Baronsmead Second Venture Trust plc
Annual Report and Audited Financial
Statements for the year ended
30September 2023
Company number 04115341
Our investment objective
Baronsmead Second Venture Trust plc (the “Company”)
is a tax ecient listed company which aims to achieve
long‑term positive 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 nal dividend
following the Annual General Meeting in February/March
The Board will use, as a guide, when setting the
dividends for a nancial year, a sum representing 7 per
cent of the opening net asset value of that nancial 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 longterm structural growth
Businesses that demonstrate, or have the potential for,
market leadership in their niche
Management teams that can develop and deliver
protable 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 signicant 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 inuential shareholder
The Manager is an engaged and supportive shareholder (on
behalf of the Company) in both unquoted and signicant
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
protable 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 oated 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
pages32 to 36. The full investment policy can be found on page 99.
About Baronsmead Second Venture Trust plc
Example investments
Airnity (unquoted)
Airnity tracks, predicts and simulates population level
disease outcomes in real time to inform decisions that can
increase the global life span.
Inspired (quoted)
Inspired is a leading technology-enabled provider of
energy and sustainable solutions that allow UK and Irish
businesses to transition to net‑zero carbon and manage
their response to climate change.
Connect Earth (unquoted)
Connect Earth supports businesses in offering their
customers transparent insight into the climate impact
oftheir spending decisions.
Tan Delta Systems (quoted)
Tan Delta Systems develops advanced real time oil
analysis and analytic technologies and products that
enable equipment operators to signicantly reduce costs,
improve eciencies and reduce carbon foot-print.
01
Strategic report
Financial hi
ghlights 3
Performance summary 4
Chair’s statement 5
Manager’s review 9
Investments in the year 15
Realisations in the year 16
Ten largest investments 17
Principal risks and uncertainties 22
Sustainable investment 24
Other matters 32
Directors’ duties 37
02
Directors’ report
Board of Directors
43
Directors’ report 44
Corporate governance 48
Audit & Risk Committee report 55
Nomination Committee report 58
Directors’ remuneration report 61
Statement of Directors’ responsibilities 66
Independent auditor’s report 67
03
Financial statements
Income statement
77
Statement of changes in equity 78
Balance sheet 79
Statement of cash ows 80
Notes to the nancial statements 81
04
Appendices
Investment
policy 99
Dividend history in last ten years 100
Dividends paid since launch 101
Performance record since launch 102
Cash returned to shareholders 103
Full investment portfolio 104
Glossary 107
05
Information
Shareholder information and contact d
etails 111
Corporate information 114
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
Annual Report and Audited Financial Statements 2023 1
01
Strategic
report
Financial highlights
318.5p
Net asset value total return
1
(as at 30 September 2023)
Sep 21
Sep 22
328.9p
406.2p
Sep 23
318.5p
Net Asset Value (“NAV”) total return to shareholders
for every 100.0p invested at launch (January 2001).
-3.1%
Change in net asset value per share
1,2
(12 months to 30 September 2023)
NAV per share decreased 3.1 per cent to 60.1p,
before the deduction of dividends, for the
nancialyear ended 30 September 2023.
Sep 21
Sep 22
Sep 23*
55.6p
NAV per share (p)
* includes proposed nal dividend of 2.25p
7.2%
Annual tax free dividend yield
1
(12 months to 30 September 2023)
Sep 21
Sep 22
9.3%
Sep 23*
7.2%
Annual tax free dividend yield based on 4.5p
dividends paid (including proposed nal
dividend of 2.25p) and opening NAV of 62.1p
£10.9mn
New investments
3
(12 months to 30 September 2023)
Investments made into six new and eight
follow-on opportunities during the year.
Sep 23
£10.9mn
Sep 22
Sep 21
£17.1mn
7.1%
62.1p
84.3p
£23.1mn
Dividends*
* includes proposed nal dividend of 2.25p
1. Alternative Performance Measures (“APM”)/Key Performance Indicators (“KPIs”) – please refer to glossary on page 107 for denitions.
2. Please refer to table on page 102 for breakdown of NAV per share movement.
3. Direct investments only – please refer to glossary on page 107 for denitions.
Unquoted: £7.5mn
Quoted: £3.4mn
4.5p
Annual Report and Audited Financial Statements 2023 3
01 Strategic report
Ten year performance record
Pence
£mn
0
50
100
150
200
250
300
350
400
450
0
50
100
150
200
250
300
Net asset value
per share (pence)
Share price (mid)
(pence)
Net asset value total return
per share (pence)*
Total net assets (£mn)
140.9
199.4
175.4
248.4
213.0
209.7
79.2
186.7
182.3
76.6
202320212020201920182017201620152014 2022
* Net asset value total return (gross dividends reinvested) rebased to 100p at launch. Source: Gresham House Asset Management Ltd
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) Cumulative dividends (p)*
020406080 100 120 140 160 180 200
2023 (Apr)**
2023 (Mar)**
2023 (Jan)**
2022 (Mar)
2022 (Jan)
2021 (Dec)
2021 (Mar)
2021 (Feb)
2021 (Jan)
2020 (Dec)
2020 (Nov)
2020 (Mar)
2020 (Feb)
2020 (Jan)
2019 (Nov)
2019 (Feb)
2017 (Oct)
2016 (Feb)
2014 (Mar)
2012 (Dec)
2010 (Mar)
2005 (Mar) - C shar
e
2001 (Jan)
* Includes proposed nal dividend of 2.25p.
** Average effective share price. Shares were allotted pursuant to the 2023 Offer at individual prices for each investor in accordance with the
allotment formula as set out in each Offer’s Securities Note
Performance summary
Annual Report and Audited Financial Statements 20234
01 Strategic report
Chair’s statement
The economic environment over the past
year has remained challenging. Consumer
and business condence continued to be
affected by high ination and rising interest
rates during the year, weighing on the value
of the Company’s unquoted and AIM-traded
investments. As a result, the Company’s NAV
per share decreased 2.0p per share (3.1 per
cent) before dividend payments for the year
ended 30 September 2023.
The Company aims to achieve long-term positive
investment returns for its shareholders from a diverse
portfolio of investments in UK growth companies. Despite
the dicult conditions leading to a drop in the value of
the portfolio over the period, the Board continues to
believe that, in aggregate, the fundamentals of the large
majority of portfolio companies remain robust. The
Company continues to be in a position to support those
investee companies where the Manager believes there is a
strong prospect of providing good investment returns for
shareholders over the medium to longer term.
Results
Pence per
ordinary
share
NAV as at 1 October 2022 (after nal dividend) 62.08
Valuation decrease (-3.1 per cent) (1.95)
NAV as at 30 September 2023 before dividends 60.13
Less:
Interim dividend paid on 8 September 2023 (2.25)
Proposed nal dividend of 2.25p payable, after
shareholder approval, on 8 March 2024 (2.25)
Illustrative NAV as at 30 September 2023
after proposed dividend 55.63
Portfolio Review
At 30 September 2023, the Company’s investment
portfolio was valued at £129 million and comprised 82
direct investments, of which 37 are in unquoted companies
and 45 are in quoted companies. The Company’s
investments in the WS Gresham House UK Micro Cap Fund
(“Micro Cap”), WS Gresham House UK Multi Cap Income
Fund (“Multi Cap Income”) and WS Gresham House UK
Smaller Companies Fund (“Small Cap”) were valued at
£63 million at 30 September. These investments provide
investment exposure to an additional 76 AIM-traded and
fully listed companies, spreading investment risk across a
highly diversied portfolio of 158 companies.
The ongoing economic and political diculties noted in
my opening remarks resulted in the unquoted portfolio
decreasing by 15 per cent in value during the year. Clearly,
this is a disappointing result. However, the quoted portfolio
proved to be resilient and, in the face of continued
outows of overall investor capital from the UK, increased
by 3per cent in value during the year. To put this in context,
the FTSE AIM All Share Index decreased by 9.9per cent
over the same period, highlighting the challenges faced by
most UK smaller companies.
Sarah Fromson
Chair
Annual Report and Audited Financial Statements 2023 5
01 Strategic report
Investments and Divestments
The Board is once again pleased to report that the
Company continues to see attractive opportunities and
make new investments. The Company invested a total of
£10.9million in 14 companies over the year. Further details
of the new investments made are included in the Manager’s
review. As we have said to shareholders previously,
the requirement to make investments in earlier stage
companies may result in greater volatility of returns over
time. However, the more mature, established portfolio of
existing investments should assist in sustaining returns
and dividends for shareholders, as the newer holdings
develop and grow. The priority for portfolio companies is
to operate in a dicult macroeconomic environment with
proactivity and resilience. The Company has the resources
to support new and existing portfolio companies and
the Manager is focusing on the key challenges and
opportunities of each holding.
There was one full realisation in the unquoted portfolio
during the year, with proceeds of £0.8 million received
from the realisation of Evotix, for a gross multiple of
0.7x cost. In addition to this, the Key Travel Loan Notes
matured for £0.4 million and a gross money multiple of
3.2x cost, along with deferred earn-out consideration of
£1.4 million from the sale of Pho for a gross money multiple
of 3.1x cost. The Manager has also continued its approach
of protable partial realisations of Cerillion during the
year, resulting in the receipt of proceeds of £0.7 million
at an aggregate of 15.8x original invested cost in this
listed company.
Dividends
The Board is pleased to declare a nal dividend of 2.25p
per share for the year to 30 September 2023, payable
on 8 March 2024. This is in addition to the 2.25p interim
dividend paid in September and means that the total
dividends for the year are 4.5p. This is a 7.2 per cent yield
based on the opening NAV of 62.1p and meets the target
policy of 7 per cent of the NAV at the start of the year.
Including the proposed nal dividend of 2.25p per share,
tax free dividends paid since launch in 2001 now total
164.8p per share, 86.5p of which has been paid over the
past 10 years.
Fees
We are happy to announce that with effect from
1stOctober 2023, the fee payable to the Investment
Manager has been amended so that the Investment
Manager is entitled to receive an annual management
fee of the aggregate of 2.5 per cent per annum of the net
assets of BSVT up to and including £209,658,860 (being
the total net assets of BSVT as at 30 September 2023) and
2.0 per cent. per annum of the amount by which the net
assets of BSVT exceed £209,658,860, calculated and paid
on a quarterly basis.
Unclaimed Dividends
The Company’s Registrar was holding £0.8 million in
unclaimed dividends as at 30 September 2023. Of this
amount, £0.1 million was unclaimed for over 12 years.
Any shareholders who have not been able to claim their
dividends are requested to contact the Company’s
Registrar. Their contact details are shown on page 112.
Under the terms of the Company’s Articles of Association,
any dividends unclaimed for a period of 12 years after
having become due for payment shall, if the Board so
resolves, be forfeited and shall cease to remain owing
by the Company. Additionally, under the terms of the
Company’s Articles of Association, I would like to remind
shareholders that it is their responsibility to keep their
address and, for those who receive their dividends by bank
transfer, their bank account details up to date by informing
the Company’s Registrar of any changes.
Environmental, Social & Governance
(“ESG”) matters
Environmental, social and governance analysis is
embedded into the Company’s investment processes by
the Manager in order to build and protect long-term value
for investors. A framework based on ten key ESG themes
in each portfolio is used to structure analysis, monitor
and report on ESG risks and opportunities across their
lifecycle. Further information in relation to the Manager’s
integration of ESG factors in the management of the
Company’s portfolio is set out on pages 24 to 31 of the
Strategic Report.
6 Annual Report and Audited Financial Statements 2023
01 Strategic report - Chair’s statement
Loss of tax reliefs Clause
When EU State Aid approval of the UK’s VCT and EIS
schemes was given in 2015, a “Sunset Clause” was
introduced for the schemes whereby, in the absence of
new or amended legislation, investors will no longer be
able to claim upfront income tax relief on subscriptions for
new VCT shares made after 5 April 2025.
In November 2023, the Chancellor announced in the
Autumn Statement that legislation will be introduced in the
Finance Act 2023 to move the effective date of the Sunset
Clause to 6 April 2035.
Acquisition of the Investment
Manager, Gresham House
Further to the announcement on 17 July 2023 of the
acquisition of the Investment Manager by Searchlight
Capital Partners L.P., the acquisition has now completed,
and Gresham House plc delisted from the London
Stock Exchange on 20 December 2023, to become a
privately owned company.
The acquisition is expected to have minimal impact on the
Company and business is continuing as usual.
For further information please visit the website link:
https://greshamhouse.com/about/.
Consumer Duty
The Financial Conduct Authority’s (FCA) new Consumer
Duty regulation came into effect on 31 July 2023. The
Consumer Duty, which sets higher and clearer standards
of consumer protection across nancial services and
requires all rms to put their customers’ needs rst,
is an advance on the previous concept of ‘treating
customers fairly’.
As previously notied, the Company is not regulated by
the FCA and therefore it does not directly fall into the
scope of Consumer Duty. However, Gresham House as the
Investment Manager, and any IFAs or nancial platforms
used to distribute future fundraising offers, are subject to
Consumer Duty.
The Board will ensure that the principles behind Consumer
Duty are upheld and have worked closely with the
Investment Manager on the information now available
to assist consumers and their advisers to be able to
discharge their obligations under Consumer Duty.
Fundraising
In September 2023, the Board announced its intention
to raise new funds to increase the Company’s resources
available for new and follow on investments over the next
two to three years. On 4 December 2023, the Company
launched an offer for subscription to raise £15 million
(before costs) with an additional £10 million over-allotment
facility available if required. Investing throughout an
economic cycle is a key part of the Company’s investment
strategy. The additional funds raised will be deployed in
smaller UK companies, at what the Manager believes to be
an advantageous time.
Annual General Meeting (“AGM”)
I look forward to meeting as many shareholders as
possible at the next AGM, to be held at 11.00am on 5March
2024. The Company intends to hold this AGM in person
again, however, we will also live stream the event for any
shareholders who do not wish, or are unable, to attend
in person. Registration details for the live stream will be
included in the Notice of AGM and on the Baronsmead
Second Venture Trust website.
Outlook
The geopolitical and economic outlook is expected to
remain challenging, with the impact of higher ination
and interest rates likely to continue to affect business and
consumer condence for some time.
We anticipate that these forces will 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 create attractive
long-term investment opportunities and we remain vigilant
for evidence of mispricing which can be used to the
Company’s advantage. We recognise, and are encouraged
by, the additional investment and operational resources
which Gresham House is deploying in the management
of your Company and expect these efforts to provide
attractive longer-term returns.
7
01 Strategic report - Chair’s statement
Annual Report and Audited Financial Statements 2023
Despite these economic headwinds, the portfolio remains
highly diversied and the Board continues to believe it
is a good time to be investing in earlier stage, innovative
and high growth potential businesses. The Manager will
be looking to take advantage of changes in consumer
behaviour and the disruption of traditional supply chains
being driven by technology. We remain condent that the
Manager is suitably positioned to provide the necessary
levels of support to the portfolio companies and remains
focussed on retaining, recovering and helping to grow
value in existing and future investee companies.
Sarah Fromson
Chair
21 December 2023
8
01 Strategic report - Chair’s statement
Annual Report and Audited Financial Statements 2023
Manager’s review
Equity markets continued to experience high levels of volatility during the year brought about by geopolitical and
macroeconomic uncertainty with downward pressure on growth company multiples. Against this backdrop, the portfolio,
whilst well diversied, with exposure to 158 quoted and unquoted companies, has delivered a decrease in net asset value
pershare of 3.1 per cent over the year.
Portfolio review
Overview
The closing net assets of £210 million were invested as follows:
Asset class
NAV
(£mn)
% of
NAV*
Number of
investees**
% return in
the year***
Unquoted 49 23 37 (15)
AIM-traded companies 80 38 45 3
WS Gresham House UK Micro Cap Fund 25 12 45 5
WS Gresham House UK Multi Cap Income Fund 21 10 42 10
WS Gresham House UK Smaller Companies Fund 17 8 40 0
Liquid assets
#
18 9 N/A 4
Totals 210 100 209 (3)
* By value as at 30 September 2023.
** Includes investee companies held in more than one fund. Total number of individual companies held is 158.
*** Return includes interest received on unquoted realisations during the year.
#
Represents cash, OEICs and net current assets. % return in the period relates only to the OEICs.
The tables on pages 15 and 16 show the breakdown of new investments and realisations over the course of the year and below
is a commentary on some of the key highlights in both the unquoted and quoted portfolios.
