Baronsmead Vt Regulatory News (BVT)

Baronsmead VCT 2 plc Half Yearly Financial Report For the six months ended 31 March 2014 The Directors announce the unaudited half-yearly financial report for the sixmonths ended 31 March 2014 as follows:- Copies of the half yearly report can be obtained from the following website:www.baronsmeadvct2.co.uk . Investment Objective Baronsmead VCT 2 is a tax efficient listed company which aims to achievelong-term investment returns for private investors, including tax freedividends. Investment Policy ● To invest primarily in a diverse portfolio of UK growth businesses, whetherunquoted or traded on AIM. ● Investments are made selectively across a range of sectors in companies thathave the potential to grow and enhance their value. Dividend Policy The Board of Baronsmead VCT 2 aims to sustain a minimum annual dividend levelat an average of 6.5p per ordinary share, mindful of the need to maintain netasset value. The ability to meet these twin objectives depends significantly onthe level and timing of profitable realisations and cannot be guaranteed. Therewill be variations in the amount of dividends paid year on year. Since launch, the average annual tax free dividend paid to shareholdersincluding the 8.0p interim dividend, has been 6.9p per share (equivalent to apre-tax return of 9.2p per share for a higher rate taxpayer). For shareholderswho claimed tax reliefs on initial subscription of 20 per cent, 30 per cent or40 per cent, their returns would have been higher. FINANCIAL HEADLINES ● 9.5% - Net asset value ("NAV") per share increased 9.5 per cent to 110.19p inthe six months to 31 March 2014, before deduction of dividends. ● 315.9p - NAV total return to shareholders for every 100.0p invested atlaunch. ● 8.0p - Dividends totalled 8.0p in the six months to 31 March 2014, after theinterim dividend of 8.0p paid on 7 March 2014. ● £5.3 m - Invested £3.3m in unquoted and £2.0m in quoted investments in thesix months to 31 March 2014. CHAIRMAN'S STATEMENT I am delighted to report a 9.5 per cent (9.56p) increase in Net Asset Value("NAV") per share before payment of dividends for the six months to 31 March2014. This strong growth was driven largely by a long awaited increase in thevaluation of the quoted portfolio. This is a welcome reward for patiencethrough the uncertain market conditions in recent years and it helps to confirmthe investment style of the Company which concentrates on the fundamentals ofmanagement quality and business innovation. The valuation of unquoted investments in the portfolio has been broadly flat inthe quarter, reflecting the fact that the majority of these investments arerecent acquisitions which have yet to achieve their potential. Howeverfollowing the profitable realisation of several older investments in the latterhalf of 2013, an interim dividend of 8p a share was paid on 7 March 2014. The Company raised £9.7 million (after costs) and, on 14 March 2014, allotted9,633,363 new ordinary shares at 103.8p a share. At 31 March 2014 the NAV was £86.5 million equivalent to 102.19p a share asfollows: Pence per share NAV as at 1 October 2013 100.63 Valuation uplift (9.5 per cent) 9.56 NAV as at 31 March 2014 before dividends 110.19 Less: Interim dividend paid on 7 March 2014 (8.00) NAV as at 31 March 2014 after payingdividends 102.19 The full record of performance can be found on our website,www.baronsmeadvct2.co.uk. PORTFOLIO REVIEW At 31 March 2014, the portfolio comprised 73 companies. In addition, theCompany's investment in Wood Street Microcap gives investment exposure to afurther 40 AIM-traded and fully listed companies, making a total of 113companies. The direction of travel showing trading and profitability of thesecompanies is recorded quarterly so that the Board can monitor the health of theportfolio. At 31 March 2014, 79 per cent. of companies in the portfolio wereprogressing steadily or better. Investment and Divestment Activity The six months to 31 March 2014 was an exceptional period of realisations fromthe unquoted portfolio. Sales of investments realised proceeds £16.9 millionand delivered net capital gains of £6.0 million. New and follow-on investmentsin four unquoted and eight AIM companies totalled £5.3 million. This activityhas seen a significant renewal of assets in the unquoted portfolio with thefull realisation of six investments and the addition of three new unquotedcompanies. Full details regarding the investments and divestments during the period areset out in the tables below. Long Term Performance The Company's investment objective continues to be focused on