,732        1,732
Net cash at end of period                       2,613        2,490        2,033
Reconciliation of operating profit before taxation to net cash flow from       
operating activities                                                           
Profit on ordinary activities before           2,202         2,247        3,587
Unrealised gains on investments               (1,019)       (2,438)      (2,434)
Realised (gains)/losses on investments          (806)           15       (1,350)
Changes in working capital and other             122         1,299        1,152
non-cash items                                                                 
Net cash inflow from operating activities        499         1,123          955

*These figures are audited.

Principal Risks and Uncertainties

The Company's assets consist of equity and fixed interest investments, cash and
liquid resources. Its principal risks are therefore market risk, credit risk
and liquidity risk. Other risks faced by the Company include economic, loss of
approval as a Venture Capital Trust, investment and strategic, regulatory,
reputational, operational and financial risks. These risks, and the way in which 
they are managed, are described in more detail under the heading Principal risks, 
risk management and regulatory environment within the Business Review and Notes 
in the Company's Annual Report and Accounts for the year to 31 December 2009. 
The Company's principal risks and uncertainties have not changed materially since 
the date of that report.

Related Parties

ISIS EP LLP (`the Manager') manages the investments of the Company. The Manager
also provides or procures the provision of secretarial, accounting,
administrative and custodian services to the Company. Under the management agreement, 
the Manager receives a fee of 2.5 per cent per annum of the net assets of the Company. 
This is described in more detail under the heading Management within the Report of the 
Directors in the Company's Annual Report and Accounts for the year to 31 December 2009. 
During the period the Company has incurred management fees of £729,000 and secretarial
and accounting fees of £53,000 payable to the Manager.

Going Concern

After making enquiries, and bearing in mind the nature of the Company's
business and assets, the Directors consider that the Company has adequate resources 
to continue in operational existence for the foreseeable future. In arriving at this 
conclusion the Directors have considered the liquidity of the Company and its ability 
to meet obligations as they fall due for a period of at least twelve months from the
date that these financial statements were approved. As at 30 June 2010 the Company held 
cash balances, investments in UK Gilts and Money Market Funds with a combined value of 
£20,006,000. Cash flow projections have been reviewed and show that the Company has 
sufficient funds to meet both its contracted expenditure and its discretionary cash 
outflows in the form of the share buyback programme and dividend policy. The Company has 
no external loan finance in place and is therefore not exposed to any gearing covenants.

Shareholder Information and Contact Details


Shareholders should contact the following regarding queries:

Basic contact details, ie change of address, joining the DRIP, queries re:
share and tax certificates and bank mandate forms: Computershare 
(Company Registrar)

Investors who hold ordinary shares in their own name can check their holdings
on our Registrar's website Please note that to access this facility investors
will need to quote the reference number shown on their share certificate.

Alternatively, by registering for the Investors' Centre facility on
Computershare's website, investors can view details of all their holdings for
which Computershare is Registrar, as well as access additional facilities and
documentation. Please see for further information.

Shareholder Helpline

Tel: 0870 703 0137 (Calls charged at national rate).

The Shareholder Helpline is available on UK business days between Monday and
Friday, 8.30 am to 5 pm. The helpline contains automated self-service
functionality which is available 24 hours a day, 7 days a week. Using your
Shareholder Reference Number which is available on your share certificate or
dividend tax voucher, our self service functionality will enable you achieve the 
following things:

Automated Functions

- confirm the latest share price

- confirm your current share holding balance

- confirm payment history

- order a Change of Address, Dividend Bank Mandate or Stock Transfer Form

e-mail: [email protected]

For information on asset allocations, dividend policies, investment process,
DRIP mechanism, share price movements, the share price discount and selling shares:

ISIS EP LLP (the Investment Manager) at

e-mail: [email protected]; [email protected]

Tel: Michael Probin 020 7506 5796; Margaret Barff 020 7506 5630.

The Baronsmead website ( links to helpful sites,
contains details of the team and some case studies of investments.

Share Price

The Company's shares are listed on the London Stock Exchange. The mid-price of
the Company's shares is given daily in the Financial Times in the Investment
Companies section of the London Share Service. Share price information can also be 
obtained from many financial websites.

Trading Shares

The Company's shares can be bought and sold in the same way as any other quoted
company on the London Stock Exchange via a stockbroker.

The market makers in the shares of Baronsmead VCT 3 plc are:

Matrix Corporate Capital (the Company's broker) 020 3206 7000                  
Singer Capital Markets                          020 3205 7500                  
Winterflood                                     020 3100 0251                  

Financial Calendar

November 2010          Quarterly fact sheet to 30 September 2010               
February 2011          Results for the year to 31 December 2011 announced and  
                       annual report and accounts sent to shareholders         
May 2011               Annual General Meeting                                  

Corporate Information

Directors                               Registrar and Transfer Office          
Anthony Townsend (Chairman)±            Computershare Investor Services PLC    
Andrew Karney†                          PO Box 82                              
Gillian Nott OBE*                       The Pavilions                          
Robert Owen                             Bridgwater Road                        
                                        Bristol BS99 6ZZ                       
Secretary                               Tel: 0870 703 0137                     
ISIS EP LLP                                                                    
Registered Office                       Matrix Corporate Capital LLP           
100 Wood Street                         One Vine Street                        
London EC2V 7AN                         London W1J 0AH                         
Investment Manager                      Auditors                               
ISIS EP LLP                             KPMG Audit Plc                         
100 Wood Street                         Saltire Court                          
London EC2V 7AN                         20 Castle Terrace                      
                                        Edinburgh EH1 2EG                      
Investor Relations                                                             
Michael Probin                          Solicitors                             
020 7506 5796                           Norton Rose                            
                                        3 More London Riverside                
Registered Number                       London SE1 2AQ                         
                                        VCT Status Adviser                     
                                        PricewaterhouseCoopers LLP             
* Chairman of the Audit Committee       1 Embankment Place                     
† Senior Independent Director           London WC2N 6RH                        
± Chairman of the Nomination Committee                                         
Remuneration and Management Engagement                                         

Additional Information

The information provided in this report has been produced in order for
shareholders to be informed of the activities of the Company during the period
it covers. ISIS EP LLP does not give investment advice and the naming of
companies in this report is not a recommendation to deal in them.

Baronsmead VCT 3 plc is managed by ISIS EP LLP which is Authorised and
regulated by the FSA. Past performance is not necessarily a guide to future 
performance. Stock markets and currency movements may cause the value of 
investments and the income from them to fall as well as rise and investors 
may not get back the amount they originally invested. Where investments are 
made in unquoted securities and smaller companies, their potential volatility 
may increase the risk to the value of, and the income from, the investment.


a d v e r t i s e m e n t