9
Annual Report and Audited Financial Statements 2023
01 Strategic report
Ken Wotton
Managing Director,
Public Equity
Clive Austin
Managing Director,
VCT Portfolio
Trevor Hope
Chief Investment Ocer,
VCTs
Tania Hayes
Chief Operating Ocer,
Strategic Equity
Tom Makey
Investment Director
Ed Wass
Director of VCT Portfolio
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 beneting from long-term structural
growth trends and in sectors where we have deep
expertise and networks.
During the year, £10.9 million was invested into 14 companies
including six new additions to the portfolio and eight
follow-on investments.
Five new unquoted investments totalling £3.3 million were
completed during the year into Branchspace, Cognassist,
Connect Earth, Dayrize B.V. and Mable Therapy.
Below are descriptions of the new investments made;
Branchspace is a provider of software and consulting
services to airlines/carriers to enhance their digital and
ecommerce offerings.
Cognassist is a provider of neurodiversity assessment
and support software.
Connect Earth is a provider of a proprietary
environmental database that estimates
carbon emissions.
Dayrize is a provider of a rapid product-level
sustainability impact assessment software tool for
retailers and Consumer Packaged Goods companies.
Mable Therapy is a digital platform offering mental
health counselling and speech and language
therapy to children.
One new AIM quoted investment of £1.0 million was made
during the year:
Tan Delta Systems is a manufacturer of oil condition
analysis sensors that detect and measure wear and
contamination in industrial applications.
The Company made additional investments totalling
£6.6 million into eight existing portfolio companies,
three quoted and ve unquoted, across the year. This is
consistent with the investment strategy of continuing to
back the Company’s high potential assets with further
capital to support future growth. We anticipate the level of
follow-on investment will continue to grow as the capital
hungry earlier stage portfolio continues to mature.
Unquoted Portfolio
Performance
The unquoted portfolio decreased in value by 15 per
cent during the year. The macroeconomic environment
remained challenging for the Company’s portfolio
companies although some stability has been seen in
market multiples in more recent months. UK businesses
have seen both demand and operating margins come under
pressure due to marked increases in ination and interest
rates. Such macroeconomic conditions have not been
faced by management teams in a generation, however
Gresham House’s experienced non-executive directors and
portfolio consultants continue to support the portfolio’s
companies during these turbulent times.
Orri and SecureCloud+ were the two investments that
made the biggest positive contribution in the year. Orri,
a provider of intensive out-patient care for adults with
eating disorders, delivered year on year revenue growth,
in excess of 20per cent. The company opened a new site
and drew down a further VCT loan in the period which is
expected to support continuing growth in the coming
year. SecureCloud+ is a specialist IT managed services
company specically serving the Ministry of Defence
and related contractors. The company delivered both
revenue and prot growth in the period, growing EBITDA,
in particular by over 40per cent. A focus on maintaining
margins for new contract wins in a growing market helped
SecureCloud+ deliver a very encouraging performance. It
is now well set to continue on its positive trajectory. Overall
performance was also positively impacted by the receipt
of the maximum deferred consideration relating to the
earnout arrangements on Pho, a divestment completed in
a previous period. In line with our valuation policy, this was
only recognised on receipt.
The largest detractors from performance were in the
healthcare and B2C ecommerce sectors. Panthera
Biopartners, an independent site management
organisation which provides patient recruitment services
to clinical research organisations, pharma and biotech
companies, struggled to scale its operations and deliver
a growing number of contracts as protably as it had
previously. This resulted in a signicantly loss-making
year and the requirement for further funding. Since then
the company has started to deliver protable revenue
growth. Yappy is an e-commerce business that provides
personalised products to companion pet owners. It
struggled to acquire customers at a cost that would deliver
sucient lifetime value to support a protable business
once signicant scale was achieved. As a result, the
company has pivoted its strategy to exploit its proprietary
personalisation software, but this new strategy remains in
its early stages of development.
01 Strategic report - Manager’s review
10 Annual Report and Audited Financial Statements 2023
As Investment Manager we remain highly engaged with the
management teams within the portfolio, sharing insight
and best practice to help them manage risk and spot
opportunities in a quickly changing environment. We have
continued to invest in our portfolio and in-house talent
teams, alongside our extensive network of earlier stage,
high growth company experts. This will ensure we are
well positioned to help the companies that the Company
invests in to navigate the challenges they face whilst also
continuing to develop and scale.
Divestments
There was one full realisation in the unquoted portfolio
during the year with proceeds of £0.8million received
from the realisation of Evotix, for a gross money multiple
of 0.7x cost. In addition to this, the Key Travel Loan Notes
matured for £0.4million taking the gross money multiple
to 3.2x cost along with deferred earn-out consideration
of £1.4million from the sale of Pho for a gross money
multiple of 3.1x cost.
Quoted Portfolio (AIM-traded investments)
Performance
The quoted portfolio delivered positive absolute
performance of 3per cent during the year, despite the
signicant geopolitical and macroeconomic uncertainty
in the markets. For reference the AIM market in the UK
fell 10per 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 nancial health and is exposed to structural growth
areas providing some insulation from the deteriorating
economic conditions.
The best performing investments sit within the software
sector with Cerillion, a provider of billing and charging
software to the telecoms industry continuing to deliver
strong revenue and prot growth with the release of
their interim results indicating over 20per cent organic
growth with record margins and strong Free Cash Flow
generation. In addition, Netcall, a provider of cloud contact
centre and business process automation software,
demonstrated ongoing strong trading driven by demand for
cloud services and robust new customer acquisition.
Investment diversication at 30 September 2023 by value
Sector* Total assets Length of time investments held*
Healthcare & education
Business services
Consumer markets
Technology
62%
6%
22%
10%
Collective investment vehicles
Unquoted
Cash liquidity funds
AIM
38%
30%
24%
8%
Between 5 years and VCT rule change
Between 3 and 5 years
Between 1 and 3 years
Pre-VCT rule change**
51%
7%
29%
3%
Less than 1 year
10%
*Direct investments only, not held by the Micro Cap, Multi Cap Income or
Small Cap funds.
**Investments made prior to the VCT rule change that took effect from
18 November 2015.
11Annual Report and Audited Financial Statements 2023
01 Strategic report - Manager’s review
The largest detractors from performance were both
in the healthcare and education sector with Aptamer,
a developer of a platform technology with applications
in the therapeutic and diagnostic areas of healthcare,
experiencing share price weakness after the release of a
trading update indicating a signicant downgrade to full
year revenue expectations. The company consequently
considered funding options and the CEO resigned. Anpario,
an international manufacturer and distributor of natural
animal feed additives for animal health, nutrition and
biosecurity, also suffered share price weakness following
a prot warning indicating a signicant reduction in full
year EBITDA due to raw material costs, Covid in China and
delays in shipment.
We closely monitor the 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 protable, cash generative
businesses with low levels of nancial gearing and
continue to have attractive long-term growth prospects.
Divestments
The opportunity to crystallise further gains was taken
for Cerillion plc; over the course of the year proceeds of
£0.7million were realised at 15.8x cost.
Seven companies which were impacted by dicult trading
conditions entered into administration during the year
and have subsequently been moved to realised values.
The impact on NAV per share for the year was -0.7per
cent in aggregate with the majority of the impact taken
in prior years.
Collective Investment Vehicles
The Manager believes that the Company’s investments
in Micro Cap, Multi Cap Income and Small Cap are a core
component of the Company’s portfolio construction.
These investments provide shareholders with additional
diversication through exposure to an additional 76
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 a return of 5 per cent
return, Multi Cap Income delivered a return of 10 per cent
and the Small Cap fund delivered 0.4per cent.
Micro Cap and Multi Cap Income 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 fth best
performing fund over the past 10 years. Multi Cap Income's
cumulative performance has remained the best performer
within the IA UK Equity Income sector since launch in
June 2017 and is the second best performer over ve
years. Small Cap has also achieved top quartile cumulative
performance since launch in 2019 and is the fth best
performing fund over the past three years.
Liquid assets (cash and near cash)
The Company held cash and liquidity OEICs of
approximately £18 million at the year-end. This asset class
is conservatively managed to take minimal or no capital
risk. The average 7 day yield on the liquidity OEICs was
5.17per cent at the end of the year.
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 page 28 in the
strategic report.
Third party independent valuations
During the year, the Company engaged the services of
Lincoln International and Kroll to conduct independent
third party valuations as a means of managing the Board’s
risk in respect of a systematic error regarding the valuation
of one or more of the material VCT portfolio assets. It was
agreed that valuation responsibility is, and will remain, with
the Investment Manager and that this does not constitute
outsourcing of any part of the valuation. The Investment
Manager uses these independent valuations in conjunction
with their own valuations to provide independent
assurance and risk mitigation to the Board and the Board
continues to support this.
01 Strategic report - Manager’s review
12 Annual Report and Audited Financial Statements 2023
Levelling up
On 18 July 2023, the House of Commons Treasury
Committee published its report (the “Report”) on Venture
Capital, which includes growth capital funding provided
by Venture Capital Trusts, which was broadly positive.
MPs recommended that venture capital rms and
their investment companies should collect and publish
their diversity statistics. The Report also considered
the allocation of investment capital to the various
regions of the UK.
The Company and the Investment Manager have long
supported the creation of opportunities for everyone
across the UK through its investment portfolio.
The investment due diligence process for any proposed
new investment includes a consideration of the board
structure and composition as part of the Manager’s
governance considerations within the ESG Decision Tool.
We have considered the ndings of the Report and set
out for the rst time the relevant metrics pertaining to
the Company’s portfolio of unquoted investments as at
30September 2023, Gresham House plc and the Gresham
House Strategic Equity division, responsible for managing
the public and private equity portfolios managed or
advised by the Manager.
Chart 1 below shows that the portfolio companies were
predominantly founded by males, or groups of male
founders, with 14per cent being founded by all females or
groups of mixed male and female founders.
Chart 1 – Portfolio company founders
Female/mixed gender
All male
86%
14%
1. Excluding Gresham House representatives.
2. Based on cost of investment.
Chart 2 – Portfolio company board composition
1
Female
Male
85%
15%
Chart 2 above shows that board composition within the
portfolio was similarly predominantly male, with 15per
cent of board members being female, after excluding
representatives of Gresham House.
Chart 3 – Allocation of capital by region
2
Other regions
London and South East
65%
35%
Chart 3 above shows the regions of the UK where the
Company’s capital has been invested, with the majority of
capital being invested in London and/or the South East.
As of the end of 2023, the Company is in the process
of signing up to the Investing in Women Code. This is
a commitment to support the advancement of female
entrepreneurship in the United Kingdom by improving
female entrepreneurs’ access to tools, resources and
nance from the nancial services sector.
13
01 Strategic report - Manager’s review
Annual Report and Audited Financial Statements 2023
In September 2023, the Manager hosted its rst female-
led event bringing together innovators, investors, and
advisers to foster relationships and share learnings.
Chart 4 below shows the gender diversity within Gresham
House as at 30September 2023.
Chart 4 – Gresham House gender diversity
1
Female
Male
62%
38%
Chart 5 – Gresham House strategic equity division
gender diversity
2
Female
Male
70%
30%
Chart 5 above shows the gender diversity within the
Strategic Equity division of Gresham House, responsible
for managing the Company’s portfolio.
1. As at 30 September 2023.
2. As at 30 September 2023.
Gresham House released their Diversity, Equity & Inclusion
(“DEI”) strategy at the start of 2022 to help understand
the changing landscape of DEI. Included within the
strategy are initiatives to improve DEI such as carrying
out unconscious bias training for all employees; evolving
Human Resources systems to include DEI data which
is now shared quarterly with our Group Management
Committee and divisional heads and developing clear DEI
guidelines for recruiters.
During the year Gresham House have promoted or
actively attended a number of events targeted at women
entrepreneurs and the senior women from across
Gresham House have all attended a 12-week external
Resilient Women’s Leadership Programme to develop their
capability to lead.
Gresham House is committed to improving the diversity
of its investment teams, the management teams of the
investee companies that they support and increasing the
amount & number of investments across the UK.
Outlook
The UK economic outlook remains uncertain but the
investment portfolio is well diversied and 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. We have an experienced
team working closely with the portfolio companies to help
them navigate the challenges that lie ahead.
The exit environment is likely to remain subdued, resulting
in longer average investment hold times, but also providing
further portfolio re-investment opportunities. Previous
evidence has shown that investing throughout the
economic cycle has the potential to yield strong returns
and we are seeing a number of opportunities, both new
deals and further investment into the existing portfolio,
which have the potential to drive shareholder value over
the medium term.
Gresham House Asset Management Ltd
Investment Manager
21December 2023
14
01 Strategic report - Manager’s review
Annual Report and Audited Financial Statements 2023
Investments in the year
Company Location Sector Activity
Book
cost
£’000
Unquoted investments
New
Cognassist UK Ltd Newcastle upon
Tyne
Healthcare & education A platform for supporting those with
learning needs
902
Dayrize B.V. Amsterdam Technology A rapid product-level sustainability
impact assessment software tool for
retailers and Consumer Packaged
Goods ("CPG") companies
756
Mable Therapy Ltd Leeds Healthcare & education Digital health platform for speech
therapy & counselling for children and
young adults
619
Branchspace Ltd London Technology Specialist digital retailing consultancy
and software provider to the aviation
and travel industry
609
Connect Earth Ltd London Business services Helps businesses track their carbon
emissions
451
Follow-on
Patchworks Integration Ltd London Technology A platform for connecting businesses’
applications
2,080
TravelLocal Ltd London Consumer markets Online travel agent specialising in
tailor‑made holidays
715
Airnity Ltd London Healthcare & education Provides real time life science
intelligence as a subscription service
676
Panthera Biopartners Ltd Lancashire Healthcare & education Recruitment services for clinical trials 480
Orri Ltd London Healthcare & education Provider of intensive day care
treatments for eating disorders
227
Total unquoted investments 7,515
AIM-traded investments
New
Tan Delta Systems plc South Yorkshire Business services
Supplier of real‑time oil condition
monitoring sensors
956
Follow-on
Crossword Cybersecurity plc* London Technology Commercialisation of university
research‑based cyber security
software and consulting
1,040
Oberon Investments Group plc London Business services Wealth advisory service for individuals
and businesses
688
SEEEN plc London Technology A video technology business 659
Total AIM-traded investments 3,343
Total investments in the year
#
10,858
* Investment in to unquoted convertible loan note.
#
includes Unquoted and AIM investments only.
15Annual Report and Audited Financial Statements 2023
01 Strategic report
Realisations in the year
Company
First
investment
date
Original
book cost
#
£’000
Proceeds
‡
£’000
Overall
multiple
return
Unquoted realisations
Evotix Ltd Full trade sale Jul 21 423 792 0.7*
Key Travel Ltd Escrow loan
notematurity
Jun 13 255 383 3.2**
Glisser Ltd Written off Nov 19 1,787 – –
Rezatec Ltd Written off Jan 20 1,620 – –
CMME Group Ltd Written off Apr 15 1,136 – –
Vinoteca Ltd Written off Sep 19 1,054 – –
Your Welcome Ltd Written off Aug 18 1,030 – –
Total unquoted realisations 7,305 1,175
AIM-traded and LSE listed realisations
Cerillion plc Market sale Jul 15 42 661 15.8
MXC Capital Ltd Tender offer May 15 30 17 0.6
Hawkwing plc Written off Nov 11 2,136 – –
InterQuest Group plc Written off Feb 07 620 – –
Total AIM-traded and LSE listed realisations 2,828 678
Total realisations in the year 10,133 1,853
Earn out proceeds of £1.4mn were received during the year from Pho, which was realised in July 2021, making a total return of 3.1x cost.
#
Residual book cost at realisation date.
‡
Proceeds at time of realisation including interest.
* Original investment was £1.1 million and following a restructuring in July 2021, the residual book cost was £0.4 million.
**
Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.
