Baronsmead 2vt Regulatory News (BMD)

28 Jan 2008 14:31

Baronsmead VCT 3 PLC28 January 2008 To: RNSFrom: Baronsmead VCT 3 plcDate: 28 January 2008 Investment Objective To achieve long-term capital growth and generate tax-free dividends for privateinvestors. Audited Preliminary Results - Year Ended 31 December 2007 + 0.9% NAV per ordinary share increased to 127.94p before deduction ofdividends. After payment of dividends totalling 7.5p per ordinary share in theyear to 31 December 2007, the NAV was 120.44p + 8.3% NAV per C share increased to 107.15p before deduction of dividends. After dividends totalling 4p in the year, the NAV was 103.15p + 71% NAV total return since launch in 2001 6.7% Dividend yield, tax-free to qualifying ordinary shareholders(gross equivalent yield for a higher rate taxpayer is 10%) based on 7.5pdividends paid divided by the mid ordinary share price of 111.5p at the year end The Chairman, Mark Cannon Brookes said: "Baronsmead VCT 3 remained steady during 2007 with value growth from theunquoted portfolio offset by the fall in the AiM portion of the portfolio,particularly exacerbated by the sharp fall in UK economic confidence in thesecond half of 2007. Five profitable unquoted company exits demonstrated theability of the private equity disciplines to generate significant uplifts invalue. With ordinary share dividends paid of 7.5p, the dividend yield grew to 6.7 percent, which is tax-free to most ordinary shareholders. The hope is to sustainthis across the enlarged ordinary share capital following the issue ofapproximately 22 million new ordinary shares in January 2008 on conversion ofthe C shares. RESULTS In the year to 31 December 2007, the Net Asset Value (NAV) per ordinary shareincreased by 0.9 per cent from 126.77p to 127.94p before deduction of dividends.Two interim dividends were paid in September (3p) and December 2007 (4.5p) perordinary share. The C share capital raised in the five month period to 3 January 2006 wasconverted into ordinary shares on 28 January 2008 at a NAV of 103.15p whichresulted in 8,564 new ordinary shares being issued for every 10,000 shares held.Two interim dividends of 2p each were paid in September and December 2007.Since their launch, the NAV total return for the C shares to 31 December 2007 is16 per cent. At 31 December 2007, the respective share pools held different portfolios ofcompanies hence the difference in the performance of the NAVs. Over the lasttwo years, as a result of the ordinary share pool being fully invested most ofthe unquoted investments were allocated to the C share pool and many of thesehave subsequently increased in value such as Fisher Outdoor Leisure and EmpireWorld Trade. Additionally, the newer AiM investments allocated to the C sharepool have been less affected by the market down turn. This has impacted therespective returns during the course of the year. LONG TERM PERFORMANCE The two standard measurements for monitoring investment performance are basedeither on the NAV plus dividends paid (known as "NAV total return") or themovement in share price plus dividends paid (known as "share price totalreturn"). The latter is particularly relevant to investors who buy in thesecondary market. Other measures include dividend yield and cash returned toshareholders. These different measures of performance are described below andmost are stated before the inclusion of VCT tax reliefs. These reliefs weredesigned to redress both the VCT constraints as well as the higher risks thatrelate to smaller unquoted and AiM-traded companies. NAV total return to ordinary shareholders since launch in January 2001 amountsto 71 per cent which represents an annual compound growth rate of 8.0 per centand is stated net of all running costs. Share price total return in the last five years has been 75 per cent, whichrepresents an annualised tax-free return of 12 per cent. This ranks BaronsmeadVCT 3 as seventh out of 63 VCTs (source Trustnet - 25 January 2008) over thisperiod. The results set out above compare favourably with other VCTs and fullercomparisons have recently been facilitated by the Association of InvestmentCompanies (AIC) who publish monthly data on their website, www.theaic.co.uk. Dividends and yield. By 31 December 2007 dividends