Baronsmead Second Venture Trust plc
Annual Report and Audited Financial
Statements for the year ended
30 September 2022
Company number 04115341
About Baronsmead
Second Venture Trust plc
Our investment objective
Baronsmead Second Venture Trust plc
(the “Company”) 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 will, where possible, seek
to pay two dividends to shareholders
in each calendar year, typically an
interim dividend in September and a
final dividend following the Annual
General Meeting in February/March.
The Board will use, as a guide, when
setting the dividends for a financial
year, a sum representing 7per cent of
the opening net asset value of that
financial year.
Key elements of the business model
Access to an attractive,
diverse portfolio
The Company gives shareholders
access to a diverse portfolio of growth
businesses.
The Company will make investments in
growth businesses, whether unquoted
or traded on AIM, which are
substantially based in the UK in
accordance with the prevailing VCT
legislation. Investments are made
selectively across a range of sectors.
The Manager’s approach
to investing
The Manager endeavours to select the
best opportunities and applies a
distinctive selection criteria based on:
Primarily investing in parts of the
economy which are experiencing long-
term structural growth.
Businesses that demonstrate, or have
the potential for, market leadership in
their niche.
Management teams that can
develop and deliver profitable and
sustainable growth.
Companies with the potential to
become an attractive asset appealing
to a range of buyers at the appropriate
time to sell.
In order to ensure a strong pipeline of
opportunities, the Manager invests in
building deep sector knowledge and
networks and undertakes significant
proactive marketing to interesting target
companies in preferred sectors. This
approach generates a network of
potentially suitable businesses with
which the Manager maintains a
relationship ahead of possible
investment opportunities.
The Manager as an
influential shareholder
The Manager is an engaged and
supportive shareholder (on behalf of the
Company) in both unquoted and
significant quoted investments. For
unquoted investments, representatives
of the Manager often join the investee
board.
The role of the Manager with investees
is to ensure that strategy is clear, the
business plan can be implemented and
that the management resources are in
place to deliver profitable growth. The
intention is to build on the business
model and grow the company into an
attractive target able to be either sold
or potentially floated in the medium
term.
A more detailed explanation of how the business model is applied is provided in the Other Matters section of the Strategic Report on
pages29 to 33. The full investment policy can be found on page 84
.
eConsult (unquoted)
eConsult develops and
operates an e-consultation
platform which provides
medical advice to its users,
digitally triage patients. Digital
triage allows patients to be
dealt with more effectively and
efficiently, allowing healthcare
practitioners to prioritise face-
to-face consultations with
those patients in greatest and
most urgent need.
PCI-Pal (quoted)
PCI-Pal is a leading provider of
Software-as-a-Service (“SaaS”)
solutions that empower
companies to take payments
from their customers securely,
adhere to strict industry
governance, and remove their
business from the significant
risks posed by non-compliance
and data loss.PCI-Pal’s
products secure payments and
data in any business
communications environment
including voice, chat, social,
email, and contact centre. Its
software is integrated into, and
resold by, some of the worlds’
leading business
communications vendors, as
well as major payment service
providers.
Crossword Cybersecurity
(quoted)
Crossword Cybersecurity
focuses on the development
and commercialisation of
cyber security and risk
management related software
and cybersecurity consulting.
The Group’s specialist cyber
security product development
and software engineering
teams develop the concept,
often working with
universities, into a fully-
fledged commercial product
that it will then take to market.
The Group has built up a
portfolio of 5 differentiated,
intellectual property-based,
cyber security products,
alongside its cybersecurity
consulting offering.
Fu3e (unquoted)
Fu3e is a collaborative project
management and real time
reporting platform focused on
the real estate sector. It
enables real estate
professionals to have better
visibility on projects, automate
reporting and have a single
source of truth for projects by
integrating with a number of
existing real estate software
applications. The platform is
designed to improve efficiency
and visibility throughout the
value chain.
Strategic report
Financial highlights 2
Performance summary 3
Chair’s statement 4
Manager’s review 7
Investments in the year 12
Realisations in the year 13
Ten largest investments 14
Principal risks and uncertainties 18
Sustainable investment 20
Other matters 29
Directors’ duties 34
Directors’ report
Board of Directors 40
Directors’ report 41
Corporate governance 44
Audit & Risk Committee report 51
Nomination Committee report 53
Directors’ remuneration report 55
Statement of Directors’ responsibilities 59
BDO independent auditor’s report 60
Financial statements
Income statement 66
Statement of changes in equity 67
Balance sheet 68
Statement of cash flows 69
Notes to the financial statements 70
Appendices
Investment policy 84
Dividend history in the last ten years 85
Dividends paid since launch 85
Performance record since launch 86
Cash returned to shareholders 86
Full investment portfolio 87
Glossary 89
Information
Shareholder information and contact details 91
Corporate information 94
If you have sold or otherwise transferred all of your shares in Baronsmead Second Venture Trust plc, please forward this document and the
accompanying form of proxy as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the
sale or transfer was, or is being, effected, for delivery to the purchaser or transferee.
Contents
Example investments
1
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Decrease in net asset value per share
1,2
(12 months to 30 September 2022)
Net asset value total return
1
(as at 30 September 2022)
Annual tax free dividend yield
1
(12 months to 30 September 2022)
New investments
3
(12 months to 30 September 2022)
0p
20p
40p
60p
80p
100p
2022*20212020
NAV per share (p)
Dividends*
*Includes proposed final dividend of 3.0p
NAV per share decreased
19.2per cent to 68.1p, before
the deduction of dividends, for
the financial year ended
30September 2022.
0p
100p
200p
300p
400p
500p
202220212020
Net Asset Value (“NAV”) total
return to shareholders for
every 100.0p invested at
launch (January 2001).
0%
2%
4%
6%
8%
10%
2022*20212020
*Includes proposed final dividend of 3.0p
Annual tax free dividend yield
based on 6.0p dividends paid
(including proposed final
dividend of 3.0p) and opening
NAV of 84.3p.
0m
5m
10m
15m
20m
25m
202220212020
Investments made into
ninenew and 11 follow-on
opportunities during the year.
Unquoted:
£18.1mn
Quoted: £5.0mn
1.
Alternative Performance Measures (“APM”)/Key Performance Indicators (“KPIs”) – please refer to glossary on page 89 for definitions.
2. Please refer to table on page 4 for breakdown of NAV per share movement.
3. Direct investments only.
Performance summaryFinancial highlights
Strategic report
3
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Ten year performance record
* Net asset value total return (gross dividends reinvested) rebased to 100p at launch.
Source: Gresham House Asset Management Ltd
Net asset value per share (pence) Share price (mid) (pence)
Net asset value total return per share (pence)*
Total net assets (£mn)
Pence £mn
0
50
100
150
200
250
300
350
400
450
30/09/2230/09/2130/09/2030/09/1930/09/1830/06/1730/09/1631/12/1531/12/1431/12/13
0
50
100
150
200
250
300
182.3
248.4
213.0
76.6
79.2
140.9
186.7
199.4
175.4
74.9
Cash returned to shareholders by date of investment
Cash returned to shareholders based on the subscription price and the income tax reclaimed on subscription.
Cash invested (p) Income tax reclaim (p)
*includes proposed final dividend of 3.0p.
Pence per share
Cumulative dividends (p)*
0
20
40
60
80
100
120
140
160
180
200
2022
(March)
2022
(January)
2021
(December)
2021
(March)
2021
(February)
2021
(January)
2020
(December)
2020
(November)
2020
(March)
2020
(February)
2020
(January)
2019
(November)
2019
(February)
2017
(October)
2016
(February)
2014
(March)
2012
(December)
2010
(March)
2005
(March) –
C share
2001
(January)
2
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
328.9p
–19.2%
£23.1mn
7.1%
Investments and divestments
The Board is pleased to report that the
Company has continued to make new
investments during the year and has
invested a total of £13 million in
ninecompanies over the year. Further
details of the new investments made
are included in the Manager’s review.
The new investments in earlier stage
opportunities may result in greater
volatility in returns from the Company
over time. However, the more mature,
established portfolio of existing
investments should assist in sustaining
returns and dividends for shareholders
as the new portfolio develops and
grows. In addition to the number of
holdings, the portfolio is well
diversified by sector, with a tilt towards
technology, healthcare, and to
recurring revenue business models.
There have been several realisations in
both the unquoted and quoted portfolio
during the year, reflecting the
Manager’s continued focus on driving
liquidity in the portfolio to create
realised capital profits to fund current
and future dividends for shareholders.
For example, the sale of Carousel, in
the unquoted portfolio, delivered total
proceeds of £9.3million for a gross
money multiple of 5.0x cost.
The Manager also realised its
investment in Ideagen, in the quoted
portfolio, which delivered proceeds of
£9.4 million for a total gross money
multiple of 13.5x. The Investment
Manager has once again made a select
number of profitable partial
realisations of Cerillion plc during the
year, resulting in the receipt of
proceeds of £1.5 million at an aggregate
of 11.4x original invested cost in this
listed company.
Sunset Clause
When State Aid approval of the UK’s
VCT and EIS schemes was given in 2015
a “sunset clause” was introduced for
the schemes which means if the
legislation is not renewed investors will
no longer be able to claim initial tax
relief on investments made after 5 April
2025 (“the Sunset Clause”).
On Friday 23 September 2022 the
Government announced as part of
a“mini-budget” that “the government
remains supportive of the Enterprise
Investment Scheme (EIS) and Venture
Capital Trusts (VCT) and sees the value
of extending them in the future”.
Additionally, on 7 November 2022, as part
of its Autumn Statement, the
Government said “the Government
remains supportive of the Enterprise
Investment Scheme and Venture Capital
Trusts and sees the value of extending
them in the future”. Given these
statements, the general consensus in
the VCT industry is that the Government
will extend the provisions of the Sunset
Clause. However, no further details have
been provided as yet on the length of
that extension, or any conditions or
variations to the current VCT scheme
that may be attached to any such
extension.
The Board has engaged external legal
advice to provide a strategic review on
possible outcomes and will continue to
monitor and report on any further
Government announcements in future
reports.
Dividends
The Board is pleased to declare a final
dividend of 3.0p per share for the year
to 30 September 2022, payable on
3March 2023. This is in addition to the
3.0p interim dividend paid in September
and means that the total dividends for
the year are 6.0p. This is a 7.1percent
yield based on the opening NAV of 84.3p
and meets the target policy of 7 per
cent of the NAV at the start of the year.
The Company has good levels of
realised reserves to fund future
dividends and the Manager continues
to focus on selling investments and
generating realised profits across the
portfolio, which help to sustain the
payment of dividends.
Environmental, Social &
Governance (“ESG”) matters
Environmental, social and governance
analysis is embedded into the
Company’s investment processes by the
Investment Manager in order to build
and protect long-term value for
investors. A framework based on 10key
ESG themes is used to structure
analysis, monitor and report on ESG
risks and opportunities across the
lifecycle of investments. Further
information in relation to the Investment
Manager’s integration of ESG factors in
management of the Company’s portfolio
is set out on pages20 to 28 of the
Strategic Report. Your Board is
particularly pleased to note the focus of
the Manager in this area.
Fundraising
In August 2022, the Board announced
its intention to raise new funds to
enhance the Company’s resources
available for new and follow-on
investments over the next two to
threeyears. The Company expects to
launch the offer for subscription in
January2023.
Annual General Meeting (“AGM”)
We look forward to holding our next
AGM in person at 10.30 am on 1February
2023 at Saddlers’ Hall, 40Gutter Lane,
London, EC2V 6BR. Asusual I will
present my own review of the year and
will then be joined by the Manager. We
would be delighted if you would join us
for light refreshments afterwards.
For any shareholders that do not wish
to attend in person, we will be live
streaming the AGM and Manager’s
presentation. Registration details for
the live stream will be included in the
Notice of AGM and on the Baronsmead
website. In order to cover as many
questions as possible, we encourage
shareholders to submit any questions
to the Board in advance of the meeting.
Outlook
The macroeconomic and equity market
outlook continue to exhibit elevated
levels of uncertainty as we appear to
be at a paradigm shift from low
inflation and low interest rates to
higher inflation and higher interest
rates and unwinding of Government
Sarah Fromson
Chair
Chair’s statement
2022 has seen higher volatility and weakness in the
markets, notably in Q3, with ongoing concerns around
inflationary pressures, interest rate rises and the
cost-of-living crisis exacerbated by the ongoing conflict in
Ukraine. Against this backdrop, the Company’s NAV per
share decreased 19.2 per cent before dividend payments for
the financial year.
Despite the drop in the value of the
portfolio over the period, the Board
continues to believe that, in aggregate,
the fundamentals of the underlying
portfolio companies remain robust and
the growth prospects for the majority
of investee companies continue to be
positive.
In addition to this, the Board believes
that the changes to the Manager’s
senior leadership of the investment
team have enhanced the Manager’s
ability to identify and manage
attractive early-stage unquoted
investments.
Results
Pence per
ordinary
share
NAV as at 1 October 2021
(after final dividend) 84.3
Valuation decrease
(–19.2 per cent) (16.2)
NAV as at 30 September 2022
before dividends 68.1
Less:
Interim dividend paid on
9 September 2022 (3.0)
Proposed final dividend of 3.0p
payable, after shareholder
approval, on 3 March 2023 (3.0)
Illustrative NAV as at 30 September
2022 after proposed dividend 62.1
Portfolio review
At 30 September 2022, the Company’s
investment portfolio was valued at
£128million and comprised direct
investments in a total of 85 companies
of which 39 are unquoted and 46 are
quoted companies. The Company’s
investments in the LF Gresham House
UK Micro Cap Fund (“Micro Cap”),
LFGresham House UK Multi Cap
Income Fund (“Multi Cap”) and in the
LFGresham House UK Smaller
Companies Fund (“Small Cap”) were
valued at £43million at 30 September.
These investments provide further
diversity, giving investment exposure to
an additional 75 AIM-traded and fully
listed companies and thus spreading
investment risk across some
160portfolio companies.
During the 12 months to 30 September
2022, the underlying value of the
unquoted portfolio decreased by
19percent and the portfolio of directly
held AIM investments decreased by
20percent reflecting the difficult
conditions experienced in the wider
market. Both portfolio returns, whilst
disappointing, compare favourably to
the FTSE AIM All Share Index which
decreased by 35 per cent for the period.
Our Micro Cap fund delivered a return
of –32 per cent, and our Small Cap fund
declined 18 per cent, compared to the
IA UK Smaller Companies Sector which
declined by 32 per cent. The Multi Cap
fund declined by 9percent compared
with the IA UK Equity Income Sector
that declined by 8 per cent for the
12months to 30September 2022.
Strategic report
The Chair’s statement forms part of the strategic report.
5
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
4
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
stimulus as well as an equity rotation
from growth to value that is well
underway.
We anticipate this uncertainty will
continue to drive periods of
sentiment-driven volatility in equity
markets well into next year. While we
view this outlook with suitable caution,
we also expect heightened volatility to
drive attractive long-term investment
opportunities and we remain vigilant
for evidence of mispricing.
Despite the continuing potential
economic headwinds, the Board
continues to believe it is a good time to
be investing in earlier stage, innovative
and high-growth potential businesses
looking to take advantage of changes
in consumer behaviour and the
disruption of traditional supply chains
being catalysed by technology. The
level of interesting investment
opportunities being reviewed by the
Investment Manager continues to be
strong and the Board remains
confident that the Investment Manager
is suitably positioned to provide the
necessary levels of support to the
unquoted company portfolio through
these difficult times. Despite the
current economic outlook, where some
portfolio companies are likely to face
more difficulties than others, there
continues to be an increase in existing
high potential portfolio companies
looking for follow on capital to support
future growth.
Sarah Fromson
Chair
1December 2022
Chair’s statement continued
This year has seen a prolonged period of weakness in the public and private equity markets brought about by macroeconomic
uncertainty and global events. Against this backdrop, the portfolio, whilst well diversified, with exposure to 160 quoted and
unquoted companies, has delivered a decrease in net asset value total return of 19.2 per cent over the year.
Portfolio review
Overview
The net assets of £213 million were invested as follows:
NAV % of Number of % return in
Asset class (£mn) NAV* investees** the year***
Unquoted 53 25 39 (19)
AIM-traded companies 75 35 46 (20)
LF Gresham House UK Micro Cap Fund 23 11 50 (32)
LF Gresham House UK Multi Cap Income Fund 14 7 41 (9)
LF Gresham House UK Smaller Companies Fund 6 3 38 (18)
Liquid assets
#
42 19 N/A –
Totals 213 100 214
* By value as at 30 September 2022.
** Includes investee companies with holdings by more than one fund. Total number of individual companies held is 160.
*** Return includes interest received on unquoted realisations during the year.
# Represents cash, OEICs and net current assets.
The tables on pages 12 and 13 show the breakdown of new investments and realisations over the course of the year and overleaf is
a commentary on some of the key highlights in both the unquoted and quoted portfolios.
Manager’s review
Clive Austin
Managing Director, VCT Portfolio
Ken Wotton
Managing Director, Public Equity
Tania Hayes
Chief Operating Officer, Strategic
Equity
Trevor Hope
Chief Investment Officer, VCTs
Ed Wass
Portfolio Partner
Tom Makey
Investment Director
Strategic report
The Chair’s statement forms part of the Strategic Report.
7
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Baronsmead Second Venture Trust plc
Audited Annual Report and Financial Statements 2021
6
Investment activity – unquoted
and quoted
The Company’s investment strategy is
primarily focused on companies
operating in parts of the economy that
we believe are benefiting from long-term
structural growth trends and in sectors
where we have deep expertise and
network. The amount of capital invested
in each business is matched to the scale,
maturity and underlying risk profile of
the company seeking investment.
During the year, £23.1 million was
invested into 19 companies including
nine new additions to the portfolio and
eleven follow on investments in ten
existing portfolio companies.
Six new unquoted investments were
completed during the year into Popsa
Holdings Ltd, Proximity Insight Holdings
Ltd, Bidnamic, Fu3e Ltd, Focal Point
Positioning Ltd and OrriLtd. Below are
descriptions of the new investments
made:
Popsa is a photobook mobile app
which utilises proprietary machine
learning (“ML”) algorithms to
dramatically shorten the time of
creation
Proximity Insight provides a
cloud-based app for retail sales
associates to engage and transact
with customers in-store or online
Bidnamic is a Google Shopping bid
optimisation platform
Fu3e is a collaborative project
management and real time reporting
platform for real estate professionals
Focal Point utilises proprietary ML
algorithms to significantly improve
satellite-based location sensitivity
Orri is a clinically-led provider of
eating disorder services.
Three new AIM quoted investments
were made during the year into
Skillcast, Aptamer Group and Oberon
Investments:
Skillcast is a vendor of financial risk
and compliance software
Aptamer is a developer of a platform
technology with applications in the
therapeutic and diagnostic areas of
healthcare
Oberon Investments is a wealth
management and financial advisory
firm
Business services 13%
Technology 55%
Collective investment vehicles 21%
AIM and LSE quoted 35%
Consumer markets 9%
Healthcare & education 23%
Greater than 5 years 51%
Between 1 and 3 years 23%
Between 3 and 5 years 17%
Less than 1 year 9%
Unquoted 25%
Net current assets 16%
Cash liquidity funds 3%
*Direct investment only.
Manager’s review continued
The Company made additional
investments in ten existing portfolio
companies, one quoted and nine
unquoted, across the year. This is
consistent with the investment
strategy of continuing to back our high
potential assets with further capital to
support future growth. We anticipate
the level of follow-on investment will
continue to grow as the earlier stage
portfolio continues to mature.
Unquoted portfolio
Performance
The unquoted portfolio decreased in
value by 19 per cent during the year.
Ourportfolio companies have faced
achallenging macroeconomic
environment, including rising levels of
inflation and interest rates and
continued supply chain disruption
relating to both the ongoing effects of
the COVID-19 pandemic and the impact
of conflict in Ukraine. In particular, this
has started to impact the consumer
facing businesses in the portfolio.
However, we have seen robust
performance from many of our
technology, healthcare and services
companies which continue to grow
recurring or contracted revenues, albeit,
in general, at a slower pace than has
been forecast.
As Investment Manager we remain
highly engaged with the management
teams within the portfolio, sharing
insight and best practice to help them
manage both risk and spot opportunities
in a quickly changing environment. We
have continued to invest in our portfolio
and in-house talent teams , which
alongside our extensive network of
earlier stage, high growth company
experts, ensure we are well positioned
to help the companies we invest in to
navigate the challenges they face,
whilst also continuing to develop and
scale.
Divestments
The Company successfully realised its
investment in Carousel Logistics in
February 2022, delivering £9.3 million in
proceeds and an initial investment return
of 5.0x. Carousel is a pan-European
logistics specialist, delivering high-value
parts and products for performance and
life-critical industries. The business grew
significantly during the investment
period, including expanding their
international footprint both organically
and through acquisition. In addition, the
Company also successfully realised its
investment in Happy Days in July 2022,
delivering £3.2 million in proceeds and an
initial investment return of 0.8x.
Also, during the year, the Company fully
divested its holding in Rainbird
Technologies for no return on investment.
Quoted portfolio (AIM-traded
investments)
Performance
The quoted portfolio decreased in value
by 20 per cent during the year, giving up
some of the strong gains made for
shareholders in the prior year. This
performance, should be viewed in the
context of a challenging equity market
environment globally, driven by
macroecomic and geopolitical
uncertainty and headwinds which have
resulted in losses across most asset
classes. For reference the AIM market in
the UK fell 35 per cent over the same
period. Despite the adverse share price
performances from many of the portfolio
companies, the majority of the AIM
portfolio remains in good financial health
and is exposed to structural growth
areas, providing some insulation from
the deteriorating economic conditions.
The best performing investments all sit
in the software sector with two
benefitting from the elevated level of
takeover activity in the UK public
markets for much of the financial year.
Cerillion, a provider of billing and
Strategic report
9
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Sector* Total assets Length of time investments held
Investment diversification at 30 September 2022 by value
8
charging software to the telecoms
industry continued to deliver strong
revenue and profit growth and upgraded
expectations on the back of strong
contract win momentum. Ideagen, a
governance, risk and compliance
software provider saw its share price
increase by 10% over the year mainly
due to a takeover approach from a
vehicle backed by private equity firm Hg
Capital, at a substantial premium. The
takeover resulted in a full exit for
Baronsmead funds at a multiple of
13.5times original cost. Cloudcall, an
internet telephony software company,
also received a takeover approach from
US private equity firm Xplorer Capital
Management LLC resulting in a strong
recovery in value following a period of
operational underperformance, realising
a return of 0.9 times original cost.
The largest detractors from
performance were Netcall, a provider of
cloud contact centre and business
process automation software which
was derated despite strong growth in
revenue and profit during the period;
TPXImpact which again was derated
during the period although we note the
business has subsequently
downgraded its market estimates
resulting in the CEO stepping down
post year end; and Inspired, an energy
procurement and optimisation
consultancy which de-rated during the
year despite delivering results in line
with expectations and seeing strong
increased demand for its services
resulting from elevated energy prices
following the conflict in Ukraine.
We closely monitor our AIM portfolio
with a rolling programme of
independent reviews of top AIM holdings
and broadly continue to be positive on
the long-term investment prospects of
these companies. Many of the larger
quoted investments have been
long-term holdings. These companies
are typically profitable, cash generative
businesses with low levels of financial
gearing and continue to have attractive
long-term growth prospects.
Divestments
Proceeds totalled £13.7 million during
the year following three full and one
partial realisation. Ideagen was fully
realised following a takeover by private
equity firm Hg Capital, returning 13.5x
cost in July 2022. The Company’s
investment in Cloudcall Group was also
fully realised returning 0.9x cost. The
opportunity to crystallise some more
profits was taken for Cerillion plc; over
the course of the year proceeds of
£1.5million were realised at 11.4x cost.
Collective Investment Vehicles
The Manager believes that the
Company’s investments in the
LFGresham House UK Micro Cap Fund
(“Micro Cap”), LF Gresham House UK
Multi Cap Income Fund (“Multi Cap”),
and LF Gresham House UK Smaller
Companies Fund (“Small Cap”) are
acore component of the Company’s
portfolio construction. These
investments provide shareholders with
additional diversification through
exposure to an additional 75 underlying
companies, as well as access to the
potential returns available from a
larger and more established group of
companies that fall within the
Manager’s core area of expertise.
Over the year Micro Cap delivered
areturn of –32 per cent, MultiCap
delivered a return of –9percent and
the Small Cap fund delivered
–18percent.
Micro Cap and Multi Cap continue to be
both highly rated by independent ratings
agencies. Micro Cap’s cumulative
performance is currently top quartile
within the IA UK Smaller Companies
sector and is the fourth best performing
fund over the past 10years. Multi Cap’s
cumulative performance has been the
top performing within the IA UK Equity
Income sector over three years,
fiveyears and since launch in June 2017.
Small Cap has also achieved top quartile
cumulative performance since launch in
2019 and is the fourth best performing
fund over the past threeyears and
second best since launch.
Liquid assets (cash and near cash)
The Company had cash and liquidity
OEICs of approximately £42 million at
the year-end. This asset class is
conservatively managed to take
minimal or no capital risk.
ESG highlights
During the year we have conducted our
second ESG survey of our unquoted
portfolio companies, to identify how
these companies think about ESG and
which ESG data is already being
reported and monitored. Further details
on our ESG approach and policies can be
found on pages 20 to 28 in the strategic
report.
Outlook
Despite the current macroeconomic
headwinds, the opportunity to invest and
support growth in entrepreneurial
earlier-stage businesses remains
strong. Our focus on investing in parts of
the economy which are experiencing
structural growth and in sectors where
we have extensive talent networks and
domain expertise continues to identify
attractive investment opportunities.
With our support and guidance, many of
our portfolio management teams
continue to innovate to take advantage
of the disruption in the market as a
result of the economic downturn.
Weanticipate the rate of follow-on
investment to increase across the
portfolio as we support our successful
companies to trade through the cycle
and to continue to scale.
Several parts of the portfolio have faced
challenges due to the macroeconomic
environment, most notably our
investments in companies that rely on
consumer sentiment. Our investee
companies are having to navigate the
impact of wage inflation, rising energy
prices and supply chain disruption.
However, the portfolio continues to be
highly diversified, and overall, is
defensively positioned.
The Gresham House team, which
consists of 21 investment professionals
is well placed to take advantage of the
opportunities that an uncertain
economic environment will present. Our
experienced portfolio and in-house
talent teams continue to add value to
our portfolio companies post
investment. We remain confident in the
ability of more agile, fast moving earlier
stage companies to perform well in the
current economic environment and in
our ability to invest capital and deliver
attractive long-term returns for the
Company.
Gresham House Asset Management Ltd
Investment Manager
1 December 2022
Manager’s review continued
Strategic report
11
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
10
Realisations in the year
First Original Overall
investment book cost
#
Proceeds
†
multiple
Company date £’000 £’000 return
Unquoted realisations
Carousel Logistics Ltd Full trade sale Oct 13 2,336 9,333 5.0*
Happy Days Consultancy Ltd Full trade sale Apr 12 4,180 3,184 0.8
Rainbird Technologies Ltd Full trade sale Feb 19 789 0 0.0
Total unquoted realisations 7,305 12,517
AIM-traded realisations
Ideagen plc Take over Jan 13 720 9,358 13.5
CloudCall Group plc Take over Apr 14 3,214 2,900 0.9
Cerillion plc Market sale Jul 15 129 1,474 11.4
Mi-Pay Group plc Liquidated Nov 12 800 11 0.0
Total AIM-traded realisations 4,863 13,743
Total realisations in the year 12,168 26,260
# Residual book cost at realisation date.
† Proceeds at time of realisation including interest.
* Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.
Investments in the year
Book cost
Company Location Sector Activity £’000
Unquoted investments
New
Popsa Holdings Ltd Surrey Technology Mobile-first photobook app provider 3,379
Fu3e Ltd Sussex Technology Real-estate development project 1,819
management platform
Proximity Insight Holdings Ltd London Technology Platform for front-line sales associates 1,152
of omni-channel retailers to engage
with customers
Bidnamic Yorkshire Technology Google shopping bid-optimisation 921
software
Focal Point Positioning Ltd Cambridgeshire Technology A research and development focused 908
technology business focusing on global
navigation and satellite systems
Orri Ltd London Healthcare & Education Provider of intensive day care treatments
for eating disorders 794
Follow-on
Panthera Biopartners Ltd Yorkshire Healthcare & Education Recruitment services for clinical trials 2,598
Airfinity Ltd London Healthcare & Education Provides real time life science 1,352
intelligence as a subscription service
eConsult Health Ltd Surrey Healthcare & Education Online consultation provider used by 1,300
GP practices and hospitals
Yappy Ltd Lancashire Consumer Markets Supplier of customisable pet products 1,059
Patchworks Integration Ltd Nottinghamshire Technology Leading integration platform for 780
fast-growing retail and ecommerce
businesses
RevLifter Ltd London Technology AI platform using advanced behavioural 779
analytics to deliver tailored promotions
to users
Custom Materials Ltd London Technology Retailer of customisable products 655
Glisser Ltd London Business Services Audience response software 330
Tribe Digital Holdings Pty Ltd London Technology Influencer marketing platform 284
Total unquoted investments 18,110
AIM-traded investments
New
Aptamer Group plc Yorkshire Healthcare & Education Platform providing antibody alternatives 2,390
to the pharma industry
Skillcast Group plc London Healthcare & Education Compliance e-learning and regulatory 817
technology services
Oberon Investments Group plc London Business Services Corporate advisory business 742
Follow-on
Crossword Cybersecurity plc London Technology Commercialisation of university 1,040
research-based cyber security software
and consulting
Total AIM-traded investments 4,989
Total investments in the year 23,099
Strategic report
13
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
12
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
eConsult Health Ltd
London
Unquoted
www.econsult.net
eConsult provides a clinically led online consultation service to digitally
triage patients, reducing the number of face-to-face consultations
required. This builds on the structural imbalance of a growing and ageing
population and an increasing scarcity in healthcare professionals. The
Company’s investment of £5 million has enabled the business to develop
its product offering for the secondary market, in addition to supporting
sales and marketing activity.
All funds managed by Gresham House
First investment:
October 2020
Total original cost: £7,500,000
Total equity held: 11.4%
Baronsmead Second Venture Trust only
Original cost:
£3,899,000
Valuation: £5,195,000
Valuation basis: Earnings Multiple
Income recognised in the year: £nil
% of equity held: 5.2%
Voting rights: 6.3%
Year ended 31 March
2021 2020
£ million £ million
Sales: 6.3 3.2
Pre-tax profits: 1.0 (0.1)
Net Assets: 7.6 (0.0)
No. of Employees: 58 42
Source: eConsult Health Ltd, Director’s Report & Financial Statements, 31 March 2021
4
Airfinity Ltd
London
Unquoted
www.airfinity.com
Airfinity is a science information data analytics platform which provides
deep information by therapeutic area on a real time basis to the life
sciences industry and public entities including governments, NGOs and
healthcare authorities. It was founded in 2015 and grew rapidly during the
pandemic on the back of its COVID-19 health analytics and intelligence
platform. The Baronsmead VCTs initially invested £5.0 million in 2021 and
recently provided follow-on funding as part of a £2.6 million investment
round which will be used to support ongoing development of the platform,
sales and marketing efforts and to build out the team.
All funds managed by Gresham House
First investment:
July 2021
Total original cost: £5,605,000
Total equity held: 20.1%
Baronsmead Second Venture Trust only
Original cost:
£2,911,000
Valuation: £4,006,000
Valuation basis: Earnings Multiple
Income recognised in the year: £nil
% of equity held: 9.3%
Voting rights: 9.2%
Year ended 31 December
2021 2020
£ million £ million
Net Assets: 3.2 (0.3)
A full set of accounts is not publicly available.
Source: Airfinity Ltd, Financial Statements, 31 December 2021
5
IDOX plc
Berkshire
Quoted
www.idoxgroup.com
Idox provides legislative compliance and document process management
software, in a variety of cloud and on-premise applications, for local
governments and the NHS. Additionally, IDOX delivers document
collaboration software for the oil & gas, energy and infrastructure sectors,
enabling accurate record keeping for project management. IDOX’s
solutions seek to deliver process automation to support enhanced citizen
and customer experience, improved operational efficiency and reduced
overheads.
All funds managed by Gresham House
First investment:
May 2002
Total original cost: £1,642,000
*
Total equity held: 4.8%
Baronsmead Second Venture Trust only
Original cost:
£1,028,000
Valuation: £7,125,000
Valuation basis: Bid price
Income recognised in the year: £44,000
% of equity held: 2.4%
Voting rights: 2.4%
Year ended 31 October
2021 2020
£ million £ million
Sales: 62.2 57.3
Pre-tax profits: 7.3 1.8
Net Assets: 60.8 47.0
No. of Employees: 567 637
Source: IDOX plc, Annual Report and Accounts, 31 October 2021
* Includes Baronsmead VCTs only
3
Netcall plc
Bedfordshire
Quoted
www.netcall.com
Netcall is a provider of intelligent automation and customer engagement
software, helping organisations to become more customer-centric.
Solutions are focused on enabling customer contact across multiple
channels and improving customer satisfaction whilst driving operational
efficiency through increased process automation. Netcall has over
700customers, spanning enterprise, healthcare and government sectors.
All funds managed by Gresham House
First investment:
July 2010
Total original cost: £4,354,000
*
Total equity held: 24.0%
Baronsmead Second Venture Trust only
Original cost:
£2,616,000
Valuation: £10,650,000
Valuation basis: Bid Price
Income recognised in the year: £55,000
% of equity held: 9.6%
Voting rights: 9.6%
Year ended 30 June
2022 2021
£ million £ million
Sales: 30.5 27.2
Pre-tax profits: 2.3 1.0
Net Assets: 27.4 24.6
No. of Employees: 252 235
Source: Netcall plc, Annual Report and Accounts, 30 June 2022
* Includes Baronsmead VCTs only
2
The top ten investments by current value at 30 September 2022 illustrate the diversity of investee companies within the portfolio.
For consistency across the top ten and based on guidance from the AIC, data extracted from the last set of published audited
accounts is shown in the tables below. However, this may not always be representative of underlying financial performance for
several reasons. Published accounts lodged at Companies House may be out of date and the Manager works from up-to-date
management accounts and has access to draft but unpublished annual audited accounts prepared by the companies. Inaddition,
pre-tax profit in statutory accounts is often not a representative indicator of underlying profitability as it can be impacted by, for
example, deductions of non-cash items, such as amortisation, that relate to investment structures rather than operating
performance.
Ten largest investments
Cerillion plc
London
Quoted
www.cerillion.com
Cerillion provides billing, charging and CRM software solutions,
predominantly to the telecommunications sector but also to other sectors,
including finance and utilities. Cerillion has c.80 customer installations
across c.45 countries, delivering a broad range of cloud solutions, managed
services and on-premise enterprise software.
All funds managed by Gresham House
First investment:
July 2015
Total original cost: £2,739,000
Total equity held: 12.2%
Baronsmead Second Venture Trust only
Original cost:
£1,507,000
Valuation: £18,435,000
Valuation basis: Bid Price
Income recognised in the year: £152,000
% of equity held:
6.7%
Voting rights: 6.7%
Year ended 30 September
2021 2020
£ million £ million
Sales: 26.1 20.8
Pre-tax profits: 7.4 2.6
Net Assets: 20.2 16.0
No. of Employees: 252 235
Source: Cerillion plc, Annual Report and Accounts 30 September 2021
1
Strategic report
15
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
14
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Bioventix plc
London
Quoted
www.bioventix.com
Bioventix manufactures and supplies high affinity sheep monoclonal
antibodies for use in immunodiagnostics. Focusing on clinical diagnostics,
the company’s strategy is to identify new assays for which there is a need
for improved antibodies. Since the Baronsmead VCTs first invested in 2013,
the company has more than quadrupled its revenues and profits.
All funds managed by Gresham House
First investment:
June 2013
Total original cost: £562,000
*
Total equity held: 9.7%
Baronsmead Second Venture Trust only
Original cost:
£309,000
Valuation: £3,887,000
Valuation basis: Bid Price
Income recognised in the year: £179,000
% of equity held:
2.3%
Voting rights: 2.3%
Year ended 30 June
2022 2021
£ million £ million
Sales: 11.7 10.9
Pre-tax profits: 9.3 8.1
Net Assets: 11.8 11.8
No. of Employees: 16 17
Source: Bioventix plc, Annual Report and Financial Statements 30 June 2022
* Includes Baronsmead VCTs only
7
Anpario plc
Nottinghamshire
Quoted
www.anpario.com
Anpario is an international manufacturer and distributor of natural animal
feed additives for animal health, nutrition and biosecurity. The products are
designed to boost growth and improve the health of the animals which
they feed. Sales growth is underpinned by both the increasing global
demand for meat, and hence animal feed, as well as the trend towards
organic foods and healthy eating.
All funds managed by Gresham House
First investment:
November 2006
Total original cost: £966,000
Total equity held: 5.9%
Baronsmead Second Venture Trust only
Original cost:
£662,000
Valuation: £3,931,000
Valuation basis: Bid Price
Income recognised in the year: £96,000
% of equity held: 4.0%
Voting rights: 4.0%
Year ended 31 December
2021 2020
£ million £ million
Sales: 33.4 30.5
Pre-tax profits: 5.7 5.4
Net Assets: 40.3 37.5
No. of Employees: 121 120
Source: Anpario plc, Annual Report 31 December 2021
6
IWP Holdings Ltd
Jersey
Unquoted
www.iwpuk.co.uk
IWP is a leading national independent financial advisory business which
was founded in 2019 shortly before the Baronsmead VCTs invested. The
Baronsmead VCTs investment provided the business with growth capital to
establish the central platform, enable the hiring of key management team
members and to establish its integrated investment management practice.
The company has grown significantly since investment and now serves
clients throughout the UK, with growth driven by organic client growth and
via acquisitions.
All funds managed by Gresham House
First investment:
July 2019
Total original cost: £3,000,000
Total equity held: 9.0%
Baronsmead Second Venture Trust only
Original cost:
£1,587,000
Valuation: £3,072,000
Valuation basis: Earnings Multiple
Income recognised in the year: £nil
% of equity held: 4.2%
Voting rights: 4.2%
Year ended 31 March
A full set of accounts is not publicly available as the company is registered
in Jersey.
10
Popsa Holdings Ltd
Surrey
Unquoted
www.popsa.com
Popsa is a photobook app that uses proprietary machine learning
algorithms to reduce the average time it takes for customers to produce
photobooks from two hours to just five minutes. Popsa was founded in 2017
with the aim to disrupt an industry that has not innovated with consumer
habits, in particular the shift to mobile as the key photo repository. The
Baronsmead VCTs investment is enabling the business to continue to grow
across their key international markets whilst also accelerating investment
in their category leading technology.
All funds managed by Gresham House
First investment:
December 2021
Total original cost: £6,500,000
Total equity held: 8.1%
Baronsmead Second Venture Trust only
Original cost:
£3,379,000
Valuation: £3,379,000
Valuation basis: Earnings Multiple
Income recognised in the year: £nil
% of equity held: 3.7%
Voting rights: 3.8%
Year ended 31 December
2021 2020
£ million £ million
Sales: 25.3 19.2
Pre-tax profits: (3.8) (1.0)
Net Assets: 12.0 6.8
No. of Employees: 50 36
Source: Popsa Holdings Ltd, Group Strategic Report, Report of the Directors and
Consolidated Financial Statements, 31 December 2021
9
Patchworks Integration Ltd
Nottinghamshire
Unquoted
www.wearepatchworks.com
Patchworks provides the software to integrate an ecommerce customer’s
front and back office operational systems, managing the flow of data
across their entire business and providing data and analytics to power
decision-making. Founded in 2014, the Baronsmead VCTs invested
originally in July 2021 in a Series A investment and since then the business
has more than doubled its recurring revenues through expansion sales and
onboarding new customers predominantly in the UK.
All funds managed by Gresham House
First investment:
July 2021
Total original cost: £4,800,000
Total equity held: 25.0%
Baronsmead Second Venture Trust only
Original cost:
£2,496,000
Valuation: £3,729,000
Valuation basis: Earnings Multiple
Income recognised in the year: £nil
% of equity held: 11.4%
Voting rights: 11.4%
Year ended 30 June
2021 2020
£ million £ million
Net Assets: 0.1 0.1
A full set of accounts is not publicly available.
Source: Patchworks Integration Ltd, Annual Report & Unaudited Financial Statements,
30 June 2021
8
Ten largest investments continued
Strategic report
17
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
16
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
The Company is facing the key emerging risks of climate change and ESG, given the regulatory, operational and potentially reputational implications if not
appropriately addressed. In order to address these emerging risks, when looking to make a new investment, the Manager uses an ESG Decision Tool to identify
any material ESG risks that need to be managed and mitigated. For further detail, see pages 20 to 28.
The Board has carried out a robust assessment of the principal and emerging risks and uncertainties facing the Company and has assessed the appropriate
measures to be taken in order to mitigate these risks as far as practicable. There is an ongoing process for identifying, evaluating and managing these risks
which is part of the governance framework detailed further in the Corporate Governance section of this report.
Principal risk Context Specific risks we face Possible impact Mitigation
The financial risks faced by the Company are covered within the Notes to the Financial Statements on pages 70 to 83.
Loss of approval as
a Venture Capital
Trust
The Company must comply with section 274 of the Income
Tax Act 2007 which enables its investors to take advantage of
tax relief on their investment and on future returns.
Breach of any of the rules enabling the Company to hold VCT
status could result in the loss of that status.
The loss of VCT status would result in
shareholders who have not held their shares for
the designated holding period having to repay the
income tax relief they had already obtained and
future dividends and gains would be subject to
income tax and capital gains tax.
The Board maintains a safety margin on all VCT tests to ensure that breaches are unlikely to be
caused by unforeseen events or shocks. The Investment Manager monitors all of the VCT tests on an
ongoing basis and the Board reviews the status of these tests on a quarterly basis. Specialist advisors
review the tests on a bi-annual basis and report to the audit committee on their findings.
Legislative
VCTs were established in 1995 to encourage private
individuals to invest in early stage companies that are
considered to be risky and therefore have limited funding
options. In return the state provides these investors with tax
reliefs which fall under the definition of state aid.
A change in government policy regarding the funding of small
companies or changes made to VCT regulations to comply
with EU State Aid rules could result in a cessation of the tax
reliefs for VCT investors or changes to the reliefs that would
make them less attractive to investors.
The Company might not be able to maintain its
asset base leading to its gradual decline and
potentially an inability to maintain either its buy
back or dividend policies.
The Board and the Investment Manager engage on a regular basis with HMT and industry
representative bodies to demonstrate the cost benefit of VCTs to the economy in terms of employment
generation and taxation revenue. In addition, the Board and the Investment Manager have considered
the options available to the Company in the event of the loss of tax reliefs to ensure that it can
continue to provide a strong investment proposition for its shareholders despite the loss of tax reliefs.
Investment
performance
The Company invests in small, mainly UK based companies,
both unquoted and quoted. Smaller companies often have
limited product lines, markets or financial resources and
may be dependent for their management on a smaller
number of key individuals and hence tend to be riskier than
larger businesses.
Investment in poor quality companies with the resultant risk
of a high level of failure in the portfolio.
Reduction in both the capital value of investors
shareholdings and in the level of income
distributed.
The Company has a diverse portfolio where the cost of any one investment is typically less than 5 per
cent of NAV thereby limiting the impact of any one failed investment. The Investment Management
team has a strong and consistent track record over a long period.
The Investment Manager undertakes extensive due diligence procedures on every new investment
and reviews the portfolio composition maintaining a wide spread of holdings in terms of financing
stage and industry sector.
Economic, political
and other external
factors
Whilst the Company invests in predominantly UK businesses,
the UK economy relies heavily on Europe as one of its largest
trading partners. This, together with the increase in
globalisation, means that economic unrest and shocks in
other jurisdictions, as well as in the UK, can impact on UK
companies, particularly smaller ones that are more vulnerable
to changes in trading conditions. In addition, the potential
impact of the geo political environment relating to the conflict
in Ukraine remains uncertain.
Events such as fiscal policy changes, aftermath of Brexit,
economic recession, movement in interest or currency rates,
civil unrest, war or political uncertainty or pandemics can
adversely affect the trading environment for underlying
investments and impact on their results and valuations.
Reduction in the value of the Company’s assets
with a corresponding impact on its share price
may result in the loss of investors through buy
backs and may limit its ability to pay dividends.
The Company invests in a diversified portfolio of companies across a number of industry sectors,
which provides protection against shocks as the impact on individual sectors can vary depending
upon the circumstances. In addition, the Manager uses a limited amount of bank gearing in its
investments which enables its investments to continue trading through difficult economic conditions.
The Board monitors and reviews the position of the Company, ensuring that adequate cash balances
exist to allow flexibility. The Board reviews the make up and progress of the portfolio each quarter to
ensure that it remains appropriately diversified and funded.
Regulatory &
Compliance
The Company is authorised as a self managed Alternative
Investment Fund Manager (“AIFM”) under the Alternative
Investment Fund Managers Directive (“AIFMD”) and is also
subject to the Prospectus and Transparency Directives. It is
required to comply with the Companies Act 2006 and the
UKLA Listing Rules.
Failure of the Company to comply with any of its regulatory or
legal obligations could result in the suspension of its listing
by the UKLA and/or financial penalties and sanction by the
regulator or a qualified audit report.
The Company’s performance could be impacted
severely by financial penalties and a loss of
reputation resulting in the alienation of
shareholders, a significant demand to buy back
shares and an inability to attract future investment.
The suspension of its shares would result in the
loss of its VCT taxation status and most likely the
ultimate liquidation of the Company.
The Board and the Investment Manager employ the services of leading regulatory lawyers, sponsors,
auditors and other advisers to ensure the Company complies with all of its regulatory obligations. The
Board has strong systems in place to ensure that the Company complies with all of its regulatory
responsibilities. The Investment Manager has a strong compliance culture and employs dedicated
compliance specialists within its team who support the Board in ensuring that the Company is compliant.
Operational
The Company relies on a number of third parties, in particular
the Investment Manager, to provide it with the necessary
services such as registrar, sponsor, custodian, receiving
agent, lawyers and tax advisers.
The risk of failure of the systems and controls of any of the
Company’s advisers including a cyber attack leading to an
inability to service shareholder needs adequately, to provide
accurate reporting and accounting and to ensure adherence to
all VCT legislation rules.
Errors in shareholders’ records or shareholdings,
incorrect marketing literature, non compliance
with listing rules, loss of assets, breach of legal
duties and inability to provide accurate reporting
and accounting all leading to reputational risk
and the potential for litigation. A cyber attack or
data breach could lead to loss of sensitive
shareholder data resulting in a breach and
liability under GDPR.
The Board has appointed an audit and risk committee who review the internal control (“ISAE3402”)
and/or internal audit reports from all significant third party service providers, including the
Investment Manager, on a bi-annual basis to ensure that they have strong systems and controls in
place including Business Continuity Plans and matters relating to cyber security. The Board regularly
reviews the performance of its service providers to ensure that they continue to have the necessary
expertise and resources to provide a high class service and always where there has been any changes
in key personnel or ownership.
The operational requirements of the Company, including from its service providers, have been subject
to rigorous testing (including remote working and virtual meetings) as to their application since the
COVID-19 pandemic, where increased use of out of office working and online communication has
been required. To date the operational arrangements have proven robust.
Principal risks and uncertainties
Strategic report
19
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
18
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Sustainable investment
The Company is required, by company
law, to provide details of environmental
(including the impact of the Company’s
business on the environment),
employee, human rights, social and
community issues; including
information about any policies it has in
relation to these matters and the
effectiveness of these policies. Since
the Company does not have any
employees and it has no direct impact
on the community or the environment
due to its status as a VCT, the Company
does not maintain specific policies in
relation to these matters.
However, the Board is conscious of the
potential impact of its investments on
the environment as well as its social and
corporate governance responsibilities.
The Board and the Manager believe that
sustainable investment involves the
integration of ESG factors within the
investment process and that these
factors should be considered alongside
financial and strategic issues.
The Company therefore complies with
current reporting and other ESG
standards for investment companies,
through its monitoring of the ESG
impact of its investee companies. The
Company will continue to evolve its
processes and reporting as ESG
requirements change. More broadly, the
Company complies with the AIC Code
of Corporate Governance.
Environmental, Social and
Governance (ESG) update from
the Manager
The Manager is committed to
sustainable investment as an integral
part of its business strategy. During
2022, the Manager has taken further
steps to formalise its approach to
sustainability and has put in place
several policies and processes to
ensure environmental, social and
governance (“ESG”) factors and
stewardship responsibilities are built
into asset management across all
funds and strategies, including venture
capital trusts.
The Manager’s sustainable investment
policies and beliefs can be found on its
website and in its Sustainable
Investment Report.
The Manager incorporates ESG
considerations throughout the
investment lifecycle including the
valuation process and this is
communicated with the Board on
aquarterly basis.
The Manager believes in playing an
industry leadership role in supporting
and promoting sustainable investment.
It is a signatory to the UN-supported
Principles of Responsible Investment
and was awarded four or five stars, out
of a maximum of five stars, for all
modules submitted in its
PRI Report
2021. It is also a signatory of the
UKStewardship Code; in September
2022, it was announced that Gresham
House had met the expected standard
of reporting for 2021 and will remain
asignatory for the second year in a row.
Sustainability governance structure
To ensure high-quality governance of
its sustainability strategy, the Manager
has developed a network of
sustainability-related committees
which oversee its work. Over the past
12months the Manager has made
twomajor improvements to ensure it
achieves its sustainability ambitions:
• The Manager’s Board established a
new Sustainability Committee to
provide oversight and accountability
for the Manager’s approach to
sustainability across its operations
and investment practices.
• The Group Management Committee
established the Sustainability
Executive Committee which aims to
elevate responsibility for
sustainability to executive level,
reflecting the importance and
materiality of sustainability to the
business.
Gresham House Sustainability Governance Structure
Board
Oversees our business strategy and management, including
sustainability matters.
in relation to investment
Consider conflicts arising
activities for clients and the
exercise of voting rights.
Sustainability
Executive Committee
(Sustainability ExCo)
Drives sustainability-
related deliverables to
ensure the business, its
staff and the investments
made demonstrate best
practice and leadership.
Also owns delivery and
oversight of the Corporate
Sustainability Strategy.
Risk Committee
Conflicts Committee
ESG risks are included in our
risk register and divisions
are required to report on
ESG-related risks to this
Committee each quarter.
Group Management Committee
The delivery of the business strategy has been delegated to the Group
Management Committee who regularly review performance against
our strategic targets, including our approach and implementation of
sustainable investment practices.
Sustainability Committee
Oversees and reviews the
Corporate Sustainability
Strategy, including
sustainable investment.
Remuneration Committee
Oversees our
business strategy and
management, including
sustainability matters.
Audit Committee
Responsible for
identification and
monitoring of business
risks, including ESG and
climate change.
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Sustainable Investment Framework
The Manager believes the ‘G’
(Governance) of ESG is the most
important factor in its investment
processes for public and private equity.
Board composition, governance,
control, company culture, alignment of
interests, shareholder ownership
structure, remuneration policy etc. are
important elements that will feed into
the Manager’s analysis and the
company valuation.
The ‘E’ and ‘S’ (Environmental and
Social) are assessed as risk factors
during due diligence to eliminate
companies that face environmental
and social risks that cannot be
mitigated through engagement and
governance changes.
Natural capital
Environment
SocialGovernance
Community care
and engagement
Governance and ethics
Waste management
Marketplace
responsibility
Supply chain
sustainability
Employment, health,
safety and wellbeing
Climate change
and pollution
Commitment
to sustainability
Risk and
compliance
Sustainable investment continued
Sustainability Executive Committee
Embedding ESG analysis
A framework based on ten key ESG
themes is used to structure analysis,
monitor and report on ESG risks and
opportunities across the lifecycle of
investments.
The ten themes are the basis of the
ESG Decision Tool which supports the
investment team in implementing the
commitments made in the sustainable
investment policies. The ESG Decision
Tool is completed as part of the due
diligence process prior to investment
for all VCT investments. The Tool will
not tell the Manager whether to invest
or not, instead it aims to provide a
rational and replicable assessment of
key ESG risks which should be
considered prior to investment, and to
help rank the significance of each risk.
It is up to the Manager to decide
whether it is sufficiently comfortable
with these risks to proceed with an
investment.
Rebecca Craddock-Taylor Peter Bachmann Lizzie Darbourne Joe Krancki
Director, Sustainable Managing Director, Group Marketing Director Investment Director,
Investment and Chair Sustainable Infrastructure Gresham House Ventures
Heather Fleming Andrew Hampshire Geoff Lambert Rupert Robinson
Managing Director COO and CTO Head of Compliance Managing Director
Institutional Business
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2022 Sustainable investment highlights
ESG Survey
This year the Manager undertook its
second annual ESG survey to
understand how its VCT unquoted
investments respond to relevant ESG
risks and opportunities and how these
are considered as part of their
operations.
The survey asks unquoted investee
businesses a range of questions based
on the ESG VC framework across a
range of material environmental, social
and governance factors. It asks them to
indicate the relevance of those
material ESG factors to their business,
as well as their ability to influence
those factors.
The Manager surveys its investee
businesses for the following reasons:
• It helps to identify an understanding
of how portfolio companies think
about ESG, and which ESG data is
already being reported on and
monitored. It provides a simple way
for the Manager to communicate
with companies as to how they
compare against their peer group.
• Repeating the survey annually allows
companies to demonstrate
progression against material ESG
issues and forms the basis of
meaningful ESG engagements
between Gresham House Ventures
and its unquoted portfolio companies.
• The survey demonstrates the
Manager’s commitment to being
responsible active owners and to use
that position of ownership to
influence the behaviour of investee
companies for the better.
Case Study: Active ownership at Patchworks
In August 2021, Gresham House Ventures invested in Patchworks, a software company helping e-commerce businesses
automate and manage data flows across back-end systems. In demonstrating its commitment to active ownership, over the
past year the Manager has played an important role in helping Patchworks to evolve from a founder-led business into one
with well-developed management and governance systems. Part of the Manager’s focus was to assist in recruiting key new
hires to strengthen the management team around the CEO and founder.
Board changes
Post-investment, one of the Manager’s investment directors joined the board, while it also helped appoint a Chairperson
through our talent network. The Manager has also been active in assisting the creation of various committees and schemes
within the business, such as the Remuneration Committee and management incentive scheme, sharing best practice to
help with the implementation and management of these new initiatives.
Senior management
The Manager then set out to assist in recruiting a senior management team to sit alongside the founder and helped to
appoint both a Chief Financial Officer (CFO) and Chief Revenue Officer (CRO). It also helped to appoint a new non-executive
director with experience in the retail and consultancy sectors.