16 Annual Report and Audited Financial Statements 2023
01 Strategic report
The top ten investments by current value at 30 September 2023 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
nancial 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. In addition, pre-tax prot in statutory accounts is often not a representative indicator of
underlying protability 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
1
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 nance
and utilities. Cerillion has more than 80 customer
installations in over 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: £2,664,000
Total equity held: 11.9%
Baronsmead Second Venture Trust only
Original cost: £1,465,000
Valuation: £25,247,000
Valuation basis: Bid price
Income recognised in the year: £192,000
% of equity held: 6.5%
Voting rights: 6.5%
Year ended 30September
2023
£million
2022
£million
Sales: 39.2 32.7
Pre-tax prots: 16.1 10.9
Net assets: 36.9 26.7
No. of employees: 324 295
Source: Cerillion plc, Annual Report and Financial Statements,
30 September 2023
2
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 eciency through increased process
automation. Netcall has over 700 customers, 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: 25.1%
Baronsmead Second Venture Trust only
Original cost: £2,616,000
Valuation: £12,425,000
Valuation basis: Bid price
Income recognised in the year: £80,000
% of equity held: 9.2%
Voting rights: 9.2%
Year ended 30June
2023
£million
2022
£million
Sales: 36.0 30.5
Pre-tax prots: 4.0 2.3
Net assets: 35.4 27.4
No. of employees: 270 252
Source: Netcall plc, Annual Report and Accounts, 30 June 2023
*Includes Baronsmead VCTs only
17Annual Report and Audited Financial Statements 2023
01 Strategic report
4
Patchworks Integration Ltd
London
Unquoted
www.wearepatchworks.com
Patchworks provides the software to integrate
an ecommerce customer’s front and back oce
operational systems, managing the ow of data
across their entire business and providing data and
analytics to power decision-making. Founded in 2014,
the Baronsmead VCTs originally invested in July 2021
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: £8,800,000
Total equity held: 23.8%
Baronsmead Second Venture Trust only
Original cost: £4,576,000
Valuation: £6,031,000
Valuation basis: Earnings multiple
Income recognised in the year: £164,000
% of equity held: 10.9%
Voting rights: 13.1%
Year ended 30June
2022
£million
2021
£million
Net assets: 2.7 0.1
A full set of accounts is not publicly available.
Source: Patchworks Integration Ltd, Unaudited Financial
Statements, 30 June 2022
3
IDOX plc
Surrey
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 eciency and reduced overheads.
All funds managed by Gresham House
First investment: May 2002
Total original cost: £1,642,000*
Total equity held: 4.7%
Baronsmead Second Venture Trust only
Original cost: £1,028,000
Valuation: £7,014,000
Valuation basis: Last price
Income recognised in the year: £55,000
% of equity held: 2.4%
Voting rights: 2.4%
Year ended 31October
2022
£million
2021
£million
Sales: 66.2 62.2
Pre-tax prots: 6.6 7.3
Net assets: 67.4 60.8
No. of employees: 578 567
Source: Idox plc, Annual Report & Accounts, 31 October 2022
*Includes Baronsmead VCTs only
18 Annual Report and Audited Financial Statements 2023
01 Strategic report - Ten largest investments
6
Airnity Ltd
London
Unquoted
www.airnity.com
Airnity 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 have since provided
follow-on funding which is being 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: £6,905,000
Total equity held: 20.1%
Baronsmead Second Venture Trust only
Original cost: £3,587,000
Valuation: £4,719,000
Valuation basis: Earnings multiple
Income recognised in the year: £35,000
% of equity held: 9.3%
Voting rights: 9.3%
Year ended 31 December
2022
£million
2021
£million
Sales: 5.4 2.4
Pre-tax prots: (3.5) (1.9)
Net assets: 2.6 3.2
No. of employees 83 57
Source: Airnity Ltd, Annual Report and Financial Statements,
31 December 2022
5
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 Baronsmead VCTs
investment of £7.5 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: £5,325,000
Valuation basis: Earnings multiple
Income recognised in the year: £3,000
% of equity held: 5.2%
Voting rights: 5.2%
Year ended 31March
2023
£million
2022
£million
Sales: 7.3 7.3
Pre-tax prots: (3.4) (5.3)
Net assets: 3.0 5.9
No. of employees: 91 104
Source: eConsult Health Ltd, Annual Report and Financial
Statements, 31 March 2023
19
01 Strategic report - Ten largest investments
Annual Report and Audited Financial Statements 2023
7
Bioventix plc
Surrey
Quoted
www.bioventix.com
Bioventix manufactures and supplies high
anity 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 rst invested in
2013, the company has more than quadrupled its
revenues and prots.
All funds managed by Gresham House
First investment: June 2013
Total original cost: £562,000*
Total equity held: 9.6%
Baronsmead Second Venture Trust only
Original cost: £309,000
Valuation: £4,476,000
Valuation basis: Bid price
Income recognised in the year: £191,000
% of equity held: 2.3%
Voting rights: 2.3%
Year ended 30June
2023
£million
2022
£million
Sales: 12.8 11.7
Pre-tax prots: 10.1 9.3
Net assets: 12.1 11.8
No. of employees: 16 16
Source: Bioventix plc, Annual Report and Financial
Statements, 30 June 2023
*Includes Baronsmead VCTs only
8
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 ve 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 31December
2022
£million
2021
£million
Sales: 26.7 25.3
Pre-tax prots: (2.1) (3.7)
Net assets: 11.3 12.0
No. of employees: 58 50
Source: Popsa Holdings Ltd, Group Strategic Report, Report of the
Directors and Consolidated Financial Statements, 31 December 2022
20
01 Strategic report - Ten largest investments
Annual Report and Audited Financial Statements 2023
9
Clarilis Ltd
Warwickshire
Unquoted
www.clarilis.com
Clarilis is a legal document automation software
and services provider, enabling both legal rms and
in-house legal teams to automate legal contract
production. The Baronsmead VCTs invested £3.5m
for 16.7per cent of the equity in July 2020. This has
enabled the business to scale, as well as optimise
their pricing structure.
All funds managed by Gresham House
First investment: July 2020
Total original cost: £3,500,000
Total equity held: 16.7%
Baronsmead Second Venture Trust only
Original cost: £1,819,000
Valuation: £2,723,000
Valuation basis: Earnings multiple
Income recognised in the year: £nil
% of equity held: 7.6%
Voting rights: 6.6%
Year ended 31December
2022
£million
2021
£million
Net assets: 1.7 3.4
No. of employees: 57 55
A full set of accounts is not publicly available.
Source: Clarilis Ltd, Unaudited Financial Statements,
31 December 2022
10
Scurri Web Services Ltd
Ireland
Unquoted
www.scurri.com
Scurri is a UK and Ireland multi-carrier management
SaaS platform based in Ireland which connects online
retailers with a wide range of delivery partners,
enabling them to route parcels to the most effective
carrier based on a range of criteria. The Baronsmead
VCTs investment will enable Scurri to focus on building
scale in the UK & Ireland, primarily across mid-sized
customers and investing in product development to
offer complementary services.
All funds managed by Gresham House
First investment: June 2021
Total original cost: £4,326,000
Total equity held: 14.7%
Baronsmead Second Venture Trust only
Original cost: £2,293,000
Valuation: £2,719,000
Valuation basis: Earnings multiple
Income recognised in the year: £nil
% of equity held: 6.9%
Voting rights: 9.2%
Year ended 31December
2022
€million
2021
€million
Net assets: 5.4 6.3
No. of employees: 41 34
A full set of accounts is not publicly available.
Source: Scurri Web Services Limited, Abridged Annual Report and
Financial Statements, 31 December 2022
21
01 Strategic report - Ten largest investments
Annual Report and Audited Financial Statements 2023
Principal risks and uncertainties
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.
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 identifyany material ESG risks that need to be managed and
mitigated. For further detail, see pages 24 to 31.
Principal risk Context Specic risks we face Possible impact Mitigation
Loss of approval
asa Venture
CapitalTrust
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
thatstatus.
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 & Risk
Committee on their ndings.
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 denition 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 benet 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 nancial resources and
may be dependent for their management on a smaller
number of key individuals and hence tend to be riskier than
largerbusinesses.
Investment in poor quality companies with
the resultant risk of a high level of failure in
theportfolio.
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 nancing 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.
Events such as scal 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 diversied 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
dicult economic conditions. The Board monitors and reviews the position of the Company,
ensuring that adequate cash balances exist to allow exibility. The Board reviews the
make up and progress of the portfolio each quarter to ensure that it remains appropriately
diversied 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
nancial penalties and sanction by the regulator
or a qualied audit report.
The Company’s performance could be
impacted severely by nancial penalties and
a loss of reputation resulting in the alienation
of shareholders, a signicant 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 & Risk Committee who review the internal control
(“ISAE3402”) and/or internal audit reports from all signicant 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
oce working and online communication has been required. To date the operational
arrangements have proven robust.
The nancial risks faced by the Company are covered within the Notes to the Financial Statements on pages 81 to 97.
22 Annual Report and Audited Financial Statements 2023
01 Strategic report
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.
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 identifyany material ESG risks that need to be managed and
mitigated. For further detail, see pages 24 to 31.
Principal risk Context Specic risks we face Possible impact Mitigation
Loss of approval
asa Venture
CapitalTrust
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
thatstatus.
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 & Risk
Committee on their ndings.
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 denition 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 benet 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 nancial resources and
may be dependent for their management on a smaller
number of key individuals and hence tend to be riskier than
largerbusinesses.
Investment in poor quality companies with
the resultant risk of a high level of failure in
theportfolio.
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 nancing 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.
Events such as scal 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 diversied 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
dicult economic conditions. The Board monitors and reviews the position of the Company,
ensuring that adequate cash balances exist to allow exibility. The Board reviews the
make up and progress of the portfolio each quarter to ensure that it remains appropriately
diversied 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
nancial penalties and sanction by the regulator
or a qualied audit report.
The Company’s performance could be
impacted severely by nancial penalties and
a loss of reputation resulting in the alienation
of shareholders, a signicant 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 & Risk Committee who review the internal control
(“ISAE3402”) and/or internal audit reports from all signicant 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
oce working and online communication has been required. To date the operational
arrangements have proven robust.
23
01 Strategic report - Principal risks and uncertainties
Annual Report and Audited Financial Statements 2023
Sustainable investment
The Company is required, under the Companies
Act 2006, 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
specic 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
nancial 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.
The FCA reporting requirements consistent with the Task
Force on Climate-related Financial Disclosures (“TCFD”),
which commenced on 1 January 2021 do not currently apply
to the Company but are kept under review, the Board being
mindful of any recommended changes. The Board is aware
of the FCA’s new Sustainability Disclosure Requirements
(“SDR”) and investment labels (together the “rules”) to
be phased-in across the next 3 years. As the Company
is classied as a Collective Investment Undertaking,
the scope of the rules capture such UK- domiciled
unauthorised funds, however given that the shares in
the Company (the “product”) do not have a sustainable
investment objective, the rules only apply on a very limited
basis (through the Manager) in relation to the Company.
We note that the Company is not an ESG-badged fund
but your Board is rmly committed to the importance of
ESG considerations within the investment process and
supports the Manager’s emphasis on these issues.
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 2023,
the Manager has taken further steps in advancing its
approach to sustainability 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.
Investing
to support a
Sustainable Investment Report | April 2023
changing world
The Manager incorporates ESG considerations throughout
the investment lifecycle including the valuation
process and this is communicated with the Board on a
quarterly 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 ve stars, out of a
maximum of ve stars, for all modules submitted in its PRI
Report 2021. It is also a signatory of the UK Stewardship
Code; in August 2023, it was announced that Gresham
House had met the expected standard of reporting for
2022 and will remain a signatory to the Code.
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.
24 Annual Report and Audited Financial Statements 2023
01 Strategic report
Gresham House Sustainability Governance Structure
Board
Oversees our business strategy and management, including sustainability matters.
Conicts Committee
Consider conicts arising in relation
to investment 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
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 identication and
monitoring of business risks, including
ESG and climate change.
01 Strategic report - Sustainable investment
25Annual Report and Audited Financial Statements 2023
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 signicance of
each risk. It is up to the Manager to decide whether it is
suciently comfortable with these risks to proceed with
an investment.
Sustainable Investment Framework
Natural capital
Environmental
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
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.
26
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
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 benet
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.
Private Equity
Sustainable Investment Policy
Meeting our Sustainable Investment
commitments within our Private
Equity strategy
Gresham House has a clear commitment to sustainable
investment as an integral part of its business mission.
The purpose of this document is to set out the manner in
which the commitments we have made at a group level to
integrate ESG considerations throughout our business will be
implemented within our Private Equity investment strategy.
We take steps to consult and understand the views,
concerns and ambitions of our stakeholders in seeking
sustainable outcomes from the investments we
are involved in.
– We actively monitor our clients’ interests in
making investments that take appropriate heed of
sustainability factors.
– We include sustainable investing as an agenda item on
a periodic basis in VCT Board meetings and separately
in meetings with stakeholders.
We integrate Environmental, Governance, Social and
Economic benet considerations into our selection,
evaluation, governance and engagement processes
across the lifecycle of each investment.
Our investment selection process goes through two
stages of proling before a decision is made, each
focused on identifying material sustainability matters
and how well they are managed:
– At stage one, we identify using our proprietary ESG
Decision Tool if there are any material ESG matters
unlikely to be suciently managed or mitigated, given
what we know about the company and its management
team, or where the business or its sector presents
signicant potential controversy risks, such that we
will not proceed.
– At stage two, we will make a wider assessment of
potential ESG issues as well as where good ESG
management has the potential to drive value, now or in
the future. This includes the identication of ESG issues
to engage on during the investment period to enhance
value, or particular areas of risk to be closely monitored.
During our stewardship and monitoring phase, our
periodic engagement with the management teams of our
investments includes discussion of ESG performance
and progress with the aim of identifying key concerns
and/or oppor tunities for value enhancement and
to give us a clearer view of ESG management
within our por tfolio.
We drive rigour and consistency by applying our
Sustainable Investment Framework and system, including
clearly dened processes and expert tools and methods.
– Our ESG integration processes are structured around
our sustainable investment framework (see page 3).
– Materiality and stakeholder assessment are core to both
our investment selection process and ESG stewardship
and we have adopted tools and methods, such as an ESG
Decision Tool, to assist us in focusing on what matters
most in any investment and the externalities and other
factors that may change over time.
–
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 suciently 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 inuence
management to proactively address longer term risks
and opportunities.
Where material ESG risks are identied, 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.
27
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
Case Study: investment into climate impact data
business Connect Earth
In March 2023 Gresham House Ventures invested into climate impact data business Connect Earth.
Connect Earth is an Application Programming Interface-rst environmental data company that works with banks and ntech
rms to offer their customers transparent insights into the climate impact of their spending and investment decisions.
The business has grown quickly since its launch and, through its easy-to-integrate Application Programming Interface, has
estimated carbon emissions for more than 500 million nancial transactions since the beginning of 2022.
The investment team completed the ESG Decision Tool during the due diligence phase and worked closely with
Gresham House’s dedicated Sustainable Investment team throughout the investment process to understand the
demand drivers of the product. This included incumbent and upcoming sustainability-related regulation requiring
greater levels of consumer-facing climate disclosures.
As part of the investment, Gresham House Ventures has brought Stewart Holness onto Connect Earth’s Board.
Holness is an experienced Chair with more than 25 years of experience scaling technology businesses as a founder,
CEO, non-executive director and Chairperson.
Sustainable investment highlights
Informing engagement objectives using
our Private Equity ESG survey
In November 2022, 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 asked unquoted investee businesses a range of
questions based on the ESG_VC framework across a range
of material environmental, social and governance factors.
It asked them to indicate the relevance of those material
ESG factors to their business, as well as their ability to
inuence 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 inuence the behaviour of investee
companies for the better.
Highlights from the survey include:
The overall ESG score for the unquoted portfolio increased
from 40per cent in 2021 to 47per cent in 2022. The
biggest increase was in Governance, which increased by 18
percentage points.
Please note that a company’s score does not pass judgment
on the response; rather it is an indication of the proportion
of suggested initiatives/policies that the business has
adopted or is intending to adopt over the next 12 months.
An engagement process was developed off the back of the
survey based on the policies or processes that companies
intended to implement over the 12-month period following
the survey. These engagements have been tracked centrally
and investment directors have included them as a regular
agenda item as part of the quarterly board meeting process.
The ESG survey was run again in November 2023 with the
results expected in January 2024 in order to understand
how portfolio companies have further integrated ESG and
sustainability‑related matters into their business operations.
ESG Survey: 2021 vs. 2022
l
2021
l
2022
16%
24%
0%
10%
20%
30%
40%
50%
60%
70%
OverallGovernanceSocialEnvironmental
51%
50%
42%
60%
40%
47%
28
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
ESG Webinar Series
In 2022 the Manager continued its series of educational
webinars for the Chairs, CEOs and executives of
unquoted and quoted investee businesses to enhance
their knowledge of material ESG issues.
1. PCAF: The Global GHG Accounting & Reporting Standard for the
Financial Industry (Nov,2020).