totalling 33.3p had been paidto founder shareholders over the last seven years. Based on the mid share priceof 111.5p at the period end, the dividend yield is currently 6.7 per centtax-free for UK private investors. The Board's intention is to sustain thisrecord in the medium term but its continuance will depend on the level ofprofitable realisations and it cannot be guaranteed. Cash returned to shareholders arises from dividends paid and the initial incometax relief that qualifying shareholders can retain beyond the initial holdingperiod. For subscribers in 2001, they will have received 33.3p plus up to 20pinitial income tax relief while subscribers for C shares have received 7pdividends and up to 40p income tax relief (as long as these shares are retainedfor more than three years). The bid price for the ordinary and C shares priorto conversion at 31 December 2007 were 110p and 90p respectively. THE PORTFOLIO The portfolio increased to 72 investments with fifteen new investments made andeleven investments fully realised during the period. New investments totalled£7.6 million across three new unquoted and twelve AiM-traded investees, much ofwhich was invested from the C share pool as the ordinary share capital wasrelatively fully invested. The split by value of the portfolio is approximately63: 37 between unquoted and AiM/full list investments and the largestinvestments in each category are 3.5 per cent and 2.3 per cent of NAV. Six VCT tests relating to the running of Baronsmead VCT 3 have to be, and were,met throughout the period to 31 December 2007. The most significant of thesetests is the need to ensure at least 70 per cent by value of its investments isinvested in VCT qualifying investments. At the period end, over 75 per cent ofthe share capital raised (net of launch costs) prior to 31 December 2005 wasinvested in such investments. The 'direction of travel' or relative health of portfolio companies is measuredquarterly in terms of profitability as well as other non-financial benchmarks.At the period end 83 per cent of the portfolio companies were reporting higheror steady profits and few at this stage appear to be affected by the creditcrunch. Investment sales totalled £12.6 million realising significant net profits of£7.3million, which represents a creditable multiple on cost of 2.4 times. MAKING FURTHER INVESTMENTS IN BARONSMEAD VCT 3 The record of share price total returns and the availability of ISA-style taxreliefs illustrate some of the merits for UK private investors of acquiringexisting shares in Baronsmead VCT 3. The Manager sent a guide to allshareholders in September 2007 titled 'How to acquire additional shares in thegeneralist Baronsmead VCTs', which provides more information about how topurchase or subscribe for more shares and how the different VCT tax reliefsapply. Following revisions to VCT legislation in the Finance Acts 2006 and 2007 thedetailed way in which new share capital can be deployed has become clearer andas a consequence the Board is able to increase the financial planningopportunities available to ordinary shareholders by offering them the ability tosubscribe for new 'top up' shares. In August 2007 top-up offers of up to €2.5m (approximately £1.7 million) weresent to ordinary and C shareholders. The offers closed on 28 September 2007.The C share offer was over-subscribed by 4.2 per cent and the ordinary shareoffer raised approximately £0.7 million leaving the capacity to raise anadditional €1.5 million. As a result, a "top-up" offer to raise up to €1.5million has been sent to the enlarged group of ordinary shareholders. In the year to 31 December 2007, the Dividend Reinvestment Plan (DRIP) acquireda total of 655,715 ordinary shares for 391 ordinary shareholders (some 22.5 percent). This scheme is now available to shareholders who previously held Cshares and allows shareholders to re-invest their dividends in existing ordinaryshares via in the market. Shares acquired through the DRIP count towards anindividual's annual limit for VCT investment and qualifying investors benefitfrom tax free dividends and capital gains. However, no upfront income taxrelief is available on shares acquired through the DRIP. The C shareholderswere sent the DRIP brochure and