Baronsmead VCT plc

Half-Yearly Financial Report

31 March 2015

The Directors announce the unaudited half-yearly financial report for the six months to 31 March 2015 as follows:-

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

Our Investment Objective

The investment objective of the Company is 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 wishes to maintain a minimum dividend level of around 5.5p per ordinary share if possible, but this depends primarily on the level of realisations achieved and it cannot be guaranteed. There will be variations in the amount of dividends paid year on year.

Shareholder choice

The Board wishes to provide shareholders with a number of choices that enable them to utilise their investment in Baronsmead VCT in ways that best suit their personal investment and tax planning 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.

·      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 2015, 745,000 shares were bought back

       representing 0.7 per cent. of the shares in issue at 31 March 2015 at prices which represent an average of 5.2 per cent.

       discount to the latest published net asset values at the time the shares were bought back.

·      Secondary market | The Company's shares are listed on the London Stock Exchange and can be bought using a

       stockbroker or authorised share dealing service in the same way as shares of any other listed company. Approximately

       392,000 existing shares were bought by investors in the six months to 31 March 2015.

Financial Headlines

·      + 1.9% - Net asset value ("NAV") per share increased 1.9 per cent. to 77.26p in the six months to 31 March 2015.
 

·      351.2p - NAV total return to shareholders for every 100.0p invested at launch in November 1995.

·      2.0p - Interim dividend of 2.0p for the six month period to 31 March 2015 to be paid on 19 June 2015.

·      £5.2m - Invested £3.9m in unquoted and £1.3m in quoted investments in six months to 31 March 2015.

Cash Returned to Shareholders

The table below shows the cash returned to shareholders, dependent on their subscription cost, including the income tax available to be reclaimed on the subscription in respect of the various prospectuses issued by the Company between 1995 and 2014.

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.

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 2.0p interim dividend payable 19 June 2015

Chairman's Statement

The six months to 31 March 2015 was an active period of investment with four new unquoted and four new quoted investments helping to further refresh the portfolio following the significant divestments of some older investments.

The Board has declared an interim dividend of 2.0p per share.

In the six months to 31 March 2015, Baronsmead VCT's net asset value per share increased by 1.9 per cent. The unquoted portfolio valuation increased by 6.6 per cent. (including capitalised interest and redemption premium income received on the sale of investments) with steady progress being made by most of the mature investments. However, this was offset primarily by the reduction in the value of Impetus Automotive. The value of the quoted portfolio (comprising AIM-traded and other listed investments as well as Wood Street Microcap Investment Fund) increased by 0.1 per cent.

PORTFOLIO REVIEW

At 31 March 2015, the portfolio comprised 66 companies: 21 unquoted and 45 quoted companies. In addition, the Company has invested in Wood Street Microcap, a fund giving investment exposure to a further 39 AIM-traded and fully listed companies. The direction of travel, showing the trading and profitability of these companies, is recorded quarterly so that the Board can monitor the state of the portfolio. At 31 March 2015, 88 per cent. of portfolio companies were progressing steadily or better.

The net assets of £80.5 million were invested in:

Over the past two years, realisations of unquoted investments and the increase in the value of quoted investments have had a significant impact on the Company's asset mix. In particular, the proportion of the Company's assets in unquoted investments is now considered to be at a cyclical low. It is expected that a rebalancing should occur over the medium term as the value of the newer unquoted investments grows. Over 72 per cent. of the Company's new and follow on investments over this two year period were in unquoted companies.

Investment and Divestment Activity

This has been a busy six months for new investment activity with a total of £5.2m invested in 8 new investments as well as a number of follow on funding rounds. The Company invested £4.4m in four new unquoted and four new quoted companies. Smaller follow-on investments in one unquoted company and three quoted companies totalled £0.8m.

A total of £7.7m was realised from the full or partial sale of investments and from loan note redemptions. Notably, the sale of the Company's investment in Luxury for Less generated a return of 2.0 times its original cost within a relatively short investment period of only 20 months. The Company de-risked its position in Nexus Vehicle Holdings, its largest investment at the beginning of the period, through the redemption of loan notes which provided a return of approximately 1.4 times cost. The Company retained its equity stake, which is currently valued at approximately 12 times cost.

Against these successes, losses were realised on other investments, notably Playforce Holdings, Surgi C and Impetus, which resulted in returns of 0.5, 0.3 and 0.0 times original cost respectively. While it was disappointing to have three poor realisations in the period, it is in the nature of investing in small companies that some investments will fail to achieve their full potential. However, the impact of these realisations on the NAV as at 31 March 2015 was limited, as the Board had previously made a provision against the value of these investments. On a more positive note, the Investment Manager has continued consolidating the gains achieved in the quoted portfolio with partial realisations from a number of quoted companies, realising an average return of approximately 2.1 times the cost of these investments.

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

LONG TERM PERFORMANCE

The Company's investment objective continues to be focused on generating consistent returns over the long-term through investing in a portfolio of unquoted and AIM-traded companies with strong growth prospects.

Baronsmead VCT has been investing funds for shareholders for almost twenty years and, despite the inherent risk of investing in small companies, the trust has delivered consistently good returns for investors. In addition, whilst VCT tax reliefs do not change the underlying risks associated with investing in smaller companies, the upfront tax relief and the payment of tax free dividends help to lessen the amount of shareholders' original investment cost which remains "at risk". 