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
The Manager has held four of these webinars and
will continue to hold these on a quarterly basis going
forwards. For a link to the webinars, please see:
ESGwebinar series – Gresham House Ventures.
Climate-related Financial Disclosures
In 2022 the Manager continued to measure its nanced
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 emissions. These are
detailed. All carbon emissions calculated are based on the
Company’s proportional share of investment in investee
companies, as per PCAF guidance
1
.
Greenhouse gas emissions associated with the Company’s
holdings are measured in carbon dioxide equivalent (CO
2
e).
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 a company.
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.
Outline of Webinar series
Metrics
and Targets
Risk Management
Strategy
Governance
Materiality
Education
29
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
2022 Portfolio-level Data
1
BSVT
(2022)
BSVT
(2021)
FTSE
All Share
(Aug 2023)
5
S&P Europe
Small Cap
(Sep 2023)
6
Scope 1+2 tCO
2
e 2,145 6,269 – –
Scope 3 tCO
2
e 4,035 3,364 – –
Weighted average carbon intensity (tCO
2
e/£m revenue)
2
45.5 95.2 115 206
Carbon Emissions per £m Invested (tCO
2
e/£m invested)
3
16.4 38.3 130 209
PCAF Score (Scope 1+2)
4
3.7 3.7 – –
1. All data calculated based on holdings as of 31.12.22.
2. WACI – The Company’s exposure to carbon-intensive companies, expressed as weighted-average exposure to investee companies’ scope 1+2
tCO
2
e/£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 tCO
2
e/£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.
5. Source: FTSE, M&G, Border to Coast
6. Source: S&P
In 2022, total emissions (scope 1, 2 and 3) fell by 36per
cent versus 2021. Total scope 1 and 2 emissions for the
Baronsmead portfolio fell by 66per cent, driven in part by
the sale of our stake in Carousel Logistics in January 2022
(2021: 6,353 tCO
2
e). Scope 3 emissions increased by 20per
cent; the biggest contributors to the scope 3 emissions
gure were Anpario and Netcall which accounted for
21per cent of Baronsmead’s scope 3 emissions. Given the
relatively concentrated nature of the portfolio, volatility in
carbon emissions gures is expected.
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 GH25
strategic objective to make a commitment to achieving
net zero emissions in its operations and its investments
and intends to provide an update on this in due course.
More information on Gresham House’s approach to
climate-related risks and opportunities can be found in
its Taskforce on Climate-Related Financial Disclosures
(TCFD) Report here.
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
suciently 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 a publicly 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, nancial performance and ESG considerations.
Dening 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 to the
organisation and its business development, aiming to keep
the directors focused and ensure continued progress.
30
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
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 identied 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
those 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 identied 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 UK
Stewardship 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 various by sources including;
procedures, research, engagement with the company,
discussions with other stakeholders and advisers,
internal discussions and consultations, and other
relevant information.
For the twelve months to 30 September 2023, the Manager
had the opportunity to vote on 1,537 issues. Of these, the
Manager voted for 96.0per cent of resolutions, against
on 2.5per cent, and abstained on 1.5per cent. Of the 39
votes against, the majority were because the resolutions
conicted with the Manager’s house policy, notably to vote
against political donations.
Voting decisions
The Manager does not have a set policy dening how voting
decisions should be made on specic 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 10 per 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.
31
01 Strategic report - Sustainable investment
Annual Report and Audited Financial Statements 2023
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 page99, is designed to ensure
that the Company continues to qualify, and is approved, as
a VCT by HM Revenue and Customs.
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
prots 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 a forward view of
rstly the broader business environment, then the sector
and nally the specic 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. Diversication 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 adult content.
The Manager’s Review on pages9 to 14 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 15per cent of the value of its
investments calculated in accordance with Section 278 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 overleaf. Throughout
the year ended 30September 2023 and at the date of this
report, the Company continued to meet these tests.
32 Annual Report and Audited Financial Statements 2023
01 Strategic report
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;
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 17 November 2015, the VCT has
not made an investment in a company which exceeds
the maximum permitted age requirement;
10 To ensure that since 17 November 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.
Appointment of the Manager
The Board expects the Manager to deliver a performance
which meets the objective of achieving positive long‑
term investment returns, including tax free dividends.
A review of the Company’s performance during the
nancial 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 5 to 8. The Board
assesses the performance of the Manager in meeting
the Company’s objective against the KPIs highlighted on
page3 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 a recommendation 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, up to 30 September
2023, the Manager received a fee of 2.5 per cent per
annum of the net assets of the Company. From 1 October
2023, the Manager will receive a fee of 2.5 per cent
per annum of the net assets of the Company up to and
including £209,658,860 (being the total net assets as at
30 September 2023) and 2.0 per cent per annum of the
amount by which the net assets exceed £209,658,860.
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 3.5 per 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
2023 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 paid to 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.
33Annual Report and Audited Financial Statements 2023
01 Strategic report - Other matters
Nil performance fee is payable for the year to 30September
2023 (2022: £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
Baronsmead VCTs.
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 nancial instruments, such as 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
prots 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
nancial 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 20 per
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 dene a “permanent equity” investment is one where
permanent equity is greater than 25 per cent of the total or
where permanent equity is greater than £250,000.
Under the terms of the amended VCT incentive scheme,
in circumstances where the Baronsmead VCTs hold a
sucient number of prior ranking nancial 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 0.75 per
cent) of all instruments available to the Baronsmead VCTs
and they also receive an option over a further proportion
(currently 12 per 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, 104 executives
have invested a total of £1.1 million in 90 companies. At
30 September 2023, 51 of these investments have been
realised generating proceeds of £402 million for the
Baronsmead VCTs and £22 million for the VCT incentive
scheme. For Baronsmead Second Venture Trust, the
average money multiple on these 51 realisations was
1.8x times cost. Had the VCT incentive shares been held
instead by the Baronsmead VCTs, the extra return to
shareholders would have been the equivalent of 3.2p a
share over 19 years (based on the current number of shares
in issue). The Board considers this cost to retain quality
people to be in the best interests of shareholders.
Advisory and Directors’ fees
During the year, Gresham House Asset Management
Limited received £191,000 (2022: £295,000) advisory fees,
£412,000 (2022: £528,000) directors’ fees for services
provided to companies in the investment portfolio and
incurred abort costs of £4,000 (2022: £7,000) 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.
34
01 Strategic report - Other matters
Annual Report and Audited Financial Statements 2023
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
30September 2026.
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 nding, 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
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. This review has considered the principal risks
as outlined on pages 22 and 23.
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 ve
years, cash and liquid money market funds have averaged
c.17 per cent of the NAV and comprised 9 per cent of the
30September 2023 NAV. Cash balances can uctuate over
time due to changes in market conditions, but positive
cash levels are expected to be maintained over the period.
The Company has no debt, and it is expected that the
Company will remain ungeared for the foreseeable future.
The Directors have also considered the Company’s income
and expenditure projections and nd 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. The Directors 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 prole, 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
30September 2026.
35Annual Report and Audited Financial Statements 2023
01 Strategic report - Other matters
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 conrms 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 nal dividend following
the AGM in February/March; and
The Board will use, as a guide, when setting the dividends
for a nancial year, a sum representing 7 per cent of the
opening NAV of that nancial year.
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 launched a new offer
for subscription in December 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 3,143,000 shares were
bought in this way during the year to 30September 2023.
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 2,088,000 shares were bought by
investors in the Company’s existing shares in the year to
30September 2023.
36
01 Strategic report - Other matters
Annual Report and Audited Financial Statements 2023
Directors’ duties
Overview
Section 172 of the Companies Act 2006 (the “Act”) requires
the Directors to act in good faith and in a way that is most
likely to promote the success of the Company for the
benet of its shareholders.
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.
Fullling 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. A
Company 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. The Board's
Schedule of Matters Reserved and the Committees' Terms
of Reference are both reviewed at least annually.
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 pages38 to 41.
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 AIC
A range of reputable external service providers
37Annual Report and Audited Financial Statements 2023
01 Strategic report
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 2023 AGM and the Company was delighted
to answer those questions received. The Chair presented on the
Company’s outlook for 2023 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 5 March
2024. 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 2024 AGM can be found in
the Chair’s Statement on pages5 to 8 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 nancial 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 oce. 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.
38
Annual Report and Audited Financial Statements 2023
01 Strategic report - Directors’ duties
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. In
addition, 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 conicts 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
VCT legislation.
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. For
unquoted and larger AIM holdings the Manager is an inuential
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.
External
service providers
To function as a VCT with
a premium 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.
39
01 Strategic report - Directors’ duties
Annual Report and Audited Financial Statements 2023
Stakeholder Group Importance Board Engagement
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
its shareholders.
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 conrmation 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.
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 fullled
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 beneting from long-term structural growth trends, whilst
recognising the risk management benets of diversication in
portfolio construction.
The Company has several policies in place to maintain a culture of
good governance including those relating to Directors’ conicts
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.
40
Annual Report and Audited Financial Statements 2023
01 Strategic report - Directors’ duties
Principal Decision Long-Term Impact Stakeholders and Engagement
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
nancial 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
signicantly 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 Board considers 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 pages 48 to 54.
Approval of
fundraising
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 manages.
The Strategic Report has been approved by the Board of Directors.
On behalf of the Board
Sarah Fromson
Chair
21 December 2023
41
01 Strategic report - Directors’ duties
Annual Report and Audited Financial Statements 2023
Board of Directors
Sarah Fromson
Chair and Nomination
Committee Chair
Appointed: 1 October 2019
Graham McDonald
Non-Executive Director
Appointed: 16 February 2021
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. In
March 2023 Sarah became an Advisory Member of the
Investment Committee to Calouste Gulbenkian Foundation,
a Lisbon-based entity.
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 in 2022. Sarah was
previously Chief Investment Risk Ocer at RBS Asset
Management (formerly Coutts).
Shareholding: 77,988 ordinary shares
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.
Graham stepped down from his position as Chair of
Continulus Limited in August 2023 and as advisor to
Arcano Capital Partners and Vedra Partners in December
2022 and April 2023, respectively. He is Strategic Advisor a
to Par Equity LLP.
Shareholding: 51,105 ordinary shares
Tim Farazmand
Non-Executive Director and
Management Engagement &
Remuneration Committee Chair
Appointed: 1 May 2020
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
Chairs The Lakes Distillery. Tim stepped down from his
position as Director of Vinoteca prior to the Company
entering into voluntary liquidation. Tim also joined as
an Advisory Board member to the AIM company Onward
Opportunities in May 2023.
Shareholding: 180,383 ordinary shares
Malcolm Groat
Senior Independent Director and
Audit & Risk Committee Chair
Appointed: 11 March 2016
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 nancial 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*
*Shares held by Person Closely Associated to Malcolm Groat.
43Annual Report and Audited Financial Statements 2023
02 Directors’ report
Directors’ report
The Directors of Baronsmead Second
Venture Trust plc (Reg: 04115341) present
their twenty-third Annual Report and Audited
Financial Statements of the Company
for the year to 30 September 2023.
Shares and shareholders
Share capital
Pursuant to the prospectus published by the Company
on 16 December 2022 in conjunction with Baronsmead
Venture Trust plc in relation to an offer for subscription to
each raise up to £20 million (before costs) with an over-
allotment facility to each raise up to a further £5 million,
the Company issued a total of 38,390,060 ordinary shares
in the year ended 30 September 2023 by way of three
allotments, raising approximately £25 million (before
costs). Details of these allotments are as set out below:
On 30 January 2023, the Company issued 11,978,695
ordinary shares under the rst allotment at an average
price of 68.19 pence per share. The shares were admitted
to trading on 3 February 2023.
On 13 March 2023, the Company issued 7,356,544
ordinary shares under the second allotment at an
average price of 65.72 pence per share. The shares were
admitted to trading on 17 March 2023.
On 3 April 2023, the Company issued under the third
allotment 19,054,821 ordinary shares at an average
price of 62.96 pence and were admitted to trading
on 5 April 2023.
At the AGM held on 1 February 2023, 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
48,855,312 ordinary shares.
During the year, the Company bought back a total
of 5,247,081 ordinary shares to be held in Treasury,
representing 1 per cent of the issued share capital as at
30 September 2023, with an aggregate nominal value of
£524,708. The total amount paid for these shares was
£3,141,574. Since 30 September 2023, 1,673,403 shares
have been bought back by the Company. The Company has
remaining authority to buy back 43,583,671 shares under
the resolution approved at the AGM in 2023.
During the year, the Company sold 1,821,803 ordinary
shares from Treasury. The total amount received by the
Company for these shares was £1,063,023. 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 as follows:
Shares Total
% of
Shares in
issue
Nominal
Value
In issue 396,279,533 100.00 £39,627,953.30
Held in Treasury 34,026,367 8.59 £3,402,636.70
In circulation 362,253,166 91.41 £36,225,316.60
The total voting rights as at 30 September 2023 were
362,253,166. Since then, the Company has bought back
1,673,403 shares, resulting in the total voting rights being
360,579,763 as at 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 prots of the Company, to receive a copy of the Annual
Report and Financial Statements and to a nal 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 takeover bid.
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 2023, 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 benecial interests exceeding 3 per cent of
the total voting rights.
44 Annual Report and Audited Financial Statements 2023
02 Directors’ report
Tax free dividends
The Company has paid or declared the following dividends
for the year paid or proposed to 30 September 2023:
Dividends £’000
Interim dividend of 2.25p per ordinary share
paid on 8 September 2023
8,148
Final dividend of 2.25p per ordinary share to
be paid on 8 March 2024*
8,151
Total dividends paid for the year 16,299
* Calculated on shares in circulation as at 30 September 2023.
Subject to shareholder approval at the AGM on 5March
2024, a nal dividend of 2.25p per share will be paid on
8March 2024 to shareholders on the register at 9February
2024. The ex-dividend date will be 8February 2024.
Annual General Meeting
The AGM will be held on 5March 2024. 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 Act 2006. Further details
in relation to the appointed Directors and the governance
arrangements of the Board can be found on page 43 and in
the Corporate Governance Statement.
Directors are entitled to a payment in lieu of three months’
notice by the Company for loss of oce in the event of
a takeover bid.
Directors’ indemnity
Directors’ and ocers’ 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.
Conicts of interest
The Directors have declared any conicts or potential
conicts of interest to the Board of Directors which has
the authority to approve such situations. The Company
Secretary maintains the Register of Directors’ Conicts
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 conicts of interest.
Directors who have conicts of interest do not take part in
discussions which relate to any of their conicts.
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 nancial instruments comprise equity
and xed 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 nancial
risk management objectives and policies arising from its
nancial 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 oce at the date of approval of
this Directors’ Report conrm 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 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
that information.
45Annual Report and Audited Financial Statements 2023
02 Directors’ report - Directors’ report
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 sucient 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
nancial statements are approved. As at 30 September
2023, the Company held cash balances and investments
in readily realisable securities with a value of £18million,
representing 9per 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 ow projections, taking
into account the current economic environment and
other, potential changes in performance, show that the
Company has sucient funds to meet both its contracted
expenditure and its discretionary cash outows in the form
of the share buyback programme and dividend policy.
Future developments
The outlook for the Company is set out in the Chair’s
Statement on pages 7 to 8.
Listing rule disclosure
The Company conrms that there are no items which
require disclosure under the listing rule 9.8.4R in respect of
the year ended 30 September 2023.
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 40,000 kWh 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 pages 24 to 31 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
21 December 2023
46
02 Directors’ report - Directors’ report
Annual Report and Audited Financial Statements 2023
47Annual Report and Audited Financial Statements 2023
02 Directors’ report - Directors’ report
Corporate governance
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 conrmed 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 2023, the Company complied with
most of the principles and provisions of the AIC Code and
the table on the following pagesreports 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 Ocer 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 condence
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 ve 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.
48 Annual Report and Audited Financial Statements 2023
02 Directors’ report
AIC
Code Principle Compliance Statement
BOARD LEADERSHIP AND PURPOSE
A. 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 ecient 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
‘ESG Decision Tool’.
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
ecient structure. It does 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 service providers.
C. The board should ensure
that the necessary
resources are in place
for the company to
meet its objectives and
measure performance
against them. The board
should also establish a
framework of prudent
and effective controls,
which enable risk to be
assessed and managed.
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 prole of the Company
and, in turn, attracting new shareholders.
The Board has agreed specic 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.
49
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
AIC
Code Principle Compliance Statement
D. 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.
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 Oce. All Directors make themselves available to meet shareholders
at the Company’s AGM.
The Directors’ Statement on meeting their responsibilities under Section 172 of
the Companies Act 2006 can be found on pages 37 to 41.