companies withstrong growth prospects and with the potential to produce consistent returnsfor shareholders over the long-term. To achieve this the Manager is now workingto help the Company's newer investments achieve their ambitious targets forgrowth in future years. The total return delivered by the Company has increased by 41 per cent. in thethree years to 31 March 2014. This is a reflection of the quality of theCompany's portfolio and the management provided by ISIS. Should this investmentperformance continue to the end of the current financial year, the returns toshareholders should have reached a level at which, after offsetting thecumulative hurdle rates from earlier years, a performance fee will be payableto the Manager. The full record of performance can be found on our website,www.baronsmeadvct2.co.uk. SHAREHOLDER MATTERS Fundraising On 22 January 2014, the Company issued a prospectus to raise up to £10 million.I am very pleased to report that the Company's offer was fully subscribed by 11February 2014, raising £9.7 million net of expenses. On behalf of the Board ofDirectors, I would like to thank the 456 existing shareholders and extend avery warm welcome to the 509 new shareholders who subscribed to thisfundraising. VCT legislation New legislation, effective from 6 April 2014, prevents the use of "EnhancedShare Buy Backs" by VCTs and restricts the availability of upfront VCT incometax relief if a shareholder sells and re-invests in new shares within a sixmonth period in the same VCT. Rather than using Enhanced Share Buy Backarrangements, the Board has always preferred to create an orderly market forall shareholders through maintaining a narrow share price discount. As a resultthis legislation is not expected to have any material impact on the Company. In addition, legislation is being introduced to prevent VCTs from distributingreserves created from converted share premium accounts within three years ofnew funds being raised. This will apply to new shares issued after 5 April 2014and is intended to prevent the return of capital to shareholders before profitsare generated from investments. As the Company already has significantdistributable reserves, it is not expected that this legislation will have asignificant impact on the Company although we are waiting to see the finalwording of the legislation. Management Arrangements The Board has considered the impact on your Company of the AlternativeInvestment Fund Managers Directive ("AIFMD"), an EU Directive that came intoforce in July 2013 to regulate the Managers of Alternative Investment Funds.The legislation permits Investment Trusts and VCTs to become self-managed forthe purposes of the Directive. The legislation also provides that AlternativeInvestment Fund Managers ("AIFMs") that manage assets under €500m can takeadvantage of a light touch regime and register as Small Registered Managerswhich only imposes some minimal additional reporting on the AIFM. To minimisethe cost of compliance with this Directive, the Board has decided that theCompany will register as the AIFM. This development will not impact on the dayto day investment activities although for regulatory reasons the InvestmentManagement Agreement will need to be transferred to ISIS VC LLP which is asister partnership of our current Manager, ISIS EP LLP, and is controlled andmanaged by the same individuals. OUTLOOK The recovery of the UK economy now appears to be more firmly established. Thisimprovement in the economic environment in which portfolio companies operate isto be welcomed. However, our focus is on the strengths of the businesses inwhich the Company has invested and using the expertise and skill of the Managerto help them to deliver increasing profits, employment and profitable exitsover the medium to longer term. The unquoted portfolio has undergone a phase of refreshment following recentsales. As a result, growth in the value of this portfolio might be expected tobe more modest in the next year or two as the portfolio companies invest intheir capacity to grow. The recent growth in the value of the quoted portfoliodoes, though, present an opportunity to realise profits from those investments.The Company's portfolio diversity and asset mix should help to deliverconsistent returns over differing phases of economic cycles. Clive Parritt Chairman 16 May 2014 Summary Investment Portfolio Investment Classification at 31 March 2014 Sector by value Percentage Business Services 46% Technology, Media & Telecommunications ("TMT") 27% Healthcare & Education 15% Consumer Markets 12% Total Assets by value