Other actions
To help Patchworks in its ambition to scale its business, the Manager also took the following actions:
1. It shared its Best Practice Board Pack for early-stage software as a service (SaaS) businesses to support their
governance processes.
2. It developed a detailed 100-day plan to help with the integration of the new management team and continued scaling of
the business.
3. Scheduled weekly calls with the management teams to evaluate progress against this plan.
4. Discussed how the Manager can assist in their aims to achieve B-Corp status.
The Manager acknowledges that Patchworks is still early on in its evolution away from a founder-led business to one with
amore established and effective governance structure. Nonetheless the Manager is pleased with the progress that has
been made in a short space of time and the partnership and cultural fit that should help to advance the development of the
company going forward.
Sustainable investment continued
ESG in the investment process
Gresham House’s Private Equity division has its own Sustainable
Investment Policy, in which it commits to:
• Taking steps to consult and understand the views, concerns and
ambitions of its stakeholders in seeking sustainable outcomes
from its investments.
• Integrating ESG and economic benefit considerations into the
selection, evaluation, governance and engagement processes
across the lifecycle of each investment.
• Ensuring its team understands the imperative for effective ESG
management and is equipped to carry this out through
management support and training.
• Conduct regular monitoring of ESG risks, opportunities and
performance in its investments.
• Incorporate ESG into its stewardship and monitoring processes.
ESG considerations are integrated into the lifecycle of each
investment as follows:
01 Initial appraisal
Identify material ESG matters
requiring further investigation
during the due diligence stage. If
certain risks are unlikely to be
sufficiently managed or mitigated,
then the Manager may choose not
to proceed at this stage.
02 Due diligence
The ESG Decision Tool and, where
possible, meetings with
management are used to assess
material ESG risks that need to be
mitigated and ESG opportunities
that could drive value. Specialised
consultants may be used
to provide additional information.
03 Investment appraisal
A summary of the ESG analysis is
included in every Investment
Committee submission. Appropriate
risk mitigation approaches will be
referenced and assurance that the
business is open to making
improvements is sought.
04 Holding period
A 100-day post-investment plan will
be developed to address shorter
term risks uncovered in our due
diligence stage. The Manager then
uses its position as a board member
and active investor to influence
management to proactively address
longer term risks and opportunities.
Where material ESG risks are identified,
these are reviewed by the Manager and
a decision on how to proceed is
documented. The Manager will then
proactively follow up with the investee
company management team and
ensure appropriate corrective and
preventative action is taken and any
material issues or incidents are
recorded by the Manager.
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emissions. These are detailed below
and will continue to form a part of this
report going forward. All carbon
emissions calculated are based on the
Company’s proportional share of
investment in quoted and unquoted
investee companies, as per PCAF
guidance
1
.
Greenhouse gas emissions associated
with the Company’s holdings are
measured in carbon dioxide equivalent
(CO2e). Emissions are broken down into
three categories by the Greenhouse
Gas Protocol:
• Scope 1 emissions are the direct
emissions associated with a
company’s activities. This includes
fuel combustion on site such as gas
boilers and air-conditioning leaks.
• Scope 2 emissions are the indirect
emissions that result from electricity
purchased and used by acompany.
Emissions are created during the
production of the energy and
eventually used by the Company.
• Scope 3 emissions are indirect
emissions associated with its
upstream and downstream value
chain.
At portfolio level, carbon emissions are
aggregated to represent the Company’s
share of emissions proportional to the
size of its exposure to each investee
company total value.
FTSE All Share MSCI UK Small Cap Index S&P Europe Small Cap
2021 Portfolio-level Data
1
BSVT (end-2020) (April 2022) (Jan 2022)
Scope 1+2 tCO
2
e 6,269 – – –
Scope 3 tCO
2
e 3,364 – – –
Weighted average carbon intensity
(tCO
2
e/£m revenue)
2
95.2 169 131 284
Carbon Emissions per £m Invested
(tCO2e/£m invested)
3
38.3 187 NA 293
PCAF Score (Scope 1+2)
4
3.7 – – –
1 All data calculated based on holdings as of 31.12.21
2 WACI – The Company’s exposure to carbon-intensive companies, expressed as weighted-average exposure to investee companies’ scope 1+2 tCO2e/£m revenue.
3 Carbon Emissions per £m Invested- Total Scope 1+2 carbon emissions for the Company normalised by the market value of the portfolio, expressed in tCO2e/£m invested.
4 PCAF Score – PCAF Scores show the level of data quality associated with the carbon emissions reported for investee businesses. “1” is the highest quality data (audited GHG
emissions) and “5” is the lowest quality data (estimated data with limited support). All data for the underlying investments was either Score 1 (audited GHG emissions data) or
Score 4 (proxy data based on investee company revenue and sector EEIO emissions factors), giving an average score of 3.7; the Manager will continue to seek to improve the
quality of the underlying data and the PCAF Score over time.
The Management Team will monitor
carbon emissions associated with its
investments over time and may use
this data to drive ESG-focused
engagement activities. Currently, the
Company has no requirements or
targets relating to carbon emissions of
its portfolio or investee companies.
However, Gresham House has a
GH25strategic objective to make a
Science-Based Target commitment to
achieving net zero emissions in its
operations and its investments and
intends to provide an update on this in
early 2023.
Stewardship Responsibilities
As an active investor, the Manager acts
as a long-term steward of the assets in
which it invests. Active ownership
responsibilities include engagement
and voting, which are used to protect
and create value. The Manager will
almost always take a board seat or
become a board observer for its
unquoted investments, which ensures
sufficiently frequent levels of
communication with the management
team.
The Manager has published its
Engagement and Voting Policy on its
website, which sets out its approach
and explains how integrated these
activities are to its business practices
and investment processes.
Engagement
The Manager’s investment philosophy
means that it is an actively engaged
shareholder. The Manager’s
assessments of management, board
and governance form a critical part of
the investment case, which
necessitates that it works with
companies on strategy, M&A,
remuneration and related matters,
from the outset of the holding period
onwards. The Manager encourages an
open and honest dialogue with the
companies as this is an essential part
of effective stewardship.
The Manager will meet face-to-face
with the management team of
apublicly listed company at least twice
a year, and more frequently when it
owns a material stake of a company.
The Manager will generally work more
closely with the management teams of
private equity investments and meet on
a more frequent basis. These meetings
form the basis for the ongoing
monitoring of a company’s strategy,
financial performance and ESG
considerations.
Defining engagement objectives
The Manager will usually identify and
agree strategic milestones that it
expects a company to deliver on over
the holding period. The Manager will
typically identify three or four key
strategic milestones that are bespoke
The results of this year’s survey will be
analysed by the Sustainable
Investment team and overlaid with a
well-known materiality framework. The
findings will be used to:
1. Assess each company against
itsrelevant peer group and
communicate findings to
management teams.
2. Support portfolio companies to
better understand the material ESG
risks inherent in their business
operations.
3. Set relevant objectives for
improvement on ESG matters,
which the investment teams
willthen engage with the
portfoliocompanies on
overthenext 12months and longer
term.
The results of the survey will be
communicated back to investee
businesses by the end of the year,
andan engagement plan based on
identified responses drawn up
for2023.
ESG Webinar Series Outline of Webinar series
Following last year’s ESG survey (see below), alongside its Sustainable
Investment team, the Manager committed to holding a series of educational
webinars for the Chairs, CEOs and executives of unquoted and quoted
investee businesses to enhance their knowledge on material ESG issues.
The outline of the webinar series aims to provide a toolkit for investee
businesses to better integrate ESG and sustainability into their businesses,
and covers:
Education & materiality
Governance
Strategy
Risk management
Metrics and targets
So far the Manager has held the first two of these webinars and will
continue to hold these on a quarterly basis going forwards. For a link to the
webinars, please see:
ESG webinar series – Gresham House Ventures.
ESG KPIs
This year the Manager constructed a list
of ESG-focused KPIs with the objective
of improving the quality and efficiency
of data capture and client reporting.
The data derived from the ESG KPIs will
help drive investment decision making,
engagement planning and enhance
stakeholder reporting. KPIs for unlisted
businesses will be collected from
investee businesses alongside the ESG
survey, while the Manager has
appointed a third party provider to
assist with the collection of ESG KPIs
for its listed investments.
In creating the list of KPIs, the Manager’s
Sustainable Investment team consulted
representatives from Gresham House’s
Private Equity division throughout the
process to understand their investment
process and the operational
management of each of their assets.
The ESG KPIs draw on elements of
existing sustainability frameworks,
while also supplementing these with
KPIs that are particularly important for
that division.
Over time, the Manager intends for the
KPIs to form the basis of ESG
engagements with investee
businesses. The output should also be
used in fund-level and client reporting,
reporting to boards, and by the SI team
in the annual Sustainable Investment
Report and Annual Report.
Climate-related Financial
Disclosures
The Manager undertook an exercise in
2021 to measure its financed emissions,
i.e. the greenhouse gas emissions
associated with its investments. This
exercise included a calculation by an
external carbon consultant of the
carbon emissions associated with the
Company’s investment portfolio which
sit under the Company’s Scope 3
Sustainable investment continued
1
PCAF: The Global GHG Accounting & Reporting Standard for the Financial Industry (Nov,2020).
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to the organisation and its business
development, aiming to keep the
directors focused and ensure continued
progress.
Objectives may change over time
depending on several factors, including
business priorities, market forces and
stakeholder considerations. Example of
engagement objectives include:
Board composition
Improvements to governance
arrangements
Improvements identified by the annual
ESG survey (e.g. carbon emissions
measurement and management,
sustainable product sourcing, human
capital policies)
Product or geographic expansion or
variance, including due to ESG related
market forces
Staff retention and reduction of
absence rates
Implementing compliance
programmes with forthcoming ESG
legislation
Improvements to reporting, including
ESG factors
The identified objectives provide a
framework which forms the basis of the
Manager’s discussions with companies
during regularly scheduled
engagements.
Voting
Voting is an important part of the
Manager’s investment strategy and
Gresham House is a signatory to the
UKStewardship Code and the Principles
of Responsible Investment (‘PRI’).
The Manager’s voting decisions are based
on the course of action that will be in the
best interest of the investee company
and are informed by various sources
including; procedures, research,
engagement with the company,
discussions with other stakeholders and
advisers, internal discussions and
consultations, and other relevant
information.
For the 12 months to 30 September 2022,
the Manager had the opportunity to vote
on 2,080 issues. Of these, the Manager
voted for 96.9 per cent of resolutions,
against on 2.5 per cent, abstained on
0.6per cent and did not vote on 0 per cent.
Of the 51 votes against, 28 were because
the resolutions conflicted with the
Manager’s house policy, notably to vote
against political donations, while the
others were on M&A and liquidation issues
that went against the investment teams’
philosophy.
Voting decisions
The Manager does not have a set policy
defining how voting decisions should be
made on specific items, but has set the
following guidelines:
1. Authority to allot shares – policy to vote
against anything over 33 per cent.
2. Disapplication of pre-emption rights–
policy to vote against anything over
10per cent.
3. Authorise company to purchase own
shares – policy to vote against
anything over 10 per cent.
4. Political donations – policy to vote
against all political donations.
Proxy voting providers
The Manager does not use any proxy
voting advisory services, but will usually
use proxy voting services to deliver
voting decisions to the companies it
invests in.
Voting against management
If the Manager plans to vote against the
company decision, it will engage with the
company in advance, explain the reasons
for voting against management and look
for ways to avoid that if possible. If a
satisfactory outcome is not reached
through this active dialogue with the
company, the Manager will typically tell
the company in advance of its intention
to abstain or vote against management
and clarify the reasons grounding such
intention.
Sustainable investment continued Other matters
Applying the business model
This section of the Strategic Report
sets out the practical steps that the
Board has taken in order to apply the
business model, achieve the
investment objective and adhere to the
investment policy. The investment
policy, which is set out in full on
page84, is designed to ensure that the
Company continues to qualify, and is
approved, as a VCT by HM Revenue
andCustoms.
Investing in the right companies
Investments are primarily made in
companies which are substantially
based in the UK, although many of
these investees may have some trade
overseas. Investments are selected in
the expectation that the application of
private equity disciplines, including an
active management style for unquoted
companies, will enhance value and
enable profits to be realised from
planned exits.
The Board has delegated the
management of the investment portfolio
to Gresham House. The Manager has
adopted a‘top-down, macro economic
and sector-driven’ approach to
identifying and evaluating potential
investment opportunities, by assessing
aforward view of firstly the broader
business environment, then the sector
and finally the specific potential
investment opportunity.
Based on its research, the Manager has
selected a number of sectors that it
believes will offer attractive growth
prospects and investment
opportunities. Diversification is also
achieved by spreading investments
across different asset classes and
making investments for a variety of
different periods.
The Manager’s policy is not to invest in
any of the following areas: human
cloning; arms/munitions; or
adultcontent.
The Manager’s Review on pages 7 to 11
provides a review of the investment
portfolio and of market conditions
during the year, including the main
trends and factors likely to affect the
future development, performance and
position of the business.
Risk is spread by investing in a number
of different businesses within different
qualifying industry sectors using a
mixture of securities. The maximum the
Company will invest in a single
company (including a collective
investment vehicle) is 15 per cent of its
investments by value of its investments
calculated in accordance with
Section278 of the Income Tax Act 2007
(as amended) (“VCT Value”). The value
of an individual investment is expected
to increase over time as a result of
trading progress and a continuous
assessment is made of its suitability
for sale.
The Company invests in a range of
securities including, but not limited to,
ordinary and preference shares, loan
stocks, convertible securities and
permitted non qualifying investments
as well as cash. Unquoted investments
are usually structured as a combination
of ordinary shares and loan stocks or
preferred shares, while AIM-traded
investments are primarily held in
ordinary shares. Pending investment in
VCT qualifying investments, the
Company’s cash and liquid funds are
held in permitted non-qualifying
investments.
VCT status
Compliance with the required VCT rules
and regulations is considered when all
investment decisions are made.
Internally, this is monitored on a
continuous basis and it is also reviewed
by PricewaterhouseCooper LLP (“PwC”)
every six months to ensure ongoing
compliance. PwC have been appointed
by the Company to advise on
compliance with VCT requirements,
including evaluation of investment
opportunities as well as appropriate
and regular review of the portfolio.
Although PwC works closely with the
Manager, it reports directly to the
Board.
The principal tests are summarised
below. Throughout the year ended
30September 2022 and at the date of
this report, the Company continued to
meet these tests.
VCT status tests
1) To ensure that the VCT’s income
in the period has been derived
wholly or mainly (70 per cent
plus) from shares or securities;
2) To ensure that the VCT has not
retained more than 15 per cent
of its income from shares and
securities;
3) To ensure that the VCT has not
made a prohibited payment to
shareholders derived from an
issue of shares since 6 April
2014;
4) To ensure that at least 80 per
cent by value of the VCT’s
investments has been
represented throughout the
period by shares or securities
comprised in qualifying holdings
of the VCT;
5) To ensure that at least 70 per cent
by value of the VCT’s qualifying
holdings has been represented
throughout the period by holdings
of eligible shares;
6) To ensure that no investment in
any company has represented
more than 15 per cent by value
of the VCT’s investments at the
time of investment;
7) To ensure that the VCT’s
ordinary capital has throughout
the period been listed on a
regulated European market;
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Appointment of the Manager
The Board expects the Manager to
deliver a performance which meets the
objective of achieving long-term
investment returns, including tax free
dividends. A review of the Company’s
performance during the financial year,
the position of the Company at the year
end and the outlook for the coming
year is contained within the Chair’s
Statement on pages 4 to 6. The Board
assesses the performance of the
Manager in meeting the Company’s
objective against the KPIs highlighted
on page 2 of the report.
Continuing appointment of the
Manager
The Board keeps the performance of
the Manager under continual review.
The Management Engagement and
Remuneration Committee, comprising
all Directors, conducts an annual
review of the Manager’s performance
and makes arecommendation to the
Board about its continuing
appointment.
It is considered that the Manager has
executed the Company’s investment
strategy according to the Board’s
expectations. Accordingly, the Directors
believe that the continuing
appointment of Gresham House Asset
Management Limited as the Manager
of the Company, on the terms agreed, is
in the best interests of the Company
and its Shareholders as a whole.
The management agreement
Under the management agreement, the
Manager receives a fee of 2.5 per cent
per annum of the net assets of the
Company. In addition, the Manager is
responsible for providing all secretarial,
administrative and accounting services
to the Company for an additional fee.
The Manager has appointed Link
Alternative Fund Administrators
Limited to provide these services to the
Company on its behalf. The Company is
responsible for paying the fee charged
by Link Alternative Fund Administrators
Limited to the Manager in relation to
the performance of these services.
Annual running costs are capped at
3.5per cent of the net assets of the
Company (excluding any performance
fee payable to the Manager and
irrecoverable VAT), any excess being
refunded by the Manager by way of an
adjustment to its management fee. The
running cost as at 30 September 2022
was 2.6 per cent.
The management agreement may be
terminated at any date by either party
giving 12 months’ notice of termination
and, if terminated, the Manager is only
entitled to the management fees
paidto it and any interest due on
unpaid fees.
Performance fees
A performance fee is payable to the
Manager when the total return on net
proceeds of the ordinary shares
exceeds 8 per cent per annum (simple).
To the extent that the total return
exceeds the threshold over the relevant
period then a performance fee of 10 per
cent of the excess will be paid to the
Manager. The amount of any
performance fee which is paid in an
accounting period is capped at 5 per
cent of net assets.
Nil performance fee is payable for the
year to 30 September 2022 (2021: £nil).
Management retention
The Board is keen to ensure that the
Manager continues to have one of the
best investment teams in the VCT and
private equity sector. A VCT incentive
scheme was introduced in November
2004 under which members of the
Manager’s investment team invest their
own money into a proportion of the
ordinary shares of each eligible
unquoted investment made by the
Baronsmead VCTs. The Board regularly
monitors the VCT incentive scheme
arrangements but considers the
scheme to be essential in order to
attract, retain and incentivise the best
talent. The scheme is in line with
current market practice in the private
equity industry and the Board believes
that it aligns the interests of the
Manager with those of the
BaronsmeadVCTs.
Executives have to invest their own
capital in every eligible unquoted
transaction and cannot decide
selectively which investments to
participate in. In addition, the VCT
incentive scheme only delivers a return
after each VCT has realised a priority
return built into the structure. The
shares held by the members of the VCT
incentive scheme in any portfolio
company can only be sold at the same
time as the investment held by the
Baronsmead VCTs is sold. Any prior
ranking financial instruments, such as
8) To ensure that the VCT has not
made an investment in a
company which causes it to
receive more than the permitted
investment from State Aid
sources;
9) To ensure that since 17November
2015, the VCT has not made an
investment in a company which
exceeds the maximum permitted
age requirement;
10) To ensure that since 17November
2015, funds invested by the VCT in
another company have not been
used to make a prohibited
acquisition; and
11) To ensure that since 6 April 2016,
the VCT has not made a
prohibited non-qualifying
investment.
Other matters continued
loan stock, held by the Baronsmead
VCTs have to be repaid in full together
with the agreed priority annual return
before any gain accrues to the ordinary
shares. This ensures that the
Baronsmead VCTs achieve a good
priority return before profits accrue to
the VCT incentive scheme.
Prior to January 2017, executives
participating in the VCT incentive
scheme subscribed jointly for a
proportion (12 per cent) of the ordinary
shares (but not the prior ranking
financial instruments) available to the
Baronsmead VCTs in each eligible
unquoted investment. The level of
participation was increased from 5 per
cent in 2007 when the Manager’s
performance fee was reduced from
20per cent to its current level of 10 per
cent. With effect from January 2017, an
additional limb was added to the VCT
incentive scheme to accommodate the
increasing number of “permanent equity”
investments being made by the
Baronsmead VCTs. “Permanent equity”
investments are those in which the
Baronsmead VCTs hold a relatively lower
proportion of prior ranking instruments
(if any at all) and a higher proportion of
permanent equity or ordinary shares. This
means that there are fewer prior ranking
instruments yielding a priority return for
the Baronsmead VCTs before any gain
accrues to the ordinary shares, hence
this additional limb to create a hurdle
described below. The cut off to define
a“permanent equity” investment is one
where permanent equity is greater
than25 per cent of the total or
wherepermanent equity is greater
than£250,000.
Under the terms of the amended VCT
incentive scheme, in circumstances
where the Baronsmead VCTs hold a
sufficient number of prior ranking
financial instruments (a “Traditional
Structure”), the terms are identical to
those set out above. However, in
circumstances where the Baronsmead
VCTs make a “permanent equity”
investment, the executives participating
in the incentive scheme are required to
co-invest pari passu alongside the
Baronsmead VCTs for a proportion
(currently 0.75per cent) of all
instruments available to the
Baronsmead VCTs and they also receive
an option over a further proportion
(currently 12per cent) of the ordinary
shares available to the Baronsmead
VCTs. The ordinary shares can only be
sold and the option can only be exercised
by the scheme participants when the
investment held by the Baronsmead
VCTs is sold. The option exercise price
has a built in hurdle rate to ensure that
the options are only “in the money” if the
Baronsmead VCTs achieve a good return
(equivalent to the priority return they
would have to achieve prior to any value
accruing to the ordinary shares in a
Traditional Structure).
Since the formation of the scheme in
2004, 101 executives have invested a
total of £1.1 million in 85 companies.
At30September 2022, 51 of these
investments have been realised
generating proceeds of £398 million for
the Baronsmead VCTs and £21 million
for the VCTincentive scheme. For
Baronsmead Second Venture Trust, the
average money multiple on these
51realisations was 1.8x times cost. Had
the VCTincentive shares been held
instead by the Baronsmead VCTs, the
extra return to shareholders would
have been the equivalent of 3.4p a
share over 18 years (based on the
current number of shares in issue).
TheBoard considers this cost to retain
quality people to be in the best
interests of shareholders.
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Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
31
Shareholder choice
The Board wishes to provide
shareholders with a number of choices
that enable them to utilise their
investment in the Company 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 costs. The
Company has announced its intention
to launch a new offer for subscription
in January 2023.
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. Approximately
2,912,000 shares were bought in this
way during the year to 30September
2022.
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-share price discount
of approximately 5 per cent to net
asset value where possible. However,
shareholders should note this
discount may widen during the
periods of market volatility.
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 484,000 shares were
bought by investors in the Company’s
existing shares in the year to
30September 2022.
Other matters continued
Advisory and Directors’ fees
During the year, Gresham House Asset
Management Limited received £295,000
(2021: £254,000) advisory fees, £528,000
(2021: £375,000) directors’ fees for
services provided to companies in the
investment portfolio and incurred abort
costs of £7,000 (2021: £8,000) with
respect to investments attributable to
the Company.
Alternative Investment Fund Managers
Directive (“AIFMD”)
The AIFMD regulates the management
of alternative investment funds,
including VCTs. On 22 July 2014, the
Company was registered as a Small UK
registered Alternative Investment Fund
Manager under the AIFMD.
Viability statement
In accordance with principle 21 of the
Association of Investment Companies
Code of Corporate Governance (“AIC
Code”), the Directors have assessed the
prospects of the Company over the
three-year period to 30 September 2025.
This period is used by the Board during
the strategic planning process and is
considered reasonable for a business
of our nature and size. The three-year
period is considered the most
appropriate given the forecasts that the
Board require from the Manager and
the estimated timeline for finding,
assessing and completing investments.
In making this three-year assessment,
the Board has taken the following
factors into consideration:
The nature of the Company’s portfolio
The Company’s investment strategy
The potential impact of the principal
risks and uncertainties
Share buy-backs
The liquidity of the Company’s
portfolio
Market falls and gains, with particular
reference to the COVID-19 pandemic
Maintaining VCT approval status
The Board has carried out a robust
assessment of the above factors, as
they have the potential to threaten the
Company’s business model, future
performance, solvency, or liquidity.
Thisreview has considered the
principal risks as outlined on pages 18
and 19.
The Board has considered the ability of
the Company to raise funds and deploy
capital. Its assessment took account of
the availability and likely effectiveness
of the mitigating actions that could be
taken to avoid or reduce the impact of
the underlying risks, and the large
listed portfolio that could be liquidated
if necessary.
The Company’s portfolio currently
includes a large position in cash or
liquid money market funds. Over the
last five years, cash and liquid money
market funds have averaged c.17 per
cent of the NAV and reflected 20 per
cent of the 30 September 2022 NAV.
Cash balances can fluctuate over time
due to changes in market conditions,
but positive cash levels are expected to
be maintained over the period.
TheCompany has no debt, and itis
expected that the Company will remain
ungeared for the foreseeablefuture.
The Directors have also considered the
Company’s income and expenditure
projections and find these to be
realistic and sensible. The Directors
have assessed the Company’s ability to
cover its annual running costs under
several liquidity scenarios in which the
value of liquid assets (including
AIM-traded investments and OEICs)
has been subject to sensitivity analysis.
TheDirectors noted that under none of
these scenarios was the Company
unable to cover its costs.
Based on the Company’s processes for
monitoring costs, share price discount,
the Manager’s compliance with the
investment objective, policies and
business model, asset allocation and
the portfolio risk profile, the Directors
have concluded that there is a
reasonable expectation that the
Company will be able to continue in
operation and meet its liabilities as
they fall due over the three-year period
to 30 September 2025.
Returns to investors
Dividend policy
The Board will decide the annual
dividends each year and the level of the
dividends will depend on investment
performance, the level of realised
returns and available liquidity. The
dividend policy guidelines below are
not binding and the Board retains the
ability to pay higher or lower dividends
relevant to prevailing circumstances.
However, the Board confirms the
following two guidelines that shape its
dividend policy:
The Board will, wherever possible,
seek to pay two dividends to
shareholders in each calendar year,
typically an interim in September and
a final dividend following the AGM in
February; and
The Board will use, as a guide, when
setting the dividends for a financial
year, a sum representing 7 per cent of
the opening NAV of that
financialyear.
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Annual Report and Audited Financial Statements 2022
Details of how the Board seeks to understand the needs and priorities of these stakeholders and how these are taken into
consideration during its discussions as part of its decision-making, are described in the table below:
Stakeholder Group Importance Board Engagement
Shareholders Continued shareholder
support is critical to the
sustainability of the
Company and delivery of
the long-term strategy of
the business.
The Board is committed to maintaining open channels of
communication with shareholders and during the year has developed
various meaningful ways of engaging with shareholders to
understand their views. These include:
Annual General Meeting (“AGM”) – The Company welcomes and
encourages attendance and participation from shareholders at
the AGM and values any feedback and questions it may receive.
Shareholders were invited to raise questions in advance of, during
and after the 2022 AGM and the Company was delighted to
answer those questions received. The Chair presented on the
Company’s outlook for 2022 and a joint investment management
presentation to shareholders of the Company and Baronsmead
Venture Trust Plc was held on the same day.
The Company’s forthcoming AGM will take place on 1 February
2023. The Company intends to hold this AGM in person, with
shareholders who are unable to attend in person given the option
to watch the AGM live. It must be noted that those who
participate virtually will not be able to vote during the course of
the AGM and are asked to submit their votes by proxy in advance
of the AGM.
Further information regarding the 2023 AGM can be found in the
Chair’s Statement on pages 4 to 6 and within the Notice of AGM
which is being sent to shareholders separately from this Annual
Report.
Publications – The Company’s Annual and Half-Yearly Reports are
made available on the Company’s website
(www.baronsmeadvcts.co.uk) and sent to shareholders. These
publications provide shareholders with information regarding the
Company’s business model, strategy and investment portfolio and
provide a clear understanding of the Company’s financial position.