DIVISION OF RESPONSIBILITIES
F. 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.
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 37 to 41.
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 nancial position and all Directors have timely access to all
relevant management, nancial and regulatory information.
50
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
AIC
Code Principle Compliance Statement
G. 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.
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.
H. Non-executive directors
should have sucient
time to meet their
board responsibilities.
They should provide
constructive challenge,
strategic guidance, offer
specialist advice and
hold third-party service
providers to account.
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 conict 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.
I. The board, supported by
the company secretary,
should ensure that it has
the policies, processes,
information, time, and
resources it needs in order
to function effectively
and eciently.
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 ows
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.
51
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
AIC
Code Principle Compliance Statement
COMPOSITION, SUCCESSION AND EVALUATION
J. 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.
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 lled by the most qualied candidates and therefore no formal diversity
policy is in place.
K. 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.
The Directors’ biographical details are set out on page 43. 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 the management of the Company, having regard to anticipated challenges
and opportunities.
52
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
AIC
Code Principle Compliance Statement
L. 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.
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 a
whole, 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 reecting on
their personal contribution and commitment as a Director during the period and
discussed any key individual areas of focus with the Chair.
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 58.
AUDIT, RISK AND INTERNAL CONTROL
M. 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 nancial and
narrative statements.
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
by the 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 55 to 57.
N. The board should present
a fair, balanced, and
understandable assessment
of the company’s
position and prospects.
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.
O. 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.
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 22 and 23.
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 61.
53
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
AIC
Code Principle Compliance Statement
REMUNERATION
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 reect the time commitment and responsibilities
of the role. As stated in the Remuneration Report on page 62 the Company’s
policy is that remuneration of Non-Executive Directors should reect 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.
Q. A formal and transparent
procedure for developing
policy remuneration
should be established. No
director should be involved
in deciding their own
remuneration outcome.
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 2023.
Further details on the Directors’ remuneration is contained in the Directors’
Remuneration Report on pages 61 to 65.
R. Directors should exercise
independent judgement and
discretion when authorising
remuneration outcomes,
taking account of company
and individual performance,
and wider circumstances.
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 Chair of the MERC.
54
02 Directors’ report - Corporate governance
Annual Report and Audited Financial Statements 2023
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. The Board 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:
Audit & Risk Committee report
Chair: Malcolm Groat
I am pleased to present the Audit & Risk Committee report
for the year ended 30September 2023.
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 nancial and risk management
experience gained from the venture capital and/or
nancial services sector to full 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 nancial 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 reecting 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 30September
2023 and audit fees with BDO; and
Reviewed its own performance as a Committee and its
Terms of Reference.
The signicant issues considered by the Committee during
the year ended 30September 2023 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 also uses independent valuations in conjunction
with their own to provide third-party assurance and risk
mitigation to the Committee. 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.
55Annual Report and Audited Financial Statements 2023
02 Directors’ report
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 provides each Audit & Risk
Committee meeting a VCT status monitoring report which
details the Company’s position against each of the VCT
qualication tests.
Looking ahead to the next nancial 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
nancial requirements and viability for the forthcoming
year and the longer period of three years, particularly
in light of the ongoing effects of rising ination. This
assessment included the review of possible declines in
investment valuations and the impact of rising ination on
nancial statements disclosures including those relating
to principal risks. As a result of this assessment, the
Committee concluded that the 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 pages46 and 35 respectively.
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 Ocer 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 prole 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 30September 2023, 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
pages22 and 23.
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 a Risk 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 identied by the Company’s third-party service
providers and the mitigating actions put in place for these.
The Audit & Risk Committee was satised 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.
56 Annual Report and Audited Financial Statements 2023
02 Directors’ report - Audit & Risk Committee report
External auditor
In early 2021, the Company completed an audit tender
process. Three rms were invited and the Board appointed
BDO as external auditor to the Company with effect from
28May 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
30September 2023. 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 ve 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 2024 AGM.
An audit fee of £51,000 (exclusive of VAT) has been agreed
in respect of the year ended 30September 2023.
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 nancial 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.
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 satised that BDO
is independent to the Company.
Malcolm Groat
Audit & Risk Committee Chair
21December 2023
57Annual Report and Audited Financial Statements 2023
02 Directors’ report - Audit & Risk Committee report
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,
condentially shared between Directors and the Chair.
This thorough evaluation process enables each Director
to evaluate, assess and reect 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.
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
30September 2024. The Nomination Committee is also
responsible for assessing the time commitment required
for each Board appointment and ensuring that the present
incumbents have sucient time to undertake them.
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 fullled by the most qualied 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.
The Board notes the FCA rules on diversity and inclusion
on company boards, namely, that from accounting periods
starting on or after 1 April 2022:
a) At least 40per cent of individuals on the Board to
be women;
b) At least one senior Board position to be held by a
woman (such as Chair, /SID, Chief Executive Ocer
(“CEO”) or Chief Financial Ocer (“CFO”); and
c) At least one individual on the Board to be from a
minority ethnic background.
58 Annual Report and Audited Financial Statements 2023
02 Directors’ report
In line with Listing Rule 9 Annex 2.1, the below tables in the prescribed format, show the gender and ethnic background of
the Directors at the date of this Report.
Gender identity or sex
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID and
Chair)*
Men 3 75% 1
Women 1 25% 1
Not specied/ prefer not to say – –
Ethnic background
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
(CEO, CFO.
SID and
Chair) *
White British or other White (including minority White groups) 3 75% 2
Mixed/Multiple Ethnic Groups 1 25%
Asian/Asian British – –
Black/African/Caribbean/Black British – –
Other ethnic group, including Arab – –
Not specied/prefer not to say – –
* The company is externally managed and does not have executive management functions, specically it does not have a CEO or CFO.
The information presented in these tables was collected on a self-reporting basis.
As at 30 September 2023, the Board comprised of four
members. The gender breakdown is as follows: 1 (25per
cent female); 3 (75per cent male). Three Board members
identify as White British or other White (including minority
White groups) and one as mixed/multiple ethnic groups.
The Board is pleased to have met recommendation b) At
least one senior Board position to be held by a woman,
with the position of Chair being held by a female. Whilst
the Board ensures that all appointments are made on
merit and that any Board vacancies are lled by the
most qualied candidates, the Board supports the
recommendations for senior positions to be held by female
directors and for ethnic representation on the Board, both
matters will be considered when assessing the Board’s
succession plan.
As the Company is an externally managed investment
Company, it has no executive staff and therefore does
not have a CEO or a CFO, both roles are deemed as
senior board positions by the FCA. The Chair and Senior
Independent Director are also considered senior Board
positions by the FCA, one of which is held by a female
(Chair) and the other position (SID) held by a male.
Further explanation of the Board’s succession planning
and approach to diversity can be found on page58.
59Annual Report and Audited Financial Statements 2023
02 Directors’ report - Nomination Committee report
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 a range
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 beneting 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.
Board of Directors Audit Committee
Management
Engagement and
Remuneration
Committee
Nomination
Committee
Eligible Attended Eligible Attended Eligible Attended Eligible Attended
Sarah Fromson 4 4 3 3 2 2 1 1
Malcolm Groat 4 4 3 3 2 2 1 1
Tim Farazmand 4 4 3 3 2 2 1 1
Graham McDonald 4 4 3 3 2 2 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
21December 2023
60 Annual Report and Audited Financial Statements 2023
02 Directors’ report - Nomination Committee report
Directors’ remuneration report
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 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
pages67 to 74.
An ordinary resolution to approve the Directors’
Remuneration Report will be proposed at the forthcoming
AGM on 5March 2024.
Annual statement from the Chair 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
page43 of the Directors’ Report.
As explained in the Corporate Governance Statement on
pages48 and 54, given the size and nature of the company,
it is felt appropriate that all Directors are members of the
Management Engagement & Remuneration Committee.
The Company 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 qualied 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.
61Annual Report and Audited Financial Statements 2023
02 Directors’ report
In recent years, the Board has seen a signicant 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 fundraise. 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
pages48 to 54, 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 Company’s Articles of Association. In November
2022, the Management Engagement and Remuneration
Committee met to consider the level of Directors’ fees
for the year ending 30 September 2023 and concluded
that it was appropriate to increase the Directors' fees by
5 per cent to reect inationary 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 Chair (if
separate to the Senior Independent Director) from £30,000
to £31,500, and the Chair's fee was increased from
£36,000 to £37,800.
In August 2023, the Management Engagement and
Remuneration Committee met to review the level of
Directors’ fees for the year ending 30 September 2024 and
concluded that the fees remained appropriate and would
not be increased for the year ending 30 September 2024.
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 Shareholder
views on remuneration received from shareholders and the
performance of the Company’s portfolio.
Directors’ remuneration policy
The Board’s policy is that the remuneration of Non-
Executive Directors should reect 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 sucient to attract and retain the Directors
needed to oversee properly the Company and to reect
the specic circumstances of the Company, the duties
and responsibilities of the Directors and the value and
amount of time committed to the Company’s affairs.
The remuneration policy, as set out above, was approved
by the members at the AGM held on 1 February 2023. There
are no proposed changes to the policy and therefore it is
intended that this policy will continue for the year ending
30 September 2024 and subsequent years. In accordance
with the regulations, an Ordinary Resolution to approve the
Directors' remuneration policy will be put to shareholders
at least once every three years.
A copy of the Company’s Remuneration Policy can be obtained
by writing to the Company Secretary at the Company’s
registered oce.
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 benets 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 three months 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 oce of the Company.
62
Annual Report and Audited Financial Statements 2023
02 Directors’ report - Directors’ remuneration report
BSVT Share Price and the VCT Generalist Share Price Total Return Performance Graph
BSVT Share Price Total Return
VCT Generalist All-Share Total Return Source: FE Analytics
200
180
160
140
120
100
Sep-23Sep-22Sep-21Sep-20Sep-19Sep-18Sep-17Sep-16Sep-15Sep-14Sep-13
%
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
(2023 AGM Results)
Number
of votes
Percentage of
votes cast
For 12,063,433 89.78%
Against 1,373,455 10.22%
Votes withheld 252,084
Remuneration policy
(2023 AGM Results)
Number of
votes
Percentage of
votes cast
For 12,104,133 90.38%
Against 1,287,708 9.62%
Votes withheld 297,131
Annual remuneration report
Scheme interests awarded during the
nancial year
The Company does not operate a share incentive plan.
The Directors do not 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 Directors’ report.
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 pages5 to 14.
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, the
Committee reviews the performance of the fund and all
aspects of the service provided by the Manager. It also
reviews the terms and conditions of the appointment,
including the level of the Manager’s fees.
63Annual Report and Audited Financial Statements 2023
02 Directors’ report - Directors’ remuneration report
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 30September Percentage change from
2023
£
2022
£
2021
£
2020
£
2022 to
2023*
%
2021 to
2022*
%
2020 to
2021*
%
Sarah Fromson (Chair) 37,800 36,000 36,000 32,733 5.0 – 10.0
Tim Farazmand 29,400 28,000 28,000 11,666 5.0 – 140.0
Malcolm Groat 31,500 30,000 30,000 30,000 5.0 – –
Graham McDonald 29,400 28,000 15,050 N/A 5.0 86.0 N/A
Total 128,100 122,000 109,050 74,399
* Individual Director fees did not change between the year ended 30 September 2021 and 30 September 2022. The percentage changes reected
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
27September 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.
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 gures below are not directly
comparable due to:
the payment of the nal dividend for the prior year within the current nancial year; and
the fundraising which was conducted between January and April 2023.
Year to
30September
2023
£
Year to
30September
2022
£
Percentage
change
Total Directors’ fees 128,100 122,000 5.0
Shares repurchased 3,141,000 2,775,000 13.2
Dividends 18,276,000 20,580,000 (11.2)
NAV 209,659,000 212,986,000 (1.6)
The Directors’ fees as a percentage of NAV for the year to 30 September 2023 were 0.061 per cent and for the year to
30September 2022 were 0.057 per cent.
64
02 Directors’ report - Directors’ remuneration report
Annual Report and Audited Financial Statements 2023
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 30 September 2023
were as follows:
30September
2023
Ordinary
10p shares
30September
2022
Ordinary
10p shares
Sarah Fromson (Chair) 7 7,988 55,926
Tim Farazmand 180,383 128,403
Malcolm Groat* 306,772 306,772
Graham McDonald 51,105 32,012
Total 616,248 523,113
* These shares are held by a person closed associated to Malcolm Groat.
There have been no changes to these holdings between
30September 2023 and the date of this report.
Approved by the Board of Directors and signed by
Tim Farazmand
Chair of the Management Engagement and
Remuneration Committee
21December 2023
02 Directors’ report - Directors’ remuneration report
65Annual Report and Audited Financial Statements 2023
Statement of Directors’ responsibilities
Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing the Annual
Report and the nancial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare nancial
statements for each nancial year. Under that law, they
have elected to prepare the nancial statements in
accordance with UK Accounting Standards, including
FRS102 The Financial Reporting Standard applicable in the
UK and Republic of Ireland.
Under company law, the Directors must not approve
the nancial statements unless they are satised that
they give a true and fair view of the state of affairs of
the company and of the prot or loss of the company for
that period. In preparing these nancial 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 nancial 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 sucient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the nancial position of the Company
and enable them to ensure that its nancial statements
comply with the Companies Act 2006. They are responsible
for such internal control as they determine is necessary
to enable the preparation of nancial 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
otherirregularities.
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 those regulations.
The Directors are responsible for ensuring the Annual
Report and the nancial 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 nancial statements, which may vary
from legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the responsibility
of the Directors. The Directors’ responsibility also extends
to the ongoing integrity of the nancial statements
contained therein.
Responsibility statement of the
directors in respect of the annual
nancial report
We conrm that to the best of our knowledge:
the nancial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, nancial position
and prot 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 it faces.
We consider the Annual Report and nancial 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
21 December 2023
66 Annual Report and Audited Financial Statements 2023
02 Directors’ report
Independent auditor’s report
Opinion on the nancial statements
In our opinion the nancial statements:
give a true and fair view of the state of the Company’s
affairs as at 30 September 2023 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 nancial statements of Baronsmead
Second Venture Trust Plc (the ‘Company’) for the year
ended 30 September 2023 which comprise the income
statement, the balance sheet, the statement of changes
in equity, the statement of cash ows and notes to the
nancial statements, including a summary of signicant
accounting policies. The nancial 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 nancial
statements section of our report. We believe that the audit
evidence we have obtained is sucient 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 nancial statements for the year ending
30 September 2021 and subsequent nancial periods.
The period of total uninterrupted engagement including
retenders and reappointments is 3 years, covering the years
ending 30 September 2021 to 30 September 2023. We remain
independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the nancial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fullled
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 nancial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the nancial statements
is appropriate. Our evaluation 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 prepared by
management expert 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 ows 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; and
Evaluating the Directors’ method of assessing the
going concern in light of market volatility and the
present uncertainties in economic recovery created by
rising ination.
Based on the work we have performed, we have not
identied any material uncertainties relating to events
or conditions that, individually or collectively, may cast
signicant doubt on the Company’s ability to continue as a
going concern for a period of at least twelve months from
when the nancial statements are authorised for issue.
to the members of Baronsmead Second Venture Trust plc
67Annual Report and Audited Financial Statements 2023
02 Directors’ report
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 nancial 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.
Overview
2023 2022
Key audit matters Valuation of unquoted investments 4 4
Materiality Company nancial statements as a whole
£3.69m (2022: £2.66m) based on 2% (2022: 1.5% of
gross investments) of net assets adjusted for signicant
fundraising in the year
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 nancial 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 signicance in our audit of the
nancial statements of the current period and include the most signicant assessed risks of material misstatement
(whether or not due to fraud) that we identied, 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. These matters were
addressed in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of unquoted
investments
(Notes 2.3, 3.3 of the
nancial statements)
We consider the valuation of
investments to be the most
signicant 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.
Our unquoted equity investments valuation testing was risk
based according to our preliminary analytical procedures,
having regard to the subjectivity of the inputs to the
valuations, the value of individual investments, the nature of
the investment and the extent of the fair value movement.
For the unquoted portfolio we:
Considered whether the valuation methodology was
the most appropriate in the circumstances under the
International Private Equity and Venture Capital Valuation
(“IPEV”) Guidelines. Where there was a change in valuation
methodology from prior year, we assessed whether the
change was appropriate;
Considered the change in market multiples and discount
applied from prior year and if they were supported by the
performance of the underlying investment;
Checked that the valuation was based on recent nancial
information and reviewed the arithmetic accuracy
of the valuation.