Percentage AIM, listed, ISDX & collective investment vehicle 48% Unquoted - loan stock 25% Net current assets principally cash 21% Unquoted - equity 6% Time Investments Held by value Percentage Less than 1 year 14% Between 1 and 3 years 26% Between 3 and 5 years 13% Greater than 5 years 47% Table of Investments and Realisations Investments in the six month period Book costCompany Location Sector Activity £'000 Unquotedinvestments New CableCom II Somerset TMT* Provider of network solutions 1,250Networking Holdings Limited Carousel Logistics Kent Business Provider of bespoke logistics 955Limited Services and supply chain solutions Kingsbridge Gloucestershire Business Independent insurance broker 952Limited Services Follow on Crew Clothing London Consumer Branded clothing retailer 109Holdings Limited Markets Total unquoted investments 3,266 AIM-traded investments New Scholium Group plc London Rare book and collectibles Consumer dealer Markets 450 Everyman Media London Consumer Boutique independent cinemaGroup plc Markets chain 392 MartinCo plc Bournemouth Consumer UK letting agency franchise Markets network 343 Daily Internet plc Stockport TMT* SME Domain registration & hosting 250 EG Solutions plc Staffordshire TMT* Back office optimisationLoan note software 33 Follow on Sanderson Group plc Coventry TMT* Retail and manufacturing IT 225 Plastics Capital London Business Specialist plastic products 189plc Services Tasty plc London Consumer Restaurant chain 126 Markets Total AIM-traded investments 2,008 Total investments in the period 5,274 * Technology, Media & Telecommunications ("TMT"). Realisations in the six month period 30 September Overall First 2013 Proceeds multiple investment valuation ‡ returnCompany date £'000 £'000 * Unquoted realisations CableCom Networking Full tradeHoldings Limited sale May 07 5,447 5,748 4.8 Full tradeCSC (World) Limited# sale Jan 08 2,838 3,115 2.4 Full tradeKafevend Holdings Limited sale Oct 05 2,569 2,430 2.5 Inspired Thinking Group Full tradeLimited sale May 10 1,837 2,315 3.4 Arcas Investments Limited Dissolved Sep 11 1,000 998 1.0 Full tradeEmpire World Trade Limited sale Aug 06 0 25 0.0 Total unquotedrealisations 13,691 14,631 AIM-traded realisations Staffline Group plc Market sale Jul 00 1,285 1,682 8.4 PROACTIS Holdings plc Full market May 06 409 621 1.0 sale Zattikka plc Write off Apr 12 0 0 0.0 Total AIM-traded realisations 1,694 2,303 Total realisations in the period 15,385 16,934† ‡ Proceeds at time of realisation including redemption premium and interest. * Includes interest/dividends received, loan note redemptions and partialrealisations accounted for in prior periods. # Deferred consideration of £57,000 was also received in respect of CSC (World)Limited. † Proceeds of £14,000 were also received in respect of Quantix Limited, whichhad been sold in a prior period. Responsibility statement of the Directors in respect of the half-yearlyfinancial report We confirm that to the best of our knowledge: ● the condensed set of financial statements has been prepared in accordancewith the Statement 'Half-yearly financial reports' issued by the UK AccountingStandards Board; ● the Chairman's Statement (constituting the interim management report)includes a fair review of the information required by DTR 4.2.7R of theDisclosure and Transparency Rules, being an indication of important events thathave occurred during the first six months of the financial year and theirimpact on the condensed set of financial statements; ● the Statement of Principal Risks and Uncertainties below is a fair review ofthe information required by DTR 4.2.7R; and ● the financial statements include a fair review of the information required byDTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. By Order of the Board, Clive Parritt Chairman 16 May 2014 Unaudited Income Statement For the six months to 31 March 2014 Six months to 31 March Six months to 31 March Year to 30 September 2014 2013 2013* Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unrealised gains on movements in fairvalue - 8,383 8,383 - 6,998 6,998 - 8,678 8,678 of investmentsRealised (losses)/gains on disposal of - (963) (963) - 929 929 - 1,535 1,535investmentsIncome 1,527 - 1,527 952 - 952 - 3,456 3,456 Other expenses (242) - (242) (229) - (229) (435) - (435) Profit on ordinary activities before 1,100 6,222 7,322 537 6,458 6,995 2,653 7,672 10,325taxation Taxation on ordinary activities (177) 177 - (74) 74 - (505) 505 - Profit on ordinary activities after 923 6,399 7,322 463 6,532 6,995 2,148 8,177 10,325taxation Return per ordinary share: Basic 1.21p 8.40p 9.61p 