application form following conversion of their Cshares and these are generally available if shareholders contact the Registrar. NEW LISTING REGULATION Listed companies are now required to state their investment policies in full andthis is set out in the Annual Report. In this way existing and prospectiveshareholders can understand the investment opportunity which the Company offersand identify how risk spreading is achieved. The Board reviews the investmentpolicy on a regular basis to ensure that it remains appropriate in theprevailing market conditions. New Disclosure and Transparency rules were introduced earlier in 2007 and as aresult interim management statements will now be produced following the 31 Marchand 30 September quarter ends. The two statutory reports and two quarterly factsheets will continue to be published by Baronsmead VCT 3 and sent direct toshareholders either electronically or by post, or published on the Company'swebsite, www.baronsmeadvct3.co.uk . ANNUAL GENERAL MEETING The Company now has approximately 3,000 ordinary shareholders and the Board'stask is to ensure that it meets and understands their requirements. The AGMwill be held on 19 March 2008 at 11 a.m. OUTLOOK The UK stock market is currently anticipating more difficult economic conditionsand further downgrades in the ratings of smaller quoted companies are possible.Unquoted companies are likely to be less affected but within both categoriesthis may present more propitious buying opportunities for which Baronsmead VCT 3has the necessary cash resources. There appears to be resilience in the trading of many of the AiM investees, butin weaker markets the ratings of smaller and less liquid companies are bound tosuffer. However the existing portfolio appears healthy enough to sustainperformance from which the hope is to maintain the dividend record." Enquiries: David Thorp 0207 506 5631 ISIS EP LLP Rhonda Nicoll 0131 718 1000 F&C Asset Management plc Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2007 Ordinary Shares Revenue Capital Total £'000 £'000 £'000 Unrealised losses on investments - (400) (400)Realised gains on investments - 564 564Income 1,548 - 1,548Investment management fee (304) (912) (1,216)Other expenses (234) - (234) Profit/(loss) on ordinary activities before taxation 1,010 (748) 262 Tax on ordinary activities (197) 237 40 Profit/(loss) on ordinary activities after taxation 813 (511) 302 Return per ordinary share: 2.53p (1.59)p 0.94p Audited Reconciliation of Movements in Shareholders' Funds Ordinary Shares 2007 £'000 Opening shareholders' funds 42,321Profit for the year 302Increase in share capital in issue 680Purchase of shares for Treasury or cancellation (759)Dividends paid (3,698) Closing shareholders' funds 38,846 Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2007 C Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,493 1,493Realised gains on investments - 309 309Income 1,021 - 1,021Investment management fee (153) (459) (612)Other expenses (247) - (247) Profit on ordinary activities before taxation 621 1,343 1,964 Tax on ordinary activities (174) 134 (40) Profit on ordinary activities after taxation 447 1,477 1,924 Return per C share: 1.83p 6.05p 7.88p Audited Reconciliation of Movements in Shareholders' Funds C Shares 2007 £'000 Opening shareholders' funds 24,227Profit for the year 1,924Increase in share capital in issue 1,696Dividends paid (1,472) Closing shareholders' funds 26,375 Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2007 Total Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,093 1,093Realised gains on investments - 873 873Income 2,569 - 2,569Investment management fee (457) (1,371) (1,828)Other expenses (481) - (481) Profit on ordinary activities before taxation 1,631 595 2,226 Tax on ordinary activities (371) 371 - Profit on ordinary activities after taxation 1,260 966 2,226 Audited Reconciliation of Movements in Shareholders' Funds Total 2007 £'000 Opening shareholders' funds 66,548Profit for the year 2,226Increase in share capital in issue 2,376Purchase of shares for Treasury or cancellation (759)Dividends paid (5,170) Closing shareholders' funds 65,221 Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2006 Ordinary Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 