68 Annual Report and Audited Financial Statements 2023
02 Directors’ report - Independent auditor’s report
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of unquoted
investments
(continued)
(Notes 2.3, 3.3 of the
nancial statements)
Further, for the unquoted investments samples selected for
detailed testing we:
Re-performed the calculation of the investment valuation;
Challenged and corroborated the inputs to the valuation
with reference to management information of investee
companies, market data and our own understanding
and assessed the impact of the estimation uncertainty
concerning these assumptions and the disclosure of
these uncertainties in the nancial statements;
Reviewed the historical nancial statements and any
recent management information available to support
assumptions about maintainable revenues, earnings or
cash ows used in the valuations;
Considered the revenue or earnings multiples applied and
the discounts applied by reference to observable listed
company market data; and
Challenged the consistency and appropriateness of
adjustments made to such market data in establishing
the revenue, cash ow 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.
Where appropriate, we performed a sensitivity analysis by
developing our own point estimate where we considered
that alternative input assumptions could reasonably have
been applied and we considered the overall impact of such
sensitivities on the portfolio of investments in determining
whether the valuations as a whole are reasonable and
free from bias.
Key observations
Based on the procedures performed we consider the
investment valuations to be appropriate considering the
level of estimation uncertainty.
69
02 Directors’ report - Independent auditor’s report
Annual Report and Audited Financial Statements 2023
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
inuence the economic decisions of reasonable users that are taken on the basis of the nancial 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 identied
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the nancial
statements as a whole.
Based on our professional judgement, we determined materiality for the nancial statements as a whole and
performance materiality as follows:
Company nancial statements
2023
£
2022
£
Materiality £3,690,000 £2,660,000
Basis for determining materiality 2% of net assets adjusted for
signicant fundraising in the year.
1.5% of gross investments
Rationale for the benchmarkapplied In setting materiality, we have had
regard to the nature and disposition
of the investment portfolio. Given
that the VCT’s portfolio is highly
weighted in listed equities and also
comprising unquoted investments
which would typically have a wider
spread of reasonable alternative
possible valuations, we have
applied a percentage of 2% of net
assets adjusted for signicant
fundraising in the year.
The basis for setting materiality
has been changed as net assets
is considered to be the key area
of focus for the users of the
nancial statements, given the
nature of the entity.
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.
Performance materiality £2,760,000 £1,990,000
Basis for determining
performance materiality
75% of materiality
Rationale for the percentage
applied for performance
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.
70
Annual Report and Audited Financial Statements 2023
02 Directors’ report - Independent auditor’s report
Lower testing threshold
We determined that for Revenue return before tax, a
misstatement of less than materiality for the nancial
statements as a whole, could inuence users of the
nancial 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 £280,000 (2022: £300,000) based on 5% of gross
expenditure (2022: 5% gross expenditure).
Reporting threshold
We agreed with the Audit Committee that we would
report to them all individual audit differences in excess
of £180,000 (2022: £133,000). 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 nancial statements other than
the nancial statements and our auditor’s report thereon.
Our opinion on the nancial 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 nancial 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 nancial 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 specied 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 nancial statements or our knowledge obtained
during the audit.
Going concern and
longer-term viability
The Directors’ statement with regards to the appropriateness of adopting the
going concern basis of accounting and any material uncertainties identied set out
on page 46; and
The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate set out on page 35.
Other Code provisions
Directors’ statement on fair, balanced and understandable set out on page 66;
Board’s conrmation that it has carried out a robust assessment of the emerging
and principal risks set out on pages 22 and 23;
The section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on page 56; and
The section describing the work of the audit committee set out on pages 55 to 57.
71
02 Directors’ report - Independent auditor’s report
Annual Report and Audited Financial Statements 2023
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.
Strategic report and
Directors’ report
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
nancial year for which the nancial statements are prepared is consistent with the
nancial 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 identied material misstatements in
the strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which
we are required to
report by exception
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 nancial 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 specied by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
responsibilities, the Directors are responsible for the
preparation of the nancial statements and for being
satised that they give a true and fair view, and for such
internal control as the Directors determine is necessary
to enable the preparation of nancial statements that
are free from material misstatement, whether due to
fraud or error.
In preparing the nancial 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 nancial statements
Our objectives are to obtain reasonable assurance about
whether the nancial 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 inuence
the economic decisions of users taken on the basis of
these nancial statements.
72
02 Directors’ report - Independent auditor’s report
Annual Report and Audited Financial Statements 2023
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:
Non-compliance with laws and regulations
Based on:
Our understanding of the Company and the industry in
which it operates;
Discussion with management, those charged with
governance and the Audit Committee; and
Obtaining and understanding of the Company’s policies
and procedures regarding compliance with laws
and regulations,
we considered the signicant laws and regulations to be
the Companies Act 2006, the FCA listing and DTR rules,
the principles of the UK Corporate Governance Code,
industry practice represented by the SORP and updated in
2022 with consequential amendments and the applicable
nancial reporting framework. We also considered the
Company’s qualication as a VCT under UK tax legislation.
Our procedures in respect of the above included:
Agreement of the nancial 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;
Obtaining the VCT compliance reports prepared by
management’s expert 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 meeting of those charged with
governance throughout the period for instances of non-
compliance with laws and regulations.
Fraud
We assessed the susceptibility of the nancial statement
to material misstatement including fraud.
Our risk assessment procedures included:
Enquiry with management and those charged with
governance and the Audit Committee regarding any
known or suspected instances of fraud;
Obtaining an understanding of the VCT policies and
procedures relating to:
– Detecting and responding to the risks of fraud; and
– Internal controls established to mitigate risks
related to fraud.
Review of minutes of meeting of those charged with
governance for any known or suspected instances of fraud;
Discussion amongst the engagement team as to how and
where fraud might occur in the nancial statements; and
Considering performance incentive schemes and
performance targets and the related nancial statement
areas impacted by these.
Based on our risk assessment, we considered the areas
most susceptible to fraud to be the valuation of unquoted
investments, management override of controls and
misappropriation & completeness of cash.
Our procedures in respect of the above included:
The procedures set out in the Key Audit
Matters section above;
Obtaining independent evidence to support the
ownership of investments;
Recalculating investment management fees in total;
Obtaining third party conrmations of all bank balances
and review other matters on conrmation letters such as
security held, derivative nancial instruments and facilities
renewal and consider implications on audit approach;
To check for the completeness and misappropriation of
cash during the year we have reviewed bank statements
for one month before and after year end and identied
transactions greater than 20% of performance
materiality and obtain an understanding of the business
rationale for the transactions. Agree transactions to
supporting documentation to conrm as bona de
business transactions; and
Reviewing the General Ledger and Journals listing for
period end nancial reporting journals based on our
risk assessment criteria and performing testing over
a sample of expense journals throughout the year to
incorporate unpredictability into our journal testing
agreeing to supporting documentation and evaluating
whether there was evidence of bias by the Investment
Manager and Directors that represented a risk of
material misstatement due to fraud.
73
02 Directors’ report - Independent auditor’s report
Annual Report and Audited Financial Statements 2023
We also communicated relevant identied laws and
regulations and potential fraud risks to all engagement
team members who were all deemed to have appropriate
competence and capabilities 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 nancial 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 reected
in the nancial 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
21 December 2023
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
74
02 Directors’ report - Independent auditor’s report
Annual Report and Audited Financial Statements 2023
02 Directors’ report - Independent auditor’s report
75Annual Report and Audited Financial Statements 2023
Financial
statements
03
Income statement
For the year ended 30September 2023
Year ended
30September 2023
Year ended
30September 2022
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Losses on investments 2.3 – (4,284) (4,284) – (48,771) (48,771)
Income 2.5 3,082 – 3,082 4,951 – 4,951
Investment management fee 2.6 (1,252) (3,758) (5,010) (1,367) (4,101) (5,468)
Other expenses 2.6 (700) – (700) (669) – (669)
Prot/(loss) before taxation 1,130 (8,042) (6,912) 2,915 (52,872) (49,957)
Taxation 2.9 – – – (263) 263 –
Prot/(loss) for the year,
being total comprehensive
income for the year 1,130 (8,042) (6,912) 2,652 (52,609) (49,957)
Return per ordinary share:
Basic and diluted 2.2 0.33p (2.32p) (1.99p) 0.85p (16.85p) (16.00p)
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 prot 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 81 to 97 form part of these nancial statements.
77
03 Financial statements
Annual Report and Audited Financial Statements 2023
Statement of changes in equity
For the year ended 30September 2023
Non-distributable reserves Distributable reserves
Notes
Called-up
share
capital
£’000
Share
premium
£’000
Revaluation
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 1 October 2022 35,789 106,099 18,834 49,142 3,122 212,986
(Loss)/prot after taxation – – 4,228 (12,270) 1,130 (6,912)
Net proceeds of share
issues, share buybacks &
sale of shares from treasury 3,839 20,452 – (2,413) – 21,878
Dividends paid 2.4 – – – (16,901) (1,375) (18,276)
Cancellation of share
premium – (126,551) – 126,551 – –
Share premium
cancellationcosts – – – (17) – (17)
At 30 September 2023 39,628 – 23,062 144,092 2,877 209,659
For the year ended 30September 2022
Non-distributable reserves Distributable reserves
Notes
Called‑up
share
capital
£’000
Share
premium
£’000
Revaluation
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 1 October 2021 31,206 74,231 7 7,481 63,698 1,758 248,374
(Loss)/prot 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
The notes on pages 81 to 97 form part of these nancial statements.
78
03 Financial statements
Annual Report and Audited Financial Statements 2023
Balance sheet
As at 30September 2023 Company Number: 04115341
Notes
As at
30September
2023
£’000
As at
30September
2022
£’000
Fixed assets
Investments 2.3 210,243 177,705
Current assets
Debtors 2.7 235 152
Cash at bank and on deposit 670 36,622
905 36,774
Creditors (amounts falling due within one year) 2.8 (1,489) (1,493)
Net current (liabilities)/assets (584) 35,281
Net assets 209,659 212,986
Capital and reserves
Called‑up share capital 3.1 39,628 35,789
Share premium 3.2 – 106,099
Capital reserve 3.2 144,092 49,142
Revaluation reserve 3.2 23,062 18,834
Revenue reserve 3.2 2,877 3,122
Equity shareholders’ funds 2.1 209,659 212,986
Net asset value per share
– Basic and diluted 2.1 57.88p 65.08p
The notes on pages 81 to 97 form part of these nancial statements.
The nancial statements were approved, and authorised for issue, by the board of Directors of Baronsmead Second
Venture Trust plc on 21December 2023 and were signed on its behalf by:
Sarah Fromson
Chair
79
03 Financial statements
Annual Report and Audited Financial Statements 2023
Statement of cash ows
For the year ended 30September 2023
Year ended
30September
2023
£’000
Year ended
30September
2022
£’000
Cash ows from operating activities
Investment income received 2,060 4,458
Deposit interest received 83 18
Investment management fees paid (5,031) (5,691)
Other cash payments (700) (657)
Net cash outow from operating activities (3,588) (1,872)
Cash ows from investing activities
Purchases of investments (92,959) (31,600)
Disposals of investments 56,993 43,658
Net cash (outow)/inow from investing activities (35,966) 12,058
Cash ows from investing activities
Gross proceeds of share issues 25,000 38,140
Gross proceeds from sale of shares from treasury 1,063 1,487
Gross costs of share buybacks (3,141) (3,219)
Cost of Share issues (1,028) (1,689)
Costs of share buybacks (16) (15)
Equity dividends paid (18,276) (20,580)
Net cash inow before nancing activities 3,602 14,124
(Decrease)/Increase in cash (35,952) 24,310
Reconciliation of new cash ow to movement in net cash
(Decrease)/increase in cash (35,952) 24,310
Opening cash at bank and on deposit 36,622 12,312
Closing cash at bank and on deposit 670 36,622
Reconciliation of loss before taxation to net cash outow from operating activities
Loss before taxation (6,912) (49,957)
Losses on investments 4,284 48,771
Income reinvested (856) (434)
Increase in debtors (83) (43)
Decrease in creditors (21) (209)
Net cash outow from operating activities (3,588) (1,872)
The notes on pages 81 to 97 form part of these nancial statements.
80
03 Financial statements
Annual Report and Audited Financial Statements 2023
Notes to the nancial statements
For the year ended 30September 2023
We have grouped notes into sections under three key categories:
1. Basis of preparation
2. Investments, performance and shareholder returns
3. Other required disclosures
The key accounting policies have been incorporated throughout the notes to the nancial statements adjacent to the
disclosure to which they relate. All accounting policies are included within an outlined box.
1 Basis of preparation
1.1 Basis of accounting
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 with HMRC.
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 a period of at least 12 months, therefore it is appropriate to apply the going concern basis in preparing the
nancial 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 sucient liquidity to meet both its contracted expenditure and its discretionary cash outows,
including to invest in new opportunities as they arise. The Directors note that the Company’s third-party suppliers
are not experiencing any signicant operational diculties 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 nancial statements.
81
03 Financial statements
Annual Report and Audited Financial Statements 2023
2 Investments, performance and shareholder returns
2.1 Net asset value per share
Number of
ordinary shares
Net asset value per
share attributable
Net asset value
attributable
30September
2023
number
30September
2022
number
30September
2023
pence
30September
2022
pence
30September
2023
£’000
30September
2022
£’000
Ordinary shares (basic) 362,253,166 327,288,384 57.88 65.08 209,659 212,986
2.2 Return per share
Weighted average number
of ordinary shares
Return per
ordinary share
Net prot
after taxation
30September
2023
number
30September
2022
number
30September
2023
pence
30September
2022
pence
30September
2023
£’000
30September
2022
£’000
Revenue 346,626,977 312,132,990 0.33 0.85 1,130 2,652
Capital 346,626,977 312,132,990 (2.32) (16.85) (8,042) (52,609)
Total (1.99) (16.00) (6,912) (49,957)
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 prot 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 signicant impact upon the valuation.
82
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Estimates
The key estimate in the nancial statements is the determination of the fair value of the unquoted investments. This
estimate is key as it signicantly 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 note 3.3 on pages 93 to 95. 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 inuence 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.
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 prot or loss
on disposal is calculated net of transaction costs on disposal.
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 classied 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.
83
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
As at
30September
2023
£’000
As at
30September
2022
£’000
Level 1
Investments traded on AIM 78,973 75,051
Level 2
Collective investment vehicles 80,764 49,502
Investments listed on LSE – 34
Level 3
Unquoted investments 50,506 53,118
210,243 177,705
For the year ended 30September 2023
Level 1 Level 2 Level 3
Traded
on AIM
£’000
Listed on
LSE
£’000
Collective
investment
vehicles
£’000
Unquoted
£’000
Total
£’000
Opening book cost 63,764 3,429 36,557 55,121 158,871
Opening unrealised appreciation/(depreciation) 11,287 (3,395) 12,945 (2,003) 18,834
Opening fair value 75,051 34 49,502 53,118 17 7,705
Movements in the year:
Transfer between levels (1,590) – – 1,590 –
Purchases at cost 2,303 – 82,878 8,634 93,815
Sale – proceeds (661) – (53,898) (2,434) (56,993)
Sales – realised gains/(losses) on sales 149 (34) – 203 318
Unrealised gains/(losses) realised during the year 466 (3,395) – (5,901) (8,830)
Increase/(decrease) in unrealised appreciation 3,255 3,395 2,282 (4,704) 4,228
Closing fair value 78,973 – 80,764 50,506 210,243
Closing book cost 64,431 – 65,537 57,213 187,181
Closing unrealised appreciation/(depreciation) 14,542 – 15,227 (6,707) 23,062
Closing fair value 78,973 – 80,764 50,506 210,243
Equity shares 78,973 – – 26,629 105,602
Preference shares – – – 20,063 20,063
Loan notes – – – 3,814 3,814
Collective investment vehicles – – 80,764 – 80,764
Closing fair value 78,973 – 80,764 50,506 210,243
84
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
For the year ended 30September 2022
Level 1 Level 2 Level 3
Traded
on AIM
£’000
Listed on
LSE
£’000
Collective
investment
vehicles
£’000
Unquoted
£’000
Total
£’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 7 7,481
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)
Sales – 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
The gains and losses included in the above table have all been recognised in the Income Statement on page 77.
In the year ending 30 September 2023, an investment held, Deepverge plc previously Level 1 was transferred to Level 3
following its delisting from AIM.
