Baronsmead Vt Regulatory News (BVT)

Baronsmead Venture Trust plc

Half-Yearly report for the six months ended

31 March 2016

The Directors announce the unaudited half-yearly financial report for the six months to 31 March 2016.

Copies of the half-yearly report can be obtained from the following website: www.baronsmeadvcts.co.uk.

Our Investment Objective

Baronsmead Venture Trust 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 of Baronsmead Venture Trust aims to sustain a minimum annual dividend level at an average of 6.5p per ordinary share, mindful of the need to maintain net asset value. The ability to meet these twin objectives depends significantly on the level and timing of profitable realisations and cannot be guaranteed. There will be variations in the amount of dividends paid year on year.

Following final shareholder approval on 8 February 2016 Baronsmead VCT 2 plc (now renamed Baronsmead Venture Trust plc ("BVT")) acquired the assets of Baronsmead VCT plc ("BVCT") in consideration for the issue of New BVT Shares for BVCT shareholders. This is the first set of accounts since the two VCTs were combined and it is important to note the comparative prior year figures relate to the original Baronsmead VCT 2 plc.

Shareholder choice

The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in Baronsmead Venture Trust in ways that best suit their personal investment and tax planning requirements and 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 issue costs. This enables shareholders seeking additional investments to do so with taxation relief.

· 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.

· Buy back of shares | From time to time the Company buys its own shares through the market in accordance with its share price discount policy. Subject to certain conditions, the Company seeks to maintain a mid market share price discount of approximately 5 per cent to net asset value. In the six months to 31 March 2016, 1,780,000 shares were bought back representing 1.0 per cent of the shares in issue at 31 March 2016 at prices which represent an average 5.1 per cent discount to the latest published net asset value at the time the shares were bought back. By providing support to market pricing, this helps those shareholders who need to realise their investment.

· Secondary market | The Company's shares are listed on the London Stock Exchange and can be bought or sold by shareholders using a stockbroker or authorised share dealing service in the same way as shares of any other listed company. Approximately 252,000 shares were bought by investors in the Company's existing shares in the six months to 31 March 2016. 

Financial Headlines

· + 3.0% - Net asset value ("NAV") per share increased 3.0 per cent. to 105.59p in the 6 months to 31 March 2016 before the first interim dividend (3.5p) paid 18 December 2015.

· 363.5p - NAV total return to shareholders for every 100.0p invested at launch.

· 10.0p - Dividends totalled 10.0p in the 6 months to 31 March 2016, after the interim dividend of 3.5p paid 18 December 2015 and the second interim dividend of 6.5p payable 3 June 2016.

Cash Returned to Shareholders 

The table below shows the cash returned to shareholders that invested in Baronsmead Venture Trust plc (formerly known as Baronsmead VCT 2 plc) dependent on their subscription cost, including the income tax available to be reclaimed on the subscription.

* Includes 6.5p second interim dividend payable 3 June 2016.

** Share dividend calculated using conversion ratio of 0.9657, which is the rate the C shares were converted into ordinary shares.

The table below shows the cash returned to shareholders that invested in Baronsmead VCT plc dependent on their subscription cost, including the income tax available to be reclaimed on the subscription.

* Dividends paid to 2003 C shareholders post conversion have been adjusted by the conversion ratio (1.1044001).

** Dividends paid to 2005 C shareholders post conversion have been adjusted by the conversion ratio (1.1286715).

+ Includes 6.5p second interim dividend payable 3 June 2016.

For former BVCT shareholders, BVT dividends paid/declared since 8 February 2016 are adjusted by a factor of approximately 0.762239, this being the basis on which shares in BVT were issued for every BVCT share previously held by them.

Chairman's Statement 

I am pleased to report a 3.0 per cent (3.03p) increase in NAV per share for the six months to 31 March 2016 before dividend payments.

A second interim dividend has been declared of 6.5p per share and will be paid on 3 June 2016 to shareholders on the register as at 20 May 2016.