As shown in the table above those shareholders who subscribed for shares in any of the Company's various fundraisings between November 1995 and March 2005 have had their entire investment returned in dividends and reliefs. For instance, since investing 100p in 1995, founder shareholders have received cash payments totalling 157.6p (being 20p VCT income tax relief and 137.6p in dividends) and they still have an investment in the trust with a NAV of 75.26p per share (after accounting for the interim dividend).  Those shareholders who subscribed to the Company's more recent fundraisings in April 2009 and December 2012 have had 87.5 per cent. and 51.1 per cent. of their investment returned to them respectively. 

However, this table does not take account of the on-going value of the tax free nature of VCT dividends, which is a continuing long term benefit to shareholders. Nevertheless, this analysis serves as a useful indicator of investment performance over the long term and the cumulative cash that has been returned to shareholders.

The ten year record of performance and full record is set out on our website, www.baronsmeadvct.co.uk.

VCT LEGISLATION

In the March 2015 Budget, the Chancellor announced changes that are designed to ensure that VCTs continue to be effective in giving small and growing businesses access to finance and ensuring that the VCT regime remains within EU rules on State Aid. The UK government has proposed introducing new criteria with respect to the age of companies that will be eligible as qualifying investments for the purposes of tax advantaged venture capital schemes (EIS, SEIS and VCTs), as well as a lifetime cap on the total amount of state aided investment that a company may receive. If these proposals gain EU State aid approval and come into law, it is expected that it will still be possible for the Investment Manager to continue sourcing suitable VCT qualifying investments in a similar manner to that under the current regime.

MANAGEMENT ARRANGEMENTS

During the course of the period, the Company's Investment Manager changed its name to Livingbridge VC LLP (formerly ISIS VC LLP). This explains the reference to Livingbridge VC LLP in the Corporate Information below. This change of name has no impact on the day to day investment activities carried out on the Company's behalf by the Investment Manager.

OUTLOOK

The UK economy now appears to be on an improving trend. However, it does not operate in isolation and the external environment remains uncertain. Concerns exist over the ongoing issues related to Greece and the Euro, slower growth in China and continued political instability in various regions. The outcome of the General Election in the UK now may be less of a concern to the growing and diverse companies in our portfolio, many of which carry low levels of debt and are well positioned to take advantage of any increase in confidence.

Peter Lawrence

Chairman

19 May 2015

Table of Investments and Realisations

Investments in the period

Realisations in the period

Summary Investment Portfolio

Investment Classification at 31 March 2015

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 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

19 May 2015

Unaudited Income Statement

For the six months to 31 March 2015

* Figures as at 30 September 2014 are audited.

Unaudited Reconciliation of Movements in Shareholders' Funds

For the six months to 31 March 2015

* Figures as at 30 September 2014 are audited.

Notes

1.    The unaudited interim results which cover the six months to 31 March 2015 have been prepared in accordance with

       applicable accounting standards and adopted the accounting policies set out in the statutory accounts of the Company for

       the year to 30 September 2014.

2.    Return per share is based on a weighted average of 104,684,680 ordinary shares in issue (30 September 2014 - 99,430,657

       ordinary shares; 31 March 2014 - 93,748,547 ordinary shares).

3.    Earnings for the first six months should not be taken as a guide to the results of the financial year to 30 September 2015.

4.    During the period, the Company purchased 745,000 shares to be held in treasury. At 31 March 2015 the Company held

       7,483,751 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.

5.    Excluding treasury shares, there were 104,202,454 ordinary shares in circulation at 31 March 2015 (30 September 2014 - 104,947,454 ordinary shares; 31 March 2014 - 105,082,454 ordinary shares).

6.    The interim dividend of 2.0p per share (0.95p capital, 1.05p revenue) will be paid on 19 June 2015 to shareholders on the

       register on 29 May 2015. The ex-dividend date is 28 May 2015.

7.    The financial information contained in this half-yearly report does not constitute statutory accounts as defined in section 434

       of the Companies Act 2006. The information for the year to 30 September 2014 has been extracted from the latest published

       audited financial statements. The audited financial statements for the year to 30 September 2014, which were unqualified,

       have been filed with the Registrar of Companies. No statutory accounts in respect of any period after 30 September 2014

       have been reported on by the Company's auditors or delivered to the Registrar of Companies.

8.    Copies of the half-yearly report have been made available to shareholders and are also available from the Registered Office of

       the Company at 100 Wood Street, London EC2V 7AN.

Unaudited Balance Sheet

As at 31 March 2015

* Figures as at 30 September 2014 are audited.

* Figures as at 30 September 2014 are audited.

Unaudited Cash Flow Statement

For the six months to 31 March 2015

* Figures as at 30 September 2014 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 loss of approval as a Venture Capital Trust, investment performance, regulatory and compliance, legislative, economic, political and 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 in the Company's Annual Report and Accounts for the year to 30 September 2014. 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 investments 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 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 2014. During the period the Company has incurred management fees of £734,000 and secretarial fees of £55,000 payable to the Manager. No performance fee has been accrued at 31 March 2015.

Going Concern

After making enquires, 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 2015 the Company held cash and readily realisable securities totalling £20,127,000. 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

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.