The Company received £3.1 million (2022: £22.9 million) from investments sold in the year, excluding liquidity funds
redeemed of £53.9 million (2022: £20.8 million). The book cost of these investments when they were purchased
was £11.6million (2022: £13.0 million). 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.
85Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
2.4 Dividends
In accordance with FRS 102, dividends are recognised as a liability in the period in which they are declared.
Year ended
30September 2023
Year ended
30September 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Amounts recognised in the year:
For the year ended 30 September 2023
Interim dividend of 2.25p per ordinary
share paid on 8 September 2023 362 7,785 8,147 – – –
For the year ended 30 September 2022
Final dividend of 3.0p per ordinary share
paid on 3 March 2023 1,013 9,116 10,129 – – –
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
1,375 16,901 18,276 1,288 19,292 20,580
2.5 Income
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 reect 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 (2022: £nil) was
received in the year ended 30 September 2023.
Income from xed 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.
86
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Year ended
30September 2023
Year ended
30September 2022
Quoted
Securities
£’000
Unquoted
securities
£’000
Total
£’000
Quoted
securities
£’000
Unquoted
securities
£’000
Total
£’000
Income from investments
Dividend income 1,822 – 1,822 1,318 211 1,529
Interest income 747 431 1,178 61 3,333 3,394
2,569 431 3,000 1,379 3,544 4,923
Other income
Deposit interest 82 28
Total income 3,082 4,951
All investments have been included at fair value through prot or loss on initial recognition, therefore all investment
income arises on investments at fair value through prot or loss.
2.6 Investment management fee and other expenses
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.
Year ended
30September 2023
Year ended
30September 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment management fee 1,252 3,758 5,010 1,367 4,101 5,468
Performance fee – – – – – –
1,252 3,758 5,010 1,367 4,101 5,468
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 a quarterly basis. The collective investment vehicles, UK Micro Cap, Multi Cap Income and Small Cap, are also
managed by Gresham House. 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. £nil performance fee is payable for the year ended 30 September 2023 (2022: £nil).
87
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Other expenses
Year ended
30September
2023
£’000
Year ended
30September
2022
£’000
Directors’ fees 128 122
Secretarial and accounting fees paid to the Manager 167 149
Remuneration of the auditors and their associates 61 53
Other 344 345
700 669
Information on Directors’ remuneration is given in the Directors’ emoluments table on page 64. During the year there was
no remuneration due to the auditors for non-audit services (2022: £nil).
2.7 Debtors
As at
30September
2023
£’000
As at
30September
2022
£’000
Prepayments and accrued income 235 152
235 152
2.8 Creditors (amounts falling due within one year)
As at
30September
2023
£’000
As at
30September
2022
£’000
Management, secretarial and accounting fees due 1,361 1,377
Share premium cancellation costs 17 –
Other creditors 111 116
1,489 1,493
88
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
2.9 Tax
UK corporation tax payable is provided on taxable prots 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 prots from which the future reversal of the can underlying timing differences be deducted.
A reconciliation of the tax charge/(credit) to the prot before taxation is shown below:
Year ended
30September 2023
Year ended
30September 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Prot/(loss) on ordinary activities before
taxation 1,130 (8,042) (6,912) 2,915 (52,872) (49,957)
Corporation tax at 22.0 per cent
(2022: 19.0 per cent) 248 (1,769) (1,521) 554 (10,046) (9,492)
Effect of:
Non‑taxable losses – 942 942 – 9,266 9,266
Non-taxable dividend income (401) – (401) (208) – (208)
Losses carried forward 153 827 980 (83) 517 434
Tax charge/(credit) for the year – – – 263 (263) –
At 30 September 2023 the Company had unrealised losses of £26,129,035 (2022: £21,679,476). A deferred tax asset of
£6,532,259 (2022: £5,419,869) 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.
89
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
3 Other required disclosures
3.1 Called-up share capital
Allotted, called-up and fully paid:
For the year ended 30September 2023 £’000
357,889,473 ordinary shares of 10p each listed at 30 September 2022 35,789
38,390,060 ordinary shares of 10p each issued during the year 3,839
396,279,533 ordinary shares of 10p each listed at 30 September 2023 39,628
30,601,089 ordinary shares of 10p each held in treasury at 30 September 2022 (3,060)
5,247,081 ordinary shares of 10p each repurchased during the year and held in treasury (525)
1,821,803 ordinary shares of 10p each sold from treasury during the year 182
34,026,367 ordinary shares of 10p each held in treasury at 30 September 2023 (3,403)
362,253,166 ordinary shares of 10p each in circulation* at 30 September 2023 36,225
For the year ended 30September 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
* Carrying one vote each.
The 38,390,060 (2022: 45,829,661) ordinary shares were issued at an average price of 65.12p (2022: 83.22p).
During the year the Company bought back into treasury 5,247,081 (2022: 3,699,362) ordinary shares, representing1.61
(2022: 1.31) per cent of the ordinary shares in circulation at the beginning of the nancial year. During the year the
Company also sold 1,821,803 (2022: 2,184,000) 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
following conditions:
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.
90
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
3.2 Reserves
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.
For the year ended 30September 2023
Distributable reserves Non-distributable reserves
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Share
premium
£’000
Revaluation
reserve
£’000
Total
£’000
At 1 October 2022 49,142 3,122 52,264 106,099 18,834 124,933
Gross proceeds of share issues – – – 21,161 – 21,161
Cancellation of share premium 126,551 – 126,551 (126,551) – (126,551)
Share premium cancellation costs (17) – (17) – – –
Purchase of shares for treasury (3,141) – (3,141) – – –
Sale of shares from treasury 1,063 – 1,063 – – –
Expenses of share issues and buybacks (335) – (335) (709) – (709)
Reallocation of prior year unrealised
losses/gains (8,830) – (8,830) – 8,830 8,830
Realised gain on disposal of investments
#
318 – 318 – – –
Net decrease in value of investments
#
– – – – (4,602) (4,602)
Management fee charged to capital
#
(3,758) – (3,758) – – –
Prot after taxation
#
– 1,130 1,130 – – –
Dividends paid in the year (16,901) (1,375) (18,276) – – –
At 30 September 2023 144,092 2,877 146,969 – 23,062 23,062
91
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
For the year ended 30September 2022
Distributable reserves Non-distributable reserves
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Share
premium
£’000
Revaluation
reserve
£’000
Total
£’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 issues 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 – – –
Prot 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
*
Changes in fair value of investments are dealt with in this reserve.
#
The total of these items is £6,912,000 (2022: £49,957,000) which agrees to the total loss for the year.
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.
Share premium is recognised net of issue costs.
The Company does not have any externally imposed capital requirements.
92
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
3.3 Financial instruments risks
The Company’s nancial instruments comprise equity and xed interest investments, cash balances and liquid resources
including debtors and creditors. The Company holds nancial assets in accordance with its investment policy to invest in
a diverse portfolio of UK growth businesses.
The Company’s investing activities expose it to a range of nancial 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 nancial 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 inuenced 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 inuenced by the estimates, assumptions and judgements made in the fair
valuation process (see note 2.3 on pages 82 and 83). 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.
93
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
As at 30September 2023
Security Valuation basis Key variable inputs
Fair Value
£'000s
Sensitivity
%
Impact
£’000s
Impact
% of net
assets
Unquoted
Rebased cost Latest funding round price 3,342 +/–10% 334 +/–0.2
Earnings multiple Estimated sustainable earnings
Selection of comparable companies
Application of illiquidity discount
Probability estimation of
Liquidation event*
46,112 +/–20% 9,222 +/–4.4
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. A sensitivity of +/– 20 per cent has been applied to the fair value of £79.0 million (2022: £75.1million), reecting
the level of volatility in nancial markets in 2023 and 2022. A movement of +/– 20 per cent would cause an increase or
decrease of £15.8 million to the fair value of the quoted AIM portfolio (2022: £15.0 million).
A sensitivity has also been performed for the Company’s investments into the Micro Cap, Multi Cap Income 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 £63.0 million (2022: £43.9 million), reecting the level of volatility in nancial markets in 2023 and 2022. A
movement of +/– 20 per cent would cause an increase or decrease of £12.6 million to the fair value of these investments
(2022: £8.8 million).
As at 30September 2022
Security Valuation basis Key variable inputs
Fair Value
£'000s
Sensitivity
%
Impact
£’000s
Impact
% of net
assets
Unquoted
Rebased cost Latest funding round price 4,543 +/–10% 454 +/–0.2
Earnings multiple Estimated sustainable earnings
Selection of comparable companies
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).
94 Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
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 explanation of 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).
Estimated sustainable earnings
The selection of sustainable revenue or earnings will depend upon whether the company is sustainably protable 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 12 months,
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, reecting 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.
95
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Interest rate risk
The Company has the following investments in xed and oating rate nancial assets:
As at 30September 2023 As at 30September 2022
Total
investment
£’000
Weighted
average
interest
rate
%
Weighted
average
time for
which rate
is xed
Years
Total
investment
£’000
Weighted
average
interest
rate
%
Weighted
average
time for
which rate
is xed
Years
Fixed rate loan note securities 3,814 10.80 4.56 9,700 8.76 4.10
Floating rate sterling liquidity funds 17,810 – – 5,608 – –
Cash at bank and on deposit 670 – – 36,622 – –
22,294 51,930
The xed rate loan notes are not subject to interest rate risk and would therefore not impact the net assets. Movements in
interest rates would not signicantly affect net assets attributable to the Company’s shareholders and total prots due to
the interest rate income received from oating rate notes being wholly immaterial.
Credit risk
Credit risk refers to the risk that a counterparty will default on its obligation resulting in a nancial loss to the Company.
The Manager monitors credit risk on an ongoing basis.
At the reporting date, the Company’s nancial assets exposed to credit risk amounted to the following:
As at
30September
2023
£’000
As at
30September
2022
£’000
Cash at bank and on deposit 670 36,622
Interest, dividends and other receivables 235 152
905 36,774
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 nancial position of the bank deteriorate signicantly the
Investment Manager will seek to move the cash holdings to another bank.
There were no signicant concentrations of credit risk to counterparties at 30 September 2023 or 2022. No individual
investment in a portfolio company exceeded 12.0 per cent of the net assets attributable to the Company’s shareholders at
30 September 2023 (2022: 8.7 per cent).
96
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Liquidity risk
The Company’s nancial 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 specic 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 sucient liquidity is maintained to meet obligations as they fall due.
At the year end the Company had nancial liabilities of £1,489,000 (2022: £1,493,000). All nancial liabilities were due
within three months and were undiscounted (2022: same).
The Company maintains sucient investments in cash and readily realisable securities to pay accounts payable and
accrued expenses. At 30 September 2023, these investments were valued at £18,481,000 (2022: £42,230,000).
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 34, 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 £191,000 (2022: £295,000) of advisory fees, £412,000
(2022: £528,000) of directors’ fees for services provided to companies in the investment portfolio and incurred abort
costs of £4,000 (2022: £7,000) 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 following events occurred between the balance sheet date and the signing of these nancial statements:
The 31 October 2023 NAV of 55.5p was announced on 6 November 2023 and the 30 November 2023 NAV of 57.3p was
announced on 6 December 2023. At the date of publishing this report, the Board is unaware of any matter that will have
caused the NAV per share to have changed signicantly since the latest NAV.
On 4 December 2023, the Company launched an Offer for Subscription to raise up to £15 million with the discretion to
utilise over-allotment facilities to raise up to a further £10 million.
Purchased 1.7 million Ordinary Shares of 10.0p on 12 December 2023 at a price of 54.4p per share to be held in Treasury.
Four follow-on investments, into Eden Research, Metrion Bioscience, Focal Point Positioning and Patchworks
Integration, completed between October to December 2023, totalling £2.6 million.
One new investment, into Ozone API, completed in December 2023, totalling £1.8 million.
Realised Gresham House plc shares in December 2023, receiving proceeds of £0.5 million and making a
return of 3.9x cost.
97
Annual Report and Audited Financial Statements 2023
03 Financial statements - Notes to the nancial statements
Appendices
04
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 total investments.
Liquidity
Pending investment in VCT qualifying investments, the
Company’s cash and liquid funds are held in permitted non-
qualifying investments.
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 prots 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 now also co‑invests alongside the Mobeus VCTs
in new unquoted VCT qualifying investments. All new
qualifying AIM dealow 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 the interests of
shareholders and the Manager.
Borrowing powers
Should it be required, the Company’s policy is to use
borrowing for short term liquidity purposes only up to a
maximum of 25 per cent of the Company’s gross assets, as
permitted by the Company’s Articles of Association.
99
04 Appendices
Annual Report and Audited Financial Statements 2023
Dividend history in last ten years
Pence
0
2
4
6
8
10
12
14
16
18
30/09/2230/09/2130/09/2030/09/1930/09/1830/09/1730/09/1631/12/1531/12/14
Dividend history per ordinary share (p)
*Includes proposed final dividend of 2.25p
30/09/23*
Source: Gresham House Asset Management Ltd
100
04 Appendices
Annual Report and Audited Financial Statements 2023
Ordinary share
Year ended
Revenue
(p)
Capital
(p)
Dividend
history
per ordinary
share
(p)
Cumulative
dividends
(p)
Average total
dividend
per ordinary
share
(p)
31/12/01 2.30 0.00 2.30 2.30 2.30
31/12/02 2.80 0.00 2.80 5.10 2.55
31/12/03 2.20 2.00 4.20 9.30 3.10
31/12/04 1.20 3.30 4.50 13.80 3.45
31/12/05 2.00 3.50 5.50 19.30 3.86
31/12/06 1.75 4.75 6.50 25.80 4.30
31/12/07 2.30 5.20 7.50 33.30 4.76
31/12/08 2.40 5.10 7.50 40.80 5.10
31/12/09 1.20 6.30 7.50 48.30 5.37
31/12/10 2.00 5.50 7.50 55.80 5.58
31/12/11 1.65 5.85 7.50 63.30 5.75
31/12/12 0.50 7.00 7.50 70.80 5.90
31/12/13 3.00 4.50 7.50 78.30 6.02
31/12/14 1.95 15.05 17.00 95.30 6.81
31/12/15 0.90 6.60 7.50 102.80 6.85
30/09/16 0.00 17.00 17.00 119.80 7.61
30/09/17 0.60 6.90 7.50 127.30 7.60
30/09/18 0.15 7.35 7.50 134.80 7.59
30/09/19 0.65 5.85 6.50 141.30 7.54
30/09/20
0.60 5.90 6.50 147.80 7.48
30/09/21 0.40 6.10 6.50 154.30 7.44
30/09/22 0.60 5.40 6.00 160.30 7.37
30/09/23* 0.20 4.30 4.50 164.80 7.24
* Includes proposed nal dividend of 2.25p. Estimated revenue and capital split based on number of shares at 30 September 2023.
Dividends paid since launch
101
04 Appendices
Annual Report and Audited Financial Statements 2023
Ordinary share
Year end
Total
net assets
(£mn)
NAV
per share
(p)
Mid share
price
(p)
NAV TR*
per share
(p)
Ongoing
charges
(%)
†
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 87.7 5 330.59 2.7
30/09/2019 175.4 7 7.05 74.50 303.80 2.7
30/09/2020 182.3
73.74 69.50 316.44 2.7
30/09/2021 248.4 87.7 7 85.00 406.18 2.7
30/09/2022 213.0 65.08 65.00 328.93 2.6
30/09/2023 209.7 57.88 55.00 318.51 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.
Performance record since launch
102
04 Appendices
Annual Report and Audited Financial Statements 2023
The table below shows the cash returned to shareholders dependent on their subscription cost, including their income
tax reclaimed on subscription.