On 8 February 2016, Baronsmead VCT 2 plc ("the Company") acquired the assets of Baronsmead VCT plc ("BVCT") in exchange for the issue of New Shares to BVCT shareholders and changed its name to Baronsmead Venture Trust plc. At 31 March 2016 the NAV was £173.9m making the Company one of the largest VCTs in the industry.

This is the first set of accounts prepared since the merger and as a result, the comparative figures in the accounts only relate to the Company prior to the merger and are therefore not a true comparison to the period under review.

RESULTS

During the six months to 31 March 2016, the Company's NAV per share increased 3.0 per cent. from 102.56p to 105.59p before dividends.

Owing to the recent profitable sale of some investments, in particular, the sale of Nexus Vehicle Holdings ("Nexus") in December, the Company has declared a further interim dividend of 6.5p per share.

Portfolio Review

The investments acquired from BVCT as a result of the transaction totalled £63m and comprised investments in companies that were all common to those already held by the Company.

At 31 March 2016, the portfolio comprised investments in 72 unquoted and AIM-traded companies. In addition, the Company's investment in Wood Street Microcap provides investment exposure to a further 36 AIM-traded and fully listed companies.

* By value as at 31 March 2016.

** Includes capitalised interest and redemption premium income received.

The increase in NAV of 3.0 per cent. was the result of steady progress in our more mature investments including Kingsbridge Risk Solutions and Nexus, (delivering an increase in the portfolio valuation of 4.4 per cent) which was partially offset, principally, by reductions in value of Valldata Group, Staffline Group and IP Solutions.

Investment and Divestments

Full details about the investments and divestments during the period are set out below.

Prior to the acquistion, between 1 October 2015 and 8 February 2016, the Company and BVCT invested in 3 new investments (£2.5m) and 3 follow-on investments (£2.4m). Following the transaction the Company made a further new investment of £0.9m in Eden Research plc.

The new VCT rules introduced in November 2015 have required the Investment Manager to adapt its investment strategy to focus on the provision of development capital to younger companies to enable them to grow their businesses organically rather than through acquisition. These rules are complex and it is taking time to reach an understanding as to how they will be interpreted and enforced by HMRC, particularly in view of the fact that the latter has only recently issued guidance on the legislation. As a result, in common with other VCTs, the rate of new investment has slowed since their introduction.

The Board believes that the Investment Manager will be able to identify an adequate supply of new and attractive investment opportunities that will comply with the new VCT rules and still generate good returns for the Company. These companies are likely to be younger and smaller businesses than those in which the Company has invested more recently and they may need to be held for longer periods. However, it is hoped that the increased risk of volatility in returns inevitably generated by this type of investment can be mitigated by making and holding a larger number of them.

A total of £15.9m was realised by the combined VCTs from the full and partial sale of investments and from loan note redemptions during the period. This includes the sale of Nexus which generated a return 4.5 times its original cost. Against this success, a loss was realised on the sale of Independent Community Care Management with a recovery of 0.5 times original cost. During the period an unexpected profit related earn-out dividend was also received from Carnell Contractors, which was disposed of in 2011, and which brings the total recovery from this challenging investment to 1.0 times its original cost.

The Investment Manager has also continued to consolidate the gains achieved in the quoted portfolio with the sale of Jelf Group, which was one of the Company's oldest investments, and generated a return of 2.5 times its original cost.

Acquisition and Fundraising

Acquisition and fundraising proposals were published on 11 January 2016 and the transaction completed on 8 February 2016. Following the transfer of all of BVCT's assets and liabilities to the Company, BVCT shareholders received approximately 0.762239 new shares in the Company ("New Shares") for every BVCT share held by them (rounded down to the nearest whole share). In aggregate, 79.4m shares were issued to BVCT shareholders in consideration for approximately £79.2 million of assets. The Company's £10m fundraising, which was exclusively available to the Company's and BVCT's existing shareholders, became fully subscribed on 15 January 2016. As a result, the Company issued a further 9.7m shares on 8 February 2016.