0.63p 8.87p 9.50p 2.89p 10.99p 13.88p * Figures as at 30 September 2013 are audited. Unaudited Reconciliation of Movement in Shareholders' Funds For the six months to 31 March 2014 Six Six months to Months to Year to 31 March 31 March 30 September 2014 2013 2013* £'000 £'000 £'000 Opening shareholders' funds 75,789 72,433 72,433 Profit on ordinary activities after 7,322 6,995 10,325taxation Net proceeds of share issues & 9,409 3,756 3,944buybacks Other costs charged to capital - - (5) Dividends paid (6,017) (3,772) (10,908) Closing shareholders' funds 86,503 79,412 75,789 * Figures as at 30 September 2013 are audited. Notes 1. The unaudited interim results which cover the six months to 31 March 2014have been prepared in accordance with applicable accounting standards andadopted the accounting policies set out in the statutory accounts of theCompany for the year to 30 September 2013. 2. Return per share is based on a weighted average of 76,201,217 ordinaryshares in issue (30 September 2013 - 74,397,698 ordinary shares, 31 March 2013-73,664,418 ordinary shares). 3. Earnings for the six months to 31 March 2014 should not be taken as a guideto the results of the full financial year to 30 September 2014. 4. During the six months to 31 March 2014 the Company purchased 300,000ordinary shares to be held in treasury at a cost of £289,000. At 31 March 2014the Company holds 10,323,819 ordinary shares in treasury. These shares may bere-issued below Net Asset Value as long as the discount at issue is narrowerthan the average discount at which the shares were bought back. 5. Excluding treasury shares, there were 84,648,313 ordinary shares in issue at31 March 2014 (30 September 2013 - 75,314,950 ordinary shares, 31 March 2013 -75,114,950 ordinary shares). 6. The interim dividend of 8.0p per share (1.2p revenue and 6.8p capital) waspaid on 7 March 2014 to shareholders on the register on 21 February 2014. Theex-dividend date was 19 February 2014. 7. The financial information contained in this half-yearly financial reportdoes not constitute statutory accounts as defined in section 434 of theCompanies Act 2006. The information for the year to 30 September 2013 has beenextracted from the latest published audited financial statements. The auditedfinancial statements for the year to 30 September 2013, which were unqualified,have been filed with the Registrar of Companies. No statutory accounts inrespect of any period after 30 September 2013 have been reported on by theCompany's auditors or delivered to the Registrar of Companies. 8. Copies of the half-yearly financial report have been made available toshareholders and are available from the Registered Office of the Company at 100Wood Street, London EC2V 7AN. Unaudited Balance Sheet As at 31 March 2014 As at As at As at 31 31 30 March March September 2014 2013 2013* £'000 £'000 £'000 Fixed assets Unquoted investments 26,363 38,859 36,485 Traded on AIM 30,928 23,756 24,994 Traded on ISDX 511 - 346 Listed on LSE 2,454 1,603 1,901 Collective investment vehicle - Wood Street Microcap 7,883 5,092 6,140Investment Fund Listed interest bearing securities - 5,619 2,999 Investments 68,139 74,929 72,865 Current assets Debtors 3,580 1,820 1,965 Cash at bank and on deposit 16,101 9,408 2,875 19,681 11,228 4,840 Creditors (amounts falling due within one year) (1,317) (6,745) (1,916) Net current assets 18,364 4,483 2,924 Net assets 86,503 79,412 75,789 Capital and reserves Called-up share capital 9,497 8,534 8,534 Share premium 16,545 7,809 7,809 Capital reserve 41,591 44,947 41,921 Revaluation reserve 18,598 17,415 17,274 Revenue reserve 272 707 251 Equity shareholders' funds 86,503 79,412 75,789 * Figures as at 30 September 2013 are audited. As at As at As at 31 March 31 March 30 September 2014 2013 2013* Net asset value per share 102.19p 105.72p 100.63p Number of shares in circulation 84,648,313 75,114,950 75,314,950 Treasury net asset value per share 101.49p 104.98p 99.88p Number of ordinary shares in 84,648,313 75,114,950 75,314,950circulation Number of ordinary shares held in 10,323,819 10,223,819treasury 10,023,819 Number of listed ordinary shares in 94,972,132 85,338,769 85,338,769issue * Figures as at 30 September 2013 are audited. Unaudited Cash Flow Statement For the six months to 31 March 2014 Six Six Year months months to to to 30 September 31 March 31 March 2014 2013 2013* £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (404) (2) 868 Net cash inflow from financial investment 10,046 6,488 5,511 Equity dividends paid (6,017) (3,772) (10,908) Net cash inflow/(outflow) before financing 3,625 2,714 (4,529) Net cash inflow from financing 9,601 3,229 3,939 Increase/(decrease) in cash 13,226 5,943 (590) Reconciliation of net cash flow to movement in netcash Increase/(decrease) in cash 13,226 5,943 (590) Opening cash position 2,875 3,465 3,465 Closing cash at bank and on deposit 16,101 9,408 2,875 Reconciliation of profit on ordinary activities before taxation (to net cash outflow from operating activities) Profit on ordinary activities before taxation 7,322 6,995 10,325 Gains on investments (7,420) (7,927) (10,213) Changes in working capital and other non-cash items (306) 930 756 Net cash (outflow)/inflow from operating activities (404) (2) 868 * Figures as at 30 September 2013 are audited. Principal Risks and Uncertainties The Company's assets consist of equity and fixed interest investments, cash andliquid resources. Its principal risks are therefore market risk, credit riskand liquidity risk. Other risks faced by the Company include economic, loss ofapproval as a Venture Capital Trust, investment and strategic, regulatory,reputational, operational and financial risks. These risks, and the way inwhich they are managed, are described in more detail under the headingPrincipal risks, risk management and regulatory environment within the OtherMatters section in the Company's Annual Report and Accounts for the year to 30September 2013. The Company's principal risks and uncertainties have notchanged materially since the date of that report. Related Parties ISIS EP LLP ('the Manager') manages the investments of the Company. The Manageralso provides or procures the provision of secretarial, administrative andcustodian services to the Company. Under the management agreement, the Managerreceives a fee of 2.0 per cent per annum of the net assets of the Company. Thisis described in more detail under the heading Management within the Report ofthe Directors in the Company's Annual Report and Accounts for the year to 30September 2013. During the period the Company has incurred management fees of £740,000 and secretarial fees of £65,000 payable to the Manager. A performancefee of £643,000 has been accrued at 31 March 2014 to reflect the potential feethat would be payable to the Manager at 30 September 2014 should the currentinvestment performance continue to the end of the current financial year. Going Concern After making enquires, and bearing in mind the nature of the Company's businessand assets, the Directors consider that the Company has adequate resources tocontinue in operational existence for the foreseeable future. In arriving atthis conclusion the Directors have considered the liquidity of the Company andits ability to meet obligations as they fall due for a period of at leasttwelve months from the date that these financial statements were approved. Asat 31 March 2014 the Company held cash balances of £16,101,000. Cash flowprojections have been reviewed and show that the Company has sufficient fundsto meet both its contracted expenditure and its discretionary cash outflows inthe form of the share buyback programme and dividend policy. The Company has noexternal loan finance in place and therefore is not exposed to any gearingcovenants. Corporate Information Directors Registrar and Transfer Office Clive Anthony Parritt (Chairman) Computershare Investor Services PLC Gillian Nott OBE‡ The Pavilions Howard Goldring* Bridgwater Road Christina McComb Bristol BS99 6ZZ Tel: 0870 889 3249 Secretary ISIS EP LLP Brokers Panmure Gordon & Co Registered Office One New Change 100 Wood Street London London EC2V 7AN EC4M 9AF Tel: 020 7886 2500 Investment Manager ISIS EP LLP Auditors 100 Wood Street KPMG LLP London EC2V 7AN Saltire Court 020 7506 5717 20 Castle Terrace Edinburgh EH1 2EG ISIS VC LLP (liquid assets only) 100 Wood Street Solicitors London EC2V 7AN SGH Martineau LLP No 1 Colmore Square Registered Number Birmingham B4 6AA 03504214 VCT Status Adviser PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH * Chairman of the Audit Committee Website ‡ Chairman of the Management Engagement and www.baronsmeadvct2.co.ukRemuneration Committee, Chairman of the NominationCommittee and Senior Independent Director. National Storage Mechanism A copy of the Half-Yearly Report will be submitted shortly to the NationalStorage Mechanism ("NSM") and will be available for inspection at the NSM,which is situated at: http://www.morningstar.co.uk/uk/NSM END Neither the contents of the Company's website nor the contents of any websiteaccessible from hyperlinks on this announcement (or any other website) isincorporated into, or forms part of, this announcement.