6,884 6,884Realised gains on investments - 779 779Income 1,170 - 1,170Investment management fee (309) (2,077) (2,386)Other expenses (230) - (230) Profit on ordinary activities before taxation 631 5,586 6,217 Tax on ordinary activities (65) 65 - Profit on ordinary activities after taxation 566 5,651 6,217 Return per ordinary share: 1.73p 17.24p 18.97p Audited Reconciliation of Movements in Shareholders' Funds Ordinary Shares 2006 £'000 Opening shareholders' funds 39,226Profit for the year 6,217Increase in share capital in issue 365Purchase of shares for Treasury (1,504)Dividends paid (1,983) Closing shareholders' funds 42,321 Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2006 C Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,509 1,509Realised gains on investments - 241 241Income 950 - 950Investment management fee (139) (775) (914)Other expenses (139) - (139) Profit on ordinary activities before taxation 672 975 1,647 Tax on ordinary activities (199) 199 - Profit on ordinary activities after taxation 473 1,174 1,647 Return per C share: 1.97p 4.90p 6.87p Audited Reconciliation of Movements in Shareholders' Funds C Shares 2006 £'000 Opening shareholders' funds 17,022Profit for the year 1,647Increase in share capital in issue 5,804Cost of share premium conversion (6)Dividends paid (240) Closing shareholders' funds 24,227 Baronsmead VCT 3 plc Audited Income Statement Year to 31 December 2006 Total Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 8,393 8,393Realised gains on investments - 1,020 1,020Income 2,120 - 2,120Investment management fee (448) (2,852) (3,300)Other expenses (369) - (369) Profit on ordinary activities before taxation 1,303 6,561 7,864 Tax on ordinary activities (264) 264 - Profit on ordinary activities after taxation 1,039 6,825 7,864 Audited Reconciliation of Movements in Shareholders' Funds Total 2006 £'000 Opening shareholders' funds 56,248Profit for the year 7,864Increase in share capital in issue 6,169Cost of share premium conversion (6)Purchase of shares from Treasury (1,504)Dividends paid (2,223) Closing shareholders' funds 66,548 Baronsmead VCT 3 plc Audited Balance SheetAs at 31 December 2007 2007 2007 2007 Ordinary C Shares Shares Total £'000 £'000 £'000Fixed assets Traded on AiM 10,369 4,627 14,996Quoted on FTSE SmallCap 1,160 - 1,160Interest bearing securities 5,587 10,750 16,337 Unquoted investments 17,934 9,692 27,626 35,050 25,069 60,119 Net current assets 3,796 1,391 5,187 Total assets less current liabilities 38,846 26,460 65,306 Creditors due after one year - (85) (85) Net assets 38,846 26,375 65,221 Financed by: Shareholders' funds 38,846 26,375 65,221 Net asset value per share: Basic 120.44p 103.15p - Treasury 119.64p - - Ordinary shares in issue 32,253,521 25,570,331 -Listed ordinary shares 35,433,521 25,570,331 -Treasury shares 3,180,000 - Baronsmead VCT 3 plc Audited Balance SheetAs at 31 December 2006 2006 2006 2006 Ordinary C Shares Shares Total £'000 £'000 £'000Fixed assets Traded on AiM 15,080 3,352 18,432Quoted on FTSE SmallCap 600 - 600Interest bearing securities 3,989 14,882 18,871 Unquoted investments 22,718 5,115 27,833 42,387 23,349 65,736 Net current (liabilities)/assets (66) 878 812 Net assets 42,321 24,227 66,548 Financed by: Shareholders' funds 42,321 24,227 66,548 Net asset value per share: Basic 130.77p 100.95p - Treasury 129.66p - - Ordinary shares in issue 32,362,392 23,999,772 -Listed ordinary shares 35,092,392 23,999,772 -Treasury shares 2,730,000 - Baronsmead VCT 3 plc Summarised Audited Statement of Cash Flows For the year ended 31 December 2007 2007 2007 2007 Ordinary C Shares Shares Total £'000 £'000 £'000 Net cash outflow from operating activities (1,308) (144) (1,452)Capital expenditure and financial investment 7,065 179 7,244Equity dividends paid (3,698) (1,472) (5,170) Net cash inflow/(outflow) before financing 2,059 (1,437) 622Financing (79) 1,696 1,617 Increase in cash 1,980 259 2,239 Reconciliation of net cash flow to movement in netcash Increase in cash 1,980 259 2,239Opening cash position 1,251 1,081 2,332 Closing cash position 3,231 1,340 4,571 Reconciliation of net revenue before taxation to netcash outflow from operating activities 2007 2007 2007 Ordinary C Shares Shares Total £'000 £'000 £'000 Profit on ordinary activities before taxation 262 1,964 2,226Profit on realisation of investments (564) (309) (873)Unrealised losses/(gains) on investments 400 (1,493) (1,093)Increase in debtors (325) (67) (392)Decrease in creditors (1,081) (239) (1,320) Net cash outflow from operating activities (1,308) (144) (1,452) Baronsmead VCT 3 plc Summarised Audited Statement of Cash Flows For the year ended 31 December 2006 2006 2006 2006 Ordinary C Shares Shares Total £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (466) 150 (316)Capital expenditure and financial investment 2,906 (11,848) (8,942)Equity dividends paid (1,983) (240) (2,223) Net cash inflow/(outflow) before financing 457 (11,938) (11,481)Financing (1,139) 7,204 6,065 Decrease in cash (682) (4,734) (5,416) Reconciliation of net cash flow to movement in netcash Decrease in cash (682) (4,734) (5,416)Opening cash position 1,933 5,815 7,748 Closing cash position 1,251 1,081 2,332 Reconciliation of net revenue before taxation to netcash (outflow)/ inflow from operating activities 2006 2006 2006 Ordinary C Shares Shares Total £'000 £'000 £'000 Profit on ordinary activities before taxation 6,217 1,647 7,864Profit on realisation of investments (779) (241) (1,020)Unrealised gains on investments (6,884) (1,509) (8,393)Decrease/(increase) in debtors 97 (208) (111)Increase in creditors 883 461 1,344 Net cash (outflow)/inflow from operating activities (466) 150 (316) Notes 1. The audited results which cover the year to 31 December 2007 have beenprepared under UK Generally Accepted Accounting Practice (UK GAAP). Where presentational guidance set out in the Statement of Recommended Practice("SORP"), revised December 2005, for investment trusts issued by the Associationof Investment Companies ("AIC") in January 2003 is consistent with therequirements of UK GAAP, the Directors have sought to prepare the financialstatements on a basis compliant with the recommendations of the SORP. In order to better reflect the activities of a VCT and in accordance with theSORP, supplementary information which analyses the income statement betweenitems of a revenue and capital nature has been presented alongside the incomestatement. The Net Revenue is the measure the Directors believe appropriate inassessing the Company's compliance with certain requirements set out in Section274 of the Income Tax Act 2007. 2. There were 32,253,521 ordinary shares in issue at 31 December 2007 (31December 2006: 32,362,392). During the year the Company issued 541,129 ordinaryshares raising net proceeds of £680,000. The Company bought back 450,000ordinary shares during the year at a cost of £526,000 to be held in Treasury,with a further 200,000 ordinary shares bought back for cancellation at a cost of£233,000. The total number of ordinary shares listed at 31 December 2007 was35,433,521 (31 December 2006: 35,092,392). There were 25,570,331 C shares in issue at 31 December 2007 (31December 2006: 23,999,772). During the year the Company issued 1,570,559 Cshares raising net proceeds of £1,696,000. 3. Revenue and capital returns for the ordinary shares for the year to 31December 2007 are based on a weighted average of 32,133,709 (2006: 32,776,271)ordinary shares in issue during the year. Revenue and capital returns for the C shares for the year to 31December 2007 are based on a weighted average of 24,421,456 (2006: 23,966,316) Cshares in issue during the year. 4. Income for the year is derived from: 2007 2006 Total Total £'000 £'000 Dividend Income 402 417Fixed interest investment 1,973 1,466Deposit interest 194 237 2,569 2,120 5. These are not full accounts in terms of Section 240 of the CompaniesAct 1985. Full audited accounts for the year to 31 December 2006 have beenlodged with the Registrar of Companies. The annual report for the year to 31December 2007 will be sent to shareholders shortly and will then be availablefor inspection at the offices of ISIS EP LLP, 100 Wood Street, London, theregistered office of the Company. Both the audited accounts for the year to 31December 2007 and the year to 31 December 2006 contain unqualified auditreports. 6. The Annual General Meeting will be held on 19 March 2008 at 11am. 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