Dividends

Prior to the acquisition the dividend policies of BVCT and BVCT2 sought to maintain average dividends of around 5.5p and 6.5p per ordinary share respectively. In formulating the dividend policy for the BVT going forward the Board wishes to ensure that a sustainable dividend level is maintained and has therefore decided to retain the Company's existing policy of trying to deliver an average annual payment of 6.5p per ordinary share. The ability to achieve this will depend significantly on the level and timing of profitable realisations and, therefore, it cannot be guaranteed. Inevitably there will be variations in the amount of dividends paid year on year.

Board of Directors

Following shareholders approval of the acquisition of the Company and BVCT, Susannah Nicklin retired as a director of BVCT and Les Gabb, Valerie Marshall and I joined the Board of the Company on 8 February 2016. On the same day, Howard Goldring and Gill Nott retired as directors of the Company. In addition, Clive Parritt will retire as a director of the Company with effect from 31 May 2016. I would like to thank each of them for the loyal and dedicated service they have given to BVCT and the Company respectively and in Clive's case his excellent Chairmanship of the Company since its inception in February 1998. The Board wishes them well in their future interests.

Outlook

In the face of uncertainty over whether the UK will vote to remain or leave the EU ahead of the referendum in June, the improvement in the UK economy now appears to have slowed and markets have continued to be volatile. However, the Company's portfolio companies have very little exposure to trading with the rest of the EU and the steady progress of their trading activity seems set to continue. The Company's portfolio diversity and asset mix should help to deliver consistent returns.

Peter Lawrence

Chairman

24 May 2016

Summary Investment Portfolio

Investment Diversification at 31 March 2016

Table of Investments and Realisations

Investments in the period

* Technology, Media & Telecommunications ("TMT").

All investments with the exception of Eden Research plc were made prior to BVT (previously known as BVCT2) acquiring the assets of BVCT on 8 February 2016. Hence, the book costs of new investments shown (except for Eden Research) relate only to the investments made by BVCT2. 

BVT acquired the BVCT investment portfolio (total £62,819,000) on 8 February 2016. This portfolio included the investments listed in the table above (with the exception of Eden Research).

Realisations in the period

Independent Review Report to Baronsmead Venture Trust plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 March 2016 which comprises the Income Statement, Statement of Changes in Equity, Balance Sheet and Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly 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 Conduct Authority ("the UK FCA").

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 FCA.

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), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with FRS 104 Interim Financial Reporting.

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2016 is not prepared, in all material respects, in accordance with FRS 104 Interim Financial Reporting and the DTR of the UK FCA.

John Waterson

for and on behalf of KPMG LLP

Chartered Accountants

Saltire Court

20 Castle Terrace

Edinburgh EH1 2EG

24 May 2016

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 FRS104 'Interim Financial Reporting';

· 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; and

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

On behalf of the Board,

Peter Lawrence

Chairman

24 May 2016

 Unaudited Income Statement

For the six months to 31 March 2016

All items in the above statement derive from continuing operations.

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"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").

Unaudited Statement of Changes in Equity

For the six months to 31 March 2016

For the year to 30 September 2015

Unaudited Balance Sheet

As at 31 March 2016

Unaudited Statement of Cash Flows

For the six months to 31 March 2016

Notes

1. The condensed financial statements for the six months to 31 March 2016 comprise the statements set out above together with the related notes. The Company applied FRS 102 and the AIC's Statement of Recommended Practice issued in November 2014 for its financial year ending 30 September 2015 in its annual financial statements. The condensed financial statements for the six months to 31 March 2016 have adopted FRS 104 'Interim Financial Reporting' for the first time and have been prepared on the same basis as the accounting policies set out in the Company's Annual Report and Financial Statements for the year ended 30 September 2015.

2. Return per share is based on a weighted average of 108,808,998 ordinary shares in issue (31 March 2015 - 83,909,220 ordinary shares; 30 September 2015 - 83,436,491 ordinary shares).