This is supplemented by the monthly publication of the NAV on the
Company’s website and quarterly factsheets. Feedback and
questions received by the Company from shareholders enables
the Company to improve its reporting, which in turn helps to
deliver transparent and understandable updates.
Shareholder communication and shareholder concerns – The
Manager communicates with shareholders periodically and
shareholders are welcome to raise any comments, issues or
concerns with the Board at any time. Shareholders are invited to
do so by writing to the Chair at the registered office. Malcolm
Groat, as Senior Independent Director, is also available to
shareholders if they have concerns that contact through the
normal channel of the Chair has failed to resolve or for which
such contact is inappropriate.
Overview
Section 172 of the Companies Act 2006
(the “Act”) requires the Directors to act
in good faith and in a way that is
mostlikely to promote the success of
the Company for the benefit of
itsshareholders.
Directors must consider the long-term
consequences of any decision they
make. They must also consider the
interests of the various stakeholders of
the Company, the impact the Company
has on the environment and
community, and operate in a manner
which maintains their reputation for
having high standards of business
conduct and fair treatment between
shareholders.
Fulfilling this duty naturally supports
the Company in its investment
objective of achieving long-term
investment returns for private investors
and helps ensure that all decisions are
made in a responsible and sustainable
way. In accordance with the
requirements of the Companies
(Miscellaneous Reporting) Regulations
2018, and the AIC Code, the information
below explains how the Directors have
individually and collectively discharged
their duties under section 172.
To ensure they are aware of and
understand their duties, Directors are
provided with a detailed induction
outlining their legal and regulatory
duties as a Director of a UK public
limited company upon appointment.
They also receive regular regulatory
updates and training as appropriate.
ACompany Secretarial Report is
included within the papers of every
Board meeting, which reminds the
Directors of their duties and
emphasises the importance of
stakeholder consideration during
decision making. Directors also receive
technical updates from the Company’s
advisers and from the Manager on a
regular basis.
The Directors have access to the advice
and services of the Company Secretary
and a range of other reputable service
providers and, when deemed necessary,
the Directors may seek independent
professional advice in the furtherance of
their duties, at the Company’s expense.
The Company has a Schedule of
Matters Reserved for the Board which
describe the Board’s duties and
responsibilities. Terms of Reference of
the Board’s Committees are in place,
which outline the duties of those
Committees that are delegated from
the Board, including their statutory and
regulatory responsibilities. Both the
Schedule of Matters Reserved for the
Board and the Committees’ Terms of
Reference are reviewed on at least an
annual basis.
The Audit & Risk Committee has
responsibility for the ongoing review of
the Company’s risk management and
internal controls. To the extent that
they are applicable, risks related to the
matters set out in Section 172 are
included within the Company’s Risk
Register and are subject to regular
review and monitoring.
Decision making
The importance of stakeholder
considerations, in the context of
decision making, is taken into account
at every Board meeting. All discussions
involve careful consideration of the
longer-term consequences of any
decisions and their implications for
stakeholders. Further information on
the role of the Board in safeguarding
stakeholder interests and monitoring
ongoing investment activity can be
found on pages 38 to 39.
Stakeholder engagement
Following a comprehensive review by
the Board, which regularly keeps
stakeholder engagement mechanisms
under review, it was agreed that, as the
Company is an externally managed
Venture Capital Trust and does not have
any employees or customers, the
Company’s key stakeholders are:
The Company’s shareholders
The Manager
The portfolio of investee companies,
and the wider communities in which
they operate
HMRC and the Company’s governing
bodies, including the FCA
The Association of Investment
Companies (“AIC”)
A range of reputable external service
providers
Directors’ duties
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Stakeholder Group Importance Board Engagement
External service
providers
To function as a VCT with
apremium listing on the
London Stock Exchange,
the Company relies on a
diverse range of highly
regarded advisers for
support in meeting all
relevant obligations.
The Board maintains regular contact with its external providers and
receives reports from them at Board and Committee meetings, as
well as outside of the regular meeting cycle. Their advice, as well as
their needs and views are routinely considered. During the period, the
Management Engagement and Remuneration Committee formally
assessed the external service providers’ performance, fees and
continuing appointment to ensure that they continue to function at
an acceptable level and are appropriately remunerated to deliver the
expected level of service. The Audit & Risk Committee reviews and
evaluates the control environments in place at each service provider
as appropriate.
HMRC and governing
bodies
The Company must comply
with HMRC VCT rules and
must comply or explain its
adherence to the AIC Code.
HMRC and the AIC have a
legitimate interest in how
the Company operates in
the market and treats
itsshareholders.
The Board regularly considers how it meets regulatory and statutory
obligations and follows voluntary and best-practice guidance,
including how any governance decisions it makes impacts the
Company’s stakeholders, both in the shorter and in the longer-term.
In particular, the Audit & Risk Committee receives confirmation from
its VCT Status Adviser regarding compliance with HMRC’s VCT rules
and at every Board meeting the Board is presented with a Company
Secretarial Report outlining the latest governance updates to keep
the Board abreast of any relevant regulatory changes. The Company
Secretary reviews the Company’s ongoing compliance with the AIC
Code, on at least an annual basis, which informs the Company’s
corporate governance disclosures in the Annual Report. In addition,
the Board receives reports from the Manager and Auditor on their
respective regulatory compliance and any inspections or reviews
that are commissioned by regulatory bodies. The Company ensures it
meets all required HMRC obligations and payments promptly and as
they fall due.
Directors’ duties continued
Stakeholder Group Importance Board Engagement
The Manager The Manager’s
performance is critical for
the Company to
successfully deliver its
investment strategy and
meet its objective to
achieve long-term
investment returns for
private investors.
The Board invites the Manager to attend Valuation Forums, Board
meetings and Committee meetings to update Directors on the
performance of the portfolio and execution of the investment
strategy. The Board holds detailed discussions with the Manager on
all key strategic and operational topics on an ongoing basis.
Inaddition, the Chair regularly meets with the Manager to ensure a
close dialogue is maintained. In line with the Company’s culture, the
Board recognises the importance of working together with the
Manager in such a way that:
encourages open, honest, and collaborative discussions at all levels,
allowing time and space for original and innovative thinking;
draws on Board members’ individual experience and knowledge to
support and challenge the Manager in its monitoring of and
engagement with portfolio investee companies;
ensures that the impact on the Manager is fully considered and
understood before any business decision is made; and
ensures that any potential conflicts of interest are avoided or
managed effectively.
The portfolio of
investee companies
The Company invests in
growth businesses,
whether unquoted or
traded on AIM, which are
primarily based in the UK.
Investments are made
selectively across a range
of sectors to meet the
Company’s investment
objectives and in
accordance with
VCTlegislation.
Day-to-day engagement with the portfolio of investee companies is
undertaken by the Manager, so a transparent and objective
relationship between the Board and the Manager is vital.
Forunquoted and larger AIM holdings the Manager is an influential
and engaged shareholder (on behalf of the Company) and Manager
representatives often join the boards of these companies.
At each scheduled Valuation Forum, the Board receives detailed
updates from the Manager covering the portfolio construction and
performance, progress and trading within the underlying portfolio
companies and valuation recommendations. The Board is also
provided with investment pipeline reports, covering both new deals
and potential follow-on investments at Board meetings.
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Principal Decision Long-Term impact Stakeholders and Engagement
The Strategic Report has been approved by the Board of Directors.
On behalf of the Board
Sarah Fromson
Chair
1 December 2022
Providing shareholders and
potential new investors the
opportunity to subscribe
for shares in BSVT, which in
turn provides opportunities
for Company growth and
increased investor
engagement.
In deciding to launch a fundraising during the reporting period, the
Board considered:
the ability to adhere to the Company’s dividend policy;
the effect on the NAV and the ability of the Company to be able to
meet HMRC’s VCT investment rules and timelines;
the new investment pipeline;
the costs involved in issuing a prospectus and of fundraising; and
the advantages and disadvantages of a joint prospectus across the
two Baronsmead VCTs which Gresham House advises.
Approval of fundraising
Directors’ duties continued
The mechanisms for engaging with stakeholders are kept under review by the Directors and discussed at Board meetings to
ensure they remain effective. Examples of the Board’s principal decisions during the year, and how the Board fulfilled its duties
under Section 172, and the related engagement activities, are set out below.
Principal Decision Long-Term impact Stakeholders and Engagement
Consideration of the
Company’s culture,
purpose and values
Establishing and
maintaining a healthy
corporate culture within
the Company will aid
delivery of its long-term
strategy.
During the reporting period, the Board considered the Company’s
culture, purpose and values.
The Company seeks to invest in innovative, high growth quoted and
unquoted companies, providing capital and expertise at a critical
stage of their development. The Company believes that the
successful development of these companies will be crucial to the
advancement of the UK economy. The Manager has an extensive
entrepreneurial network and specialist skills which are utilised both
to source new investment opportunities as well as to support the
portfolio company management teams to deliver their growth plans.
The investment strategy is based on backing the highest potential
companies operating in sectors and markets which are benefiting
from long-term structural growth trends, whilst recognising the risk
management benefits of diversification in portfolio construction.
The Company has several policies in place to maintain a culture of good
governance including those relating to Directors’ conflicts of interest
and Directors’ dealings in the Company’s shares. The Board assesses
and monitors compliance with these policies as well as the general
culture of the Board during the annual Board evaluation process which
is undertaken by each Director. This is a formal internal process
coordinated by the Chair, given the small size of the Board.
Continued focus on the
Manager’s ESG impact
The Board recognises that
sound ESG policies, when
embedded with
appropriate governance
and responsible business
practices, help generate
long-term financial
performance and
contribute to the wider
community.
The Board has continued its focus on responsible business practices
and the impact of ESG matters. The Board notes that the Manager
has added to resources in this area and has significantly developed
its ESG policy, its ESG investment tool and processes. The Board has
received a detailed presentation from the Manager’s sustainable
investment director on its responsible business practices and the
methods used to evaluate ESG risks as part of its investment
processes.
The Board acknowledges and supports the increased focus by the
Manager on ensuring new and existing investee companies are
adopting sound ESG policies and will continue to monitor the
Manager’s progress.
Board succession
planning
Effective succession
planning, leading to the
refreshment of the Board
and its diversity is
necessary for the
long-term success of the
Company.
The Board has approved and adopted a Tenure and Reappointment
Policy (the “Policy”). In accordance with the Policy, the Board will
seek to recruit a Director approximately every four years, with no
Director expected to serve on the Board for longer than nine years.
The composition of the Board was a significant focus for the
year-ended 30 September 2022. The Board considered that Directors
possess the skills, experience and knowledge essential for the Board
and its Committees to effectively exercise their duties and
responsibilities. Details of the composition of the Board can be found
in the corporate governance statement on page 48.
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Annual Report and Audited Financial Statements 2022
Shares and shareholders
Share capital
Pursuant to the prospectus published
by the Company on 4 November 2021 in
conjunction with Baronsmead Venture
Trust plc in relation to an offer for
subscription to each raise up to
£25million (before costs) with an
over-allotment facility to each raise up
to a further £12.5 million, the Company
issued a total of 45,829,661 ordinary
shares in the year ended 30 September
2022 by way of four allotments, raising
approximately £37.5million. Details of
these allotments are as set out below:
On 6 December 2021, the Company
issued 17,252,487 ordinary shares
under the first allotment at an issue
price of 88.10 pence per share. The
shares were admitted to trading on
13December 2021.
On 22 December 2021, the Company
issued 3,221,826 ordinary shares
under the second allotment at an
issue price of 88.10 pence per share.
The shares were admitted to trading
on 29 December 2021.
On 28 January 2022, the Company
issued 6,459,624 ordinary shares
under the third allotment at an issue
price of 87.10 pence per share. The
shares were admitted to trading on
3February 2022.
On 15 March 2022, the Company
issued under the fourth allotment
18,895,724 ordinary shares at an issue
price of 76.60 pence and were
admitted to trading on 22 March 2022.
At the AGM held on 16 February 2022,
the Company was granted authority to
purchase up to 14.99 per cent of the
Company’s ordinary share capital in
issue at that date on which the Notice
of AGM was published, amounting to
45,003,963 ordinary shares. During the
year, the Company bought back a total
of 3,699,362 ordinary shares to be held
in Treasury, representing 1 per cent of
the issued share capital as at
30September 2022, with an aggregate
nominal value of £369,936. The total
amount paid for these shares was
£2,775,367. Since 30September 2022, no
shares have been bought back by the
Company. The Company has remaining
authority to buy back 43,395,579 shares
under the resolution approved at the
AGM in2022.
During the year, the Company sold
2,184,000 ordinary shares from Treasury.
The total amount received by the
Company for these shares was
£1,486,940. Shares will not be sold out
of Treasury at a discount wider than the
discount at which the shares were
initially bought back by the Company.
As at the date of this report, the
Company’s issued share capital was
asfollows:
% of
Shares in Nominal
Shares Total issue Value
In issue 357,889,473 100.00 £35,788,947.30
Held in Treasury 30,601,089 8.55 £3,060,108.90
In circulation 327,288,384 91.45 £32,728,838.40
The total voting rights as at
30September 2022 were 327,288,384
and there have been no changes to this
figure between 30 September 2022 and
the date of this report.
Shareholders
Each 10p ordinary share entitles the
holder to attend and vote at general
meetings of the Company, to
participate in the profits of the
Company, to receive a copy of the
Annual Report and Financial
Statements and to a final distribution
upon the winding up of the Company.
There are no restrictions on voting
rights, no securities carry special rights
and the Company is not aware of any
agreement between holders of
securities that result in restrictions on
the transfer of securities or on voting
rights. There are no agreements to
which the Company is party that may
affect its control following a
takeoverbid.
In addition to the powers provided to
the Directors under UK company law
and the Company’s Articles of
Association, at each AGM the
shareholders are asked to authorise
certain powers in relation to the issuing
and purchasing of the Company’s own
shares. Details of the powers granted
at the AGM held in 2022, all of which
remain valid, can be found in the
previous Notice of AGM.
The Company is not, and has not been
throughout the year, aware of any
beneficial interests exceeding 3 per
cent of the total voting rights.
Dividends
The Company has paid or declared the
following dividends for the year paid or
proposed to 30September 2022:
Dividends £’000
Interim dividend of 3.0p per ordinary
share paid on 9 September 2022 9,806
Final dividend of 3.0p per ordinary share to
be paid on 3 March 2023* 9,819
Total dividends paid for the year 19,625
* Calculated on shares in circulation as at 30 September
2022.
Subject to shareholder approval at the
AGM on 1 February 2023, a final dividend
of 3.0p per share will be paid on 3March
2023 to shareholders on the register at
3February 2023. The ex-dividend date
will be 2 February 2023.
Annual General Meeting
The AGM will be held on 1 February
2023. A separate notice convening the
AGM will be posted to shareholders.
The Notice will include an explanation
of the items to be considered at the
AGM and will be uploaded to the
Company’s website in due course.
Directors
Appointments
The rules concerning the appointment
and replacement of Directors are
contained in the Company’s Articles of
Association and the Companies
Act2006. Further details in relation to
the appointed Directors and the
governance arrangements of the Board
Sarah Fromson Chair and Nomination Committee Chair
Appointed: 1 October 2019
Experience: Sarah is an experienced, independent non-executive who has served on a variety of boards and committees,
after a varied career in the asset and wealth management industry. She is a non-executive board member of
Boston-based Arrowstreet Capital Partners and is also a Pension Trustee Director of Genome Research
Pensions Trustee Limited and Wellcome Trust Pensions Trustee Limited. She chairs the Cambridge University
Endowment Fund Investment Advisory Board and also serves on the board of Quilter Investors Ltd, a
subsidiary of Quilter plc.
Sarah retired from her executive role as Head of Risk at Wellcome Trust in 2019 and as Chair of JP Morgan
Global Emerging Markets Income Trust plc on 28 November 2022. Sarah was previously ChiefInvestment Risk
Officer at RBS Asset Management (formerly Coutts).
Shareholding: 55,926 ordinary shares
Graham McDonald Non-Executive Director
Appointed: 16 February 2021
Experience: Graham has spent almost 40 years in banking and private equity. His previous executive role was Global Head
of Private Equity and Venture Capital at Aberdeen Standard Investments. Prior to that he was responsible for
the global private equity and venture capital businesses in Aberdeen Asset Management, SWIP, Lloyds Bank
and HBoS.
He is a Special Adviser to a hydrogen fund, Hycap Fund, Par Equity and Arcano Capital based in Madrid.
Graham is also a Non Executive Director of Vedra Partners Ltd a multi family office.
Shareholding: 32,012 ordinary shares
Malcolm Groat Senior Independent Director and Audit & Risk Committee Chairman
Appointed: 11 March 2016
Experience: Malcolm is a fellow of the Institute of Directors, the Institute of Chartered Accountants in England and Wales,
and the Royal Society for the Encouragement of Arts, Manufactures and Commerce. During his executive
career, Malcolm held C-suite positions with global businesses in engineering, construction and financial
services. Since 2004, whilst co-founding a series of ventures that attracted growth capital from the private
equity sector, he has also served as Chairman or Non Executive Director in more mature companies, often
listed in London.
He is currently Chairman of two AIM companies, Harland & Wolff Group Holdings and Tomco Energy.
Shareholding: 306,772 ordinary shares*
Tim Farazmand Non-Executive Director and Management Engagement & Remuneration Committee Chairman
Appointed: 1 May 2020
Experience: Tim has spent 30 years in private equity. His last full-time role was as a Managing Director at LDC, the private
equity arm of Lloyds Bank. He previously worked for 3i Group Plc and Royal Bank of Scotland Private Equity.
He was Chairman of the British Private Equity & Venture Capital Association (BVCA) for the 2014-2015 term.
He currently chairs the Palatine Impact Fund, sits on the Advisory Board of Beechbrook Capital and the
boards of The Lakes Distillery and Vinoteca.
Shareholding: 128,403 ordinary shares
* Shares held by Person Closely Associated to Malcolm Groat.
Board of Directors
Directors’ report
The Directors of Baronsmead Second Venture Trust plc (Reg: 04115341) present their twenty-second Annual Report and Audited
Financial Statements of the Company for the year to 30 September 2022.
Directors’ report
The Corporate Governance statement on pages 44 to 54 forms part of the Directors’ report.
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40
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
has taken all the steps that they ought
to have taken as a Director to make
themselves aware of any relevant audit
information and to establish that the
Company’s Auditor is aware of
thatinformation.
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. The going concern
assumption assumes that the Company
will maintain its VCT status with HMRC.
The Directors acknowledge the
uncertainty in the macroeconomic and
equity market. The Board nevertheless
considers the Company to be well
placed to continue to operate for at
least 12 months from the date of this
report, as the Company has sufficient
liquidity to pay its liabilities as and
when they fall due and also to invest in
new opportunities as they arise.
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 12 months from the
date that these financial statements
are approved. As at 30 September 2022,
the Company held cash balances and
investments in readily realisable
securities with a value of £42million,
representing 20 per cent of the
Company’s NAV.
The Company has no debt, and it is
expected that the Company will remain
ungeared for the foreseeable future. The
Directors have assessed the Company’s
ability to cover its annual running costs
under several liquidity scenarios in
which the value of liquid assets
(including AIM-traded investments and
OEICs) has been subject to sensitivity
analysis. The Directors noted that under
none of these scenarios was the
Company unable to cover its costs.
The Company’s forecasts and cash flow
projections, taking into account the
current economic environment and
other, potential changes in
performance, 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.
Future developments
The outlook for the Company is set
outin the Chair’s Statement on
pages5and 6.
Listing rule disclosure
The Company confirms that there are
no items which require disclosure
under the listing rule 9.8.4R in respect
of the year ended 30 September 2022.
Streamlined energy and carbon
reporting
The Company has no greenhouse gas
emissions to report from its operations
nor does it have responsibility for any
other emissions producing sources
under the Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013. Consequently, the
Company consumed less than
40,000kWh of energy during the year in
respect of which the Directors’ Report
is prepared and therefore is exempt
from the disclosures required under the
Streamlined Energy and Carbon
Reporting criteria.
Further information in relation to the
Investment Manager’s integration of
ESG factors in management of the
Company’s portfolio is set out on
pages20 to 28 of the Strategic Report.
Under Listing Rule 15.4.29(R), the
Company, as a closed-ended
investment fund, is exempt from
complying with the Task Force on
Climate-related Financial Disclosures.
Post balance sheet events
Post balance sheet events are disclosed
in note 3.6 of the accounts.
By Order of the Board
Gresham House Asset Management Ltd
Company Secretary
5 New Street Square, London EC4A 3TW
1 December 2022
can be found on page 40 and in the
Corporate Governance Statement.
Directors are entitled to a payment in
lieu of three months’ notice by the
Company for loss of office in the event
of a takeover bid.
Directors’ indemnity
Directors’ and officers’ liability
insurance cover is in place in respect of
the Directors and was in place
throughout the year under review. The
Company’s Articles of Association
provide, subject to the provisions of UK
legislation, an indemnity for Directors
in respect of costs which they may
incur relating to the defence of any
proceedings brought against them
arising out of their positions as
Directors, in which they are acquitted
or judgement is given in their favour by
the Court.
Save for such indemnity provisions in
the Company’s Articles of Association
and in the Directors’ letters of
appointment, there are no qualifying
third party indemnity provisions in force.
Conflicts of interest
The Directors have declared any
conflicts or potential conflicts of
interest to the Board of Directors which
has the authority to approve such
situations. The Company Secretary
maintains the Register of Directors’
Conflicts of Interests which is reviewed
quarterly by the Board. Directors advise
the Company Secretary and the Board
as soon as they become aware of any
conflicts of interest. Directors who
have conflicts of interest do not take
part in discussions which relate to any
of their conflicts.
The Board is aware that Tim Farazmand
acted as a consultant to the Manager
until October 2019. Having considered
the role that Mr Farazmand undertook
and the period of time that has elapsed
since he acted in this role for Gresham
House, the Board have resolved that
MrFarazmand is independent of the
Manager for the purposes of the AIC
Code.
Financial instruments
The Company’s financial instruments
comprise equity and fixed interest
investments, cash balances and liquid
resources including debtors and
creditors that arise directly from its
operations such as sales and purchases
awaiting settlement and accrued
income. The financial risk management
objectives and policies arising from its
financial instruments and the exposure
of the Company to risk are disclosed in
note 3.3 of the accounts.
Responsibility for accounts
The Directors who held office at the
date of approval of this Directors’
Report confirm that, so far as they are
each aware, there is no relevant audit
information of which the Company’s
Auditor is unaware and each Director
Directors’ report
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42
AIC
Code Principle Compliance Statement
B.
The board should establish the
company’s purpose, values, and
strategy, and satisfy itself that
these and its culture are aligned.
All directors must act with
integrity, lead by example, and
promote the desired culture.
The purpose of the Company is also its investment objective which is to achieve
long-term investment returns for private investors within a tax efficient structure.
Itdoes this by investing 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.
The Directors agree that establishing and maintaining an open and inclusive culture
among the Board, and in its interaction with the Manager, shareholders, and other
stakeholders, will support the delivery of its purpose, values and strategy. During the
Board’s annual evaluation process, it was apparent that all Directors seek to promote
a culture of openness, integrity and debate through ongoing engagement and
dialogue with the Manager, the Company’s stakeholders and the Company’s
serviceproviders.
The Board and Audit & Risk Committee regularly review the performance of the
Company and the performance and resources of the Manager and service
providers to ensure the Company can meet its objectives.
At each quarterly meeting, the Board receives a report on Company performance,
the performance of its investments and the VCT sector (including its competitors)
and any industry issues. The report outlines the Company’s adherence to VCT
compliance tests and includes forecasts for future periods, highlighting
investment opportunities, operational matters and regulatory developments.
Additionally, at each quarterly Board meeting, the Board is presented with a report
from Kaso Legg Communications highlighting the media coverage received by the
Company and the Manager to enhance the profile of the Company and, in turn,
attracting new shareholders.
The Board has agreed specific KPIs with the Manager that enable both parties to
monitor compliance with the agreed investment policy and risk management
framework. Directors regularly seek additional information from the Manager,
where appropriate, to supplement these reports and formally review the
performance measures and KPIs. The Manager also keeps the Board informed on
all investor relations matters and peer group information as appropriate.
Additionally, the Board has established a framework for monitoring and evaluating the
performance of its third-party services providers and, on the Company’s behalf, the
Manager monitors the performance and systems and controls employed by them.
The board should ensure that the
necessary resources are in place
for the company to meet its
objectives and measure
performance against them.
Theboard should also establish
aframework of prudent and
effective controls, which enable
risk to be assessed and managed.
C.
This Corporate Governance statement forms part of the Directors’ report.
Background
Under the UK Listing Rules, listed companies are required to disclose how they have applied the principles and complied with
the provisions of the corporate governance code to which they are subject. The provisions of the UK Corporate Governance
Code (“UK Code”), as issued by the Financial Reporting Council (“FRC”) in July 2018, are applicable to the year under review and
can be viewed at www.frc.org.uk.
The related AIC Code issued by the AIC in February 2019, addresses all the principles set out in the UK Code. The FRC has
confirmed that AIC member companies, such as Baronsmead Second Venture Trust plc, who report against the AIC Code will be
meeting their obligations in relation to the UK Code and the associated disclosure requirements under paragraph 9.8.6 of the
Listing Rules. The AIC Code can be viewed at www.theaic.co.uk where it includes an explanation of how it adapts the principles
and provisions set out in the UK Code to make them relevant for investment companies.
Compliance
The Board attaches great importance to the AIC Code and strives to observe its principles. Throughout the year ended
30September 2022, the Company complied with most of the principles and provisions of the AIC Code and the table on the
following pages reports on the Company’s AIC Code compliance, providing explanation where the Company has not complied.
As an externally managed VCT, all the Directors are non-executive and therefore provisions of the AIC Code relating to the Chief
Executive Officer and Executive Director remuneration are not relevant to the Company. Furthermore, the systems and
procedures of the Manager and the provision of services provided by the Company’s VCT Status Adviser, PwC, give the Board full
confidence that an internal audit function is not necessary.
The Company has therefore not reported further in respect of these provisions.
The principles of the AIC code
The AIC Code comprises 17 principles and is split over the following five sections:
Board leadership and purpose;
Division of responsibilities;
Composition, succession, and evaluation;
Audit, risk and internal control; and
Remuneration.
The Board’s Corporate Governance statement sets out how the Company complies with each of the provisions of the AIC Code.
AIC
Code Principle Compliance Statement
BOARD LEADERSHIP AND PURPOSE
A successful company is led by
an effective board, whose role is
to promote the long-term
sustainable success of the
company, generating value for
shareholders and contributing to
wider society.
Directors are fully engaged and committed to using their collective, extensive
experience to foster healthy debate and drive business strategy for the long-term,
sustainable success of the Company.
The Company’s investment objective is to achieve long-term investment returns
for private investors within a tax efficient structure and the Board ensures that all
decisions are made responsibly. The Board and the Manager are committed to
managing the business and its investment strategy in a sustainable manner and
the Board emphasises the importance of ESG in its investment decisions and risk
management. At each Board meeting, time is committed to assessing and
monitoring the ESG impact of new investee companies through the Manager’s
‘ESGDecision Tool’.
A.
Corporate governance
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AIC
Code Principle Compliance Statement
The Board comprises four independent Non-Executive Directors. Mr Groat is the
Senior Independent Director and serves as an intermediary for the other
Non-Executive Directors and the Company’s shareholders.
As at the date of this report, the Board comprises one female and three male
Non-Executive Directors.