Year subscribed
Cash
invested
(p)
Income tax
reclaim
(p)
Net cash
invested
(p)
Cumulative
dividends
paid
#
(p)
Return
on cash
invested
(%)
2001 (January) 100.00 20.00 80.00 164.80 184.8
2005 (March) – C share* 100.00 40.00 60.00 119.62 159.6
2010 (March) 103.09 30.93 72.16 116.50 143.0
2012 (December) 117.40 35.22 82.18 98.50 113.9
2014 (March) 112.40 33.72 78.68 78.50 99.8
2016 (February) 107.20 32.16 75.04 62.00 87.8
2017 (October) 97.48 29.24 68.24 42.00 73.1
2019 (February) 85.30 25.59 59.71 34.50 70.4
2019 (November) 78.90 23.67 55.23 27.00 64.2
2020 (January) 84.80 25.44 59.36 27.00 61.8
2020 (February) 82.50 24.75 57.7 5 23.50 58.5
2020 (March) 64.30 19.29 45.01 23.50 66.5
2020 (November) 77.90 23.37 54.53 20.50 56.3
2020 (December) 80.90 24.27 56.63 20.50 55.3
2021 (January) 84.40 25.32 59.08 20.50 54.3
2021 (February) 82.20 24.66 57.54 17.00 50.7
2021 (March) 84.90 25.47 59.43 17.00 50.0
2021 (December) 88.10 26.43 61.67 14.00 45.9
2022 (January) 87.10 26.13 60.97 14.00 46.1
2022 (March)
76.60 22.98 53.62 10.50 43.7
2023 (January)
†
68.19
1
20.46 47.73 7.50 41.0
2023 (March)
†
65.72
2
19.72 46.00 4.50 36.9
2023 (April)
†
62.96
3
18.89 44.07 2.25 33.6
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 nal dividend of 2.25p per share.
†
Shares were allotted pursuant to the 2023 Offer at individual prices for each investor in accordance with the allotment formula as set out in each
Offer’s Securities Note.
1. Average effective offer price based on allotment prices between 67.6p and 71.5p.
2. Average effective offer price based on allotment prices between 64.8p and 67.9p.
3. Average effective offer price based on allotment prices between 61.8p and 65.2p.
Cash returned to shareholders
103
04 Appendices
Annual Report and Audited Financial Statements 2023
Full investment portfolio
Company Sector
Original
book cost
†
£’000
Accounting
book cost
†
£’000
30September
2023
fair value
£’000
30September
2022
fair value
£’000
% of net
assets
% of equity
held by
Baronsmead
Second
Venture
Trust plc
% of equity
held by
all funds
#
Unquoted
Patchworks Integration Ltd Technology 4,576 4,576 6,031 3,729 2.9 10.9 23.8
eConsult Health Ltd Healthcare & education 3,899 3,899 5,325 5,195 2.5 5.2 11.4
Airnity Ltd Healthcare & education 3,587 3,587 4,719 4,006 2.3 9.3 20.1
Popsa Holdings Ltd Technology 3,379 3,379 3,379 3,379 1.6 3.7 8.1
Clarilis Ltd Technology 1,819 1,819 2,723 2,723 1.3 7.6 16.7
Scurri Web Services Ltd Technology 2,293 2,293 2,719 2,565 1.3 6.9 14.7
TravelLocal Ltd Consumer markets 2,119 2,119 2,117 1,037 1.0 5.3 10.9
RevLifter Ltd Technology 1,559 1,559 2,058 1,869 1.0 6.2 13.5
Fu3e Ltd Technology 1,819 1,819 2,001 1,856 1.0 13.6 29.7
SecureCloud+ Ltd Technology 789 789 1,904 1,482 0.9 8.8 16.6
Panthera Biopartners Ltd Healthcare & education 3,338 3,338 1,781
2,974 0.8 12.2 26.7
IWP Holdings Ltd Business services 1,587 1,587 1,510 3,072 0.7 4.0 8.5
Metrion Bioscience Ltd Healthcare & education 1,192 1,192 1,447 2,355 0.7 12.8 27.4
Orri Ltd Healthcare & education 1,021 1,021 1,413 794 0.7 5.7 28.4
Proximity Insight Holdings Ltd Technology 1,152 1,152 1,152 1,152 0.5 4.1 20.4
Pointr Ltd Technology 526 526 1,129 1,189 0.5 2.7 5.1
Counting Ltd Business services 1,059 1,059 1,055 1,055 0.5 2.4 5.3
Cognassist UK Ltd Healthcare & education 902 902 940 – 0.4 4.4 22.2
Bidnamic Technology 921 921 916 916 0.4 1.8 9.1
Focal Point Positioning Ltd Technology 908 908 908 908 0.4 1.0 4.9
Dayrize B.V. Technology 756 756 756 – 0.4 5.9 31.3
Mable Therapy Ltd Healthcare & education 619 619 619 – 0.3 6.1 34.3
Branchspace Ltd Technology 609 609 609 – 0.3 4.6 25.5
Tribe Digital Holdings Ltd Technology 1,351 1,351 559 722 0.3 6.0 11.5
Cisiv Ltd
Technology 789 789 536 992 0.3 8.1 15.3
Connect Earth Ltd Business services 451 451 451 – 0.2 2.9 14.6
SilkFred Ltd Consumer markets 966 966 396 943 0.2 2.8 5.1
RockFish Group Ltd Consumer markets 789 789 187 371 0.1 6.6 12.5
Yappy Ltd Consumer markets 2,013 2,013 115 2,602 0.1 14.9 31.9
Armstrong Craven Ltd Business services 664 1,335 – 1,815 0.0 10.3 18.7
Custom Materials Ltd Technology 3,092 3,092 – 648 0.0 15.2 27.6
Equipsme (Holdings) Ltd Business services 949 949 – – 0.0 6.4 12.1
Funding Xchange Ltd Business services 795 795 – – 0.0 2.1 4.4
Munnypot Ltd Technology 562 562 – 562 0.0 1.5 2.7
Samuel Knight InternationalLtd Business services 795 795 – – 0.0 11.1 23.8
53,645 54,316 49,455 23.6
104 Annual Report and Audited Financial Statements 2023
04 Appendices
Company Sector
Original
book cost
†
£’000
Accounting
book cost
†
£’000
30September
2023
fair value
£’000
30September
2022
fair value
£’000
% of net
assets
% of equity
held by
Baronsmead
Second
Venture
Trust plc
% of equity
held by
all funds
#
Delisted (previously AIM)
Deepverge plc Healthcare & education 1,590 1,590 – 424 0.0 0.7 1.3
MXC Capital Ltd Business services 240 267 – – 0.0 0.3 0.6
1,830 1,857 – 0.0
Total unquoted 55,475 56,173 49,455 23.6
AIM
Cerillion plc Technology 1,465 1,620 25,247 18,435 12.0 6.5 11.9
Netcall plc Technology 2,616 5,983 12,425 10,650 5.9 9.2 25.1
IDOX plc Technology 1,028 2,972 7,014 7,125 3.4 2.4 4.7
Bioventix plc Healthcare & education 309 940 4,476 3,887 2.1 2.3 9.6
Anpario plc Healthcare & education 662 2,239 2,493 3,931 1.2 4.8 7.0
Property Franchise Group plc Consumer markets 838 1,032 2,264
2,306 1.1 2.6 14.5
PCI–PAL plc Technology 1,345 1,345 2,203 1,809 1.1 6.0 10.9
Diaceutics plc Healthcare & education 1,590 1,590 2,155 1,674 1.0 2.5 12.8
Inspired plc Business services 861 2,682 1,943 3,011 0.9 2.7 29.8
Crossword Cybersecurity plc
‡
Technology 3,362 3,362 1,867 1,813 0.9 9.7 18.6
Belvoir Group plc Consumer markets 919 826 1,632 1,594 0.8 2.0 13.6
hVIVO plc Healthcare & education 1,445 1,437 1,425 719 0.7 1.1 1.9
Begbies Traynor Group plc Business services 545 513 1,326 1,656 0.6 0.8 3.9
Vianet Group plc Business services 2,092 1,724 1,244 846 0.6 5.6 17.2
Access Intelligence plc Business services 716 716 1,019 1,687 0.5 1.4 7.3
Oberon Investments Group plc Business services 1,430 1,430 957 458 0.5 5.2 9.9
Tan Delta Systems plc Business services 956 956 883 – 0.4 5.0 9.8
SEEEN plc Technology 2,250 2,250 799 247 0.4 15.6 29.8
SysGroup plc Technology 1,579 1,578 760
481 0.4 5.2 26.6
Merit Group plc Technology 3,267 4,253 734 485 0.4 6.1 10.2
Driver Group plc Business services 1,529 1,747 733 880 0.4 5.6 20.2
Beeks Financial Cloud Group plc Technology 413 413 726 1,130 0.3 1.3 2.3
One Media iP Group plc Technology 1,008 912 724 922 0.3 5.9 10.8
Eden Research plc Business services 1,375 1,380 689 720 0.3 3.8 6.9
Everyman Media Group plc Consumer markets 956 1,010 576 1,095 0.3 1.3 9.6
IXICO plc Healthcare & education 825 825 530 972 0.3 6.1 11.1
Gresham House plc* Business services 137 145 513 340 0.2 0.1 0.2
Skillcast Group plc Healthcare & education 817 817 419 441 0.2 2.5 4.7
Crimson Tide plc Technology 668 668 401 401 0.2 3.4 6.4
Scholium Group plc Consumer markets 1,100 682 352 440 0.2 8.1 14.7
TPXimpact Holdings plc Technology 660 660 348 312 0.2 1.0 1.8
Gama Aviation plc Business services 1,004 1,171 302 326
0.1 0.9 1.7
KRM22 plc Technology 550 550 192 292 0.1 1.5 2.8
Poolbeg Pharma plc Healthcare & education 51 51 169 104 0.1 0.5 0.9
105
04 Appendices - Full investment portfolio
Annual Report and Audited Financial Statements 2023
Company Sector
Original
book cost
†
£’000
Accounting
book cost
†
£’000
30September
2023
fair value
£’000
30September
2022
fair value
£’000
% of net
assets
% of equity
held by
Baronsmead
Second
Venture
Trust plc
% of equity
held by
all funds
#
AIM (continued)
Rosslyn Data Technologies plc Technology 1,407 1,407 117 498 0.1 3.3 10.7
Science In Sport plc Consumer markets 352 330 71 95 0.0 0.3 0.6
Tasty plc Consumer markets 2,033 6,085 65 175 0.0 3.4 13.7
Fusion Antibodies plc Healthcare & education 660 660 44 381 0.0 1.3 2.4
Zoo Digital Group plc Technology 817 586 41 135 0.0 0.1 0.2
I–nexus Global plc Technology 688 688 35 29 0.0 2.9 5.4
Totally plc Healthcare & education 86 197 35 151 0.0 0.3 0.5
CloudCoco Group plc Technology 535 359 31 29 0.0 0.5 0.8
Aptamer Group plc Healthcare & education 2,390 2,390 28 1,675 0.0 0.4 0.8
LoopUp Group plc Technology 616 640 13 29 0.0 0.3 0.6
Fulcrum Utility Services Ltd Business s
ervices 342 1,650 4 241 0.0 0.9 1.0
Total AIM 50,294 65,471 80,024 38.2
Collective investment vehicles
WS Gresham House UK Micro Cap Fund 6,189 10,335 24,617 23,474 11.8
WS Gresham House UK Multi Cap Income Fund 20,641 20,641 21,322 13,966 10.2
WS Gresham House UK Smaller Companies Fund 16,750 16,750 17,014 6,454 8.1
BlackRock Sterling Liquidity Fund 5,937 5,937 5,937 2,804 2.8
Goldman Sachs Sterling Liquidity Fund 5,937 5,937 5,937 – 2.8
JPMorgan Sterling Liquidity Fund 5,937 5,937 5,937 2,804 2.8
Total collective investment vehicles 61,391 65,537 80,764 38.5
Total investments 167,160 187,181 210,243 100.3
Net current assets (584) (0.3)
Net assets 209,659 248,372 100.00
†
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 84 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 investment manager, Gresham House Asset Management Ltd.
* Acquired November 2014, pre change of Investment Manager on 30 November 2018.
‡
Includes unquoted convertible loan note; Cost £1,040,000, Fair Value £1,051,000.
106
04 Appendices - Full investment portfolio
Annual Report and Audited Financial Statements 2023
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 nancial year divided by opening net
asset value per share.
BSVT Baronsmead Second Venture Trust plc
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 a subsequent 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.
Direct Investments Investments held by Baronsmead Second Venture Trust plc only. Does not
include investments held by Micro Cap, Multi Cap Income or Small Cap.
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. If the 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 ow generated by a business, most commonly used for businesses
that do not (yet) generate operating or shareholder prots.
IFA Independent Financial Advisers, professionals who offer independent
advice to their clients and recommend suitable nancial 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 two of the three recognition criteria for small or medium companies
according to EU Legislation.
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.
107
Annual Report and Audited Financial Statements 2023
04 Appendices
NAV total return reconciliation Q1 Q2 Q3 Q4
Opening NAV total return (p) 328.9 334.2 323.2 326.4
NAV movement (p) 1.6 (7.8) 1.0 (6.1)
Dividend (p) 0.0 4.5 0.0 3.7
Total return (p) 1.6 (3.3) 1.0 (2.4)
Change in NAV total return (p) 5.3 (10.9) 3.2 (7.9)
Closing NAV total return (p) 334.2 323.2 326.4 318.5
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 2023 2022 2021
Interim dividend 2.25p 3.0p 3.0p
Recommended nal dividend 2.25p 3.0p 3.5p
Total dividend 4.5p 6.0p 6.5p
Opening NAV (after nal dividend) 62.1p 84.3p 70.2p
Dividend yield 7.2% 7.1% 9.3%
108
Annual Report and Audited Financial Statements 2023
04 Appendices
109Annual Report and Audited Financial Statements 2023
04 Appendices
Information
05
Shareholder information and contact details
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, The City Partnership (UK) Ltd ,
would make unsolicited telephone calls to shareholders and that any such calls would relate only to ocial 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 certicates:
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 rm.
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 rms and individuals to avoid doing business with.
6 REMEMBER: if it sounds too good to be true, it probably is!
7 If you use an unauthorised rm to buy or sell shares or other investments, you will not have access to the Financial
Ombudsman Service (https://www.nancial-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-rm), where you can nd 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 03001232040
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.
111
Annual Report and Audited Financial Statements 2023
05 Information
Shareholder account queries
The Registrar for Baronsmead Second Venture Trust plc is The City Partnership (UK) Limited (“City”).
TheRegistrar will deal with all of your queries with regard to your shareholder account, such as:
Change of address
Latest net asset value
Your current shareholding balance
Your payment history, including any outstanding payments and reissue requests
Your payment options (cheque, direct payment to your bank/building society account, reinvestment)
Paper or electronic communications
Request replacement share certicates (for which there may be additional administrative and other charges) You can
contact City with your queries in several ways:
Telephone: 01484 240 910 Lines are open 9.00am to 5.30pm, Monday to Friday,
excluding public holidays in England and Wales.
Calls are charged at the standard geographic rate and
will vary by provider. Calls from outside the UK will be
charged at the applicable international rate
On-line: Investor Hub
https://gresham-house-vcts.cityhub.uk.com/
City's secure website, Investor Hub, allows you to
manage your own shareholding online.
You will need to register to use this service on
the Investor Hub.
You should have your Access Token to hand, which
is available on the Change in Registrar letter, any
recently issued share certicates and dividend
tax voucher and which you should always keep
condential for security reasons.
Email: registrars@city.uk.com
Post: The City Partnership (UK) Limited
Mending Rooms, Park Valley Mills,
Meltham Road,Hudderseld HD4 7BH.
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 nancial websites.
Calendar
5 March 2024 Annual General Meeting.
May/June 2024
Announcement and posting of Interim report for the six months to 31 March 2024.
December 2024
Announcement of nal results for year to 30 September 2024.
112
05 Information - Shareholder information and contact details
Annual Report and Audited Financial Statements 2023
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)
Winterood 020 3100 0000
Qualifying investors* who invest in the existing shares of the Company can benet 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 rst in rst 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.
113
05 Information - Shareholder information and contact details
Annual Report and Audited Financial Statements 2023
Corporate information
Directors
Sarah Fromson (Chair)
‡
Graham McDonald
Timothy Farazmand**
Malcolm Groat*
†
Secretary
Gresham House Asset Management Ltd
Registered Oce
5 New Street Square
London EC4A 3TW
Investment Manager
Gresham House Asset Management Ltd
5 New Street Square
London EC4A 3TW
Registered Number
04115341
Registrars and Transfer Oce
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 0800 923 1534
(From 9 October 2023)
The City Partnership (UK) Ltd
The Mending Rooms
Park Valley Mills
Meltham Road
Hudderseld HD4 7BH
Tel: 01484 240 910
Brokers
Panmure Gordon & Co
40 Gracechurch Street
London EC3V 0BT
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
(From 26 September 2023)
Howard Kennedy LLP
1 London Bridge
London SE1 9BG
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk
‡
Chair of the Nomination Committee
* Chair of the Audit & Risk Committee
** Chair of the Management Engagement & Remuneration Committee
†
Senior Independent Director
114 Annual Report and Audited Financial Statements 2023
05 Information