3. Earnings for the first six months to 31 March 2016 should not be taken as a guide to the results of the full financial year to 30 September 2016.

4. During the six months to 31 March 2016 the Company purchased 1,780,000 shares to be held in treasury. At 31 March 2016, the Company holds 13,743,819 ordinary shares in treasury. These shares may be re-issued below Net Asset Value as long as the discount at issue is narrower than the average discount at which the shares were bought back.

On 11 February 2016 the Company acquired all of the assets and liabilities of BVCT plc for the issue of 79,425,134 consideration shares, on a relative net asset basis. 9,727,419 shares were issued as part of a subsequent share issue.

5. Excluding treasury shares, there were 170,380,866 ordinary shares in issue at 31 March 2016 (31 March 2015 - 83,188,313 ordinary shares; 30 September 2015 - 83,008,313 ordinary shares).

6. The interim dividend of 3.50p per share (3.50p capital, nil revenue) was paid on 18 December 2015 to shareholders on the register on 4 December 2015. The ex-dividend date was 3 December 2015.

The second interim dividend of 6.50p per share (6.45p capital, 0.05p revenue) will be paid on 3 June 2016 to shareholders on the register on 20 May 2016. The ex-dividend date is 19 May 2016.

During the year to 30 September 2015, the Company paid a first interim dividend on 19 June 2015 of 2.50p per share (1.20p capital, 1.30p revenue) and a second interim dividend on 18 September 2015 of 4.00p per share (4.00p capital, nil revenue).

7. All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

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

• Level a - Fair value is measured based on quoted prices in an active market.

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

• Level c - i) Fair value is measured using a valuation technique that is based on data from an observable market or;

ii) Fair value is measured using a valuation technique that is not based on data from an observable market.

There has been no significant change in the risk analysis as disclosed in the Company's annual accounts.

8. 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 30 September 2015 has been extracted from the latest published audited financial statements. The audited financial statements for the year to 30 September 2015, which were unqualified, have been filed with the Registrar of Companies. No statutory accounts in respect of any period after 30 September 2015 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

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

10. Copies of the half-yearly financial report have been made available to shareholders and are available from the Registered Office of the Company at 100 Wood Street, London EC2V 7AN.

Principal Risks and Uncertainties

The Company's assets consist of equity and fixed interest investments, shares in collective investment schemes, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include investment performance, regulatory and compliance, legislative, loss of approval as a Venture Capital Trust, economic, political and other external factors and operational risks. These risks, and the way in which they are managed, are described in more detail in the Risk Matrix within the Strategic Report section in the Company's Annual Report and Accounts for the year to 30 September 2015. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Related Parties

Livingbridge VC LLP ('the Manager') manages the investment of the Company. The Manager also provides or procures the provision of secretarial, administrative and custodian services to the Company. Under the management agreement, the Manager receives a fee of 2.0 per cent. per annum of the net assets of the Company. This is described in more detail under the heading 'The Investment Management Agreement' within the Strategic Report in the Company's Annual Report and Accounts for the year to 30 September 2015. During the period the Company has incurred management fees of £1,108,000 (31 March 2015 - £764,000; 30 September 2015 - £1,590,000) and secretarial fees of £75,000 (31 March 2015 - £63,000; 30 September 2015 - £137,000) payable to the Manager. A performance fee of £107,000 (31 March 2015 - nil; 30 September 2015 - £588,000) has been accrued at 31 March 2016. This is described in more detail under the heading 'Performance fees' within the Strategic Report in the Company's Annual Report and Accounts for the year to 30 September 2015.

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 31 March 2016 the Company held cash and readily realisable securities totalling £53,376,000. 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 therefore is not exposed to any gearing covenants.

Corporate Information

# Senior Independent Director

† Chairman of Management Engagement and Remuneration Committee,

Chairman of the Nomination Committee

* Chairman of the Audit Committee

National Storage Mechanism

A copy of the Half-Yearly Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do.

END

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.