Having considered the performance and independence of each Director, the Board
has determined that each Director is independent in character and judgement and
that there are no other relationships or circumstances which are likely to affect their
judgement nor impair their independence. Therefore, the Board remains independent
of the Manager. The Chair, Sarah Fromson, was deemed to be independent at the
time of her appointment and remains so.
The Board is aware that Tim Farazmand acted as a consultant to the Manager until
October 2019. Having considered the role that Mr Farazmand undertook and the
period of time that has elapsed since he acted in this role for the Manager, the Board
has resolved that Mr Farazmand is independent of the Manager for the purposes of
the AIC Code.
As a result of the Board evaluation process, the Board determined that each Director
provided expert and valued contributions to Board deliberations and no one
individual, or small group of individuals dominated Board decision making.
The board should consist of an
appropriate combination of
directors (and, in particular,
independent non-executive
directors) such that no one
individual or small group of
individuals dominates the board’s
decision making.
G.
As part of the Board evaluation process, the contributions of each Director, and the
time commitment made by each Director, are considered. Directors’ other
commitments are regularly reviewed, and any new appointments are considered
by the other Directors to ensure there is no conflict of interest.
As a result of the Board evaluation, it was concluded that each Director provided
appropriate levels of commitment and challenge to the Board and provided the
Company and service providers with guidance and advice when required.
Non-executive directors should
have sufficient time to meet their
board responsibilities.
Theyshould provide constructive
challenge, strategic guidance,
offer specialist advice and hold
third-party service providers
toaccount.
H.
The Directors have access to the advice and services of the Company Secretary
who is responsible to the Board for ensuring that Board procedures are in place
and followed and that applicable rules and regulations are complied with. The
Company Secretary is also responsible for ensuring good information flows
between all parties. The Directors also have access to independent professional
advice at the Company’s expense where they judge it necessary to discharge their
responsibilities properly.
The board, supported by the
company secretary, should
ensure that it has the policies,
processes, information, time,
andresources it needs in order
tofunction effectively
andefficiently.
I.
AIC
Code Principle Compliance Statement
DIVISION OF RESPONSIBILITIES
The Board understands its responsibility to shareholders and stakeholders and
considers the opinions of all such parties when making any decision. The Board
considers that, other than its shareholders, its stakeholders are the Manager, the
portfolio of investee companies, HMRC and the Company’s governing bodies, the
AIC and its range of reputable advisors and service providers. The Board is also
committed to monitoring its impact on the environment and wider community and
is prioritising focus on ESG across the investment process. The Board always
considers the impact that any decision will have on any relevant stakeholder.
The Directors place considerable importance on shareholder engagement and on
communications with them and all other stakeholders. Shareholders who wish to
contact the Board may do so by writing to the Chair at the Company’s Registered
Office. All Directors make themselves available to meet shareholders at the
Company’s AGM.
This year the Company’s AGM will be held in person, with shareholders who are
unable to attend in person given the option to watch the AGM live. It must be noted
that those who participate virtually will not be able to vote during the course of the
AGM and are asked to submit their votes by proxy in advance of theAGM.
The Directors’ Statement on meeting their responsibilities under Section 172 of the
Companies Act 2006 can be found on pages 34 to 39.
In order for the company to meet
its responsibilities to
shareholders and stakeholders,
the board should ensure effective
engagement with, and encourage
participation from, these parties.
D.
There is a clear division of responsibility between the Chair, the Directors, the
Manager, and the Company’s other third-party service providers. Additionally, the
Board approved a policy setting out the responsibilities of the Chair and Senior
Independent Director which is available on the Company’s website. The Chair is
responsible for leading the Board and is responsible for its overall effectiveness in
directing the affairs of the Company. The Chair ensures that all Directors receive
accurate, timely and clear information and helps promote a culture of openness
and debate in Board meetings by encouraging and facilitating the effective
contribution of other Directors towards a consensus view. The Chair also takes a
leading role in ensuring effective communications with shareholders and other
stakeholders. Further details on the Company’s engagement with shareholders and
other stakeholders can be found in the Section 172 Statement on pages 34 to 39.
The Board meets regularly throughout the year and representatives of the Manager
are in attendance, when appropriate, at Board and/or Committee meetings.
Prior to each Board and Committee meeting, Directors are provided with a
comprehensive set of papers giving detailed information on the Company’s
transactions and financial position and all Directors have timely access to all
relevant management, financial and regulatory information.
The chair leads the board and is
responsible for its overall
effectiveness in directing the
company. They should
demonstrate objective judgement
throughout their tenure and
promote a culture of openness
and debate. In addition, the chair
facilitates constructive board
relations and the effective
contribution of all non-executive
directors, and ensures that
directors receive accurate, timely
and clear information.
F.
Corporate governance
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AIC
Code Principle Compliance Statement
AUDIT, RISK AND INTERNAL CONTROL
The Board evaluates its own performance and that of its Committees and the Chair
on an annual basis. For the period under review, this was carried out by way of a
questionnaire and individual meetings.
The Chair led the evaluation, which covered the functioning of the Board as
awhole, composition and diversity of the Board, the effectiveness of the Board
Committees and the independence and contribution made by each Director.
Each Director also completed a self-evaluation questionnaire reflecting on their
personal contribution and commitment as a Director during the period and
discussed any key individual areas of focus with the Chair.
A separate evaluation of the Chair was led by Mr Groat, Senior Independent
Director. Directors provided constructive feedback regarding the Chair by
completing a Chair evaluation questionnaire and sharing this with Mr Groat who
then met with Ms Fromson to discuss this and address any points of action.
The Nomination Committee receives relevant points from the performance
evaluation process and considers the information when making a
recommendation to the Board regarding the election and re-election of Directors.
More information regarding the proposed re-election of each Director can be found
in the Notice of AGM.
The results of the annual Board Evaluation process conducted during the period
can be found on page 53.
Annual evaluation of the board
should consider its composition,
diversity and how effectively
members work together to
achieve objectives. Individual
evaluation should demonstrate
whether each director continues
to contribute effectively.
L.
The Audit & Risk Committee has put in place a non-audit services policy which
ensures that any work outside the scope of the standard audit work requires prior
approval by the Audit & Risk Committee or the Board. This enables the Audit & Risk
Committee to ensure that the external auditor remains fully independent.
The Committee agrees that the implementation of this policy has ensured that
division is maintained going forward. No non-audit services have been provided
bythe Company’s external auditor, BDO, therefore the Committee continues to
believe that the external auditor remains independent.
Further information regarding the work of the Audit & Risk Committee can be
found on pages 51 to 53.
The board should establish formal
and transparent policies and
procedures to ensure the
independence and effectiveness
of external audit functions and
satisfy itself on the integrity of
financial and narrative
statements.
M.
The Audit & Risk Committee has considered the Annual Report and Audited
Financial Statements as a whole and agreed that it presents a fair, balanced, and
understandable assessment of the Company’s position and prospects.
The board should present a fair,
balanced, and understandable
assessment of the company’s
position and prospects.
N.
AIC
Code Principle Compliance Statement
COMPOSITION, SUCCESSION AND EVALUATION
The Board has established a Nomination Committee, which leads the appointment
process of new Directors as and when vacancies arise and as part of the Directors’
ongoing succession planning.
The Board believes that diversity of experience and approach, including gender
diversity, social and ethnic backgrounds, cognitive and personal strengths,
amongst Board members is of great importance and the Nomination Committee
and Board consider issues of Board balance and diversity when making new
appointments.
As a result of the Board evaluation held during the year, Directors acknowledge the
need to have a continued focus on diversity when considering future appointments
to the Board. The Board ensures that all appointments are made on merit and the
Board is committed to ensuring that any Board vacancies are filled by the most
qualified candidates and therefore no formal diversity policy is in place.
Appointments to the board
should be subject to a formal,
rigorous, and transparent
procedure, and an effective
succession plan should be
maintained. Both appointments
and succession plans should be
based on merit and objective
criteria and, within this context,
should promote diversity of
gender, social and ethnic
backgrounds, cognitive and
personal strengths.
J.
The Directors’ biographical details are set out on page 40. These demonstrate the
wide range of skills and experience that each Director brings to the Board.
The Board has approved a tenure policy, which encompasses the whole Board and
Chair, to ensure that the Board continues to have the right balance of skills and
experience.
The Board recognises the value of regular refreshment of its composition and
remains committed to ensuring that Directors have the right mix of skills and
experience that are aligned with the strategic plans of the Company. The Board
recognises the importance of Directors maintaining independence of character
and judgement. However, the Directors believe that the value brought through
continuity and experience of Directors with longer periods of service can be
desirable in an investment company.
Both the Nomination Committee and the Board regularly consider the composition
of the Board and the succession plans for each Director. This has ensured that the
Board’s membership has included longer-serving directors with a balance of
knowledge and experience.
With an objective to deliver long-term and consistent returns to shareholders, it is
important that the Board can maintain its long-term perspective, supported by a
long corporate memory, but with the regular challenge provided by fresh thinking.
The composition, skills and effectiveness of the Board are reviewed at least
annually to ensure that the Board has the skills and experience necessary for
themanagement of the Company, having regard to anticipated challenges
andopportunities.
The board and its committees
should have a combination of
skills, experience, and
knowledge. Consideration should
be given to the length of service
of the board as a whole and
membership regularly refreshed.
K.
Corporate governance
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Audit & Risk Committee report
Chairman: Malcolm Groat
I am pleased to present the Audit & Risk Committee report for the year ended 30 September 2022.
Membership
As reported in the Corporate Governance Statement, given the size and nature of the Board, it is felt appropriate that all
Directors are members of the Audit & Risk Committee. The Audit & Risk Committee members consider that, individually and
collectively, they are each independent and have recent, relevant financial and risk management experience gained from the
venture capital and/or financial services sector to fulfil the role of a member. The constitution and performance of the Audit &
Risk Committee is reviewed on a regular basis.
Key responsibilities of the Audit & Risk Committee:
1. Reviewing the content and integrity of the Annual and Half-Yearly Financial Statements;
2. Reviewing the Company’s internal control and risk management systems;
3. Reviewing the remuneration and terms of appointment of the external auditor;
4. Reviewing the effectiveness of the external audit process in accordance with regulatory requirements;
5. Ensuring auditor objectivity and independence is always safeguarded, but particularly in the provision of non-audit services;and
6. Providing a forum through which the auditor may report to the Board.
Matters considered during the year
During the period, the Audit & Risk Committee has:
Reviewed the Company’s financial statements for the half year and year end and made recommendations to the Board;
Reviewed the Company’s going concern and viability statements;
Reviewed the Company’s Risk Register reflecting the current and emerging risks faced by the Company;
Reviewed the internal controls and cyber security of the Company and its third-party service providers with particular
emphasis on the ESG risks and mitigation of the associated risks;
Agreed the audit plan for the year ended 30 September 2022 and audit fees with BDO; and
Reviewed its own performance as a Committee and its Terms of Reference.
The significant issues considered by the Committee during the year ended 30 September 2022 were:
Valuation of investments
Discussions have been held with the Manager about the Company’s valuation process, its ownership of assets and the systems
in place at Gresham House to ensure the accuracy of the valuation of the Company’s portfolio. The Manager, the Company’s
Joint Valuation Forum and the Board have given additional attention to the valuation methodology applied across the portfolio
as a result of the ongoing impacts of the geo-political environment relating to the conflict in Ukraine. The Audit & Risk
Committee received assurances from the Manager around the robust valuation processes in place, monitoring all potential ESG
risks that could impact the Company.
Compliance with VCT tests
The Company engages PwC as its VCT Status Adviser to advise on its compliance with legislative requirements relating to VCTs.
PwC attends at least one Audit & Risk Committee meeting each year and presents aVCT status monitoring report which details
the Company’s position against each of the VCT qualification tests.
Looking ahead to the next financial year, the Audit & Risk Committee undertakes to continue to work with the Company’s advisers to
ensure that the Company has the correct policies in place to provide necessary comfort and uphold full compliance with the VCT rules.
Going concern and long-term viability
The Committee considered the Company’s long-term financial requirements and viability for the forthcoming year and the longer
period of three years, particularly in light of the ongoing effects of rising inflation and the conflict in Ukraine. This assessment
included the review of possible declines in investment valuations and the impact of rising inflation on financial statements
disclosures including those relating to principal risks. As a result of this assessment, the Committee concluded that the
AIC
Code Principle Compliance Statement
REMUNERATION
The Board’s Committees
The Board has delegated certain responsibilities to its Audit & Risk, Management Engagement & Remuneration and Nomination
Committees. Given the size and nature of the Board, it is felt appropriate that all Directors are members of the Committees.
TheBoard has established formal terms of reference for each of the Committees which are available on the Company’s
website and from the Company Secretary upon request. An outline of the remit of each of the Committees and their activities
during the year are set out below:
P.
Remuneration policies and
practices should be designed to
support strategy and promote
long-term sustainable success.
The Company follows the recommendation of the AIC Code that Non-Executive
Directors’ remuneration should reflect the time commitment and responsibilities
of the role. As stated in the Remuneration Report on page 55 the Company’s policy
is that remuneration of Non-Executive Directors should reflect the experience of
the Board as a whole, the responsibilities and time commitments each Director
would have to devote to the Company’s affairs and be in line with that of other
relevant venture capital trusts.
Risks faced by the business are considered, monitored and assessed on a regular
basis. Details regarding the Company’s principal risks and uncertainties can be
found on pages 18 and 19.
The Audit & Risk Committee receives service provider internal control reports
which are collated by the Manager. The performance of all third party service
providers are reviewed at least annually by the Management Engagement and
Remuneration Committee. Further details can be found on page 55.
The board should establish
procedures to manage risk,
oversee the internal control
framework, and determine the
nature and extent of the principal
risks the company is willing to
take in order to achieve its
long-term strategic objectives.
O.
The Board’s Management Engagement and Remuneration Committee considers at
least annually the level of the Board’s fees, in accordance with the Remuneration
Policy approved by shareholders at the AGM held in 2020. Further details on the
Directors’ remuneration is contained in the Directors’ Remuneration Report on
pages 55 to 58. No Director is involved in deciding their own remuneration.
A formal and transparent
procedure for developing policy
remuneration should be
established. No director should
be involved in deciding their own
remuneration outcome.
Q.
All Directors of the Company are independent Non-Executive Directors, and all
Directors are members of the Management Engagement and Remuneration
Committee (“MERC”). Any decision about remuneration is taken after considering
the performance of the Company and the current market conditions.
In accordance with the AIC Code Principle 9, the Chair, Sarah Fromson who was
independent on appointment (and remains so) is a member of the MERC.
MrFarazmand is the Chairman of the MERC.
Directors should exercise
independent judgement and
discretion when authorising
remuneration outcomes, taking
account of company and
individual performance, and
wider circumstances.
R.
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Non-audit services
In accordance with the FRC’s Guidance on Audit Committees, the Audit & Risk Committee approved a non-audit services policy
in May 2017 to ensure that the auditor’s independence and objectivity is not impaired. The policy is reviewed annually and
outlines those services that the external auditor is prohibited from providing as well as those that require pre-approval from the
Committee.
During the period, no non-audit services have been provided by the Company’s current Auditor, BDO. The Audit & Risk
Committee therefore are further satisfied that BDO is independent to the Company.
Malcolm Groat
Audit & Risk Committee Chairman
1 December 2022
Nomination Committee report
Chair: Sarah Fromson
(Sarah Fromson is the Chair of the Nomination Committee except when considering Chair succession.)
Key responsibilities:
1. Lead the process for the appointments of additional Directors to the Board as and when appropriate;
2. Consider the resolutions relating to the election and re-election of Directors; and
3. Consider the orderly succession planning of the Board and the need to have a balance of skills, experience, knowledge, and
diversity amongst Directors.
Board Composition
The Nomination Committee considered the composition of the Board and concluded that, collectively, the Directors held the
skills, experience and knowledge that are essential to effectively exercise its duties and responsibilites. There were no changes
to the composition of the Board during the year.
Board evaluation
In order to review the effectiveness of the Board as a whole, its Committees, the individual Directors (including the
independence of each Director) and the Chair, the Company undertakes a thorough evaluation process by way of an extensive
and tailored board evaluation questionnaire, meetings between Board members and the Chair and completion of self-
evaluation questionnaires, confidentially shared between Directors and the Chair. This thorough evaluation process enables
each Director to evaluate, assess and reflect on the Board’s operations, individual Director contributions and the Company’s
leadership with a view to identify any shortcomings and address any areas requiring improvement.
In addition, an evaluation of the Chair’s performance and effectiveness was led by Mr Malcolm Groat, the Company’s Senior
Independent Director, by way of an extensive questionnaire. All evaluation processes are completed annually.
The results of the Board evaluation process indicated that the Board feels passionately that it operates in an open, committed
and engaged manner with a strong, forward looking relationship with the Manager. Board members believe they are an
effective Board with clear strategic vision, decision making skills and a commitment to sound corporate governance.
In addition, the Board evaluation results acknowledge the composition of the Board as appropriately diverse in respect to
gender and professional experience. The Company’s ESG risk management mechanisms were considered strong and it was felt
that ESG should continue to be integrated into every aspect of the Company and its investments.
Succession planning and diversity
The Nomination Committee reviews the size and structure of the Board annually and succession planning remains a key area of
focus for the Board for the year ending 30 September 2023. The Nomination Committee is also responsible for assessing the
time commitment required for each Board appointment and ensuring that the present incumbents have sufficient time to
undertake them.
Company had adequate resources to continue in operation and meet its liabilities as they fall due both for the forthcoming year
and until 2025. Related going concern and long-term viability statements are included on pages 32 and 51 to 52.
Cyber security
The Manager has reviewed the cyber security procedures and controls of its service providers to mitigate cyber risk and the
Manager’s Compliance Officer has presented their cyber security procedures to the Audit & Risk Committee. The Audit & Risk
Committee will continue to receive updates from, and to work with, the Manager to ensure that the procedures in place are
robust and enable continuous compliance with the General Data Protection Regulation. Following formal review of the risk
profile of the Company, the Audit & Risk Committee concluded that the effectiveness of the risk management and internal
control systems during the year remain appropriate.
Internal controls and risk management systems
The Company is exposed to a variety of risks and uncertainties. The Board, through delegation to the Audit & Risk Committee,
has undertaken a robust assessment and review of the principal risks facing the Company, together with a review of any
emerging risks that may have arisen during the year to 30 September 2022, including those that would threaten its business
model, future performance, solvency or liquidity. A statement of the principal risks and uncertainties faced by the Company can
be found on pages 18 and 19.
The Audit & Risk Committee oversees the operation of the Company’s risk management and internal control systems through
which procedures have been designed to identify and manage, rather than eliminate, risk. This involves the maintenance of
aRisk Register which records the risks to which the Company is exposed, including, among others, market, investment,
operational and regulatory risks, and the controls employed to mitigate these risks. The residual risks are rated, taking into
account the impact of the mitigating factors and, where necessary, corrective action is taken.
The Audit & Risk Committee receives service provider internal control reports which are collated by the Manager at each
meeting, which provide an overview of the main risks identified by the Company’s third-party service providers and the
mitigating actions put in place for these. The Audit & Risk Committee was satisfied that each service provider had the ability to
continue to deliver their service effectively, without disruption or issues.
Internal audit function
The Company does not have an internal audit function.
All the Company’s management functions are delegated to independent third parties whose controls are monitored by the
Audit & Risk Committee and ultimately the Board. It is therefore felt that there is no need for an internal audit function. The
need for an internal audit function is considered by the Audit & Risk Committee on an annual basis.
External auditor
In early 2021, the Company completed an audit tender process. Three firms were invited and the Board appointed BDO as
external auditor to the Company with effect from 28 May 2021. As part of the audit strategy presentation, BDO provided a clear
description of the work to be undertaken for the audit process for the year ended 30 September 2021, including an in-depth
review of portfolio valuations. The Company anticipates repeating an audit tender in 2028 in respect of the year ended
30September 2029. This is in line with latest Corporate Governance provisions.
In accordance with professional guidelines, the senior audit partner is rotated after five years (at most). The current senior audit
partner started working with the Company in 2021 and will therefore change in 2026. A resolution to re-appoint BDO as the
Company’s auditors will be proposed at the 2023 AGM.
An audit fee of £44,000 (exclusive of VAT) has been agreed in respect of the year ended 30 September 2022.
Review of effectiveness of external audit and the independence of the Auditor
The Audit & Risk Committee meets at least twice a year with the Auditor. The Auditor provides a planning report in advance of
the annual audit and a report on the annual report and financial statements. The Audit & Risk Committee has an opportunity to
question and challenge the Auditor in respect of each of these reports. In addition, at least once a year, the Audit & Risk
Committee has an opportunity to discuss any aspect of the Auditor’s work with the Auditor in the absence of the Manager. After
each audit, the Audit & Risk Committee reviews the audit process and considers its effectiveness.
Corporate governance
53
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
52
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
The Nomination Committee aims to attract directors with diverse skills and experience and recommends appointments to the
Board, based on merit, to ensure vacancies are fulfilled by the most qualified candidates. Candidates who complement the
balance of skills, knowledge and experience needed to align with the Company’s strategic aims are always considered. When
considering future appointments, the Nomination Committee promotes diversity of gender, social and ethnic backgrounds as
well as cognitive and personal strengths to aid effective decision-making. The Committee will consider the use of external
consultants when shortlisting candidates, if required.
Tenure policy
The Board has approved and adopted a Tenure and Reappointment Policy (the “Policy”). In accordance with the Policy, the Board
will seek to recruit a Director approximately every four years, with no Director expected to serve on the Board for longer than
nine years. The Policy includes the Chair within its consideration of each Director’s tenure. The Board intends to maintain
arange of experience from Directors who have served on the Board for varying periods. This approach aims to reserve the
cumulative experience and understanding of the Company, its commitments and investment portfolio amongst Directors, while
benefiting from fresh thinking and promoting diversity.
In accordance with the AIC Code all Directors will stand for annual re-election at the Company’s forthcoming AGM. Resolutions
to re-elect all Directors are contained within the Notice of AGM.
Directors’ meeting attendance
The table below sets out the Directors’ attendance at scheduled, quarterly meetings held during the year, as well as scheduled
Committee meetings held during the year, against the number of meetings each Director was entitled to attend.
Management
Engagement and
Audit Remuneration
Board of Directors Committee Committee Nomination Committee
Eligible Attended Eligible Attended Eligible Attended Eligible Attended
Sarah Fromson 4 4 3 3 1 1 1 1
Malcolm Groat 4 4 3 3 1 1 1 1
Tim Farazmand 4 4 3 3 1 1 1 1
Graham McDonald 4 4 3 3 1 1 1 1
Additional meetings were also held during the year in respect of the valuations of unquoted investments in the portfolio and the
Company’s fundraising offer to shareholders for subscription.
Sarah Fromson
Nomination Committee Chair
1 December 2022
Corporate governance
54
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
The Board has prepared this report in
accordance with the requirements of the
Large and Medium Sized Companies and
Groups (Accounts and Reports)
(Amendment) Regulations 2013.
The law requires the Company’s auditor,
BDO, to audit certain of the disclosures
provided. Where disclosures have been
audited, they are indicated as such. The
Auditor’s opinion is included in the
Independent Auditor’s Report on
pages60 to 65.
An ordinary resolution to approve the
Directors’ Remuneration Report will be
proposed at the forthcoming AGM on
1February 2023.
Annual statement from the
Chairman of the Management
Engagement and Remuneration
Committee
The Management Engagement and
Remuneration Committee is chaired by
Mr Farazmand and comprises all the
Directors of the Company, whose names
are set out on page 40 of the Directors’
Report.
As explained in the Corporate
Governance Statement on page 44, given
the size and nature of the company, it is
felt appropriate that all Directors are
members of the Management
Engagement & Remuneration
Committee. TheCompany has no
executive directors and the Non-
Executive Directors are considered
independent.
The Management Engagement and
Remuneration Committee’s key
responsibilities are:
1. Determining and agreeing with the
Board the remuneration policy for the
Board and the fees for the Company’s
Chair and Non-Executive Directors,
within the limits set in the Company’s
Articles of Association;
2. Reviewing the appropriateness of the
Manager’s appointment (including
key executives thereof) together with
the terms and conditions of the
appointment; and
3. Reviewing (at least annually), the
contractual relationship with the
Manager and scrutinising and holding
them to account for their
performance.
Manager duties
The Board delegates the execution of the
Company’s investment strategy and the
management of assets to the Manager,
by way of a Management Agreement,
subject to the Board being kept informed
of all material developments (including
proposed acquisitions or divestment of
investments) in the Company’s portfolio.
The Board believes that the Manager’s
operations in the VCT sector are
outstanding and that its ability to
continue to achieve results by adapting
to an ever-changing regulatory
environment has been impressive. The
Board continues to work with the
Manager to develop operational policies
as and where relevant and notes that
Gresham House supports the UK
Stewardship Code and complies with its
guidelines regarding proxy voting and
engagement.
Relationship with the Manager
The Management Engagement and
Remuneration Committee keeps the
performance of the Manager under
continual review. In addition, in
accordance with the requirements of the
AIC Code the Management Engagement
and Remuneration Committee reviews
the performance of the Manager’s
obligations under the Management
Agreement and considers the need for
any variation to the terms of the
Management Agreement on an annual
basis.
The Management Engagement and
Remuneration Committee then makes a
recommendation to the Board about the
continuing appointment of the Manager.
The Management Engagement &
Remuneration Committee also reviews
annually the performance of all other
service providers to the Company and
any matters concerning their respective
agreements.
Remuneration
Each year, the Committee reviews the
Directors’ fees to ensure they are
comparative with others in the VCT
industry relative to the NAV of the VCT, so
that the Board can attract suitably
qualified candidates to the Board. In
addition, the Board has regard to the
workload that individual Directors and
the Chair undertake as members of the
Board, feedback from shareholders, the
performance of the Company’s portfolio
and the prevailing rate of CPI at the time.
In recent years, the Board has seen
asignificant increase in regulation in the
industry which has in turn resulted in an
increase in the workload of the Directors.
In addition, the Directors spend a
considerable amount of time monitoring
the 80 per cent test, the other continuing
VCT tests, the co-investment scheme
and the fundraisings. They are also
responsible for monitoring the key risks
to the Company and for scrutiny of all
costs. The Directors set the strategy for
the Company’s continuing success and
decide when fundraising is appropriate.
They then monitor the performance of
the Company against the strategic
objectives set.
Directors spend further time preparing
for Board meetings, and the quarterly
valuation meetings (at which a rigorous
review of the unquoted investee
companies is undertaken so as to arrive
at the appropriate valuation) as well as a
number of other ad hoc meetings. This
work is in addition to the time taken up in
the formal meetings of the Board.
Further details of the responsibilities of
the Directors are provided in the
Corporate Governance Statement on
pages 46 and 47, all of which the Board
believes should be considered when
determining the remuneration of the
Directors.
Directors’ fees
All Directors act in a non-executive
capacity and the fees for their services
are approved by the Committee. The
fees for the Directors are determined
within the limits set out in the
Directors’ remuneration report
55
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Annual remuneration report
Scheme interests awarded during the financial year
The Company does not operate a share incentive plan. None of the Directors receive any remuneration or any part of their fee in
the form of shares in the Company, options to subscribe for shares, warrants or any other equity-based scheme.
Company performance
The Board is responsible for the Company’s investment strategy and performance, although the management of the Company’s
investment portfolio is delegated to the Manager through the management agreement, as referred to in the ‘Report of the
Directors’.
The graph below compares, for the ten periods, the percentage change over each period in the share price total return
(assuming all dividends are reinvested) to shareholders compared to the share price total return of approximately 40 generalist
VCTs (source: FE Analytics), which the Board considers to be the most appropriate benchmark for investment performance
measurement purposes. An explanation of the performance of the Company is given in the Chair’s Statement and Manager’s
Review on pages 4 to 11.
At least annually, the Management Engagement and Remuneration Committee formally reviews the performance of the
Manager and the appropriateness of its continuing appointment. At this meeting, they review the performance of the fund and
all aspects of the service provided by the Manager. They also review the terms and conditions of the appointment, including the
level of the Manager’s fees.
BSVT Share Price and the VCT Generalist Share Price Total Return Performance Graph
Directors’ emoluments for the year (audited) and annual percentage change
The Directors who served in the year received the following emoluments in the form of fees:
Year to Year to Year to Percentage Percentage
30 September 30 September 30 September change from change from
2022 2021 2020 2021 to 2022* 2020 to 2021*
£ £ £ % %
Sarah Fromson (Chair) 36,000 36,000 32,733 – 10.0
Tim Farazmand 28,000 28,000 11,666 – 140.0
Malcolm Groat 30,000 30,000 30,000 – –
Graham McDonald 28,000 15,050 N/A 86.0 –
Total 122,000 109,050 74,399
* Individual Director fees did not change between the year ended 30 September 2021 and 30 September 2022. The percentage changes reflected in the table are solely as a result of
changes to Board composition and roles, which includes the appointment of Sarah Fromson as Chair on 27 September 2020, the appointment of Tim Farazmand as a Non-Executive
Director on 1 May 2020 and the appointment of Graham McDonald as a Non-Executive Director on 16 February 2021.
Share Price Total Return
VCT Generalist All-Share Total Return
Source: FE analytics
100
150
200
250
Sep-22Sep-21Sep-20Sep-19Sep-18Sep-17Sep-16Sep-15Sep-14Sep-13Sep-12
%
Directors’ remuneration report
57
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
56
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Shareholder views on remuneration
Shareholder views in respect of Directors’ remuneration are communicated at the Company’s AGM and are taken into account in
formulating the Directors’ remuneration policy.
The votes cast at the last AGM were as follows:
Remuneration report (2022 AGM Results)
Number Percentage
of votes of votes cast
For 16,002,930 83.83%
Discretion of the Chair 1,816,374 9.51%
Against 1,272,072 6.66%
Votes withheld 350,602
Remuneration policy (2020 AGM Results)
Number Percentage
of votes of votes cast
For 11,834,934 75.27%
Discretion of the Chair 1,310,285 8.33%
Against 2,578,625 16.40%
Votes withheld 402,095
Company’s Articles of Association. In
November 2021, the Management
Engagement and Remuneration
Committee met to consider the level of
Directors’ fees for the year ending
30September 2022 and concluded that
the fees remained appropriate.
In November 2022, the Management
Engagement and Remuneration
Committee met to review the level of
Directors’ fees for the year ending
30September 2023 and concluded that it
was appropriate to increase the
Directors fees by 5 per cent. to reflect
inflationary pressures, the last fee
revision having occurred in November
2018. Accordingly, the Directors’ fees
were increased from £28,000 to £29,400,
the Senior Independent Director fee from
£30,000 to £31,500, the Audit and Risk
Committee Chairman (if separate to
Senior Independent Director) from
£30,000 to £31,500, and the Chair’s fee
was increased from £36,000 to £37,800.
In determining the remuneration of the
Directors, the Company has regard inter
alia, to the time spent by the Directors on
matters concerning the Company, the
comparative fees paid to Directors of
other VCTs relative to the NAV of the VCT,
the prevailing rate of Consumer Price
Index (“CPI”) at the time, any feedback
received from shareholders and the
performance of the Company’s portfolio.
Directors’ remuneration policy
The remuneration policy, as set out
above, was approved by the members at
the AGM held on 27 February 2020.
Inaccordance with the regulations, an
ordinary resolution to approve the
Directors’ remuneration policy will be
put to Shareholders at the upcoming
AGM in February 2023 as required every
three years. There are no proposed
changes to the policy and if approved at
the AGM, the policy will continue to the
year ended 30 September 2023 and will
be put to shareholders at least once
every threeyears.
A copy of the Company’s Remuneration
Policy can be obtained by writing to the
Company Secretary at the Company’s
registered office.
Fees for any new Non-Executive Director
who is appointed to the Board will be
made in accordance with the Company’s
Remuneration Policy.
The Directors are not eligible to receive
pension entitlements or bonuses and no
other benefits are provided. They are not
entitled to participate in any long-term
incentive plan or share option schemes.
Fees are paid to the Directors on a
monthly basis and are not performance
related.
The Directors do not have service
contracts with the Company; however,
their appointment letters do include a
three-month notice period. As a result,
the Company’s policy on termination
payments is for a payment of
threemonths in lieu for Directors that
are not requested to work their notice
period. Directors’ terms and conditions
for appointment are set out in letters of
appointment which are available for
inspection at the registered office of
theCompany.
The Board’s policy is that the
remuneration of Non-Executive
Directors should reflect the
experience of the Board as a whole, be
fair and comparable to that of other
relevant venture capital trusts that are
similar in size and have similar
investment objectives and structures.
Furthermore, the level of
remuneration should be sufficient to
attract and retain the Directors needed
to oversee properly the Company and
to reflect the specific circumstances
of the Company, the duties and
responsibilities of the Directors and
the value and amount of time
committed to the Company’s affairs.
Relative importance of spend on Directors’ fees
The below table is required to be included in accordance with The Large and Medium Sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2008. It should be noted that the figures below are not directly comparable due to:
the payment of the final dividend for the prior year within the current financial year; and
the fundraising which was conducted in December 2021, January, February and March 2022.
Year to Year to
30 September 30 September
2022 2021 Percentage
£ £ change
Total Directors’ fees 122,000 122,116 (0.1)
Shares repurchased 2,775,000 4,536,000 (38.8)
Dividends 20,580,000 18,082,000 13.8
NAV 212,986,000 248,374,000 (14.2)
The Directors’ fees as a percentage of NAV for the year to 30 September 2022 were 0.057 per cent and for the year to
30September 2021 were 0.049 per cent.
Directors’ interests (audited)
There is no requirement under the Company’s Articles of Association or the terms of their appointment for Directors to hold
shares in the Company. The interests of the Directors in the shares of the Company (including their connected persons) as at
30September 2022 were as follows:
30 September 30 September
2022 2021
Ordinary Ordinary
10p shares 10p shares
Sarah Fromson (Chair) 55,926 38,603
Tim Farazmand 128,403 65,147
Malcolm Groat* 306,772 251,804
Graham McDonald 32,012 6,013
Total 523,113 361,567
* These shares are held by a person closed associated to Malcolm Groat.
There have been no changes to these holdings between 30 September 2022 and the date of this report.
Approved by the Board of Directors and signed by:
Tim Farazmand
Chairman of the Management Engagement and Remuneration Committee
1 December 2022
Directors’ remuneration report
58
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Statement of Directors’
responsibilities in respect of the
Annual Report and the
FinancialStatements
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, they have
elected to prepare the financial
statements in accordance with
UKAccounting Standards, including
FRS 102 The Financial Reporting
Standard applicable in the UK and
Republic ofIreland.
Under company law, the Directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of
affairs of the company and of the profit
or loss of the company for that period.
In preparing these financial statements,
the directors are required to:
select suitable accounting policies
and then apply them consistently;
make judgements and estimates that
are reasonable and prudent;
state whether applicable UK
Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the financial statements;
assess the Company’s ability to
continue as a going concern,
disclosing, as applicable, matters
related to going concern; and
use the going concern basis of
accounting unless they either intend
to liquidate the Company or to cease
operations or have no realistic
alternative but to do so.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
Company and enable them to ensure
that its financial statements comply
with the Companies Act 2006. They are
responsible for such internal control as
they determine is necessary to enable
the preparation of financial statements
that are free from material
misstatement, whether due to fraud or
error, and have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets
of the Company and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that complies with that law and
thoseregulations.
The Directors are responsible for
ensuring the Annual Report and the
financial statements are made available
on a website. Financial statements are
published on the Company’s website in
accordance with legislation in the United
Kingdom governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is the
responsibility of the Directors.
TheDirectors’ responsibility also extends
to the ongoing integrity of the financial
statements contained therein.
Responsibility statement of the
directors in respect of the
annual financial report
We confirm that to the best of
ourknowledge:
the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities,
financial position and profit or loss of
the Company taken as a whole;and
the Annual Report includes a fair and
balanced review of the development
and performance of the business and
the position of the Company, together
with a description of the principal
risks and uncertainties itfaces.
We consider the Annual Report and
financial statements, taken as a whole,
is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the
Company’s position and performance,
business model and strategy.
On behalf of the Board:
Sarah Fromson
Chair
1 December 2022
Statement of
Directors’ responsibilities
59
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Overview
2022 2021
Key audit matters Valuation of unquoted investments
Valuation of quoted investments
Valuation of quoted investments is no longer considered to be
a key audit matter because it is no longer a significant risk.
Materiality Company financial statements as a whole
£2.66m (2021: £3.57m) based on 1.5% (2020: 1.5%) of Gross investments
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of
internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team. This matter was addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of
unquoted
investments
(Notes 2.3 and 3.3)
We consider the valuation of investments to be the
most significant audit area as there is a high level of
estimation uncertainty involved in determining the
unquoted investment valuations.
There is an inherent risk of management override
arising from the unquoted investment valuations
being prepared by the Investment Manager, who is
remunerated based on the value of the net assets of
the VCT, as shown in note 2.6.
For these reasons we treated the valuation of
unquoted investments as a key audit matter.
For our sample of loans held at fair value we:
Agreed the security held to independently received •
third party confirmations
Considered the assumption that fair value is not •
significantly different to cost by challenging the
assumption that there is no significant movement in
the market interest rate since acquisition through
inquiry and discussions with management as well as
reviewing the interest rates to ensure they were not
significantly different from market since acquisition
and considering the “unit of account” concept
Reviewed the treatment of accrued redemption •
premium/other fixed returns in line with the
Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and
Venture Capital Trusts (Issued in April 2021).
Our sample for unquoted equity investments valuation
testing was stratified according to risk, having regard to the
subjectivity of the inputs to the valuations Our procedures
for the sample selected for detailed testing included:
Considered whether the valuation methodology is the •
most appropriate in the circumstances under the
International Private Equity and Venture Capital
Valuation (“IPEV”) Guidelines. Where there has been a
change in valuation methodology from prior year, we
assessed whether the change was appropriate
Opinion on the financial
statements
In our opinion the financial statements:
give a true and fair view of the state •
of the Company’s affairs as at 30
September 2022 and of its loss for
the year then ended;
have been properly prepared in •
accordance with United Kingdom
Generally Accepted Accounting
Practice; and
have been prepared in accordance •
with the requirements of the
Companies Act 2006.
We have audited the financial
statements of Baronsmead Second
Venture Trust Plc (the ‘Company’) for
the year ended 30 September 2022
which comprise the Income statement,
the statement of change in equity, the
balance sheet, the statement of cash
flows and notes to the financial
statements, including a summary of
significant accounting policies. The
financial reporting framework that has
been applied in their preparation is
applicable law and United Kingdom
Accounting Standards, including
Financial Reporting Standard 102 The
Financial Reporting Standard
applicable in the UK and Republic of
Ireland (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit
of the financial statements section of
our report. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion. Our audit opinion is
consistent with the additional report to
the audit committee.
Independence
Following the recommendation of the
audit committee, we were appointed by
the Board of Directors on 28 May 2021
to audit the financial statements for
the year ending 30 September 2021 and
subsequent financial periods. The
period of total uninterrupted
engagement including retenders and
reappointments is 2 years, covering the
years ending 30 September 2021 to
30September 2022. We remain
independent of the Company in
accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, including the FRC’s Ethical
Standard as applied to listed public
interest entities, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.
The non-audit services prohibited by
that standard were not provided to the
Company.
Conclusions relating to going
concern
In auditing the financial statements, we
have concluded that the Directors’ use
of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
Ourevaluation of the Directors’
assessment of the Company’s ability to
continue to adopt the going concern
basis of accounting included:
Obtaining the VCT compliance •
reports during the year and as at year
end and reviewing their calculations
to check that the Company was
meeting its requirements to retain
VCT status.
Consideration of the Company’s •
expected future compliance with VCT
legislation, the absence of bank debt,
contingencies and commitments and
any market or reputational risks;
Reviewing the forecasted cash flows •
that support the Directors’
assessment of going concern,
challenging assumptions and
judgements made in the forecasts,
and assessing them for
reasonableness. In particular, we
considered the available cash
resources relative to the forecast
expenditure which was assessed
against the prior year for
reasonableness;
Evaluating Management’s •
assessment of the impact of market
volatility and uncertainty, including
as a result of the impact of inflation;
Calculating financial ratios to •
ascertain the financial health of the
Company.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or
collectively, may cast significant doubt
on the Company’s ability to continue as
a going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
In relation to the Company’s reporting
on how it has applied the UK Corporate
Governance Code, we have nothing
material to add or draw attention to in
relation to the Directors’ statement in
the financial statements about
whether the Directors considered it
appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the
responsibilities of the Directors with
respect to going concern are described
in the relevant sections of this report.
to the members of Baronsmead Second Venture Trust plc
Independent auditor’s reportIndependent auditor’s report
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Company financial statements
2022 2021
£ £
Lower testing threshold
We determined that for Revenue return before tax, a misstatement of less than materiality for the financial statements as a
whole, could influence users of the financial statements as it is a measure of the Company’s performance of income generated
from its investments after expenses. As a result, we determined a lower testing threshold for those items impacting revenue
return of £300,000 (2021: £310,000) based on 5% of gross expenditure (2021: 5%).
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £133,000 (2021:
£70,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report and audited financial statements other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Performance materiality
1,990,000 2,320,000
Basis for determining
performance materiality
75% of materiality
The level of performance materiality applied
was set after having considered a number of
factors including the expected total value of
known and likely misstatements and the level
of transactions in the year.
65% of materiality
The level of performance materiality applied
was set after having considered a number of
factors including the expected total value of
known and likely misstatements and the level
of transactions in the year.
The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting •
and any material uncertainties identified; and
The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment •
covers and why the period is appropriate.
Going concern and
longer-term
viability
Directors' statement on fair, balanced and understandable; •
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks; •
The section of the annual report that describes the review of effectiveness of risk management and internal •
control systems; and
The section describing the work of the audit committee •
Other Code
provisions
Independent auditor’s report
Key audit matter How the scope of our audit addressed the key audit matter
Re-performed the calculation of multiples-based •
investment valuations including agreeing to most
recent management accounts where applicable
Benchmarked key inputs and estimates to •
independent market data and our own research
Challenged the consistency and appropriateness of •
adjustments made to such market data in establishing
the revenue, cash flow or earnings multiple applied in
arriving at the valuations adopted by considering the
individual performance of investee companies against
plan and relative to the peer group, the market and
sector in which the investee company operates and
other factors as appropriate
Considered the economic environment in which the •
investment operates to identify factors that could
impact the valuation. This is particularly pertinent in
those circumstances where rising inflation, the war in
the Ukraine and the resulting impact may call into
question whether the price of recent investment
remains reflective of fair value.
Key observations
We did not identify any factors beyond those •
considered by management that could have impacted
the valuations.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Company financial statements
2022 2021
£ £
£3,570,000£2,660,000
Materiality
1.5% of gross investments1.5% of gross investments
Basis for determining
materiality
In setting materiality, we have had regard to the
nature and disposition of the investment
portfolio. Given that the VCT’s portfolio is
comprised of unquoted investments which
would typically have a wider spread of
reasonable alternative possible valuations, we
have applied a percentage of 1.5% of gross
investments.
In setting materiality, we have had regard to the
nature and disposition of the investment
portfolio. Given that the VCT’s portfolio is
comprised of unquoted investments which
would typically have a wider spread of
reasonable alternative possible valuations, we
have applied a percentage of 1.5% of gross
investments.
Rationale for the benchmark
applied
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Annual Report and Audited Financial Statements 2022
were not limited to compliance with
Companies Act 2006, the FCA listing
and DTR rules, the principles of the UK
Corporate Governance Code, industry
practice represented by the Statement
of Recommended Practice: Financial
Statements of Investment Trust
Companies and Venture Capital Trusts
(“the SORP”) issued in November 2014
and updated in February 2018 with
consequential amendments and FRS
102. We also considered the Company’s
qualification as a VCT under UK tax
legislation.
Our tests included, but were not limited
to:
Obtaining an understanding of the •
control environment in monitoring
compliance with laws and
regulations;
Agreement of the financial •
statement disclosures to underlying
supporting documentation;
Enquiries of management and those •
charged with governance relating to
the existence of any non-compliance
with laws and regulations including
fraud occurring within the Company
and its operations; and
Obtaining the VCT compliance •
reports during the year and as at year
end and reviewing their calculations
to check that the Company was
meeting its requirements to retain
VCT status; and
Reviewing minutes of board •
meetings and legal correspondence
and invoices throughout the period
for instances of non-compliance with
laws and regulations and fraud.
We assessed the susceptibility of the
financial statements to material
misstatement including fraud and
considered the fraud risk areas to be
the valuation of unquoted investments
and management override of controls.
Our tests included, but were not limited
to:
The procedures set out in the Key •
Audit Matters section above;
Obtaining independent evidence to •
support the ownership of
investments;
Recalculating the investment •
management fees in total;
Obtaining independent confirmation •
of bank balances; and
Testing journals, based on risk •
assessment criteria as well as an
unpredictable sample, and evaluating
whether there was evidence of bias
by the Investment Manager and
Directors that represented a risk of
material misstatement due to fraud.
We also communicated relevant
identified laws and regulations and
potential fraud risks to all engagement
team members and remained alert to
any indications of fraud or non-
compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to
respond to risks of material
misstatement in the financial
statements, recognising that the risk of
not detecting a material misstatement
due to fraud is higher than the risk of
not detecting one resulting from error,
as fraud may involve deliberate
concealment by, for example, forgery,
misrepresentations or through
collusion. There are inherent limitations
in the audit procedures performed and
the further removed non-compliance
with laws and regulations is from the
events and transactions reflected in
the financial statements, the less likely
we are to become aware of it.
A further description of our
responsibilities is available on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Company’s members
those matters we are required to state
to them in an auditor’s 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 and the Company’s
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
Vanessa Bradley
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory
Auditor
London, UK
1 December 2022
BDO LLP is a limited liability
partnership registered in England and
Wales (with registered number
OC305127).
Independent auditor’s report
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Responsibilities of Directors
As explained more fully in the
Statement of Directors’ responsibilities,
the Directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the Directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements,
the Directors are responsible for
assessing the Company’s ability to
continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the Directors
either intend to liquidate the Company
or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
Extent to which the audit was
capable of detecting
irregularities, including fraud
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities,
outlined above, to detect material
misstatements in respect of
irregularities, including fraud. The
extent to which our procedures are
capable of detecting irregularities,
including fraud is detailed below:
We gained an understanding of the
legal and regulatory framework
applicable to the Company and the
industry in which it operates, and
considered the risk of acts by the
Company which were contrary to
applicable laws and regulations,
including fraud. These included but
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Directors’
remuneration
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for which the •
financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal •
requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the Directors’ report.
Strategic report
and Directors’
report
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from •
branches not visited by us; or
the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement •
with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or •
we have not received all the information and explanations we require for our audit.•
Matters on which
we are required to
report by
exception
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Annual Report and Audited Financial Statements 2022
For the year ended 30 September 2022 For the year ended 30 September 2022
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Annual Report and Audited Financial Statements 2022
Non-distributable reserves Distributable reserves
Called-up Share Revaluation Capital Revenue
share capital premium reserve reserve reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
At 1 October 2021 31,206 74,231 77,481 63,698 1,758 248,374
(Loss)/profit after taxation – – (58,647) 6,038 2,652 (49,957)
Net proceeds of share issues, share
buybacks & sale of shares from treasury 4,583 31,868 – (1,302) – 35,149
Dividends paid 2.4 – – – (19,292) (1,288) (20,580)
At 30 September 2022 35,789 106,099 18,834 49,142 3,122 212,986
For the year ended 30 September 2021
Non-distributable reserves Distributable reserves
Called-up Share Revaluation Capital Revenue
share capital premium reserve reserve reserve Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
At 1 October 2020 27,146 46,775 30,890 75,290 2,216 182,317
Profit after taxation – – 46,591 8,316 1,624 56,531
Net proceeds of share issues, share
buybacks & sale of shares from treasury 4,060 27,456 – (3,908) – 27,608
Dividends paid 2.4–––(16,000) (2,082) (18,082)
At 30 September 2021 31,206 74,231 77,481 63,698 1,758 248,374
The notes on pages 70 to 83 form part of these financial statements.
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Annual Report and Audited Financial Statements 2022
Year ended Year ended
30 September 2022 30 September 2021
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments 2.3 – (48,771) (48,771) – 59,071 59,071
Income 2.5 4,951 – 4,951 3,821 – 3,821
Investment management fee 2.6 (1,367) (4,101) (5,468) (1,424) (4,272) (5,696)
Other expenses 2.6 (669) – (669) (665) – (665)
Profit/(loss) before taxation 2,915 (52,872) (49,957) 1,732 54,799 56,531
Taxation 2.9 (263) 263 – (108) 108 –
Profit/(loss) for the year, being total
comprehensive income for the year 2,652 (52,609) (49,957) 1,624 54,907 56,531
Return per ordinary share:
Basic and diluted 2.2 0.85p (16.85p) (16.00p) 0.59p 19.96p 20.55p
All items in the above statement derive from continuing operations.
There are no recognised gains and losses other than those disclosed in the Income Statement.
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 or FRS 102. The supplementary revenue return and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued by the Association of Investment Companies (“AIC SORP”).
The notes on pages 70 to 83 form part of these financial statements.
Statement of changes in equity Income statement
For the year ended 30 September 2022As at 30 September 2022 Company Number: 04115341
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Annual Report and Audited Financial Statements 2022
Year ended Year ended
30 September 30 September
2022 2021
£’000 £’000
Cash flows from operating activities
Investment income received 4,458 4,111
Deposit interest received 18 –
Investment management fees paid (5,691) (5,281)
Other cash payments (657) (680)
Net cash outflow from operating activities (1,872) (1,850)
Cash flows from investing activities
Purchases of investments (31,600) (49,314)
Disposals of investments 43,658 50,397
Net cash inflow from investing activities 12,058 1,083
Cash flows from financing activities
Gross proceeds of share issues 38,140 32,974
Gross proceeds from sale of shares from treasury 1,487 651
Gross costs of share buybacks (3,219) (4,092)
Costs of share issues (1,689) (1,459)
Costs of share buybacks (15) (21)
Equity dividends paid (20,580) (18,082)
Net cash inflow from financing activities 14,124 9,971
Increase in cash 24,310 9,204
Reconciliation of net cash flow to movement in net cash
Increase in cash 24,310 9,204
Opening cash at bank and on deposit 12,312 3,108
Closing cash at bank and on deposit 36,622 12,312
Reconciliation of realised (losses)/gains on disposal of investments to other income received
(Loss)/profit before taxation (49,957) 56,531
Losses/(gains) on investments 48,771 (59,071)
Income reinvested (434) (179)
(Increase)/decrease in debtors (43) 462
(Decrease)/increase in creditors (209) 407
Net cash outflow from operating activities (1,872) (1,850)
The notes on pages 70 to 83 form part of these financial statements.
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Annual Report and Audited Financial Statements 2022
As at As at
30 September 30 September
2022 2021
Notes £’000 £’000
Fixed assets
Investments 2.3 177,705 238,100
Current assets
Debtors 2.7 152 109
Cash at bank 36,622 12,312
36,774 12,421
Creditors (amounts falling due within one year) 2.8 (1,493) (2,147)
Net current assets 35,281 10,274
Net assets 212,986 248,374
Capital and reserves
Called-up share capital 3.1 35,789 31,206
Share premium 3.2 106,099 74,231
Capital reserve 3.2 49,142 63,698
Revaluation reserve 3.2 18,834 77,481
Revenue reserve 3.2 3,122 1,758
Equity shareholders’ funds 2.1 212,986 248,374
Net asset value per share
– Basic and diluted 2.1 65.08p 87.77p
The notes on pages 70 to 83 form part of these financial statements.
The financial statements were approved, and authorised for issue, by the board of Directors of Baronsmead Second Venture
Trust plc on 1 December 2022 and were signed on its behalf by:
Sarah Fromson
Chair
Statement of cash flows Balance sheet
For the year ended 30 September 2022
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Annual Report and Audited Financial Statements 2022
2.3 Investments
The Company has fully adopted sections 11 and 12 of FRS 102.
Purchases or sales of investments are recognised at the date of transaction at present value.
Investments are subsequently measured at fair value through profit and loss. For AIM-traded securities this is either bid
price or the last traded price, depending on the convention of the exchange on which the investment is traded.
In respect of collective investment vehicles, which consists of investments in open-ended investment companies
authorised in the UK, this is the closing price.
In respect of unquoted investments, these are valued at fair value by the Directors using methodology which is consistent
with the International Private Equity and Venture Capital Valuation Guidelines (“IPEV Guidelines”).
Judgements
The key judgements in the fair valuation process are:
i) The Manager’s determination of the appropriate application of IPEV Guidelines to each unquoted investment;
ii) The Directors’ consideration of whether each fair value is appropriate following detailed review and challenge. The
judgement applied in the selection of the methodology used for determining the fair value of each unquoted investment
can have a significant impact upon the valuation.
Estimates
The key estimate in the financial statements is the determination of the fair value of the unquoted investments. This
estimate is key as it significantly impacts the valuation of the unlisted investments at the balance sheet date. The fair
valuation process involves estimates using inputs that are unobservable (for which market data is unavailable). Fair value
estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimate.
As the valuation outcomes may differ from the fair value estimates a price sensitivity analysis is provided in Other Price Risk
Sensitivity in note3.3 on pages 79 and 80. The risk of an over or underestimation of fair values is greater when methodologies
are applied using more subjective inputs.
Assumptions
The determination of fair value for unquoted investments involves key assumptions dependent upon the valuation
methodology used. The primary methodologies applied are:
i) Cost of recent investment
ii) Earnings multiple
iii) Offer less 10 per cent, where applicable
The nature of the unquoted portfolio currently will influence the valuation technique applied. The valuation approach
recognises that, as stated in the IPEV Guidelines, the price of a recent investment, if resulting from an orderly transaction,
generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value
at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent
measurement date, including changes in the market or performance of the investee company. Milestone analysis is used
where appropriate to incorporate the operational progress of the investee company into the valuation. Additionally, the
background to the transaction must be considered. As a result, various multiples based techniques are employed to assess
the valuations particularly in those companies with established revenues. All valuations are cross-checked for
reasonableness by employing relevant alternative techniques.
The Earnings Multiple approach involves more subjective inputs than the Cost of recent investment and Offer approaches
and therefore presents a greater risk of over or under estimation. The Cost of recent investment approach involves holding
the investment at the price set in the latest available funding round, taking into account, amongst other things, factors such
as the time lapsed since the last round.
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We have grouped notes into sections under three key categories:
1. Basis of preparation
2. Investments, performance and shareholder returns
3. Other required disclosures
1 Basis of preparation
1.1 Basis of accounting
2 Investments, performance and shareholder returns
2.1 Net asset value per share
Number of Net asset value per Net asset value
ordinary shares share attributable attributable
30 September 30 September 30 September 30 September 30 September 30 September
2022 2021 2022 2021 2022 2021
number number pence pence £’000 £’000
Ordinary shares (basic) 327,288,384 282,974,085 65.08 87.77 212,986 248,374
2.2 Return per share
Weighted average number Return per Net profit
of ordinary shares ordinary share after taxation
30 September 30 September 30 September 30 September 30 September 30 September
2022 2021 2022 2021 2022 2021
number number pence pence £’000 £’000
Revenue 312,132,990 275,054,819 0.85 0.59 2,652 1,624
Capital 312,132,990 275,054,819 (16.85) 19.96 (52,609) 54,907
Total (16.00) 20.55 (49,957) 56,531
The key accounting policies have been incorporated throughout the notes to the financial statements adjacent to the
disclosure to which they relate. All accounting policies are included within an outlined box.
These Financial Statements have been prepared under FRS 102 ‘The Financial Reporting Standard applicable in the UK and
Republic of Ireland’ and in accordance with the Statement of Recommended Practice (“SORP”) for investment trust
companies and venture capital trusts issued by the Association of Investment Companies (“AIC”) in November 2014 and
updated in January 2017, February 2018, October 2019, April 2021 and July 2022 and on the assumption that the Company
maintains VCT status withHMRC.
The application of the Company’s accounting policies requires judgement, estimation and assumptions about the carrying
amount of assets and liabilities. These estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.
After making the necessary enquiries, including those made during the preparation of the viability statement in the Strategic
Report, the Directors believe that the Company will continue to be able to meet its liabilities as and when they fall due for
aperiod of at least 12 months, therefore it is appropriate to apply the going concern basis in preparing the financial
statements. The Directors acknowledge the current economic and geo political environment, however the Directors
consider the Company to be well placed to continue to operate for at least 12 months from the date of this report. The
Company has no debt and has sufficient liquidity to meet both its contracted expenditure and its discretionary cash
outflows, including to invest in new opportunities as they arise. The Directors note that the Company’s third-party suppliers
are not experiencing any significant operational difficulties affecting their respective services to the Company. The Directors
have also assessed the Company’s ability to cover its annual running costs under several liquidity scenarios in which the
value of liquid assets (including AIM-traded investments and OEICs) has been subject to sensitivity analysis, taking into
account the current economic environment and other, plausibly possible changes in performance. It is therefore appropriate
to apply the going concern basis in preparing the financial statements.
Notes to the financial statements
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For the year ended 30 September 2022
Level 1 Level 2 Level 3
Collective
Traded Listed Traded investment
on AIM on LSE on AIM vehicles Unquoted Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening book cost 63,064 3,429 – 48,404 45,722 160,619
Opening unrealised appreciation/(depreciation) 39,330 (3,395) – 27,297 14,249 77,481
Opening fair value 102,394 34 – 75,701 59,971 238,100
Movements in the year:
Purchases at cost 4,989 – – 8,935 18,110 32,034
Sale – proceeds (13,730) – – (20,782) (9,146) (43,658)
– realised gains/(losses) on sales 1,972 – – - (5,459) (3,487)
Unrealised gains realised during the year 7,469 – – - 5,894 13,363
Decrease in unrealised appreciation (28,043) – – (14,352) (16,252) (58,647)
Closing fair value 75,051 34 – 49,502 53,118 177,705
Closing book cost 63,764 3,429 – 36,557 55,121 158,871
Closing unrealised appreciation/(depreciation) 11,287 (3,395) – 12,945 (2,003) 18,834
Closing fair value 75,051 34 – 49,502 53,118 177,705
Equity shares 75,051 34 – – 26,721 101,806
Preference shares – – – – 16,697 16,697
Loan notes – – – – 9,700 9,700
Collective investment vehicles – – – 49,502 – 49,502
Closing fair value 75,051 34 – 49,502 53,118 177,705
For the year ended 30 September 2021
Level 1 Level 2 Level 3
Collective
Traded Listed Traded investment
on AIM on LSE on AIM vehicles Unquoted Total
£’000 £’000 £’000 £’000 £’000 £’000
Opening book cost 54,095 3,429 6,513 45,418 39,587 149,042
Opening unrealised appreciation/(depreciation) 17,433 (3,387) (3,960) 13,949 6,855 30,890
Opening fair value 71,528 42 2,553 59,367 46,442 179,932
Movements in the year:
Transfer between levels 6,513 – (6,513) – – –
Purchases at cost 4,146 – – 32,439 12,908 49,493
Sale – proceeds (10,946) – – (29,453) (9,997) (50,396)
– realised gains/(losses) on sales 4,253 – – – (1,163) 3,090
Unrealised gains realised during the year 5,003 – – – 4,387 9,390
Increase/(decrease) in unrealised appreciation 21,897 (8) 3,960 13,348 7,394 46,591
Closing fair value 102,394 34 – 75,701 59,971 238,100
Closing book cost 63,064 3,429 – 48,404 45,722 160,619
Closing unrealised appreciation/(depreciation) 39,330 (3,395) – 27,297 14,249 77,481
Closing fair value 102,394 34 – 75,701 59,971 238,100
Equity shares 102,394 34 – – 37,795 140,223
Preference shares – – – – 10,074 10,074
Loan notes – – – – 12,102 12,102
Collective investment vehicles – – – 75,701 – 75,701
Closing fair value 102,394 34 – 75,701 59,971 238,100
The gains and losses included in the above table have all been recognised in the Income Statement on page 66.
The AIM-traded investments held in Level 2 as at 30 September 2021 have been transferred to Level 1 after recent trading activity in
the period.
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2 Investments, performance and shareholder returns (continued)
2.3 Investments (continued)
All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the
Income statement. The details of which are set out in the box above.
The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine
the valuation.
Level 1 – Fair value is measured based on quoted prices in an active market.
Level 2 – Fair value is measured based on directly observable current market prices or indirectly being derived from
market prices.
Level 3 – Fair value is measured using a valuation technique that is not based on data from an observable market.
As at As at
30 September 30 September
2022 2021
£’000 £’000
Level 1
Investments traded on AIM 75,051 102,394
Level 2
Collective investment vehicles 49,502 75,701
Investments listed on LSE 34 34
Level 3
Unquoted investments 53,118 59,971
177,705 238,100
Assumptions (continued)
The key assumptions for the Multiples approach are that the selection of comparable companies on which to determine
earnings multiple (chosen on the basis of their business characteristics and growth patterns) and using either historic or
forecast revenues (as considered most appropriate) provide a reasonable basis for identifying relationships between
enterprise value and growth to apply in the determination of fair value. Other assumptions include the appropriateness of
the discount magnitude applied for reduced liquidity and other qualitative factors. The assumption of offer less 10 per cent is
in line with our internal valuation methodology.
Gains and losses arising from changes in the fair value of the investments are included in the Income Statement for the year
as a capital item. Transaction costs on acquisition are included within the initial recognition and the profit or loss on
disposal is calculated net of transaction costs on disposal.
Notes to the financial statements
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Year ended Year ended
30 September 2022 30 September 2021
Quoted Unquoted Quoted Unquoted
securities securities Total securities securities Total
£’000 £’000 £’000 £’000 £’000 £’000
Income from investments
Dividend income 1,318 211 1,529 968 193 1,161
Interest income 61 3,333 3,394 1 2,659 2,660
Total income from investments 1,379 3,544 4,923 969 2,852 3,821
Other income
Deposit interest 28 –––
Total income 4,951 969 2,852 3,821
All investments have been included at fair value through profit or loss on initial recognition, therefore all investment income
arises on investments at fair value through profit or loss.
2.6 Investment management fee and other expenses
Year ended Year ended
30 September 2022 30 September 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 1,367 4,101 5,468 1,424 4,272 5,696
Performance fee ––––––
1,367 4,101 5,468 1,424 4,272 5,696
The management agreement may be terminated by either party giving 12 months notice of termination.
The Manager, Gresham House, receives a fee of 2.5 per cent per annum of the net assets of the Company, calculated and
payable on aquarterly basis. The collective investment vehicles, UK Micro Cap, Multi Cap and Small Cap, are also managed by
GreshamHouse. Arrangements are in place to avoid the double charging of fees.
The Manager is entitled to a performance fee when the total return on net proceeds of the ordinary shares exceeds 8 per cent
per annum (on a simple basis). The Manager is entitled to 10 per cent of the excess. The amount of any performance fee which is
paid in respect of a calculation period shall be capped at 5 per cent of the shareholders’ funds at the end of the calculation
period. £nilperformance fee is payable for the year ended 30 September 2022 (2021: £nil).
Other expenses
Year ended Year ended
30 September 30 September
2022 2021
£’000 £’000
Directors’ fees 122 122
Secretarial and accounting fees paid to the Manager 149 143
Remuneration of the auditors and their associates:
– current auditors 53 48
– previous auditors – 30
Other 345 322
669 665
Information on Directors’ remuneration is given in the Directors’ emoluments table on page 57. During the year there was no
remuneration due to the auditors for non-audit services (2021: £nil).
All expenses are recorded on an accruals basis.
Management fees are allocated 25 per cent income and 75 per cent capital derived in accordance with the board’s expected
split between long-term income and capital returns. Performance fees are allocated 100 per cent to capital.
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2 Investments, performance and shareholder returns (continued)
2.3 Investments (continued)
The Company received £22.9 million (2021: £20.9 million) from investments sold in the year, excluding liquidity funds redeemed
of £20.8 million (2021: £29.5 million). The book cost of these investments when they were purchased was £13.0 million (2021:
£8.5million). These investments have been revalued over time and until they were sold any unrealised gains or losses were
included in the fair value of the investments.
2.4 Dividends
Year ended Year ended
30 September 2022 30 September 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
For the year ended 30 September 2022
Interim dividend of 3.0p per ordinary share
paid on 9 September 2022 980 8,826 9,806 –––
For the year ended 30 September 2021
Final dividend of 3.5p per ordinary share paid on
4 March 2022 308 10,466 10,774 –––
Interim dividend of 3.0p per ordinary share
paid on 10 September 2021 –––850 7,646 8,496
For the year ended 30 September 2020
Final dividend of 3.5p per ordinary share paid
on 4 March 2021 –––1,232 8,354 9,586
1,288 19,292 20,580 2,082 16,000 18,082
2.5 Income
In accordance with FRS 102, dividends are recognised as a liability in the period in which they are declared.
Interest income on loan notes and dividends on preference shares are accrued on a daily basis. Provision is made against
this income where recovery is doubtful.
Where the terms of unquoted loan notes only require interest or a redemption premium to be paid on redemption, the
interest and the redemption premium is recognised as income once redemption is reasonably certain. Until such date
interest is accrued daily and included within the valuation of the investment. When a redemption premium is designed to
protect the value of the instrument holder’s investment rather than reflect a commercial rate of revenue return the
redemption premium should be recognised as capital. The treatment of redemption premiums is analysed to consider if they
are revenue or capital in nature on a company by company basis. A redemption premium of £nil (2021: £nil) was received in
the year ended 30 September 2022.
Income from fixed interest securities and deposit interest is included on an effective interest rate basis.
Dividends on quoted shares are recognised as income when the related investments are marked ex-dividend and where no
dividend date is quoted, when the Company’s right to receive payment is established.
Notes to the financial statements
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3 Other required disclosures
3.1 Called-up share capital
Allotted, called-up and fully paid:
For the year ended 30 September 2022 £’000
312,059,812 ordinary shares of 10p each listed at 30 September 2021 31,206
45,829,661 ordinary shares of 10p each issued during the year 4,583
357,889,473 ordinary shares of 10p each listed at 30 September 2022 35,789
29,085,727 ordinary shares of 10p each held in treasury at 30 September 2021 (2,909)
3,699,362 ordinary shares of 10p each repurchased during the year and held in treasury (369)
2,184,000 ordinary shares of 10p each sold from treasury during the year 218
30,601,089 ordinary shares of 10p each held in treasury at 30 September 2022 (3,060)
327,288,384 ordinary shares of 10p each in circulation* at 30 September 2022 32,729
For the year ended 30 September 2021 £’000
271,466,654 ordinary shares of 10p each listed at 30 September 2020 27,146
40,593,158 ordinary shares of 10p each issued during the year 4,060
312,059,812 ordinary shares of 10p each listed at 30 September 2021 31,206
24,215,084 ordinary shares of 10p each held in treasury at 30 September 2020 (2,421)
5,685,643 ordinary shares of 10p each repurchased during the year and held in treasury (569)
815,000 ordinary shares of 10p each sold from treasury during the year 81
29,085,727 ordinary shares of 10p each held in treasury at 30 September 2021 (2,909)
282,974,085 ordinary shares of 10p each in circulation* at 30 September 2021 28,297
* Carrying one vote each.
The 45,829,661 (2021: 40,593,158) ordinary shares were issued at an average price of 83.22p (2021: 81.23p).
During the year the Company bought back into treasury 3,699,362 (2021: 5,685,643) ordinary shares, representing
1.31(2021:2.30)percent of the ordinary shares in circulation at the beginning of the financial year. During the year the Company
also sold 2,184,000 (2021: 815,000) shares from treasury.
Treasury shares
When the Company re-acquires its own shares, they are currently held as treasury shares and not cancelled.
Shareholders have authorised the board to re-issue treasury shares at a discount to the prevailing NAV subject to the
followingconditions:
It is in the best interests of the Company;
Demand for the Company’s shares exceeds the shares available in the market;
A full prospectus must be produced if required; and
HMRC will not consider these ‘new shares’ for the purposes of the purchasers’ entitlement to initial income tax relief.
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2 Investments, performance and shareholder returns (continued)
2.7 Debtors
As at As at
30 September 30 September
2022 2021
£’000 £’000
Prepayments and accrued income 152 109
152 109
2.8 Creditors (amounts falling due within one year)
As at As at
30 September 30 September
2022 2021
£’000 £’000
Management, secretarial and accounting fees due 1,377 1,598
Amounts due to brokers – 444
Other creditors 116 105
1,493 2,147
2.9
Tax
A reconciliation of the tax charge/(credit) to the profit before taxation is shown below:
Year ended Year ended
30 September 2022 30 September 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Profit/(loss) on ordinary activities before taxation 2,915 (52,872) (49,957) 1,732 54,799 56,531
Corporation tax at 19 per cent (2021: 19.0 per cent) 554 (10,046) (9,492) 329 10,412 10,741
Effect of:
Non-taxable gains – 9,266 9,266 – (11,223) (11,223)
Non-taxable dividend income (208) – (208) (221) – (221)
Losses carried forward (83) 517 434 – 703 703
Tax charge/(credit) for the year 263 (263) – 108 (108) –
At 30 September 2022 the Company had unrealised losses of £21,679,476 (2021: £18,894,527). A deferred tax asset of £5,419,869
(2021: £3,589,960) has not been recognised because the Company is not expected to generate taxable income in a future year in
excess of the deductible expenses of that future year. Accordingly the Company is unlikely to be able to reduce future tax
liabilities through the use of existing surplus expenses. Due to the Company’s status as a VCT, and the intention to continue
meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
UK corporation tax payable is provided on taxable profits at the current rate.
Provision is made for deferred taxation, without discounting, on all timing differences and is calculated using substantively
enacted tax rates.
This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable
profits from which the future reversal of the underlying timing differences can be deducted.
Notes to the financial statements
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Distributable reserves may also include any net unrealised gains on investments whose prices are quoted in an active market
and deemed readily realisable in cash.
The Company does not have any externally imposed capital requirements.
3.3 Financial instruments risks
The Company’s financial instruments comprise equity and fixed interest investments, cash balances and liquid resources
including debtors and creditors. The Company holds financial assets in accordance with its investment policy to invest in
adiverse portfolio of UK growth businesses.
The Company’s investing activities expose it to a range of financial risks. These key risks and the associated risk management
policies to mitigate these risks are described below.
Market risk
Market risk includes price risk on investments and interest rate risk on investments and other financial assets and liabilities.
Price risk
The investment portfolio is managed in accordance with the policies and procedures described in the full Annual Report and
Audited Financial Statements.
Investments in companies listed on the AIM market usually involve a higher risk than investments in larger companies quoted
on a recognised stock exchange. The spread between the buying and selling price of such shares may be wide and the price
used for valuation may be limited and many may not be achievable. The valuation of the portfolios and opportunities for
realisation of AIM-traded investments within the portfolios may also depend on stock market conditions.
The Company aims to reduce these risks by diversifying the portfolio across business sectors and asset classes. The Board
monitors the portfolio on a quarterly basis.
Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies
quoted on a recognised stock exchange. The fair valuation of these unquoted investments is influenced by the estimates,
assumptions and judgements made in the fair valuation process (see note 2.3 above).
Price risk sensitivity
The fair valuation of unquoted investments is influenced by the estimates, assumptions and judgements made in the fair
valuation process (see note 2.3 on pages 71 and 72). A sensitivity analysis is provided below which recognises that the valuation
methodologies employed involve different levels of subjectivity in their inputs. The sensitivity analysis below applied a wider
range of input variable sensitivity to the earnings multiple method due to the increased subjectivity involved in the use of this
method compared to the rebased cost method, which refers to the price of a recent investment.
Share premium is recognised net of issue costs.
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3 Other required disclosures (continued)
3.2 Reserves
For the year ended 30 September 2022
Distributable reserves Non-distributable reserves
Capital Revenue Share Revaluation
reserves reserve Total premium reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
At 1 October 2021 63,698 1,758 65,456 74,231 77,481 151,712
Gross proceeds of share issues – – – 33,557 – 33,557
Purchase of shares for treasury (2,775) – (2,775) – – –
Sale of shares from treasury 1,487 – 1,487–––
Expenses of share issue and buybacks (14) – (14) (1,689) – (1,689)
Reallocation of prior year unrealised gains/losses 13,363 – 13,363 – (13,363) (13,363)
Realised gain on disposal of investments
#
(3,487) – (3,487) – – –
Net decrease in value of investments
#
– – – – (45,284) (45,284)
Management fee charged to capital
#
(4,101) – (4,101) – – –
Taxation relief from capital expenses
#
263–263–––
Profit after taxation
#
– 2,652 2,652–––
Dividends paid in the year (19,292) (1,288) (20,580) – – –
At 30 September 2022 49,142 3,122 52,264 106,099 18,834 124,933
For the year ended 30 September 2021
Distributable reserves Non-distributable reserves
Capital Revenue Share Revaluation
reserve reserve Total premium reserve* Total
£’000 £’000 £’000 £’000 £’000 £’000
At 1 October 2020 75,290 2,216 77,506 46,775 30,890 77,665
Gross proceeds of share issues – – – 28,915 – 28,915
Purchase of shares for treasury (4,536) – (4,536) – – –
Sale of shares from treasury 651 – 651–––
Expenses of share issue and buybacks (23) – (23) (1,459) – (1,459)
Reallocation of prior year unrealised gains/losses
#
9,390 – 9,390 – (9,390) (9,390)
Realised gain on disposal of investments
#
3,090 – 3,090–––
Net increase in value of investments
#
– – – – 55,981 55,981
Management fee charged to capital
#
(4,272) – (4,272) – – –
Taxation relief from capital expenses
#
108–108–––
Profit after taxation
#
– 1,624 1,624–––
Dividends paid in the year (16,000) (2,082) (18,082) – – –
At 30 September 2021 63,698 1,758 65,456 74,231 77,481 151,712
* Changes in fair value of investments are dealt with in this reserve.
# The total of these items is £49,957,000 (2021: £56,531,000) which agrees to the total profit for the year.
Gains and losses on realisation of investments of a capital nature are dealt with in the capital reserve. Purchases of
the Company’s own shares to be either held in treasury or cancelled are also funded from this reserve. When shares are
reissued from treasury the original cost is allocated to the capital reserve with any gains allocated to share premium. 75 per
cent of management fees are allocated to the capital reserve in accordance with the board’s expected split between
long-term income and capital returns.
Notes to the financial statements
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Estimated sustainable earnings
The selection of sustainable revenue or earnings will depend upon whether the company is sustainably profitable or not, and
where it is not then revenues will be used in the valuation. The valuation approach may use prior year actuals, the last
12months, or a forecast of earnings where deemed appropriate. The valuation approach will typically assess companies based
on the prior year actuals or last 12 months of revenue or earnings, as this represents the most recently available trading
information and therefore is viewed as the most reliable. Where the company has a history of accurate forecasting, or where
there is a change in circumstance at the business which will impact earnings going forward, then a forecast or budget will be
deemed most appropriate.
Selection of comparable companies
The selection of comparable companies is assessed individually for each investment at the point of investment, and at each
valuation thereafter. The key criteria in selecting appropriate comparable companies are the industry sector, the business model,
and the respective revenue and earnings growth rates of the company. Typically up to 15 comparable companies will be selected
for each investment to derive the adopted revenue or earnings multiple.
The earnings multiples can be derived from either listed companies with similar characteristics or recent comparable
transactions. The value of the unquoted element of the portfolio may therefore also indirectly be affected by price movements
on the listed exchanges.
Application of illiquidity discount
An illiquidity discount is applied to the majority of unquoted investments, reflecting that the Company usually holds a minority
stake and that the realisation of the investment may require cooperation on the timing and sale price from other stakeholders.
The illiquidity discount applied can range from 10 per cent to 30 per cent, depending upon the ownership percentage the
Company holds in the investment and the Company’s alignment with other institutional investors.
Probability estimation of liquidation event
A liquidation event is typically a company sale or an Initial Public Offering (“IPO”). The probability of a company sale versus an
IPO is typically estimated from the outset to be 50:50 if there has been no indication by the company of pursuing either of these
routes. This weighting is then adjusted as either scenario becomes more or less likely to occur.
Interest rate risk
The Company has the following investments in fixed and floating rate financial assets:
As at 30 September 2022 As at 30 September 2021
Weighted Weighted
Weighted average Weighted average
average time for average time for
Total interest which rate Total interest which rate
investment rate is fixed investment rate is fixed
£’000 % Years £’000 % Years
Fixed rate loan note securities 9,700 8.76 4.10 12,102 7.58 3.20
Floating rate sterling liquidity funds 5,608 – – 26,390 – –
Cash at bank and on deposit 36,622 – – 12,312 – –
51,930 50,804
The fixed rate loan notes are not subject to interest rate risk and would therefore not impact the net assets. Movements in
interest rates would not significantly affect net assets attributable to the Company’s shareholders and total profits due to the
interest rate income received from floating rate notes being wholly immaterial.
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3 Other required disclosures (continued)
3.3 Financial instruments risks (continued)
As at 30 September 2022
Fair Sensitivity Impact Impact
Security Valuation basis Key variable inputs Value % £’000s % of net assets
Rebased cost Latest funding round price 4,543 +/–10% 454 +/–0.2
Earnings multiple Estimated sustainable earnings
Selection of comparable companies
Unquoted
Application of illiquidity discount
Probability estimation of Liquidation event* 48,575 +/–20% 9,715 +/–4.6
Offer less 10%
Current offer price received for sale
Discount applied to offer – +/–10%
* A liquidation event is typically a company sale or initial public offering (IPO).
A sensitivity has been performed for quoted AIM investments, which are valued at the latest share price set by the market.
Asensitivity of +/– 20 per cent has been applied to the fair value of £75.1 million (2021: £102.4 million), reflecting the level of
volatility in financial markets in 2022 and 2021. A movement of +/– 20 per cent would cause an increase or decrease of
£15.0million to the fair value of the quoted AIM portfolio (2021: £20.5 million).
A sensitivity has also been performed for the Company’s investments into the Micro Cap, Multi Cap and Small Cap funds, which
are valued at the latest share price set by the market. A sensitivity of +/– 20 per cent has been applied to the fair value of
£43.9million (2021: £49.3 million), reflecting the level of volatility in financial markets in 2022 and 2021. A movement of +/–20per
cent would cause an increase or decrease of £8.8 million to the fair value of these investments (2021: £9.9 million).
As at 30 September 2021
Positive impact Negative impact
Fair % of % of
Risk Sensitivity Value net net
Security Valuation basis Key variable inputs Level % £’000s £’000s assets £’000 assets
Earnings multiple Estimated sustainable earnings
Selection of comparable companies High +/–30 4,979 2,246 0.9 (2,344) (0.9)
Application of illiquidity discount Medium +/–20 28,106 6,571 2.6 (7,149) (2.9)
Probability estimation of Liquidation Low +/–10 19,835 1,409 0.6 (1,370) (0.6)
Unquoted
event
Price of recent
Latest funding round price
Medium +/–10 1,509 151 0.1 (151) (0.1)
investment Low +/–5 5,209 357 0.1 (452) (0.2)
Other Low +/–5 334 17 0.0 (17) 0.0
Key variable inputs/valuation bases
The key variable inputs applicable to each valuation basis will vary dependent on the particular circumstances of each
unquoted company valuation. Where there has been a recent transaction, such as an initial investment being made into the
company, or where there has been a subsequent external funding round, the key variable input will be the last funding round
price. Where this is not the case, the valuation has been based on a multiple of estimated sustainable earnings. An
explanationof each of the key variable inputs is provided below and includes an indication of the range in value for each input,
where relevant.
Latest funding round price
The latest funding round price is the key variable input in the valuation of a company when there has been a recent investment
either by the Company or by another investor. This transaction provides evidence of the price an independent third party would be
willing to pay for the investment. There is lower estimation uncertainty where this third party is an external investor, and higher
estimation uncertainty where this is an internal investor (i.e. where the investor already has an investment in the company).
Notes to the financial statements
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3 Other required disclosures (continued)
3.3 Financial instruments risks (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its obligation resulting in a financial loss to the Company. The
Manager monitors credit risk on an ongoing basis.
At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following:
As at As at
30 September 30 September
2022 2021
£’000 £’000
Cash at bank and on deposit 36,622 12,312
Interest, dividends and other receivables 152 109
36,774 12,421
Credit risk on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed earlier
in the note.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers
used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.
All the assets of the Company which are traded on a recognised exchange are held by JP Morgan Chase (“JPM”), the Company’s
custodian. The board monitors the Company’s risk by reviewing the custodian’s internal controls reports as described in the
Corporate Governance section of this report.
The majority of cash held by the Company is held by JPM. The board monitors the Company’s risk by reviewing regularly the
internal control reports. Should the credit quality or the financial position of the bank deteriorate significantly the Investment
Manager will seek to move the cash holdings to another bank.
There were no significant concentrations of credit risk to counterparties at 30 September 2022 or 2021. No individual investment
in a portfolio company exceeded 8.7 per cent of the net assets attributable to the Company’s shareholders at 30September
2022 (2021: 6.7 per cent).
Liquidity risk
The Company’s financial instruments include investments in unquoted companies which are not traded in an organised public
market, all of which generally may be illiquid. AIM traded equity investments also carry a degree of liquidity risk. As a result, the
Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair
value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness
of any particular issuer.
The Company’s liquidity risk is managed on an ongoing basis by the Investment Manager. The Company’s overall liquidity risks
are monitored on a quarterly basis by the Board. The Company is a closed-end fund, assets do not need to be liquidated to meet
redemptions, and sufficient liquidity is maintained to meet obligations as they fall due.
At the year end the Company had financial liabilities of £1,493,000 (2021: £2,147,000). All financial liabilities were due within
threemonths and were undiscounted (2021: same).
The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued
expenses. At 30 September 2022, these investments were valued at £42,230,000 (2021: £38,702,000).
3.4 Related parties
Related party transactions include Management, Secretarial, Accounting and Performance fees payable to the Manager,
Gresham House Asset Management Ltd, as disclosed in notes 2.6 and 2.8, and fees paid to the Directors along with their
shareholdings as disclosed in the Directors’ Remuneration Report. In addition, the Manager operates a VCT Incentive Scheme,
detailed in the Management retention section of the Strategic Report on page 30, whereby members and staff of the Manager
are entitled to participate in all eligible unquoted investments alongside the Company.
During the year, Gresham House Asset Management Ltd received £295,000 (2021: £254,000) of advisory fees, £528,000 (2021:
£375,000) of directors’ fees for services provided to companies in the investment portfolio and incurred abort costs of £7,000
(2021: £8,000) with respect to investments attributable to Baronsmead Second Venture Trust plc.
The Company also holds an investment in Gresham House plc, as part of its quoted portfolio. This investment was made in
November 2014, prior to the change of Manager. For further details on this, please refer to the Full Investment Portfolio in the
Appendices.
3.5 Segmental reporting
The Company has one reportable segment being investing in primarily a portfolio of UK growth businesses, whether unquoted
or traded on AIM.
3.6 Post balance sheet events
The Board is not aware of any significant events or transactions which have occurred between 1 October 2022 and the date of
publication of this report which would have a material impact on the financial position of the Company.
Notes to the financial statements
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Appendices
Dividend history in last ten years
Dividends paid since launch
Ordinary share
Average
total
Dividend history Cumulative dividend
Revenue Capital per ordinary share dividends per ordinary share
Year ended (p) (p) (p) (p) (p)
31/12/2001 2.30 0.00 2.30 2.30 2.30
31/12/2002 2.80 0.00 2.80 5.10 2.55
31/12/2003 2.20 2.00 4.20 9.30 3.10
31/12/2004 1.20 3.30 4.50 13.80 3.45
31/12/2005 2.00 3.50 5.50 19.30 3.86
31/12/2006 1.75 4.75 6.50 25.80 4.30
31/12/2007 2.30 5.20 7.50 33.30 4.76
31/12/2008 2.40 5.10 7.50 40.80 5.10
31/12/2009 1.20 6.30 7.50 48.30 5.37
31/12/2010 2.00 5.50 7.50 55.80 5.58
31/12/2011 1.65 5.85 7.50 63.30 5.75
31/12/2012 0.50 7.00 7.50 70.80 5.90
31/12/2013 3.00 4.50 7.50 78.30 6.02
31/12/2014 1.95 15.05 17.00 95.30 6.81
31/12/2015 0.90 6.60 7.50 102.80 6.85
30/09/2016 0.00 17.00 17.00 119.80 7.61
30/09/2017 0.60 6.90 7.50 127.30 7.60
30/09/2018 0.15 7.35 7.50 134.80 7.59
30/09/2019 0.65 5.85 6.50 141.30 7.54
30/09/2020 0.60 5.90 6.50 147.80 7.48
30/09/2021 0.40 6.10 6.50 154.30 7.44
30/09/2022* 0.60 5.40 6.00 160.30 7.37
*Includes proposed final dividend of 3.0p. Estimated revenue and capital split based on number of shares at 30 September 2022.
Source: Gresham House Asset Management Ltd
Dividend history per ordinary share (p)
Pence
0
2
4
6
8
10
12
14
16
18
30/09/22*30/09/2130/09/2030/09/1930/09/1830/09/1730/09/1631/12/1531/12/1431/12/13
*Includes proposed final dividend of 3.0p
Investment policy
The Company’s investment policy is to
invest primarily in a diverse portfolio of
UK growth businesses, whether
unquoted or traded on AIM, which are
substantially based in the UK, although
many of these investees may have
some trade overseas.
Investments are made selectively
across a range of sectors in companies
that have the potential to grow and
enhance their value and which will
diversify the portfolio.
The Company will make investments in
accordance with the prevailing VCT
legislation which places restrictions,
inter alia, on the type and age of
investee companies as well as the
maximum amount of investment that
such investee companies may receive.
Investment securities
The Company invests in a range of
securities including, but not limited to,
ordinary and preference shares, loan
stocks, convertible securities, and
permitted non-qualifying investments
as well as cash. Unquoted investments
are usually structured as a combination
of ordinary shares and loan stocks or
preference shares, while AIM-traded
investments are primarily held in
ordinary shares. No single investment
may represent more than 15 per cent
(by VCT value) of the Company’s
totalinvestments.
Liquidity
Pending investment in VCT qualifying
investments, the Company’s cash and
liquid funds are held in permitted
non-qualifyinginvestments.
Investment style
Investments are selected in the
expectation that the application of
private equity disciplines, including
active management of the
investments,will enhance value and
enable profits to be realised on the sale
of investments.
Co-investment
The Company typically invests
alongside Baronsmead Venture Trust
plc in unquoted and quoted companies
sourced by the Manager. Following the
Manager’s acquisition of the Mobeus
VCTs in September 2022, the Company
will also co-invest alongside the
Mobeus VCTs in new unquoted VCT
qualifying investments. All new
qualifying AIM dealflow will continue to
be exclusively allocated between the
Company and Baronsmead Venture
Trust plc.
The Manager’s staff invest in unquoted
investments alongside the Company.
This arrangement is in line with current
practice of private equity houses and
its objective is to attract, recruit, retain
and incentivise the Manager’s team and
is made on terms which align
theinterests of shareholders and
theManager.
Borrowing powers
Should it be required, the Company’s
policy is to use borrowing for short
term liquidity purposes only up to
amaximum of 25 per cent of the
Company’s gross assets, as
permittedby the Company’s Articles
ofAssociation.
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Performance record since launch
Ordinary share
Total NAV Mid share NAV TR
*
Ongoing
net assets per share price per share charges
Year end (£m) (p) (p) (p) (%)
†
31/12/2001 31.1 93.85 88.00 101.21 2.9
31/12/2002 32.1 94.85 85.50 105.35 3.3
31/12/2003 33.0 97.15 90.00 112.65 3.1
31/12/2004 35.1 106.38 92.50 125.64 3.5
31/12/2005 56.2 117.31 100.50 144.77 3.5
31/12/2006 66.5 130.77 116.50 169.27 3.4
31/12/2007 65.2 120.44 111.50 170.56 3.4
31/12/2008 55.1 102.72 90.50 149.56 3.0
31/12/2009 52.9 97.50 86.25 159.89 3.1
31/12/2010 64.6 106.60 94.25 180.19 3.0
31/12/2011 60.1 100.16 91.25 189.74 3.0
31/12/2012 74.6 111.62 105.38 217.38 3.0
31/12/2013 74.9 113.40 106.25 245.38 3.0
31/12/2014 76.6 101.72 95.00 257.18 2.9
31/12/2015 79.2 106.46 101.00 288.38 3.0
30/09/2016 140.9 92.17 87.13 295.75 2.9
30/09/2017 186.7 94.61 89.50 313.53 2.7
30/09/2018 199.4 92.10 87.75 330.59 2.7
30/09/2019 175.4 77.05 74.50 303.80 2.7
30/09/2020 182.3 73.74 69.50 316.44 2.7
30/09/2021 248.4 87.77 85.00 406.18 2.7
30/09/2022 213.0 65.08 65.00 328.93 2.6
* Net asset value total return (gross dividends reinvested). Source: Gresham House Asset Management Ltd.
† Figures from 31 December 2012 onwards are based on the new AIC guidelines for the calculation of ongoing charges.
Cash returned to shareholders
Cumulative Return on
Cash Income tax Net cash dividends cash
invested reclaim invested paid
*
invested
Year subscribed (p) (p) (p) (p) (%)
2001 (January) 100.0 20.0 80.0 160.3 180.3
2005 (March) – C share 100.0 40.0 60.0 115.8 155.8
2010 (March) 103.1 30.9 72.2 112.0 138.6
2012 (December) 117.4 35.2 82.2 94.0 110.1
2014 (March) 112.4 33.7 78.7 74.0 95.8
2016 (February) 107.2 32.2 75.0 57.5 83.7
2017 (October) 97.5 29.2 68.2 37.5 68.4
2019 (February) 85.3 25.6 59.7 30.0 65.2
2019 (November) 78.9 23.7 55.2 22.5 58.6
2020 (January) 84.8 25.4 59.4 22.5 56.5
2020 (February) 82.5 24.8 57.7 19.0 53.1
2020 (March) 64.3 19.3 45.0 19.0 59.6
2020 (November) 77.9 23.4 54.5 16.0 50.6
2020 (December) 80.9 24.3 56.6 16.0 49.8
2021 (January) 84.4 25.3 59.1 16.0 48.9
2021 (February) 82.2 24.7 57.5 12.5 45.3
2021 (March) 84.9 25.5 59.4 12.5 44.8
2021 (December) 88.1 26.4 61.7 9.5 40.7
2022 (January) 87.1 26.1 61.0 9.5 40.9
2022 (March) 76.6 23.0 53.6 6.0 37.9
Note 1 - 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 C shareholders post conversion have been adjusted by the conversion ratio (0.85642528).
*Includes proposed final dividend of 3.0p.
Appendices
Full investment portfolio
% of equity
30 September 30 September held by
Original Accounting 2022 2021 Baronsmead % of equity
book cost† book cost† Fair value Fair value % of net Second Venture held by
Company Sector £’000 £’000 £’000 £’000 assets Trust plc all funds#
Unquoted
eConsult Health Ltd Healthcare & Education 3,899 3,899 5,195 3,491 2.4 5.2 11.4
Airfinity Ltd Healthcare & Education 2,911 2,911 4,006 1,559 1.9 9.3 20.1
Patchworks Integration Ltd Technology 2,496 2,496 3,729 1,716 1.7 11.4 25.0
Popsa Holdings Ltd Technology 3,379 3,379 3,379 – 1.6 3.7 8.1
IWP Holdings Ltd Business Services 1,587 1,587 3,072 5,679 1.4 4.2 9.0
Panthera Biopartners Ltd Healthcare & Education 2,858 2,858 2,974 438 1.4 11.9 26.0
Clarilis Ltd Technology 1,819 1,819 2,723 2,723 1.3 7.6 16.7
Yappy Ltd Consumer Markets 2,013 2,013 2,602 2,662 1.2 14.9 31.9
Scurri Web Services Ltd Technology 2,293 2,293 2,565 2,332 1.2 6.9 14.7
Metrion Bioscience Ltd Healthcare & Education 1,192 1,192 2,355 1,569 1.1 12.7 27.3
RevLifter Ltd Technology 1,559 1,559 1,869 811 0.9 6.2 13.6
Fu3e Ltd Technology 1,819 1,819 1,856 – 0.9 13.7 30.0
Armstrong Craven Ltd Business Services 664 1,335 1,815 1,649 0.8 10.3 18.7
SecureCloud+ Ltd Technology 789 789 1,482 1,817 0.7 8.8 16.6
Pointr Ltd Technology 526 526 1,189 979 0.6 2.7 5.1
Proximity Insight Holdings Ltd Technology 1,152 1,152 1,152 – 0.5 4.1 9.4
Counting Ltd Business Services 1,059 1,059 1,055 1,055 0.5 2.5 5.3
TravelLocal Ltd Consumer Markets 1,325 1,325 1,037 530 0.5 4.5 9.5
Cisiv Ltd Technology 789 789 992 1,322 0.5 9.2 17.3
SilkFred Ltd Consumer Markets 966 966 943 1,707 0.4 2.8 5.1
Bidnamic Technology 921 921 916 – 0.4 1.8 9.1
Focal Point Positioning Ltd Technology 908 908 908 – 0.4 1.1 5.5
Vinoteca Ltd Consumer Markets 1,054 1,054 843 1,074 0.4 6.7 14.3
Orri Ltd Healthcare & Education 794 794 794 – 0.4 5.7 28.4
Tribe Digital Holdings Ltd Technology 1,351 1,351 722 1,563 0.3 3.5 6.7
Custom Materials Ltd Technology 3,092
3,092 648 3,290 0.3 12.9 23.4
Munnypot Ltd Technology 562 562 562 562 0.3 1.5 2.7
Evotix Ltd Technology 423 423 423 423 0.2 0.7 1.3
RockFish Group Ltd Consumer Markets 789 789 371 395 0.2 6.6 12.3
Key Travel Ltd Business Services 255 255 364 334 0.2 0.0 0.0
Your Welcome Ltd Technology 1,030 1,030 354 872 0.2 8.3 15.6
Glisser Ltd Business Services 1,787 1,787 115 1,549 0.1 6.7 14.5
Rezatec Ltd Technology 1,620 1,620 108 1,921 0.1 0.0 0.0
CMME Group Ltd Consumer Markets 1,136 1,204 – – 0.0 2.3 4.2
Equipsme (Holdings) Ltd Business Services 949 949 – 949 0.0 6.8 12.8
Funding Xchange Ltd Business Services 795 795 – 397 0.0 3.7 8.0
Samuel Knight International Ltd Business Services 795 795 – – 0.0 7.0 13.2
53,356 54,095 53,118 25.0
Delisted (previously AIM)
InterQuest Group plc Business Services 620 726 – – 0.0 2.2 4.3
MXC Capital (UK) Ltd Business Services 270 300 – – 0.0 0.3 0.6
890 1,026 –
Total unquoted 54,246 55,121 53,118 25.0
AIM
Cerillion plc Technology 1,507 1,666 18,435 16,572 8.7 6.7 12.2
Netcall plc Technology 2,616 5,983 10,650 12,869 5.0 9.6 24.0
IDOX plc Technology 1,028 2,972 7,125 7,753 3.4 2.4 4.8
Anpario plc Healthcare & Education 662 2,239 3,931 5,561 1.8 4.0 5.9
Bioventix plc Healthcare & Education 309 940 3,887 4,594 1.8 2.3 9.7
Inspired plc Business Services 861 2,682 3,011 4,872 1.4 2.8 29.7
Property Franchise Group plc Consumer Markets 838 1,032 2,306 2,281 1.1 2.6 14.6
Crossword Cybersecurity plc Technology 2,322 2,322 1,813 1,368 0.9 9.8 18.9
PCI-PAL plc Technology 1,345 1,345 1,809 2,557 0.9 6.0 10.9
Access Intelligence plc Business Services 716 716 1,687 2,637 0.8 1.4 7.3
Aptamer Group plc Healthcare & Education 2,390 2,390 1,675 – 0.8 3.0 5.7
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Glossary
AIM The Alternative Investment Market, a sub-market of the London Stock Exchange,
designed to help smaller companies access capital from the public market.
Annual Dividend Yield The rate of dividend paid/declared for financial year divided by opening net asset value
per share.
Book Cost (Original) Total acquisition value, including transaction costs, less the value of any disposals or
capitalised distributions allocated on a weighted average cost basis.
Book Cost (Accounting) The original book cost of an asset, rebased to the value at which it was used in
asubsequent transaction, such as a transfer between entities.
Collective Investment Vehicle An entity which allows investors to pool their money, investing the pooled funds on
their behalf.
Discount/Premium If the share price is lower than the NAV per share, it is said to be trading at a discount.
The size of the Company’s discount is calculated by subtracting the share price from
the NAV per share and is usually expressed as a percentage of the NAV per share.
Ifthe share price is higher than the NAV per share, this situation is called a premium.
EBITDA Earnings before Interest, Tax, Depreciation and Amortisation – a proxy for the cash
flow generated by a business, most commonly used for businesses that do not (yet)
generate operating or shareholder profits.
IFA Independent Financial Advisers, professionals who offer independent advice to their
clients and recommend suitable financial products.
Key Performance Indicators (“KPIs”) A measurable value that demonstrates how effectively the Company is achieving core
business objectives.
NAV The total value of all the Company’s assets, at current market value, having deducted
all liabilities at their carrying value.
NAV per share Total Net Asset Value divided by the number of shares.
NAV total return A measure showing how the Net Asset Value has performed over a period of time,
taking into account both capital returns and dividends paid to shareholders.
Return on Cash Invested to shareholders The amount of cash returned to shareholders through income tax reclaimed, and
cumulative dividends paid, expressed as a percentage of the initial investment.
Shares Held in Treasury Shares in the Company repurchased by itself, reducing the number of freely traded
shares.
SME Small and medium-sized entities. These are independent companies which meet
twoof the three recognition criteria for small or medium companies according to
EULegislation.
Total Assets All assets, both current and non-current. An asset is an economic resource owned by
an entity that can lead to an increase in economic value.
VCT Value The value of an investment when acquired, rebased if the holding is added to or any
payment is made which causes an increase or decrease in its value.
80 per cent test Ensuring that the Company meets the requirement to hold 80 per cent of its
investments in qualifying holdings.
Appendices
% of equity
30 September 30 September held by
Original Accounting 2022 2021 Baronsmead % of equity
book cost† book cost† Fair value Fair value % of net Second Venture held by
Company Sector £’000 £’000 £’000 £’000 assets Trust plc all funds#
AIM (continued)
Diaceutics plc Healthcare & Education 1,590 1,590 1,674 2,280 0.8 2.5 12.8
Begbies Traynor Group plc Business Services 545 513 1,656 1,625 0.8 0.8 3.6
Belvoir Group plc Consumer Markets 919 826 1,594 1,860 0.8 2.0 12.2
Beeks Financial Cloud Group plc Technology 413 413 1,130 1,584 0.5 1.3 2.3
Everyman Media Group plc Consumer Markets 956 1,010 1,095 1,591 0.5 1.3 4.0
IXICO plc Healthcare & Education 825 825 972 2,298 0.5 6.1 11.1
One Media iP Group plc Technology 1,008 912 922 895 0.4 5.9 10.8
Driver Group plc Business Services 1,529 1,747 880 1,467 0.4 5.6 20.3
Vianet Group plc Business Services 2,092 1,724 846 1,874 0.4 5.8 17.7
Eden Research plc Business Services 1,375 1,380 720 1,225 0.3 4.0 7.3
hVIVO plc (formerly Open Orphan plc) Healthcare & Education 1,445 1,437 719 1,511 0.3 1.1 1.9
Rosslyn Data Technologies plc Technology 1,407 1,407 498 1,143 0.2 8.6 28.3
Merit Group plc Technology 3,267 4,253 485 808 0.2 6.1 10.2
SysGroup plc Technology 1,579 1,578 481 886 0.2 5.1 28.3
Oberon Investments Group plc Business Services 742 742 458 – 0.2 2.6 5.0
Skillcast Group plc Healthcare & Education 817 817 441 – 0.2 2.5 4.7
Scholium Group plc Consumer Markets 1,100 682 440 330 0.2 8.1 14.7
Deepverge plc Healthcare & Education 1,590 1,590 424 1,219 0.2 2.4 4.6
Crimson Tide plc Technology 668 668 401 601 0.2 3.4 6.4
Fusion Antibodies plc Healthcare & Education 660 660 381 991 0.2 3.1 5.7
Gresham House plc* Business Services 137 145 340 432 0.2 0.1 0.2
Gama Aviation plc Business Services 1,004 1,171 326 211 0.2 0.9 1.7
TPX Impact Holding plc Technology 660 660 312 2,229 0.1 1.0 1.9
KRM22 plc Technology 550 550 292 154 0.1 1.5 2.8
SEEEN plc Technology 1,591 1,591 247 1,307 0.1 7.1 13.3
Fulcrum Utility Services Ltd Business Services 438 1,650
241 773 0.1 0.9 1.0
Tasty plc Consumer Markets 2,033 6,085 175 350 0.1 3.4 13.7
Totally plc Healthcare & Education 86 197 151 173 0.1 0.3 0.5
Zoo Digital Group plc Technology 817 586 135 121 0.1 0.1 0.2
Poolbeg Pharma plc Healthcare & Education 51 51 104 242 0.0 0.5 0.9
Science In Sport plc Consumer Markets 352 330 95 452 0.0 0.4 0.8
CloudCoco Group plc Technology 535 359 29 49 0.0 0.5 0.8
I-nexus Global plc Technology 688 688 29 48 0.0 2.9 5.4
LoopUp Group plc Technology 616 640 29 151 0.0 0.5 1.0
Total AIM 48,679 63,764 75,051 35.2
Listed on LSE
Hawkwing plc Business Services 2,136 3,429 34 34 0.0 1.1 28.3
Total listed 2,136 3,429 34 0.0
Collective investment vehicles
LF Gresham House UK Micro Cap Fund 6,189 10,335 23,474 34,507 11.0
LF Gresham House UK Multi Cap Income Fund 14,364 14,364 13,966 9,028 6.6
LF Gresham House UK Smaller Companies Fund 6,250 6,250 6,454 5,776 3.0
BlackRock Sterling Liquidity Fund 2,804 2,804 2,804 13,195 1.3
JPMorgan Sterling Liquidity Fund 2,804 2,804 2,804 13,195 1.3
Total collective investment vehicles 32,411 36,557 49,502 23.2
Total investments 137,472 158,871 177,705 83.4
Net current assets 35,281 16.6
Net assets 212,986 100.0
† The original cost column provides the combined cost of investments made by BVCT3, BVCT4 and BVCT5 prior to the merger of the three VCT’s to become BSVT. This is included for
information purposes for shareholders reviewing the portfolio.
The accounting cost column ties into the investment note on page 73 of these accounts. For Investments owned before the assets of BVCT 4 and BVCT 5 were acquired by BVCT 3 the
accounting book cost is a sum of the original cost of the investments held in BVCT 3 and the market value of the investment in BVCT 4 and BVCT 5 at the date of each of the mergers.
# All funds managed by the same manager, Gresham House Asset Management Ltd.
* Acquired November 2014, pre change of Investment Manager on 30 November 2018.
Shareholder information
and contact details
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Warning to Shareholders
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from “brokers” based overseas who target UK shareholders offering to sell them what
often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely
persuasive. shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or
offers for free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare, would make unsolicited
telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to
shareholders and never in respect of investment “advice”.
If you are in any doubt about the veracity of an unsolicited phone call, please call either the Company or the Registrar at the
numbers provided below.
Protect yourself
If you are offered unsolicited investment advice, discounted shares, a premium price for shares you own, or free company or
research reports, you should take these steps before handing over any money or share certificates:
1. Get the name of the person and organisation contacting you.
2. Check the FCA Register at www.fca.org.uk/register to ensure they are authorised (or www.fca.org.uk/publication/systems-
information/aifmd-small-register.pdf).
3. Use the details on the FCA Register to contact the firm.
4. Call the FCA Consumer Helpline on 0800 111 6768 (freephone) from 8.00am to 6.00pm, Monday to Friday (except public
holidays) and 9.00am to 1.00pm, Saturday (from abroad call +44 20 7066 1000) if there are no contact details on the Register
or you are told they are out of date.
5. Search the FCA’s list of unauthorised firms and individuals to avoid doing business with.
6. REMEMBER: if it sounds too good to be true, it probably is!
If you use an unauthorised firm to buy or sell shares or other investments, you will not have access to the Financial
Ombudsman Service (https://www.financial-ombudsman.org.uk/) or Financial Services Compensation Scheme
(https://www.fscs.org.uk/) if things go wrong.
Report a scam
If you are approached about a share scam, you should tell the FCA using the Share Fraud Reporting Form
(www.fca.org.uk/consumers/report-scam-unauthorised-firm), where you can find out about the latest investment scams. You
can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money (or otherwise dealt with share fraudsters), you should contact ActionFraud on 0300 123 2040 or
use the ActionFraud (https://www.actionfraudalert.co.uk/) Online Reporting Tool.
More detailed information on this or similar activity can be found on the FCA web site.
Shareholder account queries
The Registrar for Baronsmead Second Venture Trust plc is Computershare Investor Services plc (“Computershare”).
TheRegistrar will deal with all of your queries with regard to your shareholder account, such as:
Change of address
Latest share price
Glossary
NAV total return
reconciliation Q1 Q2 Q3 Q4
Opening NAV total return (p) 406.2 396.9 359.3 347.6
NAV movement (p) (2.2) (14.0) (3.2) (9.5)
Dividend (p) 0.0 4.2 0.0 4.1
Total return (p) (2.2) (9.8) (3.2) (5.4)
Change in NAV total return (p) (9.3) (37.6) (11.7) (18.7)
Closing NAV total return (p) 396.9 359.3 347.6 328.9
AIC methodology: The NAV total return to the investor, including the original amount invested (rebased to 100) from launch,
assuming that dividends paid were reinvested at the NAV of the Company at the time the shares were quoted ex-dividend
Annual dividend yield
reconciliation 2022 2021 2020
Interim dividend 3.0p 3.0p 3.0p
Recommended final dividend 3.0p 3.5p 3.5p
Total dividend 6.0p 6.5p 6.5p
Opening NAV (after final dividend) 84.3p 70.2p 73.6p
Dividend yield 7.1% 9.3% 8.8%
Shareholder information
and contact details
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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. Gresham House Asset Management Limited does not give investment advice and the
naming of companies in this report is not a recommendation to deal in them.
Baronsmead Second Venture Trust plc is managed by Gresham House Asset Management Limited which is Authorised and
regulated by the FCA. 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.
Secondary market in the shares of Baronsmead Second Venture Trust plc
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 Second Venture Trust plc are:
Panmure Gordon & Co. 020 7886 2500 (the Company’s broker)
Winterflood 020 3100 0000
Qualifying investors* who invest in the existing shares of the Company can benefit from:
Tax free dividends;
Realised gains are not subject to capital gains tax (although any realised losses are not allowable);
No minimum holding period; and
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.
Your current shareholding balance
Your payment history, including any outstanding payments
Your payment options (cheque, direct payment to your bank/building society account, reinvestment)
Paper or electronic communications
Request replacement cheques or share certificates (for which there may be additional administrative and other charges) You
can contact Computershare with your queries in several ways:
Telephone: 0800 923 1534
This is an automated self-service system.
It is available 24 hours a day, 7 days a week.
You should have your shareholder Reference Number (“SRN”) to hand,
which is available on your share certificate and dividend tax voucher and
which you should always keep confidential for security reasons.
Press ‘0’ if you wish to speak to someone.
The Contact Centre in Bristol is available on UK business days between
8.30am – 5.00pm Monday to Friday.
On-line: Investor Centre Computershare’s secure website, Investor Centre, allows you to
www.investorcentre.co.uk manage your own shareholding online.
You will need to register to use this service on the Investor Centre website.
You should have your SRN to hand, which is available on your share
certificate and dividend tax voucher and which you should always keep
confidential for security reasons.
Email: web.queries@computershare.co.uk
Post: Computershare Investor Services PLC
The Pavilions Bridgwater Road
Bristol BS13 8AE
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 the link on the Company’s website and many financial websites.
Calendar
1 February 2023 Annual General Meeting.
May/June 2023 Announcement and posting of Interim report for the six months to 31 March 2023.
November/December 2023 Announcement of final results for year to 30 September 2023.
94
Baronsmead Second Venture Trust plc
Annual Report and Audited Financial Statements 2022
Directors
Sarah Fromson (Chair)‡
Graham McDonald
Timothy Farazmand**
Malcolm Groat*†
Secretary
Gresham House Asset Management Ltd
Registered Office
5 New Street Square
London EC4A 3TW
Investment Manager
Gresham House Asset Management Ltd
5 New Street Square
London EC4A 3TW
Registered Number
04115341
‡ Chair of the Nomination Committee
* Chairman of the Audit & Risk Committee
**Chairman of the Management Engagement & Remuneration Committee
† Senior Independent Director
Registrars and Transfer Office
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 0800 923 1534
Brokers
Panmure Gordon & Co
One New Change
London EC4M 9AF
Tel: 020 7886 2500
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Solicitors
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London EC2A 2EW
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk
Corporate information
Head Office
80 Cheapside, London EC2V 6EE
(0)20 3837 6270
baronsmeadvcts@greshamhouse.com
www.baronsmeadvcts.co.uk
Gresham House Asset Management Limited is certified to the ISO 9001 standard.
© 2021 Gresham House plc.